Dealing with Major Market Shifts: Aphrodite’s CEO Jonathan Foltz (Part 4)

Sramana Mitra: Did you have the same marketing strategy?

Jonathan Foltz: Yes. Our expertise was definitely Facebook and Instagram. You can do this with influencer marketing. We can go from $10,000 a day to over $300,000 in less than a week. The scalability is unparalleled with Facebook and Instagram.

Sramana Mitra: I guess there are two questions that come from that. Did you have to do buy-one-get-two-free with this new product?

Jonathan Foltz: We had one advertisement. It was very orange and it stood out. That ad, by itself, made us almost a million image. It was still image. You can take a thousand people that visited your website, pipe it into Facebook, and that gives you look-alike audiences. You are marketing to demographics that are similar to whoever is shopping.

We had to figure out how to get enough traffic to our website from these look-alike audiences. It blew me away with how much you can do with Facebook. I usually do media buying.

Sramana Mitra: How did you finance all the media buying in the beginning?

Jonathan Foltz: In 2016, I sold my reptile company. It was my second time getting a larger sum, but this was direct to myself. I spent a little bit too much money in my personal life. Simultaneously, I went all-in. The first project didn’t work out so well. We were running out of money right before that holiday.

Because we scaled so quickly, they shut down all our accounts. Shopify stopped our accounts for about 30 days. PayPal shut down our account. When you scale so quickly and you didn’t pre-warn them, they will put your account on hold. We were in a tight crunch while I was trying to find more products here in the US. I was just scrambling. In the beginning, I got an MCA in order to get us there until we were profiting enough.

Sramana Mitra: Explain MCA.

Jonathan Foltz: A lot of people in the investment space don’t like MCAs, but when you need money very quickly, they’ll lend you at high rates. Sometimes these rates are as low as 8%. Sometimes, you’re getting 30%. The faster you pay them, the lower they’ll be. When you’re scaling this fast in a short period of time, you won’t get your money until the next Tuesday or Thursday. Sometimes you’re spending 30% just on the marketing piece.

A lot of times, we take MCA’s right before holidays. Once you have a reputation, they move the money much faster. It was mostly MCA’s at that time. Once we got acquired, it was a whole different ball game in the public market.

Sramana Mitra: Besides your own money, did you raise money?

Jonathan Foltz: It was self-financed and loans. My brother and father gave MCA’s. It was not a free loan. Most of it were MCA’s. We were taking high interest rates. There are companies that help out too. We did get loans from PayPal itself.

Sramana Mitra: PayPal, Kabbage, OnDeck.

Jonathan Foltz: Yes, all of those. We took a lot of loans.

Sramana Mitra: When you got the exit, it was all coming to you?

Jonathan Foltz: In 2019, we had people who wanted to buy us. I thought to myself, “We’re doing so well. What happens if I wait one more year and the company is worth more?” That year, we did $7 million to $10.8 million the next year. It was not as profitable as I would have wanted. I was moving to Silicon Valley. I had people who were interested to purchase.

Then the pandemic happened. They completely dropped out. Our international shipping drops out. Thank goodness we had the extra inventory. We didn’t know how perfect it was because we needed that merchandise in April and May because there were not shipments coming in from China. As the pandemic started, we had to cut out all international shipping.

Most of our stuff was fashion jewelry. We were getting worried. Then we decided to adapt. We went into sentimental gift-giving. Three things happened. It was the perfect storm for us. Moms can’t see their kids. Kids can’t see their moms. Mother’s Day is coming up. Stimulus check is coming in. E-commerce had blown up.

Sramana Mitra: Yes, I got story after story of pandemic beneficiaries that are e-commerce companies.

Jonathan Foltz: That’s similar to what happened to us. Right before Mother’s Day, we sold out 75% of our merchandise. We did about almost $400,000 in a single day.

Sramana Mitra: How did you get merchandise at this point?

Jonathan Foltz: We had so much extra merchandise from not hitting our numbers. Shortly thereafter, we were able to get some when things slowed down a bit. We got very lucky.

This segment is part 4 in the series : Dealing with Major Market Shifts: Aphrodite's CEO Jonathan Foltz
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