The Come Up
The Come Up
Jun 3, 2021
Matthias Metternich — CEO of Art of Sport on Being a 5x Founder, Skincare for Athletes, and Pitching Kobe Bryant
Play • 1 hr 19 min

Matthias Matternich is the co-founder and CEO of Art of Sport. We discuss growing up as the son of a German ambassador, starting his first company at 14, when Brexit devalued his investment capital, selling women's smimwear, pitching Kobe Bryant, his 500 mile trek in the Alps, and redefining body and skincare for athletes. 

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EPISODE TRANSCRIPT:

Chris Erwin:

Hi, I'm Chris Erwin. Welcome to The Come Up. A podcast that interviews entrepreneurs and leaders.

 

Matthias Metternich:

I remember Brian and I thinking, well, who represents the kind of tenacity, and focus, and mental and physical commitment to being the best version of yourself possible. Done so successfully that they've transcended their sport. And it really took us almost no time to say, well, that's Kobe Bryant. And we asked ourselves, "Do we think we could get him involved?" And our path took us to his door.

 

Chris Erwin:

This week's episode features Matthias Metternich, the co-founder and CEO of Art of Sport. Matthias was born in Germany. And because his father was an ambassador, he had lived in nearly 10 different countries by his teens. And he began coding at age seven, and began pursuing it seriously a couple of years later while living in Mongolia, as it helped him pass the time during the harsh winters. Soon after Matthias' entrepreneurial streak kicked off. He started his first company at 14, and since then started over five businesses, ranging from women's swimwear and enterprise software to his current company, Art of Sport, where he's redefining body and skincare products for athletes.

 

Chris Erwin:

So this interview is a bit on the long side and covers more topics than most. It's because Matthias' intellect and passion is far reaching. We discuss why he's not a good video game developer. How the founder of MySpace became his mentor during undergrad, how Brexit devalued one of his companies, and what it was like to recruit basketball legend Kobe Bryant as a co-founder. All right, let's get into it. 

Let's rewind a bit. You had told me that you originally grew up in Germany. Tell me about that and your household.

 

Matthias Metternich:

I grew up in Germany until about the age of eight months. So it wasn't my whole life. It was a very short moment. I was born there and then my dad was in the foreign service. So every three years we would get posted somewhere else. And so, from the age of eight months onward until really, I mean, even to this point, I've been moving around the world every two to three years. So we moved to the Soviet Union and I lived in Leningrad, then we moved to Los Angeles, then we moved to Mongolia, then we moved to the Middle East. And so there's been a lot of transition in my life. So that was a very interesting experience, that was quite formative for me.

 

Matthias Metternich:

But went back to Germany for high school for about two or three years for boarding school. And then I continue to... I went back for college for a very brief period, and then always go back whenever I have time to see friends and family, but I'm a bit of a nomad.

 

Chris Erwin:

What was your father doing in the foreign service?

 

Matthias Metternich:

My dad was an ambassador. He represented the German government in different countries. So that meant that he would often be the man in charge to present German interests, build relationships politically, economically, drive through cultural agendas. And it was an interesting time because that was really... His formative years in the service were deep within the cold war era. So there was a lot of really exciting espionage, nuclear proliferation, all kinds of stuff like that is what I grew up with. And I do remember it was even a period where if your listeners remember their history, there was an east and west Germany for about 40 years.

 

Matthias Metternich:

And so east Germany had embassies in countries that west Germany didn't. But when the wall fell and east and west Germany came back together, my dad was responsible for actually going to these places in these countries that west Germany didn't have a political presence and taking over those embassies. So I remember a lot of the places I lived was right next to the "access of evil" types of Eastern Soviet bloc embassies, like North Korea and whatnot. And if I kicked the ball over the fence in the wrong way, there would be a military procession where they'd pass the soccer ball back to us.

 

Chris Erwin:

What a unique childhood. Now, did that peak your interest, and did you think about going into government or the foreign service?

 

Matthias Metternich:

So my family has been in the political arena for several hundred years, and there's a lot of tradition there that I think my father [inaudible 00:04:25] spouse. But I think he was actually quite remarkably aware of how the role was changing in a more and more connected world. And what does a public servant, government figure head do in a foreign country where now you have video conferencing, you're on a jet, you're there in a couple hours. So there's diminishing opportunities over time as we become more and more connected. And because of his role, he was also always interfacing with and exposing me to really remarkable walks of life, business people who are sometimes coming to China for the first time, like large industrialists, well-known household names who would be coming and stopping through the house and having dinner with us.

 

Matthias Metternich:

And you'd hear their stories about this global world that was changing and forming. And in that context of the diplomats role diminishing over time or sunsetting a little bit on golden era of what that diplomat would do. And I don't want to take anything away from those folks doing that. It's still a very important part of the civil society and political arena. But with that sunsetting and this coming online of this connected industrial world, for me as a kid, I saw very clearly the writing on the wall that committing my time to something that was sunsetting versus something I was actually passionate about, which was shaping the planet or trying to shape the planet in some way, that's where my future was.

 

Chris Erwin:

And so speaking to that theme, which I think also relates to the compression and changing of information cycles and dynamics, you mentioned that at a pretty early age you had bought your first computer or connected to the internet and you were coding very young?

 

Matthias Metternich:

Yes.

 

Chris Erwin:

When did that first happen? Did that start in Mongolia or another country?

 

Matthias Metternich:

It started in Los Angeles. My parents bought it, and I was about seven but really I appropriated it fully when I was nine. And we moved to Mongolia, and Mongolia as a really pretty horrible.... Really beautiful country, but it has a very harsh winter, which can last upwards of six months. And so when you're in a place like that, there's only so much your parents are willing to entertain you. I found a lot of entertainment from the computer, and folks in the embassy who knew their way around this. And there was one guy in particular who was a bit of a hacker gadgets guy. And so, he gave me a running start at it, but I taught myself how to code because I wanted to make games for myself. I had exhausted the two games that I had.

 

Matthias Metternich:

And that took me on a journey into figuring out how to connect to the internet, talking to people all over the world at a time when very few adults knew how to do this. I felt incredibly empowered. And then I had the tools to come up with ideas and articulate those using code and using design. And I realized very quickly that my video games were pretty shitty because I was actually not a very good storyteller, but I was good at some of the code. And that's where I started to lose myself in the world of storytelling, and design, and empathy, and understanding what connects with people and why people get inspired or sad or happy or excited. And I tried to weave that into my games.

 

Matthias Metternich:

So in a way it was a little bit of a workshop for me. I was a craftsman honing my own craft at my own pace with the world's information, gradually coming online and being available online for me to learn from other people. It was a really powerful period for me.

 

Chris Erwin:

This reminds me of another interview that we did on the show with Christian Baesler, who is the president of Complex Networks. He was born, I think, in the late '80s in Germany. So there must be something in the water there, because he also began coding at a very young age himself, or his uncle had bought him a computer. I think he was born within a month of the Berlin Wall coming down. And he was in a small town, and he felt the need that through his computer he can express himself through coding, developing games, and also through the internet, connecting with people that were outside of his community, craving that need for connection and new information and exposure.

 

Matthias Metternich:

Yeah. Very similar stories.

 

Chris Erwin:

After this, you then go and you do your undergrad, and that's at... Did you say UCLA?

 

Matthias Metternich:

Yes, that's right.

 

Chris Erwin:

You do your undergrad at UCLA. And what's going through your mind while you're there in terms of fast forward, you clearly have a very impressive entrepreneurial career, which leads to founding Art of Sport a few years back. Was this in your mindset when you were going through undergrad as well?

 

Matthias Metternich:

Yeah. So I started my first company when I was about 14 years old, and it was out of necessity. It was really not necessarily... I mean, I always had an entrepreneurial bent. I was intrigued by money, but it wasn't a means to an end for me. But the idea of having something that someone wanted and being able to charge for it, was an interesting idea to me. And I remember, I mean, my first businesses were trying to sell my video games, and then it was actually building out a bigger video game library, where back in the day, it was fairly easy to just copy CD ROMs and sell those. And that was illegal obviously. But buying a video game for $35 and then selling a piecemeal for $5 a pop to a 100 kids was pretty lucrative.

 

Matthias Metternich:

It then snowballed into my first formal business, where I refurbished and sold computers in bulk to schools and to small businesses. And I would have ongoing service contracts where I would keep them updated, and fix those computers. And it was a really, actually pretty easy job for a kid in high school. And the pocket money was really good.

 

Chris Erwin:

Wait, so I have to pause there. So did you have a team that was helping you to do this or was it all by yourself?

 

Matthias Metternich:

It was all by myself. I didn't have a driver's license. So I would have to ask older friend in high school if they could drive the computers around in bands and stuff like that to get places. But I never employed anybody. It was just myself. And then I was part of the Computer Lab Society and whatnot. And there were folks there that were just excited to help. And I also was on the basketball team. So I sold these computers to the schools I was playing against. And so, sometimes I'll try to put the computers on the team basketball bus and transport them that way. But no, it was a great to work. It was a great way to learn. And then that's snowballed into one day walking down to my local staples and I needed business cards.

 

Matthias Metternich:

I realized I needed to have some way for people to call me. And so my parents were kind enough to have set up a dedicated line in my room. And so I went down to staples and had these business cards printed, and I didn't have that much money. And there was this offer, I think, for small businesses for 10,000 business cards or whatever for $100. It was a special or something like that. But you had to let them put the staples logo on the back of the card. And it was essentially their version of us know co-marketing that day. And I took it because it was the cheaper route. But then when I started putting those through mailboxes and small businesses to help them build websites and stuff, people thought I worked for staples and they actually called me back. They called me back probably at a higher rate than if I didn't have the staples logo on the card.

 

Chris Erwin:

That logo gave you legitimacy.

 

Matthias Metternich:

Gave me a legitimacy. And because I was doing so much of this remotely, they very rarely... Fortunately puberty hit me when I was about 14. So I had a voice that occasionally cracked, but sounded a little older, and they had no idea who they were working with. So I then started building websites. And by the time I got to college long way of telling you... Long story here, but by the time I got to college, I had a few businesses under my belt that I was running. I felt it was the most empowering and exhilarating experience. I had done lots of mixed media things, where I tried to make music, and produce music, and made websites, and build computers, and tried build apps.

 

Matthias Metternich:

And so, for me, it was very strange to think of studying something to go within into a function, into a single domain, or expertise, or functional expertise, or focus, when I was already relatively fluent. I'll be amateurish across all these different buckets that I felt were... When you paired my experience back to how that manifested within academia, those were all separate degrees and people were studying those things separately. So, I fell out of water. I felt weird about what I was doing in college. I felt like a complete fish out of water also just culturally. It was tough for me to connect with kids who had probably mostly grown up in the same town or same city, and were going to college in their same city. And I started another company while I was in college. So to answer your question, yeah, the intention was always to build businesses, but never just to build businesses. It was because I loved the process of making things and seeing opportunities, and asking myself questions about where the world was going, and then try and articulate those.

 

Chris Erwin:

Wow! So when you say that you had fluency in a lot of different, call it the capacities and how you build a business and how you run a business, and that you felt that those were modularized when you were in undergrad and that's not how you looked at it. What did you perceive as those core competencies that you had already figured out by your undergrad years?

 

Matthias Metternich:

I don't want to overstate it. I mean, I still knew nothing about very much of anything, and probably still don't know anything about anything.

 

Chris Erwin:

Beginner's mind is a good place to be.

 

Matthias Metternich:

Yeah, absolutely. But look, this was still a time in an era where somebody who could use Photoshop fluently and design something leaks ahead of entire digital agencies that were just starting to become proficient in digital stuff. I mean, this was 2004. And so, I don't want to overstate my skills, but by that point I was fluent in Excel, and basic financial modeling, building up PnL, and managing that, and forecasting and that sort of stuff, pretty rudimentary arithmetic. I was fluent in designing things, both physical and not structural design, but physical media billboards, or postcards, or whatever else. I was packaging and so on.

 

Matthias Metternich:

I was pretty fluent in designing digital products, whether those were app style products or just informational websites. I've had experience copywriting and telling stories that I thought could lead to consumers clicking on things, and seeing things. So I had some proximity to search and search optimization. I was fluent a little bit in having talked to people who were open to putting some money into my projects, which at the time I wasn't really familiar with institutional capital, institutional investors, or even angel investors, but I understood what that-

 

Chris Erwin:

You had bootstrapped everything yourself to dig, right?

 

Matthias Metternich:

... totally. Yeah. Bootstrapped, but also with the luxury of safety net for my parents. I wasn't paying rent. So, it was the best time to be trying things, because I still was fed at the end of the day. And so, when I looked at college, it was a case of saying, okay. Well, there's, there's an accounting degree, there's an economics degree, there's a bit poly-psy, which I felt like I had from home. There's the design school. Okay. That seems pretty limited. And where does that lead from a career perspective? And then none of those things had really tentacles that led out of the institution into the real world.

 

Matthias Metternich:

So all these kids were studying this thing within this echo chamber and then going to a job fair. And I just thought that seems so backwards. You'd want to accelerate your craft and accelerate your learning into something actually relevant in the real world. Those things shouldn't be distinct, where there's a learning center and then there's the real world. Those things are probably the same space. And there's no reason why you can't learn on the job.

 

Chris Erwin:

And speaking of reaching your tentacles out into the real world, is this around the same time when you sneak into, I think a speaking event of the founder of MySpace, Brett Brewer?

 

Matthias Metternich:

Yeah, it was. It was actually my... I want to say it was my sophomore year. And UCLA business school, these are young executives or corporate leaders coming back to get their MBAs. And here is this 19 year old kid who's loitering around their departments and walking into the buildings, and just walking into different classes. And there was a business plan competition for its students. I think the best business plan was going to get $10,000 or something like that. And I went around asking different MBA students if they'd be willing to let me join their team, because I personally couldn't really apply myself to this. I wasn't a bit in the business school. So I could be part of a team, but I couldn't be leading it. And two guys were kind enough to take me on.

 

Matthias Metternich:

And basically then I worked with them to come up with a business plan and design the deck, and do the financials, and do it all with them. And during one of the mentor classes, Brett Brewer was speaking. I'd snuck in to attend this. Again, I'm never really allowed to be present in these spaces as an undergrad. And Brett Brewer was standing on stage and he was being interviewed, and he went to UCLA as an undergrad. And the moderator said, "Tell us about your college experience." And he said, "I snuck into the business school as an undergrad. I met somebody who was talking on stage and that person was able to help me enter into the internet space as I was running a company from my dorm room." And of course that spoke to me perfectly, because that was me.

 

Matthias Metternich:

And I felt almost like he was talking to me and inviting me to come talk to him, which I did afterwards. And I walked up to him and I told him this, and he was incredibly gracious. And I bumped into him since a few times and I never let him forget it. But he was my first real person that had built internet companies, built successful internet companies, embodied in a person, and was willing to talk about the inner workings of the tech industry. And at a time when very few people were trying to be tech entrepreneurs. Now every day there's a new startup. But then it was really hard to get an understanding of, how do I enter this space? Who are the players? What are the rules of the game? How does it actually work?

 

Matthias Metternich:

And at least what he did was, he looked at my business plan and I showed him the products, and he saw talent and he made introductions. And he made some introductions to some very interesting people who have become tech Titans and were tech Titans then, and have continued to be tech Titans now. But that was one of the most formative moments for me, where it was really a validation of, okay, someone great things that I can play ball. And I felt like I had been basically recruited onto a team. I wasn't a starter, but I had at least made it into the NBA. And the question was like, what do I do with this?

 

Chris Erwin:

My next question is, so you graduate from UCLA. And in terms of your next step, was it directly inspired or related to your relationship with Brett or something else?

 

Matthias Metternich:

I wouldn't say it was directly inspired. What I was doing in college, my company was essentially a creative digital agency. But I only did that so that it could cash flow into my real passion, which was to incubate our own products. And I did that because I didn't really want to be dependent on outside capital and raising capital. And I wanted to actually have good bread and butter work coming in, people getting paid, and then use whatever leftover cash to come up with our own products that we owned entirely and can scale maybe into an internet company. And that was the real business model. And in a way, because of my proximity or at least my exposure to Brett and his way of thinking, and then all these other folks. I don't want to overstate the relationship at the time, but definitely he was an inspiring figure locally. I continued to build this agency with an aim to try and launch new products.

 

Matthias Metternich:

And right at the time I was graduating, there was an opportune time for me to exit the agency and sell it to my partners. But also I had heard of a couple of agencies in London that were really remarkable working with really big clients, and were the ideas of the digital arena. These think tanks that were also creative. They knew about marketing, but they were also about creating valuable products and services. And these were bigger agencies. And I hadn't really realized there were big agencies doing this. And so I decided to move to London and joined those firms, and then start firms like that with them. And so that gave me exposure to a ton of global brands and really big brands and exciting big projects that I would have never ever done in my small studio. But I was serving global clients very quickly at a young age, working on some very challenging and complicated platforms and services and products across insurance, across consumer goods, across whatever it was. And so I had some really remarkable opportunities in that context.

 

Chris Erwin:

I think that your agency/incubator was called Popsicle Vision.

 

Matthias Metternich:

That's right.

 

Chris Erwin:

And so did you end up selling it to a London-based incubator?

 

Matthias Metternich:

No, I didn't. I sold it to my local partners in California, and then I moved to London to join this firm.

 

Chris Erwin:

You move to London, you kick off this journey. Is this your first career moment where you're actually working for someone else?

 

Matthias Metternich:

Yeah.

 

Chris Erwin:

It's not a business that you had founded?

 

Matthias Metternich:

Yes. That was the first time working for someone else. And I had the opportunity to sit down with the partners of this firm, and they had no idea what to do with me. And I had no idea what I was going to do there. And credit to them they said, "Well, why don't you just hop a board and see what happens? And you can help us with the business and help us think about building the business because we're also stuck serving all these clients. Maybe you can pull out to [inaudible 00:21:24] and help us understand what services we're offering, what should we should be doing more of, whether it's intellectual property that we could maybe build out." And I was thinking very much from Silicon valley startups, building tech companies, building products and services. And these guys didn't really have proximity to that in London.

 

Matthias Metternich:

I was put in a role that was very fluid and they gave me a lot of runway to do whatever I wanted. To the extent that one day I got a call, and I could barely understand. It was a very thick accent. And I hung up a few times, and they kept calling back, until they finally said, "Hey, we're a publicly listed $10 plus billion telecoms company based in Istanbul. And we'd like to fly you out to Istanbul." And I looked over at one of the partners and I said, "I think I'm going to go down in Istanbul and talk to these guys. I have no idea who they are, what they want, but it sounds fun." And I got on a plane and I went down there. And sure enough, it was the biggest company in Turkey, 90 million plus subscribers.

 

Matthias Metternich:

It's Turkcell, it's the largest telco company down there, huge offices, beautiful offices, huge budgets, massive projects, total desire to transform their organization, build all these new products and services, and no real domestic talents, no real Turkey based agencies, able to pull any of this stuff off. And so there I was feeling like a kid in a candy shop, and also feeling really comfortable in that environment, having lived in all these different countries, where I basically called the partners back in London and I said, "I'd like to build the agency here. We'll share the business. And I'll drive business back into London. I'll use the portfolio and we'll see where it takes us." That was a chapter that moved me from London to Istanbul.

 

Chris Erwin:

So I have to ask Matthias, if I'm following your timeline right, you're right out of undergrad call in your early 20s, maybe mid 20s max?

 

Matthias Metternich:

Yeah.

 

Chris Erwin:

I assume that in the London office, looking around the different cubicles, you have people that are right out of undergrad analysts, junior level, and you're getting calls from major executives in Turkey that are then flying you out. So it feels like your role is more like that of a partner. Is that what it felt like to you and did that felt natural?

 

Matthias Metternich:

100%. Totally felt national. It wasn't pretentious on my part. It was just that I also wasn't... In some cases I was noticing these junior staffers or mid-level staffers were vastly more proficient in the one skill they'd been honing for years. So I wasn't going to compete with them. And also I didn't want to compete with them because I wasn't wanting to work within that silo. And I didn't see myself progressing from a junior level person to a mid-level person, to a senior level person within that function. And then maybe get into graduate into the executive suite that never really made sense for me, because I was perfectly proficient by that point to speak relatively fluently with partners about some of the actual business challenges and some of the business logic, and what we should be going after or not going after.

 

Matthias Metternich:

And so, when you're in that growth mindset of making things and creating things that isn't limited by the bread and butter of what you already do, then you'd just by definition, get to live at a more fluid state. And by the way, it wasn't just me being exceptional or anything like that. Consultants have the same privilege. There are a lot of second or third year analysts out of college who work at McKinsey or Boston Consulting Group who have exactly the same experience. Because that's what they do. They get to parachute into an organization and work with the senior leadership on what the future should look like. So it was unique to me, but I was doing it within a function that wasn't necessarily the big four cost and consulting or McKinsey type places.

 

Chris Erwin:

I think you assumed this consultant advisory role for around five years after undergrad, before you returned to the US. Is it true that you bounced around to a few different companies? And I'm probably pronouncing this wrong, but Poke MEA and a global partner at Aqua.

 

Matthias Metternich:

Yeah. AKQA.

 

Chris Erwin:

Okay. AKQA.

 

Matthias Metternich:

Yeah. So these are two of the sort of leading digital transformation agencies. And I worked with clients across the gamut of industries. But when I was sort of tired of doing that because we sold the agency to publicists and then AKQA had been sold to WPP, I wanted to go back to building products cause that's what I was doing, advising clients, that's what I was helping them think about. So I wanted to go back to building my own company. So I started an enterprise software company that was backed by a bunch of venture capital funds in London, and spent three years building that. And that was an enterprise software business in the FinTech and marketing automation space.

 

Chris Erwin:

And what was the name of that company? Was that Believe.in?

 

Matthias Metternich:

Yeah, that's Believe.in.

 

Chris Erwin:

I look at what you're doing now at Art of Sport, which is you're disrupting the body and skincare industry. And there's also a major intersection of media around the talent network that you're building out, very different from enterprise software. So was your heart in this product that you had created back then or, hey, you perceived opportunity, you had a unique set of skills. There was a moment in time.? Or was it something that you were generally very passionate and interested in as well?

 

Matthias Metternich:

I can be very quick to fall in love with opportunities that don't exist in the white space. And so because I think the world of having built different things in the fluid nature of digital businesses and products and servicing all these different clients, and some might have been banks, or insurance companies, or race teams, or Skype, or [inaudible 00:26:37], seeing all these different types of companies, I think you come away with an appreciation for different types of businesses, at least a fidelity of understanding what the rules of the game are within those different verticals.

 

Matthias Metternich:

So when you see, hey, I can bring this design thinking, or this distribution differentiation, or this ability to scale to something that hasn't been done before, I tend to fall madly in love with those. So I love B2B businesses, I love B2C businesses. But with Art of Sport, it was a very clear white space to go after, creating the first sports brand to define application what you put on your skin every day. And so I took inspiration from Nike, and Nike did that for decades with what you wear. Gatorade did that for decades with what you drink and defined what that should look like. And really built a team that was focused on the athlete and creating real cultural residence, but no one had ever done it in the skincare space.

 

Matthias Metternich:

And I felt that was a huge opportunity having played sports my whole life, and knowing the category, knowing very well that consumer who chooses a brand tends to stick with that brand for decades. And that to me, was a very powerful opportunity to not just define what the Nike of skincare should look like, but also have that proximity to a consumer who applies this to their skin every day for the rest of their lives.

 

Chris Erwin:

And before we go deeper into art of sport, actually want to go back to when I think it was the early days when you were actually really interested in the intersection of culture and commerce. You had founded, I think a digitally native brand called COCODUNE back in 2014. What's the story behind that? Because I felt like that kicked off your artist sport journey in a way.

 

Matthias Metternich:

It did. I mean, it transitioned me back to the United States and I saw an opportunity where I want him to get in on the e-commerce game. And what I liked about e-commerce compared to software was, I liked the idea of a physical asset. And I liked understanding the balance sheet from the perspective of future earnings and lifetime value of consumers to individual one-off orders, where you're selling a product, and you're making it for X and you're selling it for Y, and you have the potential to scale that business off of that model. And so I was very intrigued by the fundamentals of e-commerce. I was very intrigued by what I was seeing in the social media space. And I was interested about every product having its own set of variables that expresses what I call the physics of that opportunity.

 

Matthias Metternich:

So certain products weigh a certain amount, certain products you can sell for a certain amount, because there's ambiguity about the actual cost of making them. Certain products are hard to shop for in the real world, therefore they're more suited to online. Certain products haven't seen a lot of innovation. So there's a lot of really interesting questions to be asked about a category. And I honed in on what I thought was a very interesting one, which was swimwear for women. And it sounds crazy. And I certainly had a lot of people in my world who thought I was crazy going from all the things I was doing before to bikini's. But there was something really interesting in the fact that, okay, this is a product that weighs almost nothing. It's a product that sold for 350, sometimes, dollars. It costs about between six and $10 to make.

 

Matthias Metternich:

And paradoxically, the less fabric there is the more expensive these products are. There were all these friction points that I saw, plus all of these variables within swimwear that I thought, "Hey, this might lend itself very well to be commerce, especially if we can predict the integrate, especially if we can create a really seamless experience for the consumer trying this product on at home, free shipping and free returns. Maybe we send them a several sizes so that they can find their size without friction, and they could send back what they don't like, because there's that lower weight." And so therefore the shipping rates aren't going to necessarily be arbitrarily that much higher or lower, depending on if we send them actually more inventory, we can always bill them retroactively. In some cases.

 

Chris Erwin:

That's like the Warby Parker model in a bit.

 

Matthias Metternich:

Exactly like the Warby Parker model, except with eyewear you choose one model and you stick with that. You don't really explore things. But with fashion, you might go with the polka dot one, you might want the black top, and you might also want the striped one, and you might want this color, and so on. So there was a lot of opportunity for cross and lateral selling. We also were making silhouettes that were sometimes very fashioned bourbon. And then sometimes we were making them a little bit more sporty. And people who are swimming or going on holiday, in some cases, were buying four or five, six, seven, eight, nine pairs of swimwear, and then those fade, and then you buy them again for the next season.

 

Matthias Metternich:

And so, there was a very rationalized construct behind why I did this. And one thing that I had learned from that business that was so interesting was, one, people buying things online and what triggers them. But two, we had a, surprisingly, very successful offline business through wholesale. And I remembered we had these two young women who were hosting a pop-up in Nantucket of all places. And they have this tiny little store, and they asked if we could send some product. We sent product, and the next day it was gone, sold out. And then we sold more and it sold out. We sold more, it sold out. And we were doing tens of thousands of dollars for this one, tiny little pop-up in Nantucket.

 

Matthias Metternich:

And I remember thinking to myself, this is actually putting some burden on our inventories, it's annoying actually. I mean, it's great that we're getting this revenue, but we're trying to build an e-commerce business. And I remember ignoring the wholesale business. And I remember thinking to myself, the offline business is not what I want to be building because I was buying into this mantra that it was all about pixels and not bricks. And have everything centralized in the warehouse, low cost of operations, warehouse vertically integrated and ship it. Have those DTC metrics really prove out because you can scale it into a unicorn.

 

Matthias Metternich:

And I was never delusional enough to think that I was going to be as big as Warby Parker, but I did remember hearing that Victoria secret had a $500 million swimsuit business, and they were discontinuing swimwear. And I thought to myself, there's a big of an opportunity to get something like this to 100 or 200 million revenue, except I can't get distracted by wholesale. And so I remember as we started to try and rationalize the business and figure this business out, we neglected the wholesale business. We also found that the cost of acquisition was creeping up because social channels are really saturated and becoming more and more saturated. And so we ended up leaving that business where we were selling it for... We sold it for parts. We had different types of attributes and assets that were interesting to a different parties in different ways.

 

Matthias Metternich:

And that's how we moved off of that business. And it was also an interesting time not to get too lost in the weeds here, but I raised a bunch of capital from fashion and tech investors in London because I had been in London and I was operating out of California. And my capital was partly held up in pounds, in British pounds, Sterling. And when Brexit happened, the pound massively devalued against the dollar. Part of the reason we ended up selling it for parts is because we were in a position where an enormous amount of our runway basically disappeared overnight with the de-valuing of the British pound when Brexit happened.

 

Chris Erwin:

It's one of those things that you can never anticipate.

 

Matthias Metternich:

Never anticipate.

 

Chris Erwin:

It's like you're building a startup. You know you're going to have many headwinds. And this is, as they say, the unknown unknowns.

 

Matthias Metternich:

I've always said this, everything that could possibly go wrong doesn't help describe enough how many things can go wrong when you're building a startup. And that was one of them where I just was thinking to myself, "This just can't be possible. How are we going to position where the future of the business is dependent on currency exchange?" That's insane.

 

Chris Erwin:

So I'm curious, because looking back when you were growing up, Matthias, you had bootstrapped companies that were cashflow positive, recurring revenues through these amazing service contracts with the schools that you had structured in your teen years, which is very impressive. Then you go into raising capital from other investors for enterprise software at Believe.in, and then for COCODUNE. And then you have... These aren't material exits for you they're challenges. And so does this start to dissuade you from, "Hey, the next company I built, I'm going to do differently?" What was going through your head?

 

Matthias Metternich:

That's a great question. Because I think that that's really fundamental to, I think, of a lot of entrepreneurs journey is when they think about the venture capital versus self-funding and profitability. And I had this conversation just last night with someone, where... I mean, look, it depends partially on your risk profile and what you're in the game for. I'm motivated by money. No question. I mean, we all are in some ways. But I'm also motivated to make something of my time and I want to make sure that I'm doing stuff that's exciting to me. And as much as I can. And the idea of spending 15 years building a cashflow positive business slowly, but surely it doesn't necessarily appeal to me.

 

Matthias Metternich:

I mean, I like the idea, but that's slow going. That's a lot of risk that you're taking on yourself. And this is the really, the big point of discussion me, is if you look back historically... And I like to think of myself as somebody who studies this a little bit and you look back to the 17th century, 16th century around businesses, most of these were family run, small operations that had a really tough time getting loans, really tough time having any liquidity whatsoever, really tough time being able to fund inventory.

 

Matthias Metternich:

And so we've migrated over hundreds of years to a place where access to capital is not only available in the form of these really great debt instruments, but we're also talking about a new frontier in asset class, which is called venture capital. And venture capital provides capital to entrepreneurs with ideas at stages of their development, where they have no idea how it's going to shake out. And it's right at the beginning. And not only that, the capital's available at prices that are very, very effective and accommodating for entrepreneurs to own. Most of their intellectual property that in into itself is an enormous privilege, that we live in an era where theoretically, you could raise a million dollars or more for 20% of your business. And there you are with 80% of your business and a million dollars, and hopefully a good plan to go and execute this, but you have the whole world ahead of you to go after.

 

Matthias Metternich:

And depending on the type of business, it might be 5 million, it might be 100 million, it might be a billion dollars. But we are in this very unique period in our world, in our lives, where we get to articulate ideas, we get to get funding for them, and we get to own meaningful stakes in those endeavors. And typically, you get to do that with relatively limited downside of personal risk in the way of liability. And that, to me, fundamentally from just a historical perspective, the time that we live in a generational perspective is one of the greatest, most remarkable things that I'm privileged to experience in this era. And so, to that end, it's a case of all... I mean, excuse my French, and you might have to bleep this out, but why wouldn't I fuck with that? Why wouldn't I go after that? Even if the risks are such that you lose everything at least on paper. You fail the endeavor. Okay, fine. Get up again and try it again.

 

Chris Erwin:

I'll poke one part of that, because this has come up something that I think about for myself and also from some of my peers is, Matthias, the argument that you just made in terms of the financial opportunity, the risk profile and ownership is very compelling. A potential counterpoint though, is that if you're doing, say, a 15 year cashflow business versus a venture funded business, the pressure from investors, the feeling of a bit of lack of control, and that you have to grind, and this word hustle, which is increasingly going out of fashion, could be very unappealing to entrepreneurs that are like, "Look, I want to work hard, but the classic venture hustle maybe is not and I don't want to burn out early."

 

Matthias Metternich:

100%.

 

Chris Erwin:

There's certain operators, maybe like you who have more grit resilience, and are actually better at finding the balance with a venture business.

 

Matthias Metternich:

Yeah. I think those are valid points. I don't think those things are mutually exclusive. And I think you have to ask yourself, who am I, and what do I want? I think that if you're going to take venture capital, then you can't delude yourself to think that you can somehow not play the game. You're entering into a contract that is just like any pro athlete. The expectation is that, "Okay. If I'm going to go sign for the NFL and play for a franchise team, or the NBA, or MLB, then I'm expected to put my life into this thing," because it's an opportunity. That's an enormous privilege. But it also in the case of the startup world, the upside could potentially be enormous.

 

Matthias Metternich:

And so from that perspective, I think it's a mindset. And I think it's really about asking oneself, "Am I that person," or does that just really sound cool and sound fun? Because you'll very quickly realize that, "Hey, if you're not willing to put that time in and willing to orchestrate or structure your life to prioritize that as the number one, because you've entered into this contract, then maybe you shouldn't play in the professional sports," at least if venture is... We're calling professional sports for this analogy sake. I 100% here you. Look, I think amongst entrepreneurs and most of my friends are entrepreneurs and they're venture backed, and many of them are also self-funded, there's always that discussion.

 

Matthias Metternich:

And I think some of them that are funding it themselves can really stand there and point to having built something slowly, being able to control their own destiny, being able to pay themselves what they want to pay. And they've gone through that ringer in the wars in ways that venture capital folks or venture funded people might not have gone through. And I think a lot of venture-funded startup entrepreneurs look at people who own their whole businesses and are, let's say cashflowing positively with massive admiration, because they know what tip to get there. But the stresses within venture capital are very different, and turning something from zero value into 100 plus million valuation in three or four years is also extraordinary.

 

Matthias Metternich:

From my perspective, it's all good. But still it's a privilege and it's an opportunity, and it's a flexibility that the entrepreneur, the operator has never had historically. All of those instruments that are available to us, all come with different conditions, different expectations. And I think one thing that I think entrepreneurs also get wrong is they point often at venture funded businesses and look at those boards. And they say, "By definition, the pressures are going to be crazy. Expectations are going to be out of saying, everyone's going to expect to make a shit load of money really quickly. I don't want to do that." But that is a trope.

 

Matthias Metternich:

Because I've only had experiences where my board is aligned, where my investors understand the business we're in, they understand the challenges, they understand not exerting too much pressure onto something and doing something that's super inorganic or unhealthy. And so, I think it's on the entrepreneur and on the partners to all find alignment and understand the physics of the game that they're in. And that alignment will create solid expectations and solid foundations for running something that is hot pressure cooker, but it's within reason and it's within rationale.

 

Chris Erwin:

In a way to sum it up, I think it's important to know thyself. Know who you are and also know the people around you that you're getting into business with. Hey, listeners. This is Chris Erwin, your host of the Come Up. I have a quick ask for you. If you dig what we're putting down, if you like the show, if you like our guests, it would really mean a lot if you can give us a rating wherever you listen to our show. It helps other people discover our work. And it also really supports what we do here. All right, that's it, everybody. Let's get back to the interview. So look, speaking of sports analogies, I think this is a great transition point to talk about the founding of Art of Sport. After COCODUNE, you ended up founding Art of Sport. How did that come to be?

 

Matthias Metternich:

Well, it cam…

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