434: SOS with Susanna Twarog

Susanna Twarog is Co-Founder and Co-CEO of SOS, which is transforming wellness on the go through a network of smart vending machines that deliver just-in-time necessities where and when you need the most. Chad talks with Susanna about wellness on the go, the unique business that they're building and what SOS can offer brands, and the biggest hurdles to overcome to get 10,000 machines up and running. SOS Follow SOS on TikTok, YouTube, Instagram or LinkedIn. Follow Susanna on LinkedIn. Follow thoughtbot on Twitter or LinkedIn. Become a Sponsor of Giant Robots! Transcript: CHAD: This is the Giant Robots Smashing Into Other Giant Robots Podcast, where we explore the design, development, and business of great products. I'm your host, Chad Pytel. And with me today is Susanna Twarog, Co-Founder and Co-CEO of SOS, which is transforming wellness on the go through a network of smart vending machines that deliver just-in-time necessities where and when you need the most. Susanna, thank you for joining me. SUSANNA: Thank you, Chad. It's great to be here. CHAD: So, what makes the vending machines from SOS smart? SUSANNA: So what makes our vending machines smart? Well, I think smart and vending are typically not words that go together. And I think when we founded the company, the machines that we were looking at were outdated and old and out of stock. And to be honest, first and foremost, payment methods that are accepted by most vending machines are completely not in line with the modern consumer. So we were looking at vending machines that take quarters and cash. And as two working women on the trading floor, nobody has quarters or coins or even cash anymore. So first and foremost, we are a cashless, modern vending machine that accepts contactless and modern forms of payment. CHAD: Let's level-set a little bit about wellness on the go, what that means. What I hear when I look at...which I took a look at the product on the website, which I encourage people to do, and it's worldofsos.com. I think it gives a much better sense of this. But correct me if I'm wrong that what we're talking about here is the vending machines that might typically be in a men's or women's restroom. Is that right? SUSANNA: Absolutely. So the problem that we are in a mission to solve is to transform outdated, completely broken, ugly hardware that's existed to distribute wellness essentials like menstrual care and other wellness products in public spaces. So those old machines that look like steel box drops [chuckles] that is the business or the distribution channel that we're looking to disrupt. And so, by introducing beautiful design-first tech-enabled hardware into this space, we're completely transforming a distribution channel that has not worked or served anyone for decades at this point. CHAD: I don't even use those vending machines. But it seems to me like they're often broken, dirty, not even stocked. Is there market reasons why that's the case? SUSANNA: So, to be quite honest, I think Robina and I, when we founded the company, started to explore why hasn't this problem been solved? And the fact of the matter is the built world, and a lot of commercial real estate is designed and developed by a group of people who don't necessarily menstruate or need these products that are everyday health and wellness essentials for actually what is over half of the world's population. But the folks who design and plan these spaces are not necessarily coming at the design with a perspective of these needs. And so, honestly, Robina and I set out on a mission to say when we think about inclusive space and the world that we want to live in, we want to live in a world where not just among certain people but all people have access to health and wellness products that they need when they're not at home. So you may have everything that you need and want from the brands that you love and the ingredients that you trust in your own cabinet. But when you're on the go, and you're at work or you're traveling or entertaining, or spending time in other physical spaces that aren't your home, typically, those products aren't available, and they're very hard to access. So it's a major area for us to innovate and introduce a world that we want to live in where you can access the products you need from brands you already know and love or want to discover and try. CHAD: So building really any hardware, and I have a lot of guests who have done hardware in the past, can be a challenge, especially starting out. What you talk about in the startup industry is often like starting out small, figuring out the minimum viable product, bringing that to market to early customers, and then learning and refining. And that can be difficult to do when you're shipping something physical. So how did you approach that? SUSANNA: Robina and I approached this with a lot of intention and a lot of thought. We came from finance, business development, and sales backgrounds. Neither of us are engineers. So when we decided that we were going to found SOS and started to literally sketch out renderings for the type of hardware and design that we wanted to see in the world, initially, we were faced by a lot of people telling us to white-label products that already existed. You know, maybe don't invest in proprietary hardware or designing it yourselves. Try something that already exists. See if there's a product-market fit. And ultimately, we actually invested in and began to work with an industrial design firm from the beginning. We have seven global design patents on the hardware because we knew that without an elevated design-first piece of hardware, the network would not be well-received, would not be able to grow and exist in the places we knew it needed to be, so to be in grade A commercial real estate where hundreds of millions of dollars are spent on designing and innovating into the built world to make these spaces cutting edge and tech-enabled. And yet, if we didn't do the same with our hardware, this would just be another vending machine that got relegated to the basement or the back room, and that is not the company that we set out to build. We want to be a piece of integrated, exciting, engaging hardware and tech-enabled experience in these spaces. And so, to do that, we had to forge the path of bringing in and working with and basically investing our own money into designing a proprietary piece of hardware that could deliver the experience we knew was so integral to driving value for the company. CHAD: I assume that wasn't easy or cheap. Did you fundraise at that point to do it? Or when you say your own money, were you literally the two of you investing yourselves? SUSANNA: Absolutely. A big point of pride for me and Robina is that from the moment we founded the company through, to be quite honest, I would say the first 18 months of work, we invested our own personal savings. And this wasn't trust fund money that we'd inherited. This was truly just personal savings as young women in finance that we'd put aside, and it was the most money that either of us had ever spent on anything, was investing in ourselves and our own company. So we started...our first investments were in legal work and doing the patent search, and generating ultimately what has now been granted as seven patents for the company. So patent work was the first money we spent, and then also engaging with an industrial design firm to get our concept into CAD rendering and identify the first contract manufacturer that we worked with on the prototype. So we were able to get pretty far prior to fundraising with our own investment. And trust me, it was a big commitment from both of us. And I think the fact that as co-founders being totally in lockstep with taking some of the biggest financial risks that either of us had ever taken and doing it together, and really having equal passion and commitment and belief in what we were going to build was an exceptional part of our founding story. CHAD: I imagine you were probably a little nervous, the two of you. [chuckles] SUSANNA: You know, it felt just like we had to do it. And I think it's kind of like lightning struck in the sense that we had this moment. And from literally the moment that we stepped aside and started to map out the business, there hasn't really been a pause or self-doubt in the sense that we've really known we're going to take this as far as we possibly can. So scary, yes, but it felt like we had the conviction from the very beginning, which I know is rare and not everyone's founding story. But for us, it really was 100% the right thing to do at the time, which was we're going to make this happen. CHAD: So where did you and Robina meet? SUSANNA: So we met as colleagues first and foremost. So we were two, I would say at the time, young women working in finance, and she was my counterpart. So she had a role in London, and I was in Boston. And we worked on our basically sales and business development pipelines together as colleagues first. And ultimately, Robina relocated back to the U.S, and we became friends on the same trading floor. So really, it was a friendship that grew out of a business relationship. CHAD: Do you remember when and where this idea first came from? SUSANNA: Sure do. [chuckles] It's very close to my heart. I was in the middle of a workday faced with a frustration and inconvenient situation where I couldn't find products that I needed when I needed them at work. And it was interrupting my day for the millionth time. And you know those moments when you have a friend, and you choose the person that you run to when you are, I guess, pissed off for lack of a better word? [laughs] And we just took that moment of me saying, "This is insane. How am I dealing with this? I can't get a tampon when I need one." And our eyes lit up. And we said, "Ah, well, this is a common problem for a very important segment of the world. And we need to do something about it." CHAD: Now, it's a big leap to go from that frustration to founding a company together and actually working on it. So, how did that happen? SUSANNA: So we had that moment, and we stepped aside and said, "This is completely insane. I'm too valuable to be wasting my time worrying about this on a daily basis." And the other fun part of our relationship is that we're also two young women with disposable income. We love products; we love travel, we love entertainment. We like to have fun. We work hard; we play hard. I'm taking those two perspectives, which is like this frustration and universal need combined with consumerism. And this desire to make money, spend money is like combining the two and saying we have an opportunity to capitalize on this need and this consumer at the same time to deliver on a mission and drive value and consumer value for brands at the same time. And that really, I would say, sparked a tremendous amount of excitement and interest from Robina and myself. How incredible to have an opportunity to build a company that is really driving good, and changing the world, and elevating access to these essential products while also tapping into this consumer interest of ours in products, and brands, and emerging indie brands, and digital content, and tech. And combining them all into one company and doing so with a lot of, I would say, excitement, and optimism, and win-win-win. Making the world a better place fulfilling a passion and interest of ours at the same time and driving value, and building a company. CHAD: How far along were you in the idea stages, the legwork stages, before you both quit and started working on it full time? SUSANNA: Took the leap. Yeah, that was a really critical decision and part of our journey. We were very intentional about taking the business as far as we could while protecting our personal financial interests in the sense that, you know, retaining benefits, positioning ourselves so that the company would have the most ability to succeed. And so we actually got through to basically 2020 when we were launching our first machines before we quit and ultimately joined our Techstars Boston 2020 program. So we were, I would say, nights and weekends absolutely killing ourselves with work. We were able to raise our seed round, our pre-seed round technically, while still employed at the bank. And I would encourage others who are thinking about starting companies to maybe...in some cases; I'd say do what we did. And in other cases, I'd say it might kill you. CHAD: [laughs] SUSANNA: But I feel like whether we liked it or not, it put us in a position where we had achieved a tremendous amount of traction. We had our prototypes built and ready to be installed. And they were literally going into some of the most prestigious physical, commercial real estate locations in Boston as we were quitting. So I would say we were taking quite a bit of risk still. But we'd done everything we could to protect the company and make sure that we could get SOS where it needed to be before joining and coming on full-time. CHAD: How did you find those first places where the machines were going to be installed? SUSANNA: From the beginning, it was one of the areas of the company that we invested the most of our time in, which was that we had extensive contacts and relationships in financial services; that was our background. We had to start from scratch networking, and telling our story, and telling our vision with commercial real estate partners. So pre-product, first slide decks, first cold calls, and warm introductions all really focused on commercial real estate. So we gave ourselves a crash course in real estate owner-managers, who the national players were, and started to network a ton, which was just LinkedIn, asking for introductions, having some meetings that were successes, having others that weren't. But really, I think Robina and I had a and have a very, I guess, strong sense of salesmanship, I would say. That's a strength of ours. And so we were able to really get people excited and to believe in us and not to say sell smoke and mirrors, but we were waiting on a physical product prototype to arrive. And we were able to get believers and commitments before we actually had the product ready to demo in the market. Mid-Roll Ad: As life moves online, bricks-and-mortar businesses are having to adapt to survive. With over 18 years of experience building reliable web products and services, thoughtbot is the technology partner you can trust. We provide the technical expertise to enable your business to adapt and thrive in a changing environment. We start by understanding what’s important to your customers to help you transition to intuitive digital services your customers will trust. We take the time to understand what makes your business great and work fast yet thoroughly to build, test, and validate ideas, helping you discover new customers. Take your business online with design‑driven digital acceleration. Find out more at: url tbot.io/acceleration or click the link in the show notes for this episode. CHAD: So you already said at the beginning of the show your product is targeted or primarily for people who menstruate, and not a lot of property, commercial real estate developers, that kind of thing, are those people. So was that a struggle early on to get people excited or to find the right people? SUSANNA: It will always be a struggle, or maybe not always, but it continues to be a struggle. I do also want to make sure I share what we have built. And we have a mission to elevate access to menstrual care products, but our product is for everyone. So our actual physical network and machines we actually carry wellness essentials for everyone. So by solving this mission-based problem of access to menstrual care, we're actually building a product that serves everyone. We have products that everybody uses and needs every day. And what we see in the marketplace is that SOS really is for everyone. But to your point, I think a lot of conversations, particularly early days and even now, still is a lot of educating and educating decision-makers about the need for this amenity in inclusive space and diversity and inclusion goals. And how can you expect or corporations expect to deliver on these important metrics that their leadership teams are being asked when these essential everyday products aren't even available in their space? So there is a huge education. There are some uncomfortable conversations. Robina and I have gotten very, very good at having these direct conversations with a lot of people who maybe aren't comfortable talking about the products, but it's an important conversation that needs to happen. And if we don't have the conversation, then we're never going to get anywhere, and we're not going to be making progress. So our goal is to try to make the conversation exciting and engaging and show these leaders or decision-makers that there is a lot of brand equity that can go alongside thinking about the people in their space, what they need, and what can make their experience in physical spaces better. So that's kind of like leading leadership to a place where being part of what we're building is exciting. And it's an exciting opportunity to deliver an experience that's been long overlooked and is in need of a refresh. And so I think when we find folks who get that and are comfortable and excited to be part of the story, then that's usually where we find our best fit. CHAD: So you're now a little ways on from that period of time. So what stage would you say you're at from a company and a product perspective and a market perspective? SUSANNA: We closed our seed round fall of 2021. And that put us in a position, and that capital has taken us to a place where we're a team of 12, and that's across sort of all categories, which is sales, product, marketing, operations. And we're operating in three markets so New York, Boston, and South Florida. We are going to be doubling our network from just over 40 machines to over 100 by the end of summer. And then we'll be looking to get to closer to between 300 and 400 by the end of 2023. So we are in a phase where our prototypes went from three machines in Boston to, like I mentioned, over 40 machines on walls now across corporate locations, transit, retail, sports, and entertainment. And we are and have been investing in and developing and evolving our tech stack and our product. So we've made some changes to our hardware since our prototypes, of course, and then invested quite a bit in our tech stack on the product side. So we will continue to bring in new best-in-class software partners where appropriate and then also invest in-house in continuing to evolve our product and features that we release to the network. CHAD: Do you have a sense of, you know, currently the biggest number you mentioned is the 300 to 400 machine target. I imagine that the total possible number of machines that you could have, even just with moderate growth, is actually huge. SUSANNA: Absolutely huge. So when we talk about our five year-projection, the number that we use is like 10,000 machines. So really, we want SOS to be ubiquitous. We want SOS to be everywhere you go, and so it's a brand that you associate and you trust to deliver just-in-time necessities from brands you love when you're not at home. So that would be across, you know, as people return to offices being an enterprise amenity and being in all leading real estate locations across the categories that I mentioned and really having a connected network. So I would say, in general, vending is usually associated with white-label machines or mom-and-pop operations with snack machines, and that is really not the goal. We want to deliver an elevated experience as a brand and as a company across all of these locations so that you recognize the SOS machine. You know the experience that you're going to get. You know the perks of interacting and engaging with us as a brand and that there's a real trust and brand awareness that comes with the network as it grows. CHAD: I totally get that you're trying to do something different in this space. But what are the numbers of those traditional vending machine suppliers like? Is there a big player in this space, or is it a lot of local companies white-labeling? SUSANNA: It's a lot of local companies. And I think probably a good opportunity for me to highlight probably the biggest component of our business has to do with the media network that we're driving. So our machines are 32-inch touch screens serving interactive digital media when not being used as a point of sale. So, in addition to obviously having contact with cashless payment for the actual transactions and retail at the machines, we are serving direct campaigns and programmatic advertising across the network. And in terms of the value and the drivers behind what we're building, experiential marketing which can be a combination of digital media and physical retail distribution and sampling. And we have abilities to deliver value to brands looking for both. And in some cases, brands are looking to execute both at the same time. Others will be just looking at SOS as a unique way to drive impressions and brand awareness in spaces, and locations, and audiences that they haven't had access to in the past in this way. CHAD: What might that look like? That might be a company like an exercise equipment company or something wanting to spread awareness but not necessarily having a product to offer in the vending machine. SUSANNA: Exactly. It could be fitness, financial services, direct-to-consumer brands where the consumer matches the audience that we're reaching, but the product doesn't belong in the machine at the distribution point. So the digital media and impressions that we can drive in addition to the product type, which is we have touch screens. So we have first-party data collection opportunities, interactive campaigns, and surveys that run on our screens that are different than, for instance, a billboard that you drive by because this is a physical, interactive network. And with Instagram and Facebook advertising and first-party data being a very hot topic right now, having opt-in first-party data collection mechanisms for brands to offer sampling in a new channel is very valuable right now to a lot of the executives and CPG brands that we're talking to. CHAD: I assume that from a business perspective, that is pretty attractive to you because the business of physical goods looks like one thing, but the business of advertising is a completely different model. And the combination of those two could be pretty attractive. SUSANNA: Exactly. It's really unique about the business that we're building and what SOS can offer brands. So in order to, for instance, stand up a sampling campaign with SOS versus potentially having a street marketing team sampling, the cost and the data that we're able to collect by sampling through our network is much more valuable than potentially hiring folks to stand around and pass out product. CHAD: Yeah, there might even be some brands that aren't necessarily comfortable doing it depending on what it is, a street campaign, or consumers that might not be comfortable taking something from somebody on the street that in the privacy of a restaurant might go over a little better. SUSANNA: Absolutely. I think there's discretion in this automated retail experience for actual interaction with the physical product. And our machines and the network are, in some cases, in restrooms. In other cases, we're actually public access, and we're in amenity spaces. So these machines and the distribution channel is available in a whole host of appropriate locations and spaces. CHAD: Cool. So what's your biggest hurdle to getting to 10,000 machines? SUSANNA: Well, right now, we have a ton of demand, and the hardware is capital intensive. I'm sure there'll be people listening to this who are scared of hardware. And I would say, in general, that is certainly an obstacle to growing a hardware business. CHAD: Putting a machine in a new location is not immediately profitable. There's an expense to creating that machine and then a timeline for it to pay itself back. SUSANNA: I would say certainly. At a high level, SOS is a B2B2C business. So it’s a B2B sales lifecycle for you're building relationships selling into institutions in commercial real estate and corporations. That is the first I would say challenge, and funding the hardware and lead times with supply chain and hardware right now. It's a very hot topic, certainly hasn't been easy. So the lead times on the hardware and then funding the hardware, so exactly if it's going to be a three or four-month potential lead time on hardware and orders. Funding that order before machines are on walls and revenue can be generated on media, and our product sales or amenity fees kick in. The timing of all of that makes, I would say, our business but hardware businesses in general potentially either less attractive to investors who are looking at SaaS companies all day long and have a very different profile in terms of the company. But we're excited to be in a position where we have a very, very hot pipeline, a lot of inbound interest. I would say we're getting inbounds from best-in-class partners that we could only dream of doing business with. And they're reaching out to us to bring in the amenity. So it's an exciting position as a founder to be in to be opening your inbox and having multiple grade A inbounds a day. That's fantastic. And moving towards a place where we're happy to report that we have signed and committed machine financing in place for this next period of growth. So that opens up a lot of doors. And in terms of our journey, initially investing our own cash into getting the prototypes ready for installation in 2020 to being in a position now where we have our first machine financing vehicle in place to actually protect our equity as we grow the network, which is what we're looking to do for the remainder of this year and next. I don't know if I answered that accurately. [chuckles] But the challenges of running and operating and funding a hardware capex–intensive business is probably the biggest. CHAD: Is there a point in time where it really is that or something close to that that's holding you back, and you end up just doing this huge financing round or something in order to completely blow out the scale? SUSANNA: I think we have, and we're very keenly aware of first-mover advantage in the sense that we have, and COVID and other global macro-economic barriers have basically made it hard for a lot of companies to grow really fast right now in certain industries. So we do have a first-mover advantage right now. And I think we want to look at the next; I would say year to year and a half to get the company to a network size where we're operating profitably and then go to our Series A and really crank on the growth and get the network humming and growing really rapidly after our Series A. CHAD: So your goal would be to be operating profitably before getting to that next phase of growth. SUSANNA: We expect to right now based on what we're seeing. So the business and our performance indicates that with this equity, this next...we're basically entering a bridge round, but with this machine financing and a bridge round, we should be in good shape to do so. CHAD: Yeah, I think there are lots of different ways of doing things. But that seems to be what investors are wanting to see today. But also, I think not only is it from the market, but I think they're a little bit more...not to dwell on specific examples that I don't know too much about, but like, for example, scaling Blue Apron and a lot of the other meal box companies they were doing that when they weren't profitable. So they had never really shown that they could actually be profitable, but there were real costs to scale as well like you have. SUSANNA: I think for many reasons, it makes sense for us, I think, to get the business to profitability. And a lot of it is selfish, you know, thinking about the company and our current equity stakeholders. But we don't want to be in a position where we dilute ourselves out of the business effectively with growth capital when we haven't proven or made the company profitable. So, anyway, that's our goal. And I think we're feeling pretty optimistic about it right now despite the fact that I know the market and the world feels like it's falling apart [chuckles] for a million different reasons. But we actually, surprisingly and shockingly, feel pretty optimistic right now. CHAD: Well, I really wish you the best with that, and I look forward to following along and seeing all the good news along the way. If folks want to find out more about SOS or get in touch with you, where are the best places for them to do that? SUSANNA: So definitely, I think you mentioned our website, that's worldofsos.com. And you can feel free to email us at [email protected]. CHAD: Awesome. Thanks so much for stopping by and sharing your story and your wisdom with us. I really appreciate it. SUSANNA: Great. Thank you so much for having me. CHAD: You can subscribe to the show and find notes along with a complete transcript for this episode at giantrobots.fm. If you have questions or comments, email us at [email protected]. And you can find me on Twitter at @cpytel. This podcast is brought to you by thoughtbot and produced and edited by Mandy Moore. Thanks so much for listening, and see you next time. ANNOUNCER: This podcast was brought to you by thoughtbot. thoughtbot is your expert design and development partner. Let's make your product and team a success.Special Guest: Susanna Twarog.Sponsored By:thoughtbot: As life moves online, bricks-and-mortar businesses are having to adapt to survive. With over 18 years of experience building reliable web products and services, thoughtbot is the technology partner you can trust. We provide the technical expertise to enable your business to adapt and thrive in a changing environment. We start by understanding what’s important to your customers to help you transition to intuitive digital services your customers will trust. We take the time to understand what makes your business great and work fast yet thoroughly to build, test, and validate ideas, helping you discover new customers. Take your business online with design‑driven digital acceleration. Find out more at: url tbot.io/acceleration or click the link in the show notes for this episode.Support Giant Robots Smashing Into Other Giant Robots