Matthew Arevalo, Co-founder, Loot Crate
Many of us have been to one of those startup events where you’re divided up into teams and have to whip up a company in the span of a weekend. You make great connections and have some fun, but typically the business idea you were working on for past 48 hours is gone by the time your head hits the pillow.
But Matthew Arevalo and his new friend, and soon-to-be co-founder, realized they were onto something special. While most people went back to their daily lives, Arevalo began dedicating all of his time and energy into this new business. The result was a company called Loot Crate, a subscription service that ships a mystery box of items made for geeks by geeks.
“Subscription boxes had been around, and had existed in the past. But a lot of the focus had been on sampling. It had been on trying to get samples of products into a box and get them out to folks,” says Arevalo. “Loot Crate really was the first company to work directly and say, ‘We’re going to put full-sized apparel, figures, collectibles, and items that pop culture fans gravitate towards and have an emotional connection to.'”
Since that fateful weekend in 2012, the fledgling startup has grown into a powerhouse company with more than 650,000 subscribers, making it the fastest-growing company in the US.
But earning such an accolade took a lot of experimenting, perseverance, and a couple of setbacks along the way, all of which Arevalo was more than happy to share with the Foundr audience.
- The secret to tapping into a niche and creating a true emotional connection with your audience
- What your number one focus should be in the early stage of a fast-growing startup
- Why it’s important to always be looking for feedback from your customers
- How to turn failure into a learning experience
- The difference between running a physical business and a digital one\
Full Transcript of Podcast with Matthew Arevalo
Nathan: Hello and welcome to another episode of the “Foundr Podcast,” my name’s Nathan Chan, and I’m your host, coming to you live from Melbourne, Australia. I’m the CEO of Foundr Magazine and also the host of this podcast.
All right guys, so we’re getting well into 2017, I hope you’ve had a great start to your year. Make sure you keep hustling, make sure you’ve got goals set. Make sure if you haven’t, set a goal pyramid or create a goal pyramid. If you haven’t yet, make sure you check out episode number 56 with Matthew Michalewicz, or episode number 17 where he showcases and shares how to do that. It’s a process and practice that I’ve done for a very long time, it’s incredibly powerful. And for some reason when I write those goals down, they always come to life.
But anyways, enough about me, let’s talk about today’s guest, Matthew Arevalo, the founder of a company called Loot Crate. Wow, I had only just heard of these guys recently, and the way that they came to my attention was from being in the Inc. 5000 list. And if you guys are not familiar, like Inc. do like a 5,000 list where it’s like the fastest growing 5,000 companies in America, and, you know, we have interviewed a lot of founders that are in this list and a lot of founders of companies that are in this list obviously, and pretty much, like the reason that we interview these people, because they’re growing fast companies, they know something that we don’t. They’re sharing their experiences so we can learn from them how we can build fast growth companies too, because that’s what we’re here to do and make an impact in a very, very big way.
And these guys were number one in the Inc. 5000 list for 2016. Their revenue for 2015 was $116.2 million, and their three-year growth was 66,000%.
And Loot Crate is a subscription box essentially for gamers. You know, they do a lot of cool stuff, a lot of other stuff for gamers and enthusiasts around “Harry Potter” or “Game of Thrones” or “Pokémon GO,” etc., etc. But yeah, look, these guys are very, very smart, fast-growth company, fastest growing company in America, and they share a lot of golds, you know?
What can I say? Matthew does not hold back, amazingly humble guy, and we hear all the stories of how they started, how they manage growth. How do you manage the growth of a company that fast? It’s insane.
Anyways, that’s it from me, let’s jump into the show. But before I do, I just want to say, if you are enjoying these episodes, please, please, please do check out the fruits of our labor like the magazine, the blog, any of our free guides or e-books. You know, we’re all about just sharing and providing as much value to you guys as possible. So, make sure you check that out.
All right guys, I hope you have a fantastic day wherever you are around the world, thank you so much for taking the time to listen. Now let’s jump into the show.
The first question I ask everyone that comes on is, how did you get your job?
Matthew: My job here as the Chief Experience Officer and Co-Founder at Loot Crate?
Mathew: That’s actually an interesting story. You know, I had not previously met my co-founder, Chris Davis, who’s our CEO, until I met him at a Los Angeles hackathon that was called Startup Weekend, Los Angeles in 2012. It’s an event where entrepreneurs in the L.A. area come, whether they be developers, or marketers, or you know, finance, or designers, and they all kind of get together and split up into teams, working around an idea, and in 54 hours they present to a judge panel of known kind of VCs and known tech kind of advisors. And then when, you know, prizes and gifts and recognition, some of them go on to continue to do what they kind of came up with during that weekend and some of them don’t, and in that particular case I met Chris.
We worked together on Loot Crate with a group of…a handful of other folks, and at the end of the weekend while we didn’t win first or second place, not even third place, we were the only company when we gave our presentation to say, you know, this is a subscription product where we take credit cards in exchange for what we’re promising, and we already have generated revenue.
And so, at the end of that presentation, we then kind of met afterwards, two weeks later we were starting full time on it as co-founders, and about a couple weeks after that we shipped our first box to 220 people.
Nathan: Fantastic. And look, you guys are experiencing tremendous growth, like the fastest growing company in the U.S., a turnover of $116 million in revenue for 2015. I read a lot about you, I’m really, really excited to speak with you, because I think you’re absolutely nailing it in so many aspects, and I just wanna congratulate you on all the success. But I’m really curious, is this your guys’ first business?
Matthew: Chris had a company before and that was in the food and gaming space, called Gamer Food, that he was running. I was running kind of a small consulting group that was myself, my wife, a couple of other kind of part-time people, and then some collaborators that we would work on projects together. And I was working with companies to help develop their community, to focus their kind of brand positioning, to build up their production efforts, and kind of sunsetted all of that beforehand, and Chris as well kind of took…you know, had some previous work with startups in the past, and we kind of just both stopped doing both of those things.
Previously I’ve worked at Apple and Microsoft, a security company called Trend Micro out of Japan, and just a handful of positions that I feel; thankfully, kind of just like Chris, given us the background experience especially during a really important time for brands’ evolution through social, to put us in a really good position.
Nathan: Yeah, I see. So, it sounds like, you know, still recently like grain, like…so I’m really curious, like do you guys have an unfair competitive advantage like when you first started Loot Crate? If you could nail it, both you and Chris, what was your unfair competitive advantage that no one in the marketplace had to be able to achieve what you guys have achieved at such a fast rate?
Matthew: Well, I think it’s one of those things where, you know, subscription boxes had been around and had existed in the past, but a lot of the focus had been on sampling, it had been on, you know, trying to get samples of products into a box, and give them out to folks, and that product would be, you know, at a very low cost, and you could put it in the same size kind of small little pink or blue box, and send it out. And while they had community engagement and they had some sort of ties to the brands that were in the boxes they were shipping, Loot Crate really was the first company to work directly and say we’re gonna put full size apparel figures, collectibles, and items that your fans gravitate towards and have an emotional connection to, and do it in such a way that our community dictates what is going to be in there.
So beyond just selecting, you know, I’m interested in this type of thing and that type of thing, and the box being customized, everybody has this shared experience, and everybody in our community contributes to where we focus as a business and how we go about doing things. So, I believe that it was really just more about our commitment and focus to doing something new for an audience that we were fans of already. You know, both Chris and I are very interested in the entertainment space for video game aficionados, and it just…it seemed to be something that made sense at the time.
Nathan: Interesting. So like when you go to your website, one thing I noted which was interesting is, you specifically say, you know, geek subscription box for gamers and nerds. And before, you know, I didn’t really know…I don’t really know personally, to be honest, much about this market. Like I love “Overwatch,” that’s a great game, epic game that I love to play with my little brother. But I don’t really know much about this market, but one thing I can tell you that I’ve noticed, we were just running a Kickstarter campaign at the moment for one of our products, and there was one like cards game that has raised, you know, $6.5 million, you know, I guess targeting that market, and it raised like $6.5 million, there was like 30 days to go. It seems very, very…I guess the people that are in that market are very, I guess, engaged.
Matthew: Yeah. I think this is a demographic of individuals who have been having conversations about what they were interested in online, they were purchasing items and choosing to showcase their fandom in ways that was a little more subtle, and that the general rise of acceptance of pop culture and of, you know people really being…instead of just having that Captain America figure on their desk, being comfortable to wear a Captain America t-shirt and jeans to work to say like, “Hey, you know, I like comics, I’m a fan of Marvel and Captain America.” That’s shift because of the way that the entertainment studios were gravitating more towards this kind of geek and pop culture was very advantageous for us and allowed us to serve that market with a unique product that they hadn’t seen before.
And I think the way that it became a celebration every month and that we would change the themes up, and that we weren’t just selling a single product or a single figure line, or something that was very unique, and we’re happy to be serving a number of fans in different niches from being the official WWE subscription service, as well as the official “Halo” subscription service with Microsoft. We’ve got some really amazing products that are coming out in 2017, and those two products I just mentioned just scratch the surface. We have over 10 subscription lines that makes it perfect for anybody who considers himself a fan of something and wants to join in that community and get exclusive licensed items that they can’t get anywhere else.
Nathan: Yeah, wow. Okay. You guys really nailing it. So, just to circle back, you said to me that Startup Weekend, you guys are the only people that first had revenue, you’re the only ones to have revenue. So does that mean that you sold within the two-day period?
Matthew: Yeah, during that 54 hours we set up using, you know, kind of off-the-shelf platforms that would allow us to accept credit card payments, to create a website. We used Twitter Bootstrap actually just to kind of build the first site, and solicited…you know, I went through my roller decks of people that I knew in the entertainment kind of geek space contacts that I’d made over the years, and said, “Hey, I’m doing this hackathon,” and Chris did his outreach as well. And we said, “Hey, we’re doing this, try and share with your friends, this is something that’s interesting.” And you know, we didn’t get hundreds and hundreds and hundreds of people to sign up, but during that first month to get 220 people to sign up for the service and receive the boxes, and during that weekend to just get, you know, a few dozen people to say, this is a company that didn’t exist hours ago, yet this is an interesting concept, the pricing is right. All of it was there, and you know, our very first subscriber came from Canada, her name’s Ala Chan [SP], and to this day she’s still a subscriber with us years later and we see her at shows and everything.
And the way she came across it was she just saw a link that was posted by her friend, and she went to the website, she thought it was interesting, she signed up and, you know, she stayed with us ever since.
And we have over 650,000 subscribers in 35 countries today, and it’s a very engaged and very passionate audience that we’re proud to represent, and to provide, you know, fun experiences for through our products, through our digital communities that we have online, and through an event presence that we have at shows around the world.
Nathan: Yeah, amazing. Okay. So, after the hackathon, you and Chris, you went full time on it. What happened next?
Matthew: The growth was very quick, you know, in 2012, we went from buying just white boxes, you know, from cardboard manufacturers and laying them out on the floor and just walking by and being like, “Oh, we have to drop this item in here and this item there. Okay, now we have the 220 cards. Well, let’s do membership cards for people, and we gotta put this card here and here,” and it was a very manual process. We even just bought a couple of stamps that just had the logo Loot Crate on them from a local company here in L.A., and hand-stamped each box and we did that hand stamping, hand…us packing it, Chris and I as well for a few months before we started using a service called TaskRabbit to bring in some people who were gonna be able to help us out with that, and it was just amazing to see.
You know, went from a whole wall of boxes to a room, to us filling up the back of a car and making a couple of trips to the post office nearby, to the post office dropping off a giant flatbed…not flatbed, but a giant shipping container and trucks, and, you know, it just continued to just get bigger and bigger and bigger.
And to this day we still run our own operations out of a separate facility. You know, we learned from scratch, we went from hand packing the boxes to having whole automated systems and over 300 people who ship out 70,000 boxes a day out of a separate warehouse, and I think that complete kind of control of the operation allows us to be nimble, and allows us to create really exceptional experiences that go from everything from the corrugate that we ship it to, to making sure that you get the right tracking and the right information, everything when you need it.
Nathan: I see. And when it comes to…you said that things were growing really fast, what besides an amazing product and really knowing your market was fueling that growth?
Matthew: A lot of the growth came from us celebrating the way that our community was experiencing the products that we were putting in the crate. So you know, I devoted the entire portion of my day to reaching out personally to these individuals to showcase the photos that they were putting on Instagram, to develop some videos of us around the office, kind of peeling back the curtain and saying like we’re not this big, giant company. While the items we have in here are, you know, licensed and interesting, we are just a group of fans like you.
And I think allowing people to see that story happen, created a base of subscribers and community that wanted to go on this journey with us, and that we’re able to tell their friends more of a story than this is just a great product that I was able to sign up for at some website, but they would tell the stories about meeting us at events, or the funny videos we were doing from the office, or you have to see what the packing operation is. Like I watched it three months ago and then they just shared a video, what it looks like today, thanking us for the growth, and that kind of conversation and brand kind of awareness was very strong for us.
And we also focused on items very early on that are similar, just today they’re just more, you know, data driven and back then it was, you know, just kind of how we felt as fans. But we focused on items that were shareable, that were unique, and that were interesting, things that you wanted to show to your friends and family, and then as a company we didn’t just bolt social on or bolt on community engagement, from day one we had a Facebook page, from day one we had a Twitter account.
And you know, we came from a background of individuals that use these platforms as a method of determining a value and an interest in companies and their products. And so we took that same information, that same experience and built it into a fan platform that we’re very proud of today and that we’re happy to continue to see grow.
Nathan: So, you would say that something that was fueling a lot of the traction was all the social media platforms? Did you work at mastering one at a time, or it just kind of… you know, from fostering the community and sharing your content behind the scenes, all the channels really grow? Was there any in particular that really stood out?
Matthew: Well, anything visual was very big. You know, so things like Instagram and YouTube were very big for us then. You know, in 2012, 2013, YouTube and unboxing videos, and you know, taking the time, whether you were an influencer with a large audience or just an everyday person, was very open and very mature at that point. We were here in L.A. and we had direct relationships with, you know, some of the agencies that represent big talent, that were influencers on these social platforms. And so was mostly visual, but there was a lot of production involved, you know, like the same kind of care and attention that Chris was giving to the business infrastructure, making sure that we were providing great support and great service, and you know, as our CEO, focusing on everything the CEO needs to focus on.
You know, it was long days, you know, it was 14-hour days, sometimes 20-hour days, 7 days a week, building the infrastructure that today is a community department, and building the infrastructure today that is a service design organization.
And you know, it wasn’t any one platform that was bigger, I think it was all together, but if I had to say the ones that did best, seeing as how we ship a physical product, a lot of it was the more visual platforms and our usage of them.
Nathan: I see. And is there any particular growth hacks that you could attribute to the growth? I know like our audience loves growth hacking.
Matthew: You know, I think it was just…we tried a lot of various different things, and we were not really averse to risking some things and seeing what the feedback would be. You know, and when we would try something and it would have either not as positive or even a slight kind of negative reaction from the community, we were quick to recognize that, to let the community know that we hear them and move in a different direction.
There isn’t…you know, I can’t really think of any specific things like, oh, we did this one growth hack trick that did this. A lot of it was focusing on, you know, the fact that there wasn’t any kind of shortcuts to get to where we wanted to go, and thinking about this as a long-term business, thinking about this as this isn’t an app we’re trying to develop to be super valuable and our exit strategy is this. Or, hey, we wanna build, you know, this subscription box company that will someday just be an e-commerce play. We truly did believe in those early days that we were creating a community that was gonna be a brand of brands, and a house of brands, and something that would be able to live on.
And so I think the result of that kind of strategy of letting people know that this is something that is ever evolving and including them in the process with our community, as well as limiting any kind of friction or any roadblocks that would allow them to share their experiences, not just with their friends and family, but with us, was the most important thing that we did early on as far as growth was concerned.
Nathan: Interesting. You know, this is really fascinating because I guess what I was looking for as you might have said to me, you know, we have like Dropbox where they have that, you know, amazing growth hack where it’s a viral loop where it’s refer a friend and you get a free one gig if you get a sign up, and that just kind of flowed on, or if you had something. Yeah, so, nothing of the sort that has been…
Matthew: I mean, we did…again, like my previous experience before Loot Crate was working with a lot of brands in doing these types of things, and building a community that is authentic and passionate, and you know, giving the right tools that they need in order to express themselves. So, it was a suite of different ideas and strategies, all of which are things that are tried and true, and then some things that, you know, we tried based off of just a suspicion of something that might work. So everything from referral programs and influencer network, working with YouTubers to allow them to create content around our products every month, our relationships where we started to get closer with the brands and the studios, and find out what their needs were, where their fans were located, what they were talking about, you know, it was really just a very broad spread of things.
And while it is infinitely more complicated today, and, you know, we have data scientists and marketing analysts and, you know, people who are responsible for a lot of really complex data, back then it was…the strategy was just create the best product you can, make it as easy to share as possible, stay authentic, you know, have a true brand voice. And, you know, things just kind of fell into place as we continued to just reinvest in the business.
Nathan: Got you. Can you talk to us about investors? Are you guys…you know, you bootstrapped?
Matthew: Oh yeah, we will. We bootstrapped for the first…that growth of the company, everything that you see when it comes to any kind of awards or listings that we have, that growth came prior to any kind of funding or investment. So, the growth that we…the growth recognition that we’ve seen was entirely based off of bootstrapping the company and reinvesting our resources back into it. It was only until earlier this year that we took a strategic series A round with some really great partners to kind of further the growth of the business and to give us access to advisors and resources that would allow us to kind of take this thing to the next level.
Nathan: Yeah, wow. That’s really interesting. So, listing on the Inc. 5000 was a good move you think?
Matthew: I think it was something that allowed us to be able to share and talk about, you know, how it is we built what we did, and it just served as a good method for us to show other companies and other businesses what it is we do and why we do it, and what our capabilities could be. You know, and by that same token, you know, it is always great to get some extra press for your business, and was something that we really hadn’t focused on in those first early years, and so we were happy to be able to share with our community that recognition, and, you know, ultimately every Looter out there that shares in that growth and that contributed to it. So, we were very proud of our community and our employees, and the hard work that we put in, in order to get that.
You know, all awards are a recognition and validation that we’re on the right path, than it’s, while we can look at our community and get that as a baseline of how we’re doing in an engagement fashion, these types of rewards allow us to be able to see that our feedback loop is working and that we’re on the right path from a business perspective, and that’s…it was really great for us. We’re really proud of that.
Nathan: Yeah, no, you guys are doing amazing stuff. So, for the series A, are you able to share details?
Matthew: I mean, a lot of it has been published already, you know, the round was led by a really great L.A. company which is Upfront Ventures, we also had Time Incorporated as an investor, Robert Downey Junior’s Downey Ventures, Sterling.VC off the East Coast, and, you know, a number of partners that we work together on that round to kind of get us in the right place for the next couple of years.
And you know, from a strategic perspective they’ve been really great partners for us, and, yeah, we’re really excited about it.
Nathan: Hey guys, just wanted to take a quick second to let you know about our amazing sponsor for today’s episode, Freshdesk. Freshdesk has an amazing suite of products for all your support, ITSM, In-app, and live chat, and CRM needs. Teams using Freshdesk come in all shapes and sizes, and based all over the world. Be sure to check them out on their website, freshdesk.com, and remember, when you support our sponsors, you’re also supporting the show.
So yeah, in the early days you were fueling growth from reinvesting profit. To move that many boxes though, like physical products is quite a capital-intensive business. How are you managing cash flow?
Matthew: Well, the subscription businesses have their pros and cons, and like when a subscription business is not working and, you know, you have less subscribers in one month than the month you had before, because somehow your product offering is just that, it is just product, you know, our investment in a community, our investment in an experience-driven platform that is ultimately of course centered around the products that we ship, but I think the value that our subscribers give to us isn’t just based around just those items. While it may start there and that is the biggest thing, you know, it really is more about the overall experience of being a subscriber of Loot Crate. And I think, you know, subscribers are willing to invest their time with us in a longer, in a more well-defined path that is great as a subscription box company to be able to do so.
Nathan: I see. So, how did you manage scale?
Matthew: Continuing, you know, again, it was just the reinvestment of our resources, whether it be financial or, you know, actual personnel, we were thankfully able to bring on a lot of people who even today some of our top C-level recent employees who’ve come on board, are people who knew about Loot Crate and were fans about it beforehand. So, you know, it wasn’t very difficult for us to find people who wanted to go on this journey with us. You know, some of them worked at organizations where they had to focus on a single thing like growing a particular film business or pushing a specific product, and it was really great to find people who wanted to come on board early and invest their time and energy into helping us grow.
So, it was a matter of figuring out how to deal with the messiness that scaling like this is, and, you know, there are challenges from a growth perspective that we had to go through, and we really did learn a lot. You know, we made some hiccups here and there, but we always focused on making sure that it never negatively impacted the service that we provided. And I think that consistency in delivery of the physical products and of the experience that we promised our subscribers, was something that really helped us, you know, be able to continue to scale and grow in the way that we did.
Nathan: I see. And you said you’d learned a lot of hard lessons and you had some hard times, and…because I agree, like managing growth is difficult, especially at your scale, so that’s why I asked how you manage it. Can you tell us some stories or some things that our audience could learn from?
Matthew: Well, you know, shipping a physical product is complex, and there’s a lot of different things from, you know, the logistics and operation side that Chris and I didn’t have the previous experience to do. You know, we’re at the whim of shipping and of factories and things of that nature. So, it took us a little while to understand how things worked from an international shipping perspective. You know, the fact that we had just a small office space in order to work out of and how to, you know, meet the space demands of working…having a team that’s really excited and were surrounded by boxes everywhere.
So, you know, we learned about OSHA regulations, we learned about what it takes to import products. And, you know, one thing that we did kind of in the first year was we had these really great pixel sunglasses that were orange and black like our company colors, and we actually found out that because they had UV protection, we actually had to register as a medical device importer, and we had to scramble and get the paperwork together and everything, here we are, we’re like, oh, these would just be great, you know, great sunglasses in August and, you know…” or during the summer rather, and people are gonna really love it. And Chris is like on the phone pretty much 24 hours just trying to talk to the port and figure out like what are the delays and what paperwork do we need and everything.
You know, so it was definitely something that we had to learn as we went along, but the shipments went out on time, and even bigger issues where there were port delays and strikes in the Los Angeles shipping ports, we were able to navigate around and successfully deliver the product on time as promised. That was even during the holidays. It was things like that, just silly things like you can’t just go and buy a forklift, no, you need to have training, and what kind of forklift should you buy? And should it be diesel or electric? And oh, we need to put like a new charging station in the warehouse because it’s a high voltage thing.
Like all of those things are just one out of millions of things that we had to deal with back then and try and solve, and today with all the products that we have, it’s even more complex. But thankfully we have an incredibly talented and diverse creative team who works on solving those things every day.
And I think even our Looter Community doesn’t really kind of understand everything that goes into it, and we’re doing a little bit more to kind of show behind the scenes what it takes to create these products from scratch and create this kind of exclusive experience.
But it was definitely some long hours and some lessons that we had to kind of lick our wounds and figure out how to do what we said we were going to do, and we always focus on making sure the customer would never be impacted, and if so, we specifically called it out and didn’t try and sugarcoat it, we just said, “We learned from this and we’re gonna do better, and we fixed the situation and it’s not gonna happen again.”
Nathan: I see. And talk to me about sacrifices. You know, to get where you guys are today, you in particular as a founder, what are…can you share with us some of the sacrifices that you’ve had to make to get where you are today?
Matthew: Thankfully, for both Chris and I, again, this is a business that is centered around things that we are passionate about, you know? While it is, you know, long, and especially back then, you know, was long hours of just like coming in, working the entire day, “Oh, there’s this thing…fire needs to be put out, oh, but there’s this really great thing that happens here,” and then coming home late at night.
You know, at the end of the day we’re working with really amazing products and partners like Marvel and Microsoft and Sony and Fox, and, you know, to be able to see the smile on people’s faces when they took a chance on us because we are a mystery, and we told them we’re gonna deliver this amazing box centered around a theme, and we see the photos online, we see the families doing unboxings together, we see people telling us stories about walking down the street and seeing somebody else who has the exclusive t-shirt for that month, and it’s spurring some sort of conversation and creating friendships, it really makes those sacrifices worthwhile.
And, you know, my wife works full time here at the company as well, and we have an amazing 15-year-old son, and we’re still able to make it work. You know, we’re thankful to work at a company that really cherishes a work-life balance, and Chris and I put in those really, really, really hard years in order for us to have a culture here about it. And I said 15-year-old, I meant 15 month. I don’t have a 15-year-old son, that’s 15-month son, who’s a little easier to distract with things like YouTube videos and toy cars.
But, you know, we do make it work, and we make sure that we have a culture and a work environment that is conducive to a nice balance.
Nathan: Amazing. And can you tell me…you said that you guys worked…did work a lot of hours in the early days. When did things get easier?
Matthew: For myself, you know, while we both are co-founders, you know, Chris and I realized that the problems change, but it’s not really any easier, I would say. You know, I think we could have brought in some folks a little bit earlier on, and I think if we did this again, the way that we would structure bringing in, you know, some experienced leadership around certain aspects of the business would probably have occurred a little earlier. I don’t think it was pride where we’re like, “We can do this ourselves.” It was just a matter of we didn’t know what we didn’t know. We didn’t realize the complications of international shipping or vendor relations and things.
So, you know, things did become a little bit easier as we brought on some…as I said, really talented people from like Mattel and TrueCar, and, you know, people who worked at studios and video game companies. But, you know, it is tough to be able to have a business where you’re consistently seeing growth and trying to roll out more and more products to serve a need that you see that’s out there, it’s tough but it’s fun. And you know, Chris and I as entrepreneurs really…we like solving challenges, and we like sharing that experience with others. And, you know, we get by.
Nathan: You mentioned also around, you said that you got the pricing right in the early days. What did you mean by that?
Matthew: Well, I mean, we thought about the pricing for about 10 minutes, and realized that this is…you know, that at the time, you know, a nice solid price was about $20 or so to get a box that would be worth about double that, that seemed to be the appetite for people on a monthly basis. I think we’d have a little more struggle these days if we had just started the company right now, just because of where everybody’s dollar is going, you know, Hulu and HBO and Netflix and Spotify and everything.
But at the time, $20 seemed to be right, and as we had a gamer kind of background to us, we pitched the idea of 1337, which is kind of Leet speak for Leet in the gamer culture, and then just tacked on a $6 shipping charge on top of that to say, “Hey, the final price is $19.37.” And even that…the idea that it’s $13.37, and we were talking to a lot of gamers early on, it spoke to them, they’re like, “Oh, I get it.” Like it was authentic, it wasn’t like, you know, a big, stuffy brand being like, “Let’s put emoticons in our subject line emails, that’s what the kids like.” It was like we didn’t think about doing it as a gimmick, we were just like, “That would be kind of cool, let’s do it.”
I think back of like with Apple when Steve Jobs and Wozniak got the price for their very first computer they were selling, their number was a little bit more potentially controversial, being $666.66, but that’s what they decided to price it. And, you know, it was like it meant something, and it was just small little things like that that we would rally around where people are like, what’s your price? Like $13.37, and they’re like, oh 1337, you know? And it was just small little things like that that allowed us to do it.
But it ended up being the right…you know, we decided on $20, and to this day we’re still…we have different products at different price points, but our core product has stayed the same and it seems to be doing well. We have a really great lifetime value of a customer and really awesome metrics around people staying with us and going on that experience.
Because, you know, to be honest, that monthly amount is not just for the products in the box, it’s for the overall experience you get to have. You know, the fact that we ship everywhere in the world around the same time to create this big, social movement online of everybody anticipating a crate and then, boom, it’s there, and people are sharing it and tagging things, the spoiler alerts, and having fun with the way that they use the products and the way they photograph it and unbox it. You know, that’s a really big part of our company culture, and that celebration of fandom is something that is always gonna be something that we’re gonna focus on.
Nathan: Awesome. Look, we have to work towards wrapping up. A couple questions, one, you shared about your metrics. Are you able to share like retention churn, those kind of numbers, or…
Matthew: A lot of those kind of business-related items, you know, as a private company, you know, we’re very proud of them, but we try and save those kind of details for other outlets, and we hope to be making some announcements next year that will kind of share a little bit more around those particular details. I’m sure you can understand that like it’s something that a lot of people are working on and, you know, it’s just not something that we really as a company really kind of center around divulging.
Nathan: Yeah. No, no stress at all. Then a couple of last questions. Can you talk to us about, you know, if you were to order a Loot Crate, what the experience looks like, and I guess how you guys are creating it?
Matthew: Sure. So, we have a team…we have, you know, a great sized organization here of people who are product designers, illustrators, designers, copywriters, and everything that we do is focused around a theme. And so, once we…and those themes are generally based around major entertainment tech polls, things like movie releases, TV shows coming back on the air, video game releases and everything. We then work with our teams in-house, listen to all…look at all the data and the feedback that we’ve gotten from our subscribers over the years of what they value and the item types they’re looking for, and we craft a box together that even the corrugate that is shipped in itself is bespoke and changes every month, and sometimes has some sort of interesting and interactive element to it.
We then say, hey, you know, this month we’re celebrating this theme, and these are the franchises that are gonna be in it, and you’re guaranteed a t-shirt as well as, you know, a few other items that we kind of play with the mystery aspect of it. You go to our website and sign up, we then interact with you in different touch points between when you sign up and when you get your crate with interesting games to play, content to view, music to listen to, other Looters in the community who will welcome you and allow you to be however deep you wanna be involved with the community, you get to kind of choose, and then you get your crate.
And your crate arrives, you open it up, and the items inside are generally…almost 90% are designed by us and are exclusive, or with some really great partners, and you share your photos online and you talk about the things you’re interested in, and you see how…you watch everybody else in the community kind of have that same experience, and really get excited about doing it all over again the next month. And you get to decide, you know, what kind of commitment you’d like to have with us, and we have a large variety of different products based off of different fandoms.
So if you’re just a diehard gaming fan, we have Loot Gaming for you and you’ll always get just gaming products that are there. If you’re a fan of MMA, we have Loot MMA. If you’d like to go deeper into a specific franchise, like “Halo” or “Firefly,” or the world of Harry Potter, we also have things for you for that.
But the through line that we have that are all these different products is the focus on 100% customer satisfaction and support, an experience that goes beyond the products that are in there, and a commitment to being able to provide you with something that you’ve never seen before, and the actual feedback loop that…what we wanna hear, how did we do? What can we do better? And that kind of journey is something that, you know, some of our subscribers, something going on with us from day one, and there are gonna be some people who are gonna find out about the company from this podcast and what you put out there. And we welcome them and are ready to have them join our community and become a Looter.
Nathan: Yeah, amazing. Two last questions. You said that you’d be welcomed into the community. Do you have a forum? I noticed you’re on Subreddit. Like, you know, what is facilitating that community welcoming and interaction? Not just, yeah, I’m really curious around that.
Matthew: Well, we make sure to share within the corrugate of the box as well as the magazine that we produce inside of the crates, and our social presence everywhere, your ability to be able to interact with us and others. Right now a lot of it is on non-owned social platforms like Twitter and Facebook, but we also run our own Minecraft server, we have a video game club on Xbox Live, now that Xbox is supporting the idea of clubs. We have our own Steam group, so if you’re interested in Indie games and the Steam platform and you can become part of that group. You know, it really extends in quite a different way.
And the biggest thing that we have right now is with Halo we’ve been able to work with them to create something called Fireteam Apollo, which is kind of the sub community of Halo fans that are subscribers, so the Halo Legendary Crate, which is the crate that we do every other month with Microsoft. And that group not only exists online, but we’ve actually been able to expand into the world of Halo, and that’s something really special. So the crates that you get kind of induct you into this new organization, and you wear apparel and have items in the crate that is from the world of Halo, but also is part of this new community. And I think that’s the best example of, you know, a story-driven and narrative-driven community that exists through the crate now in the expanded world of Halo, as well as online.
Nathan: Yeah, amazing. Okay. Awesome. Well, look, two last questions before you go, Matthew. I’ve really picked your brain man, so look, thank you so much for all your time, you’ve been very generous and you’ve shared a lot of gold with our community.
One, three of your top biggest lessons that you’ve learned on running one of the…like the fastest growing company in America right now, well, one of. So, three top, you know, lessons that you’ve learned as super action items for our audience, and then the last question would be the best place people can find out more about yourself and Loot Crate.
Matthew: I think the…if I was to pick three things, the first thing would be, you know, to make sure that you are really telling a story that you believe in, that the marketing and the promotion that you’re doing is not what you think your audience wants to hear, but make sure that you actually have a good understanding of that community who you’re trying to reach and that consumer that you’re trying to reach, and you know, really integrate yourself into it. We were thankful enough and lucky enough that we were, you know, very large fans and part of this community before it existed as a product, and so we were able to really integrate ourselves into it. I think some brands struggle a little bit with too much of like what is the right positioning, the right words we should use and everything, and you really kind of just need to really dive into it and really live and breathe it every day.
As you can see the office that I’m in right now, you know, it’s surrounded by different things that inspire me as a creator and as an entrepreneur, that are all tied to pop culture.
But I think, you know, the idea that, you know, scaling is messy and then that’s okay. You know, if you’re not failing, you’re not really getting the opportunity to learn new things. So the second thing would be to, you know, accept that there are going to be situations that are gonna be outside of your control, and these are opportunities for you to be able to learn and adapt from it, and make sure that you have a retrospective, that you don’t just resolve that problem and we’re moving on. Take the time, even if it means more time afterhours, early mornings, whatever it means to be, to meet with your team and to discuss things and even, you know, reflect internally, what are some things that we’ve learned from this and how can we prevent this from happening, and how can it make this a better business?
But I think the third thing would be is, you know, there are still companies today that are run by entrepreneurs or entrepreneurs that have an idea, and they believe that, you know, the method of getting things out there, that there’s this big difference between traditional marketing and digital marketing. And, you know, our integration into making sure that social was very…a big part of what we did early on, and that that was the way that we’d be able to communicate, because we are shipping everywhere with our community, was really important.
I know that sounds pretty basic, like you know, make sure you have social ahead of time, but that would be a whole other conversation or talk about, you know, what is the tone and the voice, what is the type of content you should be celebrating. But you should have a strategy, you should have some…you know, granted when we started this company in 54 hours, it’s not like we sat around for days talking about what our strategy was going to be for social, but we had experience prior to that that allowed us to make sure that the authenticity was, you know, the social strategy that we rally behind, and that it wasn’t just a thing that we would just say that sounded good, but we really did live it. And we allowed people to view it, to really like…you know, like, “Here it is.” And I think that transparency and telling our story early on was very important, and I would encourage other entrepreneurs to do the same thing.
And I’m sorry, the last question?
Nathan: Thank you so much, that was amazing. The last question is, the best place people can go to find out more about Loot Crate or yourself.
Matthew: Oh, so, you know, myself I’ll save for after. But to learn about Loot Crate, you know, you can use the hash tag #LootCrate on pretty much any social channel, and, you know, pull up any Instagram tagged Loot Crate or tweets tagged Loot Crate, and not only see the content that we create, but all the amazing content and sharing that our community does. Obviously our website at lootcrate.com is a…that’s a good hub to learn about our products and what we do.
We also have an internal production team that produces video content called Loot Crate studios on YouTube, which is just youtube.com/lootcrate if you’re more visual and you wanna watch unboxings and see kind of what our company culture is all about.
Myself, I have a website, mattarevalo.me, as well as on LinkedIn, and I do encourage, you know, I have it open that if people do want to reach out and other entrepreneurs wanna discuss or talk about things, you know, and trade strategies and ideas and everything, is something that I really believe in, that you know, by working together we can really kind of do some really amazing things. So, that’s basically it.
Nathan: Fantastic. Well, look, thank you so much for your time, Matthew, this has been incredible.
Matthew: Thank you very much, Nathan, and I’m happy to be able to spend this time with you. Thank you.
Key Resources From Our Interview With Matthew Arevalo