Episode 62: How to Change an Industry with Morgen Newman, CEO of Cora

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Transcript

Announcer:

Welcome to Nerd Marketing, an original podcast for e-commerce operators and marketers. Looking to level up? Drew Sanocki and Michael Epstein will bring you actionable strategies from their decades of running eight- and nine-figure brands along with interviews and insights from the leaders of some of the most successful brands in the world.

Drew Sanocki:

Hey everybody. Welcome to the Nerd Marketing podcast today my buddy Mike Maher and I interview a mutual friend Morgen Newman, who is a three or four time founder, currently the founder and CEO of Cora, which is remaking feminine hygiene products and is a great DTC brand. Previous to that, he was the CEO of mix made and idea paint, which was whiteboard paint. He exited both businesses, so just a great guy to learn from. Always has been a creative thinker and each of these brands has been fabulously successful. So a lot to learn from Morgen and enjoy today's podcast. Thanks.

Mike Maher:

Where to start? One probably good place is a, I've known Morgen for most of my adult life, close friend from college, my roommate within a house of five guys in a three bedroom apartment for the first year out of college. One of the best scrappiest entrepreneurs I know who is now on his third company. How'd you get into slinging tampons?

Morgen Newman:

I think there's a quote that says something like, behind every guy, there's really a kick ass woman. There's a more eloquent way of saying it behind

Mike Maher:

Every good man is a great woman or something like that. 

Morgen Newman:

Yeah, that's definitely the case for me. Yeah, I mean really that was it. I was sort of in idea mode where I think you're a little more open-minded and empathetic, and I heard out of the bathroom, oh shit, I got my period. We need tampons and maybe not empathetic. It's my response wasn't like a really generous one, but I really challenged my wife, you get your period every month, how are you not prepared again and again and again, which led us to a walk to this group dinner. We stopped at a convenience store, bought a box of tampons, and I just on that walk literally started from the outside of the box all the way to learning about her experience managing her period, and I was just shocked at how pain point filled everything about it was. So the branding and the packaging certainly wasn't made for my wife and our peers.

They were made for maybe something that was appropriate many generations ago. The whole user experience, like these crunchy crinkly wrappers I was surprised at. I opened a tampon and started to play with it and I was curious what they're made of, and I read all of the fine print on the box and there was no mention of ingredients and I thought that was kind of odd. She was going to put this thing in her body for many of them for the better part of a week, and she didn't even know what they're made of. So we Googled it, saw they're made from synthetics, and I was like, aren't synthetics linked to women's health issues? And she said, yes. And I was, that's weird. I would think someone would've solved this by now. And so she started to kind of school me on what it's like to live in her life for a week while she's on her period.

My conclusion was like, it's 2014, people are solving much harder problems in the world. Someone fixed this. Someone has made the modern natural brand method at this point is what a 20 plus year old company that made natural cleaning products. Surely someone made a brand that made a natural modern period suite of products, and I just decided we needed to find her that brand. And we got to this group dinner after many margaritas, the conversation turned to our pink box of tampons and not a single one of our friends had any awareness of a modern, safer brand. So I started to dig into the industry and within a few days I learned two things that just shocked me and kind of hooked me on the opportunity. One was the frequency. So she will use 12,000 plus period products in her lifetime, and every one of those is going to be pain point filled and potentially unhealthy.

And then the other fact that I learned that's just stuck with me ever since was that in most of the world, girls drop out of school two to three times the rate of boys at the age of puberty. So it's not the only reason, but one of the leading reasons is they don't have access to period products. So they get their periods, stay home from school, and after missing, after many months of missing the better part of a week of school, they're much more likely to drop out. So at that point, it felt like I had this enough experience with physical product and kind of helping build a couple modern brands that I felt like I could at least be part of bringing a solution to the US and use our consumptive power to try to help keep more girls in school.

Drew Sanocki:

That's awesome. You never told me the whole story. No, that was really cool. And then I guess you found a partner who was not your wife.

Morgen Newman:

Yeah, that's true. I mean, honestly, I think we couldn't afford for it to be. My wife Katie paid the bills and I needed someone to pay the bills so I could try to do this thing. I think it was pretty clear from the onset that I wanted to find a co-founder. I think I'm a big believer that the best brands are authentic, and my reason for building my part of Cora was driven from a really authentic place, but I'm not a user. I don't get my period. And so I really wanted to make sure that at the core of the business, we were thinking first and foremost about the user. I wanted a partner who menstruated. I honestly just started to dig deep into my network and sort of phone and video date dozens of really impressive women to see who could be an amazing, there's been a recurring theme where I found that some of the best sources are not the ones you expect the most.

And I had kind of a colleague, loose friend, I called her and asked her if she knew anyone great. And she gave me the, I'll keep my ears open answer, which means I'm not going to put any effort into this. And she called me out of the blue months later and said, I've been working with this woman, she's phenomenal. She's working on the exact same concept as you and I think you need to work together. So she made this introduction to my co-founder, Molly, now co-founder Molly, and we just had really aligned visions and values and neither of us needed to scrap either of each other's babies. We could really combine them and hit the ground running. And so we spent two or three months doing a bunch of literally relationship exercises and tried to play to these real extremes of fairness to understand how we would run the business and if we thought we could persevere all the challenges we thought we'd have to go through and felt like we had a really natural fit. And we were introduced in maybe the spring of 2015, we put together a beta version of our offering that fall and then launched the business in February of 2016.

Drew Sanocki:

And it's been great ever since. I mean with her. 

Morgen Newman:

Yeah, I mean, I can't say the same from either the former or two companies. I definitely had some really rough co-founder experiences there in this case like Molly, and I think we both genuinely believe we wouldn't have built what we have so far without each other and respect each other more today than we did when we met six years ago, which I think is probably not that common. So I feel really fortunate, honestly,

Mike Maher:

Have known about the things that you've dealt with in the past. But was it kind of like a third time's a charm? I'm actually going to spend some time dating before marrying as I kind of going to the co-founder and doing those exercises. Do you feel that?

Morgen Newman:

I think so. I think those exercises in the beginning were maybe in retrospect really just about clear expectation setting. And I think there probably was some luck involved too. I think at the time, I don't know if Molly and I either knew enough to really understand where each of us excelled and what our roles would each grow into. And we really naturally grew into places that were different but complimentary rather than competing. And we both have, I think maybe a similar mindset in work ethic. So there's no one who's pulling an all-nighter with me more than Molly is when it's really needed. There's also no one who wants to see the big picture as quickly as Molly does alongside of me. So yeah, I think part of it was being a little better with expectation setting. And I'm sure a big part of it has been luck,

Mike Maher:

Obviously, from your conversations about Molly and bringing her on as somebody that is an active user of said products, it is helpful. But you've assumed this role of the CEO, the leader of the company, and talk to us about building trust with team members in a company culture, in the femcare space, especially being a man.

Morgen Newman:

Yeah, it's something that we, I mean Molly and I talked about on day one was like I probably fell more naturally towards the hard business role and that's sort of more naturally fit as CEO, but we talked really openly about can a modern femcare company, does it have room for a male leader? And I think where she and I landed, and I think we still feel this way today, is gender or menstrual equality is not a women's problem. It is an US problem. And so it's not wrong for us to be part of the solution. And in terms of building a team, I mean, I think I've had discussions with candidates before as we're trying to hire some senior leaders where they've said they had a bias coming in against a male CEO. But I think at the end of the day, one of my big learnings as a CEO every six months because we've been successful at growing the business every six months, my job is totally different and new and I'm learning it on the fly.

One of the biggest learnings has just been to be more vulnerable and more myself. I think I'm a better leader today than I was two years ago because I'm more willing to just be vulnerable and I'm trying less and less to be the thing that I think I'm supposed to be. And I think that that resonates with the team and has created a closer culture. I think that ultimately our team has very low ego, and that's one of the things that makes Cora, I think a pretty special place to work and has made us successful I think as well.

Drew Sanocki:

How big is the team?

Morgen Newman:

We're just shy of 30 people.

Drew Sanocki:

So your previous business was a handful, right? 

Morgen Newman:

Yeah, Bushwick Kitchen, three and a half people at best.

Drew Sanocki:

How about the whiteboard paint business? 

Morgen Newman:

Idea Paint? When I left Idea Paint, it was probably 20 or 25, but I certainly wasn't running it and got it. That was a good example of a business that you wouldn't look to for great management practice.

Drew Sanocki:

So this one's different then. I mean it's like more people and you're in more of that leadership role

Morgen Newman:

For sure. I really mean it when I say that every six months it's different every six months it's a different scale, different set of problems. And I'm conscious, I think I have some natural skills that are good for getting something off the ground and plowing through barriers, but what I'm doing now is a whole different skillset. So I'm conscious that there might be a point where maybe I'm not suited anymore. And so far I'm learning a ton and I really enjoy it. And so I kind of think almost in these six months increments of my job. You

Mike Maher:

Discussed the vulnerabilities of just being a leader. Are those vulnerable moments of you being like, this is changing every six months. I don't know what I don't know. We're all on this journey together, so let's lean in together, or is it something else?

Morgen Newman:

So I think a lot of it comes from being really transparent, and that's my natural style. Our team has a much more clear picture of the potential value of their equity, the valuations we're raising with our investor, critical issues we're talking about with our board. There's very little information that we don't share. And so I think part of it comes from my natural styles. I just realized it was easier to lean into my natural style. And with that, I think vulnerability, the challenge, I think I am pretty vulnerable in my personal life, and the challenge has been I'm not the cheerleader. I don't normally run towards the microphone. That's obviously a requisite part of the CEO role. So I think recognizing that I can speak to the group and I don't necessarily have to shout or cheer, but I can just share more openly has been a big part of it.

So I think a couple of those examples are bringing the team along on some of the decisions that usually only get made behind a closed door, difficulties with customers or investors that maybe would, I think a lot of companies would naturally hide. It's tough. I think the challenge is in being transparent, where do you draw the line? Is there a line at which it's better to keep everyone heads down and not let them know about the problems? Or are you better off having everyone truly on the same team? So I'm still trying to figure out where that lies.

Mike Maher:

You mentioned the other businesses now under your third seemingly far and away the most successful one. What were some of the biggest learnings you took from each of those previous experiences to you when you started Cora or you're taking with you now?

Morgen Newman:

Yeah, I mean we know each other because we went to Babson and I remember seeing some data there at some point that said the most successful founders weren't just out of school. They tended to be in their thirties or forties and thinking as an entitled know nothing, 20-year-old thinking that it couldn't be right. So I think one part is just maturing personally, but I think coming out of Idea paint, there were a lot of decisions that were made kind of because they looked good on paper. One of the things that happened was a lot of people were hired because of what they did on paper, but they may not have actually been great for that stage or the skillset needed at that time. So for instance, someone who runs a $500 million p and l may not be the right person to take a company from three to 10 million. I felt like Idea Paint. What I really developed was a healthy sense of impatience. And so we had a lot of strategists and not a lot of executors and bringing that into Cora, we didn't hire a specialist until at least our 15th person. So everybody is first and foremost an executor. From my role down, there's no one who is not a majority player and part-time coach. And I think that was one of the biggest lessons that

Drew Sanocki:

Was intentional or you just kind of ended up there. 

Morgen Newman:

Very intentional because I couldn't at Idea Paint, it was the opposite. We'd have a great meeting with a lot of smart people in a room talking to each other about all the things we needed to do and meeting would end door would open and no one

Would do anything. That's not true. No one. But the people who really did things were undervalued because maybe they didn't have a clear role and they weren't given credit. So at Cora we've really built a team and a culture where we prioritize action. And I think Drew, you and I may have talked about this before, but in talking with a friend came away with this idea that failure rarely occurs because of the wrong action. It much more often occurs because of no action. And so at Cora, we all have a bias for action and everybody we hire as an executor

Drew Sanocki:

First and foremost. How do you screen for that? I love the idea that it's like, okay, I want executors in here first. I think Danny Meyer, the restaurateur, he talks about picking up the sugar packet. He's like, anybody that works at one of his restaurants, Shake Shack, Union Square Cafe, you never walk by a table. If there's a sugar packet that's empty, you pick it up and it's like everybody kind of has that is empowered to take care of the customer from the GM down to the busboy. I've always been fascinated with that. How do you screen for that? Or is it a matter of you have to get 'em in the door and work with them for a while?

Morgen Newman:

I don't take credit for this, but we've been really successful. We've had no natural attrition. No one has left Cora on their own accord in five years. And we've had a couple employees that we exited because they weren't the perfect fit. But we've had remarkably low attrition. A couple of things that have helped us is we do screen culturally. So we've had a couple employees who were very well qualified or a couple should say prospects who were very well qualified, who at the final stage walked because we told them or they realized that they weren't going to be willing to give the level of effort that we expect. So we tell people in the interview process, this is not going to be the place you come to cruise. You're going to work at a more rapid pace here than anywhere else you have. And that's true. And so we do try to scare people a little bit,

Drew Sanocki:

Rapid pace or just sort of hours of the day,

Morgen Newman:

Not hours of the day, the pace. I have three kids and Mike knows, but I'm an unpleasant person. If I don't get to go play in the woods and be on my bike or run, I definitely don't think that it's healthy to be working 60, 70 hours a week. But I think that there are times where you might have to really hustle and everyone needs to show up for each other, but I think it's the pace. It's really fast decision making. Sometimes there's a negative to that, but that bias for action is consistent in everything we do. So I think one is setting a really clear expectation upfront that this is going to be a place that's going to feel like a hundred percent in all the hours you're working. The other I think is experience. I tend to find that across a lot of our team, they've had generalist roles in the past or in a specific role. You've seen them wear hats in adjacent functions because they're just a really capable person who's willing to pick up that sugar packet and clean it up. So it seems to have worked so far. I

Drew Sanocki:

Love the philosophy. It's like something I've been trying to implement at our company, and it's just like, it's frustrating because it's change. It's different from how the company was when we acquired it.

Morgen Newman:

People's the hardest part of the job.

Drew Sanocki:

Yeah, it is. For us, it's been like you bring in the leaders first who can exemplify what you want and set that culture that it kind of trickles down.

Morgen Newman:

What I've thought about too, going back to the first time fo- real CEO role is, I'm good at some things. I'm not good at a lot of things. I lack a lot of experience. I've never had a real job before. So to your point about the leadership team, really trying to bring in people around me who compliment my weaknesses or compliment strengths and have real strengths in areas where I don't, I think has been a really big learning for me. And I think early in the journey, I kind of thought you get credit as the entrepreneur if you can do everything yourself. And I've had more and more learnings that you're actually more successful if you surround yourself with really kick-ass people and let them do what they're great at.

Drew Sanocki:

Yeah, agree.

Morgen Newman:

And then Bushwick Kitchen, I think that was a learning project that was never meant to be something that could live on. And we were fortunate and it's still a brand that's alive and growing well, but I think there that learning experiment was the early days of the Shopify suite and this idea that mountaineering or rock climbing light and fast has become this really incredible approach. And the idea was could you take this suite of services and tools, kind of that Shopify ecosystem, if you will, knowing the tools will change over time, but could you assemble those in a way that lets you move really light and fast with very few resources? So that was the goal with Bushwick, it was meant to be a very constrained project. So we took a few thousand dollars and went from idea to shipping product in 30 days, and it was literally about like, can we make a hundred bottles under a brand name of a good product in 30 days if we sell those, let's figure out how to make a thousand. If we can sell a thousand, let's make more.

And that worked. It kind of proved, I think, too, that you can duct tape things together and there is a scrappy way through. And that was a huge learning we took into Cora. I think rightfully have gotten credit for doing a lot with very little—our revenue for our team size, our growth rate for our team size and resources has been, I think it’s generally pretty respectable. And a lot of it is because we tend to be willing to use duct tape quite often. And of course there's downsides to that where we've broken it a couple times and realized there's certain areas where you really shouldn't. But it led to I think trying more things we wouldn't have otherwise. Have you guys upgraded to Shopify Plus yet? I don't think so. I think we're still on, still on basic Shopify.

Drew Sanocki:

Well, it's also like you've got limited resources, you've got 30 people and then focusing them not on systems. And we're not going to build our own tech stack or be good at that stuff because that is kind of commoditized. Now we've got to focus on what matters. And it's probably the brand and customer acquisition and product probably for you,

Morgen Newman:

Right? Yeah. Yeah. Product has been a huge one over the last two years. I think that's right. And I think as this is a podcast about e-commerce, when we launched the business, DTC was the rage and we felt like it was actually like Katrina Lake at Stitch Fix. I was talking to her and she was like, you can't be DTC only. There's no way you can compete with me on ad spend. And her point really resonated. And as I dug more into the category, it's a huge category. Femcare in the US is a 6 billion category. Molly and I talked a lot about it, and omnichannel wasn't a term yet and there was no brilliance, but we just thought, why don't we go meet our customer where she is? Let's go meet her where she has her wallet out and is willing to shop for these products already.

And that was not DTC. So we were omnichannel from the early days and we launched DTC, but we went to retail. Six months later we were in Target. And a few months after that we were on Amazon where at the time you weren't supposed to take a premium brand. And again, it wasn't because we were really smart, we just figured we should go meet our customer. To your point, Drew, of building your own tech stack and focusing on where you can actually create an impact, I do think we were fortunate in that we got a lot of traction on DTC in the early days. And in retrospect, I think one of my regrets is that we really burned plenty of capital unnecessarily growing that DTC business. But I'm not sure if we could have done it differently.

At the time, that's what investors were rewarding. It was driving tremendous exponential growth. And so we kind of built in that direction, but we still did it with a small scrappy team. And more recently we've come to the view, Mike know is a pretty pragmatic person and felt like you can't have a good business that's losing money if the business loses money and you're growing the business, all you're doing is growing the amount of money you lose, which at some point starts to feel really silly. So over the past two years, we really forced our e-commerce businesses into profitability. So we cut the budget in half 2019 to 2020. We cut it in half again, 2020 into 2021 basically said, we're no longer willing to have these businesses if they can't make money. And we've been, it's a huge credit to my team, but we've been really fortunate in that our e-commerce business is now profitable and even better case, we now know how to grow it profitably. So we've turned it back into meaningful growth. The

Drew Sanocki:

E-commerce is the Shopify business. You wouldn't include the Amazon one

Morgen Newman:

We wrap it in. So for us, it's primarily DTC and Amazon.

Drew Sanocki:

Got it. Yeah, it's interesting. We had another guy on the podcast who started a maternity gear company, which is a brand called Kindred bravely, but he started, it was almost like the inverse he started on Amazon, did like he is an old SEO kind of person, so was able to figure out the category first. Let's just produce this nursing bra that takes off. It's not a brand, he's just arbitraging the category, but eventually layered on more products and then went off to Shopify and now it's a brand. So I don't know if he had started that or if you had started it at a different time and there wasn't sort of the push to DTC, would that have been, I mean, I guess the other way to ask the question is, if you were starting this today, would you just go straight to Amazon and get traction?

Morgen Newman:

For sure. It's no different than I think, would you open up your stall at the farmer's market with no foot traffic or the one where everyone goes, sure.

Drew Sanocki:

Yeah. Go where they are. Yeah, yeah,

Morgen Newman:

Let's show up where the customers are. And I think also there was for a long time a concern that Amazon used to be the discount channel or it was perceived that way. And one of the things we've done that's let us continue to be successful with our retail partners is that Amazon is not our low cost channel. So you pay a premium on Amazon for the convenience of getting a core product there. So I think Amazon has kind of turned the corner in that way too, where you can have a premium brand and a premium product there. And I think five years ago, that was I think a much bigger question.

Drew Sanocki:

Certainly noticed that in a lot of food and supplement categories where it's often more expensive on Amazon versus going direct through their own website.

Morgen Newman:

I think I'm not alone in this, but today I can discover a great new product or brand, and one of the first things I'll do is just go to Amazon to add it to my cart. I'm creating a new login, an unfamiliar checkout experience. So I think there's a higher expectation for great brands to show up on Amazon today.

Mike Maher:

And you're willing to pay more for it too. I totally agree like that. I don't mind paying a premium. A lot of times you call me an idiot, won't even go do comparison shopping because I'm just like, I know I can get this in two days. And there's a simplicity to it. Be like, well, you're willing to pay an extra five bucks for, I know something as stupid as maybe goldfish. We got a few minutes left. I'd love to finish up with what was the toughest moment at Cora? Stop puffing you up a little bit here and make you talk about some hard shit.

Morgen Newman:

Yeah, I think for me, all of them are going to be financial and cash in the world of billions of dollars getting invested in different directions. And in California companies raising $50 million seed rounds. Cora has never been the sexy company. We sell physical products. The model isn't that complicated. We buy it for X, we try to sell it for more than X, but we have to buy that inventory and hold it and ship it around. And a lot of investors don't like that. So fundraising has never been easy for us, and at least until we had really meaningful traction. And in the early days, there were a lot of you guys have been there before, but yeah, this round has a minimum $200,000 check. And then you get an email back saying, well, you take 15,000, you say, sure. So plenty of those. And I remember we had one round,

Drew Sanocki:

That was me when you were raising for Cora?

Morgen Newman:

That might've been, yeah.

Drew Sanocki:

And that investor's name is Drew Sanocki.

Morgen Newman:

Yeah, yeah, yeah. We've had plenty of those. But we had one anchor investor. The round was fully lined up. We already had started pulling some capital in and they had a firm commitment for $2 million. And after two days of not returning my call came back saying it would be a half a million to a million dollar check. I can't remember exactly, but I want to say that was maybe 40% of that round size that we have at Delta. We left sitting on our lap with hours to go. So that was a tough one. And then what

Drew Sanocki:

Did you reduce the size of the raise? Or you just pound the phones…

Morgen Newman:

Pound, extend the timeline, a delayed close on the full amount, go back to everyone to ask if their amounts were final. If they want to increase them, call every reference possible. So I've been there a few times and fortunately haven't had to do that again recently. And we had a second time where we had a predetermined capital allocation from a lender and had been working through the paperwork, everything was confirmed, had a prepaid closing fee, and at the 11th hour when we had weeks of cash left on hand because this capital was coming in, we got a call saying, Hey, we're actually not going to give you the money, or if we do the terms are going to be more than painful. And so I think they felt like we were really stuck in a corner with very little cash left. And that was a sweaty situation. And it was the same thing where we dug in and maybe that's for the scrappiness and resilience is a real positive. And we dug in and turned our three weeks of cash into nine weeks of cash and hit the phones and rounded up all of our supporters, and we were able to come out on the other side with certainly, I gained maybe a year of aging in that next month, but we were able to come out the other side with a solution we were happy with and plenty of runway to keep growing.

Drew Sanocki:

Well, this has been really good. It's been great to catch up and hear about Cora. It sounds like those fundraising days are behind you. There's light at the end of the tunnel now, right?

Morgen Newman:

Totally. We're in much better shape. We're scraping at, or I should say scratching at profitability and actually in a good position to take our growth rate way up next year, which gets harder to do. And so I'm excited to do that. We've had a couple of years where we really were focusing more on bottom line and retooling the business for long-term value, and now we can sort of pour some fuel back on, which is

Drew Sanocki:

Exciting. Thanks Morgen.

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