Twelve Days of Commerce: #7 IQBAR
The power of wholesale and a few lessons from my pitch to Will Nitze
If you’ve followed Dollar Commerce for even a day, you’ll know I’m not quick to celebrate venture-backed brands, especially those burning through capital like it’s a rite of passage. Venture money, for all its perks, has had a nasty habit of pushing D2C founders into building inefficient businesses while scaling. The pressure from LPs filters down to the teams at the VCs, who then force their portfolio companies to either show hockey-stick growth or stage a flashy exit, often at the expense of long-term stability.
That said, number seven on my list is a bit of an exception. I say “bit” because, yes, this brand has raised multiple rounds of funding, and if you put a gun to my head, I’d bet there was a ‘capital burn’ phase somewhere along the way. But here’s what I like: CEO/Founder Will Nitze - LinkedIn voice and co-host of Eating Glass - made a series of decisions early that propelled his brand to an outstanding +120% growth this past year. Welcome IQBAR, to my Christmas roster.
I was just enjoying my honey deuce
While in New York earlier this year for work, I ventured down to Flushing Meadows to watch the US Open with friends and colleagues. Persuaded (though it didn’t take much) to try the famous honey-deuce melon and vodka cocktail - a US Open trademark - I headed back up to Armstrong, $30 lighter, to hang with friends and watch Jannik Sinner cruise through to the fourth round.
While sitting next to a mutual friend, I noticed he was snacking on an IQBAR. I turned to him and said, “Oh cool, what do you think of IQBAR? I met the founder a couple of years ago.” He replied, “I actually know Will pretty well. We grew up near each other in Florida. These IQBAR’s are great. How’d you meet Will?” or something along those lines.
As I sipped my honey deuce slowly, savoring every dollar spent, I explained briefly that we’d pitched our paid media services to IQBAR about two years ago when they were exploring new agencies. Igloo was still relatively new as far as agencies go, and it turned out to be an interesting learning experience, one that ultimately changed the way I approach audits with growing venture-backed businesses.
Think bigger
About a year in, we managed to grow our Igloo Portfolio and we’d worked on some fantastic projects with incredible founders.. However, one thing we hadn’t done as much of, was working with businesses who were subscription-based food businesses as well as heavy hitters on the B2B front, who have a strong understanding of the life-time value of their customers. Most of our brands were heavily focused on first purchase profitability with return-on-ad-spend (ROAS) as their north star KPI. These were typically bootstrapped brands generating $3M–$15M in annual revenue, relying on us to lower agency fees and optimize ad-level efficiency with senior operators.
As we worked through with their marketing lead, Will sat quietly, listening in as the team went on with our audit. While we proposed a few changes, shared insights on how to improve efficiency, I realized sometime later we’d spent our time pitching the wrong way. I connected with Will on LinkedIn shortly after, only to realize that, of all the fire posts he writes daily, Will almost never talks about the unit economics of advertising or the financials of the business (unless it’s about growth). He also thinks ROAS is a bunch of bulls**t (at least for his business). Instead, he writes a lot more about the following: building a cult, the power of branding and design, lifetime value and customer experience, competition, and the science behind their products. Occasionally, he covers a few macro topics on e-commerce.
What I didn’t do was put myself in Will’s shoes. If you’ve just raised a bunch of money and go back to your VC and say, “We just spoke to an agency that recommends we keep spend flat, optimize our campaign structure, and slowly scale once we see ROAS improve our efficiency,” they’re likely to tell you to f**k off and continue to scale because, in their eyes, if you’re not growing, you’re shrinking.
For a brand like IQBar, where the direct-to-consumer channel is secondary to Amazon or Costco anyway, they’ll operate on a cost-per-acquisition (CPA) basis. Assuming you have enough data, if your customer’s average lifetime value is 10, 20, 30, or even 100 purchases after acquisition, then the profitability (within reason) of how you acquire your customers can be a little more flexible. If I were Will, I’d be looking for an agency with profitability in mind but one that considers the net impact of the bigger picture - a team that dives into understanding more about the organic lifetime-value of their customers and the incremental impact of each channel. Also, how we can continue to grow as a powerhouse in the CPG space.
Questions I’d ask next time:
What’s your target CPA, not ROAS?
What’s the lifetime value of customers acquired for the first time through your D2C channels?
What’s your subscriber LTV? Do you notice customers shifting to retail bulk purchases instead?
How much budget is available, once we’ve completed efficiency adjustments, to test some out-of-the-box strategies?
Have you tried TV advertising, like working with Tatari?
Have you used Recast or any MMM models to run lift tests and identify which channels drive the most incrementality?
Have you considered implementing Buy With Prime (BWP) to see if it acts as a differentiator for lower-priced SKUs or bundles, like Dr. Squatch has done?
Have you noticed any knock-on effects on D2C channels driven by your Costco or Amazon engines?
Is there strong crossover from Amazon to D2C? Have you run tests between the two channels to see if driving traffic to Amazon achieves a higher conversion rate?
Have you tested landing pages with different pricing to measure customer price sensitivity?
How many geos can we expand to in 2024?
Could we push the B2B offering through paid media somehow?
And, most importantly: Can you get me a round of golf with Will Zalatoris (an IQBAR athlete)?
...etc.
Is IQBAR Profitable and why I agree with wholesale and Amazon
Advertising is hard. Google, Meta, and TikTok are becoming increasingly expensive to sustain creative strategists, designers, and media buyers, especially for bootstrapped brands. In 2024, around 40% of all e-commerce sales were on Amazon, and 50% of total Q4 sales are projected to come from retail. From the start, the IQBAR team has focused heavily on moving product into Costco and maximizing their Amazon engine.
Part of the challenge with wholesale, however, lies in the payment terms. Costco, Target, Walmart, and similar giants have strict policies. Their terms are almost never entirely up-front, and it’s likely they’ll pay you over multiple installments. The difficulty with this model is that brands need to front the cost of their COGS to suppliers in advance, all while supporting growing demand until they generate enough operating income to become profitable on a cash basis rather than an accrual basis, (what's the difference?). The goal is to scale enough to the point where you can finance your own growth where you don’t have to raise. As Will said in a recent post:
Operational excellence allows you to price lower. Lower pricing allows you to open new channels and achieve scale. Scale allows you to achieve profitability. Profitability allows you to exercise optionality. Optionality allows you to say NO when you want, and to have FUN! Point being...get good at ops and you'll feel cool and crack more smiles.
IQBAR raised another $6.8M earlier this year, which given the size and their growth, isn’t actually that radical. Something tells me if they’re not profitable they’re getting really close on a cash-basis. They could already be there, but chose to let go of some secondary shares to new investors. Who knows. But the reality is IQBAR has shown enormous growth on channels, that aren’t completely dependant on Facebook, Google or TikTok like a lot of other venture-backed businesses. By pushing wholesale and Amazon (which carries enormous organic value), and not relying on paid social or paid search as their biggest funnels, I think they’re prime for a big 2025, and who knows, in a few years, maybe even a nine figure exit.