Helping 3PLs Win with Warehouse Software

Welcome to the supply chain technology podcast. I'm Nabil, your host, and I'm so happy to receive Aaron today, the CEO and founder of Sheep Hero. Aaron, good to see you. Welcome.

Thanks for having me.

How are you doing?

Great. How are you?

Yes. Very good. Very good. Well, Aaron, it's a pleasure to have you. um know each we know each other for a couple of years now at this point and uh I'm so excited to have you on the podcast because there's so much things to talk about um for the people that don't know you maybe tell us a little bit about you tell us about sheep hero you know your your journey um building the company high level

sure so um I mean a bit about me uh father of four uh started ship hero in 2013 so before that had an e-commerce company so um but Yeah, 13 years at Ship Hero. We provide software for warehouses. Um we serve a bit over a thousand buildings um in the US uh over 150 million e-commerce packages a year shipped through the software. Uh a lot of um a lot of 3PL's um a lot of more modern 3PLs.

That's great. You have an interesting story, right? because you you are one of these entrepreneur that went to build a business because you faced the challenges yourself, right? Like you had a

was it a martial art business? I think you still have it, right? Like like uh so tell us how you come up with the idea and and

Sure. So yeah, Yoseph Hos our BP product and I we go back and we we went to middle school together um and then we had a company selling um Brazilian jiu-jitsu is the martial art um apparel. Um it was the you know the biggest one in a very very very small space uh very small industry and then um you know uh when we were looking for WMS you know 2010 or whatever uh there was like Ship Station which is great for printing labels and then um really expensive you know sales people didn't want to talk to us that's how they knew we couldn't afford what they they were selling uh you know we couldn't afford a Manhattan like it's just not even close um and couldn't find anything uh that was you know modern and um and uh worked for us. So, first we built one just for ourselves, just internal. Um, never going to sell it just to run our own warehouse. We're great. Uh, efficiency went way up. Um, which was important because before that, basically what happened was the more the orders went up, the more the employees we needed went up. Um, and it went linearly and I was like there should be as I add more orders, yeah, I need more people, but like there should be a curve to this. And there was no curve. It was linear. If anything, the curve was the wrong way. Um, because we were just printing papers. it just became easier for people to get lost and not do any work and all those negative things. So, we built just for ourselves just to run our business. And then my background is computer programming. I got into the whole um martial arts thing by accident in college. Um

do you do you practice also? Do you do martial arts?

I do Brazilian jiu-jitsu now, but I did not when I um started the business. I started it

you you started the business first and then you get got into

I had never done a martial arts class in my entire life. When I started the business, I was just away in college. I I had done a few other things um really since high school uh to make money online. I made basically every dollar I ever made other than being a lifeguard at 16

online and this was just one way to um make some money like we ranked number one in

Google actually even before Google in like Ulta Vista and I knew how to get our ranking really high and I probably should have sold something like with better a better business but I know everything about business so I was able to sell that and sell a lot of those uniforms. um just by knowing the SEO. Didn't know the industry at all. And then eventually I I started doing jiu-jitsu and I've done it for um over a decade and I love it. Um but yeah, that was that came after. So yeah, so then I wanted to get back into uh doing programming and um that was you know after some conversations of exploring ideas was like well people like the WMS. I don't think we knew what a WMS was when we built it, but we built our own WMS. People that I showed it to seem to be like, "Wow, that was super cool. I would buy that." And then I was like, "Okay, why don't we start a new company, start from scratch, none of the technology, um, but leverage two big trends at the time that were seemed very new and very, you know, no one was really or very few people really taken advantage of, but seemed very obvious to us, which were uh, Shopify and iPads."

Uhhuh. So we're like we built only for iOS. Still to this day we are only iOS only works iOS devices. Uh everyone was using Windows C devices. Those things are expensive. Uh you don't get a lot of value for your money. Um and um and focus on Shopify instead of uh you know at the time Magento was clearly the dominant one but Magento was every single version of Magento roughly was different and therefore building scalable software meant you had to build one-off integrations.

So but Shopify had this a brilliant beautiful API the most beautiful API I'd ever uh run into. And um I'm like I the amount of work for me to build on Shopify is onetenth of what it is to build or 100th of what it's going to be to build against Magento. So I'm going to do the Shopify. I'm going to and uh use iPads and this is what the future's going to look like and I'm just going to get started, you know, nights, weekends, you know, didn't you know um didn't raise money or anything. Just, you know, on the side built a Shopify app uh I think $99 a month. submit it to the Shopify app store. The guy who was running the Shopify app store at the time, nicest guy, he sends me an email from his personal email and says, "I really appreciate, you know, you submitting this. I just want to be give you good advice. I like what you're doing. Don't work on Shopify. Work on Magento. What you're doing is for big merchants. Shopify is for little merchants. So, you should Thank you. I work for Shopify. So this for my personal not Shopify, my personal opinion, don't work with Shopify, work with Magenta.

That's crazy. That's crazy.

Anyways, I ignored him. I stuck with Shopify. Um, which you can say in one hand that made me really smart because clearly today Shopify is the dominant one. On the other hand, he seems really stupid because I should have just not done any of this. Put my money in Shopify style and I would have made way more money. So, you know, at one hand I'm an idiot. At one hand, I'm a genius. But either way, um, we said we're just going to be Shopify and and iPad. And then over the over the years, we became much more serving 3PL's than brands, but most of those 3PLs still serve brands on Shopify and Amazon. Um, with um and and you know, working with Apple, you know, we continue to have a tight relationship with Apple. Um, by the way, they're amazingly um, you know, you would think there's this huge company. They're actually like amazingly open and helpful in anything we need. They're always they're always um so generous. Um but anyways, working with those two companies um and leveraging the fact that Apple products get better every year

has clearly been the right decision. Like if you look at the what you get for your money uh on iPad today, it's the best computing platform for warehousing by far. And that wasn't obvious when we uh when we it wasn't the case probably when we started but we bet on the trajectory of um you know consumer products versus you know uh enterprise business whatever um and that's turned out to be a great bet and something we continue to do today believe in you know mass adopted uh consumer grade technologies and deploying that versus trying to you know um focus on enterprise stuff

on like very um very industrial type of devices and setup. Yeah, that's great. We'll come back to that because I think that's a really interesting point. But, uh, I think for the audience that, you know, have now an understanding of, you know, warehouse management software and what you do, it's very likely that actually you bought something online and it was processed through the through the Ship Hero uh, warehouse management software by one of the merchants or brands of FreePL that are sering the merchants. What's what's the number, Aaron? I think you've shared it on social media in the past, but like how much GMV a gross merchandise value or how much percentage of the total orders in the US actually gets processed through uh ship hero?

Yeah, I think it's it's somewhere like 1.4% uh or 1.5% of all e-commerce orders in the US are picp packed and shipped through ship. We also have customers like 41 countries. So, um, but we don't have the same percent of the market outside of the US and Canada, we have a good percent of the market. Obviously, in those other markets, while we're there, uh, it's not as much, but yeah, in the US market, in the Canadian market, it's like 1.4 1.5%.

Yeah, that's that's pretty impressive. Um, you know, there's always this um thinking people give you a big number and they say, if I can capture just 1% of that market, it's huge, right? And and it's true. Sometimes you once you're there you forget but it's it's massive especially when you think about like a huge market like the US like owning a percent of anything

is is extremely extremely meaningful and and and an amazing uh success and I know the the journey is still not complete u tell us a bit like so I love I love the Shopify um story because it's like uh as you go and you build a company there's a lot of these things that comes along the way of like hey what's which path do you take and and which path you don't so you talk about using devices that are easy to use. You talked about like like reducing friction, uh helping these merchants, you know, to adopt technologies that are easier and cheaper, right? I think there there's a lot of the things that you do um are really based on that like enablement to this this merchant. Why is this important? Um and how do you do this right at scale and continue to keep that that principle, you know, as you scale the business? Because as you scale the business, there's always these things about, well, now you need more reliable devices or you might have people along the way that kind of say, well, you have you need to have more security. So, how do you you stay agile for the journey?

Yeah. Well, I mean, security is the most important thing we do. Um, security is number one, reliability is two, and knock on wood, we've been very successful um at both of those and and we spend a shocking amount of money uh and time on on security um which is not in conflict. I mean, Apple has amazing um tools and we could spend a lot of time on it, but I don't think most of the audience would care. But you can look into Apple's tools for securing um their devices and their networks and um I think it's it's at par or surpassed um the ones that you would typically see like um you know the Android and the Microsoft ecosystems at this point. Um but yeah, our approach like I you know I believe in cheap um like I

I believe in cheap.

Yeah,

I like that. I like I'm sure a lot of your customers would be like, "Yes, you need to do some pricing adjustments then."

I I I think we're we're cheap. Um

we uh you know, my my background um I started my first company um with $2,500. Um uh generated um you know, many millions of profit um over the years uh from that business. Um and then Ship Hero um I don't know the amount of money I put in. Um but um you know I did it without investors uh for many years um partially by just not taking a salary and just working you know um on it myself and hiring some people and I had some money was for my first business but um like we want to enable people who are early early in their journey um and then continue to enable them like we have people I actually had We had an event this week and and one of the people that came uh I was sitting with him. Yoseph went and set him up in I don't know 2018 or something in uh a 20,000 square foot class C not well lit tiny tiny tiny warehouse. Um and today um you know it's it's you know an eight figure profit eight you know eight figures of annual profit. uh a business uh with many warehouses and um and still a customer um and and um the reason for that is we had the product that at 20,000 square feet he can afford and we also have the product that at the scale he's at is still the best product for him. Um, if your idea is, hey, I'm going to build a product that's once you get to that million square feet, you'll be able to afford and and um you're going to lose the muscle of making it easy to use, easy to adopt, right?

Because it's just you can get away with it with you just have consultants and you have s you have um implementation people and you've got thirdparty consultants and the other person has a team and you could get through. so much of the friction um with money and people at that stage but and and we have we sign people at that stage too and it's great. We love working with those teams. But if you if you abandon that but the small end of the market forces you to have software that a sixperson team you know and I'm talking about like six people doing everything you know including picking and packing the orders um there no IT uh no complex implementation plans no uh industrial engineers can adopt it and be live in 30 days up running shipping. It It's harder, but it forces a quality to the software. It has to be built well to make that work. So that's why it's so important to be able to get people at a cheap price and make a profit at that. And then as they scale up, of course, we charge them more, right? And we make more money. Um because of course you couldn't

if everyone paid the same amount, the person with 20,000 square feet and the person with 2 million square feet.

Yeah. I couldn't run the business. But um but yeah, I think that's important you that you build a company that has the ability to start with people that are early. Um and in order for that to happen, it has to be easy to use and it has to be cheap. They have to be able to afford.

Yeah. So um the way you speak about this makes me feel like um not only makes me feel, but I also have, you know, I know you for, you know, for a couple of years and I've seen you interacting with the community and so on. Does does enabling these businesses the story of this business that was you know a small business now it's a huge business helping this type of entrepreneurs being successful and building massive business does that make you proud is that is that like is that like something you look at you're like this is what I want to see is is that part of the of the mission here

yeah absolutely like the um I mean the main reason I do it is like for my kids like I think you know obviously the main reason I did it was the money and then after a point where you made enough Um, I I I like that my kids see what I do. I I incorporate my kids in my work and I like they they see um that I work hard and and um that I have an impact. So, that's the main reason. But I I do feel like I have a um you know, I feel like responsibility is a gift and I have the capacity to to deliver something to the world that has a lot of value. Now, it's not, you know, a medicine that's going to save lives, and that's even better. That's even more value, for sure. But that's not something I'm capable of. And I think what I'm capable of is helping hundreds, thousands of businesses um and entrepreneurs and tens or tens of thousands of of people every day working on the product to have a better business, a better job. um and for them to see success in in their lives and what they're doing. And if if my company didn't exist, they would use another another WMS and maybe they would be successful, but maybe not quite as successful, right? I think our our product is really good. Our business, our company helps them. They're more successful in their lives. And I think that's the way I could contribute to society is by helping all these other people be more effective in their goals, which is to build their business and support their family. So to me that's extremely rewarding. Um yeah it's that's

I love that. Love that. I I was going to ask you this later but since you touched on this um you are one person that definitely um not only your kids but also Marina and and uh the whole family like you you really uh you host event with your family uh business events and you bring them and I love that. I I try to do this also when I when when I can and as much as I can. Um, why is that important? And you also said, um, I want my kids to see that I work hard. Why is that important?

Well, I mean, there's a few reasons. I mean, the most selfish reason is I want my kids to have an unfair advantage in life. Um, so, you know, I uh my parents uh my mom uh was a high school math teacher and uh my dad still is a college professor. He teaches uh biology at Forton University here in the Bronx. Um, we had no idea what business was. Like there was no, we didn't really know. There was no I had no idea how business worked. Um, and um, you know, uh, my uh, my my dad uh, certainly felt like I should, you know, go to college, um, get, you know, a secondary degree and then get a job in whether it was academia or law or um, something like that, you know. uh a very traditional um career and he didn't know I don't think uh what an entrepreneurial life looked like. He just wasn't exposed to it. Um my mom a little bit different. Her her father was an immigrant um from Germany and you know worked his way up from poverty to working as a butcher eventually buying a butcher shop. So he was an entrepreneur. So she she saw uh she saw a bit of that. Um but not I didn't have exposure to like the world I live in today uh as an adult. I never even glimpsed um as a as a child. I the first time I was on a plane was with my friends uh going to spring break in uh in college. Um we didn't travel. We didn't have money. Like so

where did you go?

Uh we went to Cancun.

Okay.

Good good uh traditional one. Yeah. Yeah. For the US college bro trip. What I tell you? Um uh and now you know my my daughter who's 13 months old uh has been on three international trips now. She's young. She doesn't remember. Um but I but I I I want my kids to have a wide range of opportunities um in their life and by introducing them to people who have. So um I introduced my son um just at this event to a public company CEO and um uh a theoretical mathematician who's uh who now who now works in supply chain. Um but by being exposed to like these are different careers like this is what a public company CEO looks like. Like a public company CEO probably seems very very intimidating and unachievable. um because you just see them on TV, right? But then when you get to like shake their hands and say hello and you realize that they're just people who are working hard and doing their best and making mistakes and um you know, maybe they're charismatic and they're but they're real people. Um and uh same thing for the theoretical ma mathematician. He's not a guy who looks like Albert Einstein. It's like so just a normal guy, right? Just normal guy. Um, and it makes them see, you know, um, if that's something that they want in their life, they can visualize it versus I certainly struggled as a child or not as a child, you know, growing up uh, in the earlier part of my career to understand what it meant to be the CEO of a first a very small business, now a much larger business. Um, so I'm just so part of it is just cheap code um for them. Give them a little uh free free look and free exposure for what that uh for what that world looks like. Um but then I also enjoy it like I like hanging out with my kids. Um, and I worked I don't know like a you know I I I think I had a point in my life where I thought like the goal was like I'm going to work this number of hours and then I'm going to stop working and then I'm going to go and have fun. And then as I matured I realized and as I got to the point where like I didn't have to work right in the beginning I had to work. I had no like my parents didn't give me money. I didn't have money. Like I had to pay the bills. I wanted to pay rent. I wanted to go have a drink. like I needed money, so I had to work. But then at some point when I didn't have to work for money, um I realized that yes, it's very hard sometimes. There's some certainly hard days. There's certainly hard things you have to do, but I enjoy what I do and I want to make it so that there's not this work is like painful working in the coal mines and I go home. It's like my real life. It's like no, the whole thing is my real life, right? And um so I bring my kids because my kids are part of my real life and to the degree I can um I mix all the time. We were just talking about it. I'm going to go I'm going to go see the World Cup and host a um uh a customer event and go visit um meet with a robotics uh company all on the same trip, right? because I put all those things together and um to me it's not a work trip or a or a a trip to see the World Cup. It's just a trip and I I try to incorporate them. So

yeah. No, I love that. I love that and I uh I feel the same you know I think there's um especially you know growing up in Europe you're like you are clearly told like you have to to separate you know your your personal life from your professional life. And I remember so I I I used to work for for Patrick Keller

um who is now the the CEO of GXO. Amazing guy. Um in one of the team meetings I remember one of the conferences somebody asked him how does he uh manage um work life what people call work life balance which which you know I think for many people yeah it's not a balance you know at best it's harmony or you can call it whatever you want but and his answer was there's no there's no balance like his life he was saying that him has a you know has a pretty mixed you know energy and I also always felt the same I was like I met my wife at work you know I bring my kids you uh we worked in the same company for many years. Um, so I think it's a great, you know, it's a great uh if you feel like it, obviously it's not for everybody also, but you know, I think I think u it's just it's just who you are, right? And so and so I always feel like there's no reason to separate and like just say, "Hey, this is it's a different person." And I think just like humanize the people. I think it's it's great.

Yeah. And and if you're yourself, you're yourself. So like your kids see you with your kids. And yeah, sometimes I'm like, "Sorry, I got to go take care of the baby." It's people are very understanding and um Yeah.

Yeah. that we see that we're real people

and for sure like I think from also from the time of COVID I think the work from home dimension have also humanized a lot of these things where you have like you know you might be working and you know your your kids pop up and then before it was kind of like you know

you yeah you'll be like worried that people start to judge you and then it became just like it's fine right so me I went from somebody that if I was on cards you know I close the doors I say to my wife hey I don't need to um I don't need to have any type of disruption I need to have like focus and you know to a point where even the most important meetings you know if my kids will come in I would be like just like it's okay you know it doesn't matter you know I give them a kiss and then I tell them just you know

our first engineer Russell uh still with us today still working here today working on hardware uh every call that we have because usually I call we don't have scheduled calls I don't think I've ever scheduled a call with Russell I just FaceTime him or he facetimes me um and um everyone he's with his daughter or I'm with one of my It's It's like a joke. It's just like there's never a call we have where one of us isn't with one of our kids because we're just calling each other like Saturday morning or, you know, whatever Monday at 9:00 p.m. or whatever. We're working on stuff. I love it. Um but yeah, it's it's it's just so much easier versus like imagine he would like he had to take the call. He would be like, "Oh, I got to drop off my kid." And like it's just like why just get on the kid's going to distract a little bit and that's life.

Yeah. Absolutely. Absolutely. Um now that we're talking about about COVID and some of the changes a COVID um that period was a big um accelerator for for e-commerce business a I think today uh the software serves omni channel customers so e-commerce and also like traditional retail how important was that stage for the company in term of like acceleration of the business um and what what that has done for not only for e-commerce but for retail and for for your company up to today.

Yeah. I mean I think from our business I think actually the most important thing we did was not make any major mistakes. We made mistakes. We didn't make any catastrophic mistakes. I've seen uh I think the most important one is we didn't take out debt. Um a lot of companies um took out a lot of debt during that era. that was very cheap and then um have really struggled to pay that back now. Um as debt got more expensive and growth slowed um we didn't um and um yeah so I think not making that major mistake uh which I was tempted to do uh I thought about I considered it um uh was probably the most important thing about co for us. I don't know that the the adoption curve which went up and then back down and was really an accelerator. I I don't think it actually turned up a positive for most of the industry. Yes, some people made a lot of money um who sold at the right time, but a lot of those businesses as you know went to zero. Um so I think it seemed like a great thing at the time for the businesses but didn't work out uh for most of them.

Um

yeah, huge right. I mean the the the entire space of aggregators and so on billions billions went to to

yeah the the Amazon a aggregator went to zero. The Shopify one I think also like open store or whatever I think also went to zero. Um

we know some of the logistics a bunch of the logistics went to zero. I I I spoke to some you know a few of them before they uh shut down. Um yeah a lot of money went in and a lot of money was lost um with very few long-term winners. um there's just too much money chasing what turned out to be a very short-term trend. Um yeah, and to but the the good I think one interesting thing about it was it changed the shape of retail. So I think if you look at the the shelves today of uh you whatever big box stores um you see a lot of brands that started online like they started on Shopify and now

they might sell 10 times as much in the stores as they did on Shopify. something about COVID and the end of COVID and people were like buying all their stuff online and then they went to the stores and I think they went to the stores and the quality and like the color and the you know just the the the spiciness of what they saw on the shelves just pald in comparison to what they saw from these Shopify entrepreneurs that just created more interesting products. Um, and then because of that, I think the the big box retailers started to take a chance on some of these smaller brands instead of just relying on the traditional CPG brands. And um, I think that's been great for retail. That's been great for uh, the consumer. And, um, it's been good. A lot of those brands have been acquired, right, um, by the big CPG brands, which is great for those entrepreneurs as well. So I think it just it reset people to what's possible and and created a lot of um very successful like mighty patch would be you know the skincare thing great example is just online and then in store and then uh you and so many other ones like that um they've been great stories so yeah I think that's been that was the biggest change coming out of co

yeah and and I think you are yeah you are certainly pointing to also something that um brands I The most common categories probably would be like cosmetic um CPG in general and uh and some of the fashion fashion and apparel brands that have have gone there. I mean including like um oh I forgot the name of the glasses uh company. Oh my god. Anyway, but yeah there there are definitely a lot of um companies that started pretty online and then evolved as well as part of their channel strategy as well. Momaf Fuku um company we've been uh privileged to work with for many years um only sold online

and now they're everywhere right Whole Foods, Target um almost every uh you know mid or high-end grocery store they're in and they you know obviously they started as a restaurant but um they sold only online and now they're everywhere and um you know food is a is a place you don't typically think of innovation coming out of Shopify source, but um they're a great example and and there's cosmetics so many um so many of the cosmetics companies, probably the majority of them these days uh start online um and then um become just mainstream products sold in every store um and if not for what Shopify provides them and again just go back to being cheap. the fact that you can get a Shopify store and you could be selling goods for less than $100, like $100 a month. Um, it took me started e-commerce. Um, it took and I was a computer programmer and a good computer programmer. Uh, it took me six months um of a lot of hard work to sell my first product. Um, that's not attainable to most people, but $100 a month Shopify five hours. I'm not pitching Shopify. I don't know Shopify stock or anything like that like like that. But um

you don't you still don't?

I still don't know Shopify stock.

You never did at the end. You never did.

I don't like to invest in only only invest only stock I invest in is uh my son, my 13-year-old is into stocks. So we have a little portfolio that we trade together. Okay.

As a learning experience. But no, I I stay away from stocks. I think my job is to run my company and that's a full-time job. Okay. Um, but the the fact that they're cheap has in some of these companies would not exist because they didn't have the time or money to create their Shopify to create their what are you calling a Shopify store their online store if not for Shopify. So the fact that Shopify enabled them means that they created these businesses some of which have are you know doing north of $100 million in revenue

today but they couldn't afford the other solutions which were you know in the thousands of dollars um and they never would have never would have existed if Shopify did not was not cheap. That's why like I believe a lot we try to do the same for 3PL's we try to be cheap so they can start and be achievable and then they'll grow and they'll get bigger and same with Shopify. Sure, sometimes they lose uh one to, you know, Salesforce Commerce Cloud or something, but very very few, almost everyone, you know, we have Shopify, we have companies uh doing insane amount of uh volume uh on Ship Hero and just selling through Shopify today and um that's because they start cheap.

Yeah. No, not and I I think I think it's an amazing company. Um I uh

You probably own some stock.

Yeah, I do. Disclaimer, I do. It was actually it was actually my top stock always Shopify and Amazon. Um

yeah, great companies, great great founders.

Yeah. And I also just because I'm also like not like I don't do short term, you know. I always felt like if I'm going to do this, you know, and I'm not at all an expert or anything like this, you know, certainly not pretending to have a type of genius in in investing. I just I you know, that's why I was asking you because you understand obviously the space in a very different way than most of the people out there. And so I always felt like okay if I am going to do some something I would do it in businesses that I understand a bit better and and I I really just think that that business is actually a bit like the WMS business in the sense that the retention level on the businesses

and the more you build capabilities and the more you stay with the company the harder it gets to live

because you start to build up ads on and you start to build features and I just felt like on that front Shopify did amazing by by all the

quality is good it's about the quality though because people will get frustrated and leave as they grow

if the quality is not good. We've seen that I mean Magento owned the market and people left and it was painful. No one wanted to leave because Magento you spend so much money building your custom shop

and I know people who are like I've spent all this money and now I'm going to go to an out of the box Shopify store and it feels horrible

but it's a better product. So you gota do

Yeah. No, the product didn't follow and they they had to take the decision. I you you you talked about um bootstrapping the company which is I'm not going to say unique but it's not so common especially when you look at the tech software uh space in supply chain and you think about like the amount of businesses that have been created the last say 10 years it's not that common right the path is usually more of going raising money some people raising billions and then not delivering we'll talk about that later a but you the other way around like like tell us why and maybe for entrepreneurs that watch this and for people that are building a businesses as well that might be a bit earlier why ultimately you took money um and when and what was kind of like trigger points where you said like now it's the right time and this is the right investor like couple of couple of thoughts there

no one would give us money no one give us money I didn't know any um I didn't know any VC funded companies. So I had no network. I had no one I can uh network through. Um I was in, you know, uh New York, a little upstate from the city. So not a bad geographic area. Um but I had no network. Um and um it was pretty obvious that I wasn't going to be able to raise any money. Um so I didn't really have a choice. Um and then um you know we we were able to run the company um without needing outside capital for the first uh eight years and then um we were operating profitably um and like we had competitors that had raised $200 million and we had raised zero. Um actually no it's not true because we had some friends who put in some money already at that point. So at that point I we had like raised $435,000 uh but you know

first 200 million

um and um and you know maybe I should have had the courage of my conviction and say it's fine we're still going to beat him with zero. Um but I didn't and I said you know I was like all right we gota we gota um to be credible we have to at least have you know some money in the bank. not as much as them, but we have to have some money in the bank. Um, so we raised some money. Um, in hindsight, um,

I mean, it's public race like it's by it was 50, right?

Yeah. Yeah. We ended up raising, um, yeah, uh, $50 million, uh, rounds from a single investor. Riverwood Capital been great. Um,

great people, too. Yeah.

Yeah, they're great. And, um, I'm very thankful for their support. whether it was the like whether it was the right decision to raise money. Um certainly the reason was bad like oh because my competitors did it's not a good reason. I I did it out of more of like defensive and fear versus like um some great use for the money. Um we didn't really need it. Um so again as we talk about mistakes during COVID um whether that was one or not could be debated but it wasn't a fatal mistake right versus um you know there's people who raised $200 million um and I know you're going to be like well how can raising 200 million be fatal when you know uh you have more money but it turns out to be fatal because um it's probably too long for this conversation but if you raise too much money Um it it could it

you have to grow into that valuation, right? And you have to grow into it, right? I mean,

and $200 million is is a lot of money to grow into. Um especially when uh it's not even about growing into it. So, it's about the incentives and the timelines where it's just you you people make poor decisions when you raise $200 million. you have this expectation, CO's over, the level seems unachievable. So then you make stupid decisions to try to get back to that level, right?

Um and you're chasing and it just never works.

Versus we raised at a level that we could have justified without COVID. So like

we didn't need the COVID boom to justify that amount of money. So we didn't have to chase it as much. So, uh, we made poor we made we made several poor decisions. Um, but, um, they were they were fixable mistakes. Um, versus if we had raised $200 million, um, we very likely would have made even worse, bigger bad decisions. Um, which could clearly have been unfixable. Or if we had taken out debt, like let's say I took the $50 million and I literally on fire, right? um which some could argue that we did. um it's kind of fine if it's so yeah now I own less of the company whatever um but if I took it out in debt I got to pay that back and now interest rates are higher right so now you know it's 0% interest rates at the time now effective interest rates are you know closer to 10% on that sort of debt or more

it's a lot of money you gota be paying back every year that's a drag on R&D um so that's one so like debt could be bad too much equity could be bad um uh so anyways So my if you ask advice for entrepreneurs, the money has a lot of negatives tied to it in terms of you know your own ability to make good decisions after you raise the money which again it sounds like but I'll make good decisions. Well most people um end up making poor decisions um when they raise too much money and um you could just we know all the examples um in our industry. So yeah, I I would say, you know, if you can if you can not raise money, even if you're going to grow slower in theory, I think in reality, the risks are are are um the risks are lower and you can still build a massive business without without raising a lot of money. And you know, if we hadn't raised any money, we'd probably be the same size. Um and just one more thing on like those bad decisions because we made a ton of bad decisions and we were talking about Shopify. I was had this conversation the other day may be relevant which is um I think Toby the CEO of Shopify has made the most bad decisions of any CEO but he's also made some such good decisions that the bad decisions don't matter like even if he was wrong 80% of the time the 20% of and he lost a bunch of money on it the 20% of the time he was right it was so right and so ahead of everyone else and so successful that the 80% doesn't matter because all that money gets paid off 10 times over by the right ones. So I always try to keep that in mind.

Yeah.

Like we're in this weird game where the number of bad decisions even if some of them are massively costly don't matter as long as you can make the good decisions and have the right ideas and be ahead of the game for the huge winners. And that's why like I have so much respect for Toby because you know you're as a human when you make a mistake you get more cautious but he seems to not have that problem where he'll make a mistake and then he'll just just keep like you know brush it off keep going and like not let it affect his ability to make more big decisions and then I mean I think probably Jeff Bezos at Amazon because those are two stocks you own um is very similar in that um you know They had the Firephone which lost a ton of money, you know, they had they Amazon had so many bad decisions and so many times they burned so much money, but then they also had AWS

which is probably like worth I don't know a trillion dollars on its own, right? Like who cares? He lost $400 million on the Fire or whatever it is, but he made a trillion dollars on on uh AWS and all the other amazing things that um they've done. So yeah, those are just entrepreneurs that are able to like make decisions, big decisions,

they lose on a few and it's like doesn't matter because the ones they win on are

the best.

Yeah. Know, I love this actually. I I watched this video recently that was um I was talking about exactly what you just mentioned like success and failure and um and I was using it's it's soon it's the World Cup, right? So so maybe we use the the football analogy or the the soccer analogy. We're in the US here. Um but the question was who has scored the highest amount of uh penalties in the history of football?

Okay. Who is it?

It's Cristiano Ronaldo.

Yeah.

But who has failed the highest amount of

it's the other example they were taking was so you you obviously you know in the context of sports they were talking about um who is the uh the player um in defense that has the highest amount of red cards. um it's uh the Spanish player uh Ramos who who played for Real Madrid was a very very famous player. But if you if you also go and you look at who is the best a defense player in soccer in the Spanish league over the years over the decades he's also the one that comes up right

and so it's like you know like it's yeah it's

bad decisions

don't necessarily mean that it's it's bad it's how many you take as a ratio to the good ones and do the good ones ultimately

uh end up to be so I think it's your point around there the AWS example and I mean Bezos he talks a lot about this about this one way and two ways type of decisions. Um the one and I think that's what it's also what you're referring to as big mistakes versus mistakes that are okay, you know,

but even the big mistakes like the the it's easy to say,

but you know, as a person when you know it's just human nature is we're afraid to make mistakes. Like that's just a very human thing of

I don't want to I don't want to be wrong. I don't want to lo, you know, I don't want to bet and um it's a failure.

Yeah. And um and I think because of that, people don't make some of those decisions because you look very stupid in in those cases. Like these are decisions that lose hundreds of millions, billions of dollars that everyone a year later looks back and says this was the stupidest idea. It had no shot at working, right? You look like an idiot,

right?

No one wants to take that risk. So they don't make so they don't do it. And then and that's why they didn't create AWS, right? you know, Amazon was not uniquely positioned to win the cloud. They were there's probably a hundred companies that could have won the cloud uh and had more advantages than Amazon, but none of them were willing to go and m take the risk of building this thing that no one else had tried before and looking stupid and wasting billions of dollars and therefore none of them made the trillion dollars. Yeah. So, you know, it's easy to say is really hard to do um because you will look stupid more often than you're

Yeah, absolutely. I tell us a bit about like um building technology in supply chain, right? Like so warehouse management software is one of the hardest category when it comes to selling and it's it's a it's not an easy shift for companies. Um but it's also a critical piece of software for most of the for most of the brands and for most of especially for the logistic companies of course. Um what's the um what's the easy thing in the industry of building software in supply chain and what's the hardest one or like supply chain

WMS? Yeah, like WMS in in in that context.

Yeah. So, um I'll I'll um

so I'll I'll I'll trigger Niel a little bit. Um you know, let's go.

I uh I I did a video call with Ryan Peterson from Flexport.

Yeah.

Uh many years ago,

and he wanted to see the product and um I love Ryan. Um and um um you know, I don't like

he's trying to trigger me there. Yeah, go ahead.

We get through the demo and or we don't get through the demo. We got through like an hour and we're like there's still so much more to go. Uh because I'm like what do you want to see? Because normally when you demo it's like I want to see how this receiving works because like I have this problem but I was like what do you want to see? He's like just show me software. Great. Go for like an hour and then I'm like let's just take a break here and um you know why don't just tell me what you think. And he's like, "That's a lot of software." That was his feedback. Uh I thought it was gonna be like, "Oh yeah, this is amazing. I love this." That's a lot of software. Um

yeah, you're a tech company, right?

Well, WMS is uh some of the most broad software that exists. Uh there's other categories as well that are that are so broad. Um, but there's so many things that you have to do in W. And um, that's why you see label printing software that's like $9 a month uh, which prints labels and it's amazing, high quality and it works amazing and you see, you know, Manhattan, Blue Yonder, Corbird, you know, it's a million dollars or more. And there's very, very little in the middle. And the reason is, um, there's no value in the middle. If I build half a W, I can charge halfway between $9 and and a million dollars because it's worth less than the $9 software because if you have to run a third party logistics company and um you can do, you know, I can receive the orders, I can pick the orders, I can pack the orders, but I can't print the label or I can't, you know, sort it for the carrier or um you know, any of the million other replenish or cycle or and a million not million but many tasks that have to happen in a in a warehouse by software is useless. So you spend a lot of time building before you have something that has any value. Um therefore people tend to uh gravitate towards building uh solutions that are not WMS. So you you build a label printing software because that is a complete piece of technology or you build uh billing software so it works on top of a WMS and that's why almost every company in the warehousing space there's probably 10 companies uh that build on top of WMS for every one WMS

because uh as an entrepreneur if your idea is I'm going to build um a compliance layer I'm going to build a um a sorting technology. Those are all good point solutions that you could put on top of a WMS and that's why there's so many of them because it's achievable and you can build it and then the next year you can launch something else and keep growing. When it comes to W until you have a huge breath of software, you have nothing. You have nothing you could sell. Um that's why most companies don't make it. Most companies never become most people that start a WMS never have a successful WMS because the amount of pain and time it takes to put in is uh pretty insane. you just you have to have a a very strong conviction in what you're building, a very high tolerance for pain and uh the right financial setup to support it. So when um you know I I told you you know we couldn't raise money um I had uh at some point we had we had some traction um we had some customers in um in the Bay Area um connected us with um some VCs and

Ryan could have helped at the time.

I didn't know Ryan he wasn't Yeah Ryan knows everyone but he I didn't know he wasn't taking my call. I didn't even know his who he was. Um and uh we so I had a call with these these VCs. Um and um you know I pitched him on the solution like how much money do you need? I'm like I don't know if I had a million dollars like they'll be like that's what all I need to get this thing to the next level and they're like there was this com there was this software called uh Stitch Labs. You never heard of it. Doesn't exist.

They had just recently raised 20 or 25 million. some others that had raised, you know, the tens of millions of dollars. Um, and this was way before COVID when, you know, those were big numbers in in our space. And they're like, you will never beat these guys. You're going to get a million dollars. These guys have more. They're ahead of you. You got no shot. I'm not going to give you a million dollars. I'm wasting my million dollars.

Yeah.

Um, and none of those companies exist anymore. Uh, they all got swallowed up, aqua, hired, bankrupt. Um, and the reason is you can't build a WMS in 2, three, four, five years. You can't, but when you take VC money or PE money, that's the timeline you're working on. You have to show that you can get to that sort of uh scale and growth within that number of years. And it's just not going to happen in WMS. And that's why every WMS basically you see um has gone through a very long journey um like us because it's just such a broad piece of technology. So anyways that's my very long answer.

Yeah. No but um that's just to be clear like so for the audience because we have a point of disagreement on on flex sports with

we're going to talk about Messi and Abi next. So just keep going with the controversy here.

Yeah. Exactly. Exactly. We'll talk we'll talk Argentina France after in in in who is going to who's going to win. But um in in the World Cup u but uh just to for the record, right? And and I really hope at some point like Ryan comes into the into the podcast and we can have a discussion between somebody. Yeah. Once we have the recording of this out, you can send it to him also and tell him. I'll I'll definitely he's definitely one of the top people I want to get also here. And for one very simple reason is that I think for many people of the industry when you look at um when you look at fundraising and you look at innovation in the space you actually want the highest amount of companies to succeed

because I think this is really what moves the needle right it's a company come in raise money or put strap but like create a better technology we all benefit of this right I mean

we not only us right but the world benefit right And I think the world gets more efficient,

right? The world gets more efficient and so it's it's it's it's it's better for everybody because it does drive the cost down and all this, right? I I always felt like our industry has a much bigger responsibility than sometimes what we think about because you you you know if she gets better well you know one point whatever percent of all the orders potentially get faster.

Yeah.

Right. And they get processed by people that can make more money

saves a little money so that means they have more money.

Yeah.

Exactly. So I think there's a big responsibility and and the point with flexot I think to me was always like you know and I watched a lot of the interviews and so on and there was always I always felt that there was um a reality given to the investor community that was actually not the reality that that people know you know like when you say well the entire industry works on Excel sheets and things like this this is really just like people that that you know will buy that story because they just don't have the experience and I think it's fine you know when you do this at small scale Okay. But when you become the biggest company in term of like fundraising and so on, it comes also with responsibility. You cannot you cannot uh really like make that kind of statement that just send like a completely wrong because at some point at some point you're going to have to show results and when these results don't come up like the same way you were talking about like about the you know if you take money from outside, if you take debt, you know you you're going to have to pay it off at some point, right? And and so when you start to go into this big fundraising, um if it doesn't work and people are like, well, this was most of it was BS, then you have a problem because then entrepreneurs that come behind, they're not going to get funded because they're going to be like, yeah, this is not an industry that you can actually make money. You cannot build software in this ind. And it's absolutely not true. And this is, I think, an amazing industry to build software. And not only it's an amazing industry to build software, but I think there's still so much to do.

Oh, yeah.

So much to do, right? I mean you look at the all the spaces around value chain it's there is still a lot of inefficiencies you know I'm not going to say it's manual because that's not also not true

there's a lot of there's a lot of opportunity

but there's a lot of opportunity so right so so we want entrepreneurs to come into the space we want investors to put money into the space and we want wealth to be created into the space and I just felt like in that front I think uh and it we not we haven't got yet to the worst I think because I don't I don't know what the future is going to look like for for for for flex in that regard but But there is going to be it's going to be at some point you're going to have to show the numbers right and and uh and uh and these numbers in my view they don't look good you know they don't look good and I might be proven wrong and you know that's why I'd love to have Ryan here and and have the conversation on this but my point on this is more like if you BS your way at the beginning when you raise a bit of money and so on it's fine but then at some point you have to you have to to be conscious that you have a big responsibility because you also have big money in the hand a

I just say we didn't we didn't BS at all and we didn't raise any money. Don't give us money. So, um DNO and you can you can argue it. I get it. But, um the the hype works um and um

doesn't seen that. Well,

we will see. We've we've seen it time and again um where uh the best product uh is not always the one that gets funded because people like the excitement and the energy um of of the more bold statements and you know um we were talking about Elon before uh you know Elon Musk has definitely said a lot of things um that didn't come to fruition um certainly on timelines but the the value he's delivered to the world has been uh amazing. The products are are amazing uh for all of us and um we all benefit from from those technologies that you know he helped push forward

and it takes some uh you know some bravado and some overconfidence um to align a team and investors and and get everyone excited about a mission. Um there's, you know, there's there's uh scales to it. Um and I don't know ex exactly where anyone falls on that. No, I don't think any of us really know. Um but it's fun to be part of a mission where, you know, we're going to colonize Mars and and we're going to eliminate um you know, we're going to do self-driving. We're going to eliminate all uh uh internal combustion cars. And those are great missions. Um and maybe you don't quite you know, you know, the old adage, right? You shoot for the stars, you land on the moon. um or whatever the expression is. Um

that's one of my favorite quotes by the way.

So um so you know I it's it's all it's you know

No, I I'm I'm with you. Like I think I think on that front I'm with you. I'm still waiting to see the

the the flex flex for disruption. Maybe that's why. But but maybe maybe uh

maybe when Ryan comes here he can debate me on that one.

Yeah. He'll tell he'll show you he'll give you a demo and you'll be like it's a lot of software.

Exact. Exactly. That's at the same time when you said it's a lot of software I'm like it doesn't surprise me because I think I think uh I think uh it's really important I think if you build technology here and you know this we talked about this earlier also is like the software needs to deliver value and that value could be in multiple ways but it needs to make a workflows processes communication you know better right faster cheaper right and otherwise otherwise software for the sake of software doesn't work right and and you you know, I'm not going to name names, but there's there's definitely uh you know,

you can you can I make up anyway, but you know, high-profile company uh in this space that um you know, raised a lot of money to solve, you know, maybe a problem that didn't exist, right? That that definitely happens um in our space, but

yeah. No, absolutely. So let's talk about um let's talk about like real value and technologies that actually you see bringing our eye. So we have this little uh set here. It's just one of the babies of the of the company. So you see here this is not QVC but uh we will uh we'll explain to you what it is.

Four low monthly installments.

Yeah. It is not a DJ set but Aaron like explain to us what is this?

Yeah. So well first of all the design is um is just mine u so this is a one of one signed by um the person we were talking about earlier actually Russell our our uh number first engineer at Shapiro um and uh he was instrumental this this was his baby and again first engineer at Shapiro so he he designed this custom face plate and signed it for me which thank you Russell um yeah so we call it tap to pack um it's relatively cheap um it comes with a bunch of

we're staying the cheap theme and you know this year

uh about a five you get about five uh times your money back in year one in terms of labor savings in according to the the studies we've done in our lab. Um so it's a device to eliminate the mouse and keyboard uh at the packing station in the warehouse. So um you know employee comes here this is like a NFC. So they badge in uh with their badge just tap it. badge. When it's time to uh pick a box to pack the items, the there's buttons under each box, they light up. Uh there also buttons so you can switch if the you know, you ever get like the packaging is way too big for the product and you're like, you know, why' they put in this box? It's because the system told them to put in that box. We also tell people what to put in the box, but you know, sometimes we're wrong. And um we simply have a button. You just choose the actual correct box. will record that and let the human override the computer because while the computer's right 99 something percent of the time it's not 100. Um so anyways so that's not here because I didn't want to bring a bunch of wires. Um so you hit that if you need to. It lights up. You um all the stuff lights up. You uh print the label. You complete the order. There's other things you know. Okay. Hospital um other functions on here as well. But the idea was um it takes about eight seconds longer to pick and pack uh to pack an order if you have to touch uh the mouse or the keyboard. Um in fact when you touch the mouse it adds about 15 seconds. You don't always have to touch the mouse. So that's why it averages to about 8 seconds. But with this there is no mouse and keyboard. So if you look at uh hundreds of warehouses that have this technology deployed when you go to the packing station there is no mouse and keyboard there. Therefore, the only way they can enter information is via this device and those buttons. What that means is when you hire a temp, so you don't want people fixing stuff like one of the one of the ways that things go bad in warehousing is when people try to fix things. Um so, uh particularly if you have a temp, but um really in most circumstances, if something goes wrong, the last thing you want is someone to start clicking buttons, try to fix it. But it's really hard to train. But people like to fix things like something's broken, they just want to fix it. Well-meaning. Um, so you just take away their mouse and keyboard. They can't fix anything. Uh, which means they also can't break anything. So they have a button here, which is the hospital button. They hit the the hospital button if they get stuck. Um, that routes that to uh we call a wham, a warehouse account manager, but someone who's trained to handle problems uh and they simply go on to the next order. Um but yeah, by eliminating the mouse and keyboard, it uh makes training easier, reduces errors, and increases output. And we see that people get about uh $5 of savings for every $1 they invest in this piece of technology, which is exactly what we want to be delivering. That's that's really that's really interesting because I think most of the warehouse management software um at least that I have experienced um they really focus on the on the software but you you have you have this solution which is a a tap to pack uh you have also um the uh AI picking you also have the uh the pick to light a a so you're adding more and more hardware right into a what's what's the vision there is the vision to be really like a fully integrated ecosystem.

Yeah, we want to we want to we want to like I'll go back to cheap. We want to save our our mission we we say our mission in two ways. The the kind of like less polite way we say our mission is uh we want warehouses that use Shapiro to beat warehouses that don't use Shapiro. Uh that's

Yeah, that's your LinkedIn the best warehouses run on Ship Hero, right? Uh yeah,

the more polite version uh is uh we we want to help 3PL's make more money. Um and that's the mission. It's not to be software. It's not to be is there's no there's no other constraints around that. So you know we do events, we do training, whatever. Um but hardware we found uh obviously most of what we do is software but adding small pieces of hardware that are relatively inexpensive just allows us to do things that we couldn't do just in software. We have some computer vision things that um we have deployed in in some pilots and um we've got some other projects that uh involve even bigger pieces of hardware um in in testing. Um, and the goal is always help lower the labor cost by providing solutions that are cheap um, and therefore affordable for smaller 3PLs and where they're going to see an ROI near one. Like none of the C none of the 3PLs that are small can afford to invest on a four, six, eight year uh, ROI time horizon, right? You know, like a DHL,

even the medium ones, right?

Yeah. DHL, GXO, Amazon can, you know, DHL, GXO can do four year time horizon. Amazon can do 10 year time horizons, right? Um, most 3PLs, they sign contracts that are one to three years. So, there needs to be a business case why if I do this today, in a year from now, I will have more money in my pocket. And that's our requirement when we launch new things. We want to always have a one-year ROI. Um, and there's pieces of hardware where we can deliver that. You know, they're not going to be an auto store, right? We can't deliver a full um, ASRS system with a one-year ROI. I don't think anyone's going to do that, right? So, that's not what we're trying. We're trying to find things that are not going to be as um as amazing as an ASRS system, but from the day you say you want to get it and then a year later you will have more money in your pocket as a 3PL owner versus again if you put an ASRS system one year later you're not going to have an ASRS system, let alone an ROI, right? Because they're just they're great systems. They just take time to set up, provision, permit, install. Like they take time. So

um and they take a lot of money. Um so yeah we're trying to deliver solutions that are uh far cheaper, far faster ROI, far lower risk from a financial perspective.

Does this also increase maybe um defensibility compared to if you're doing P software particularly in the age of AI?

We started on hardware two years ago. Um I don't think AI was a was a factor when we started it. We really just looked at solving a customer problem that um we just wanted to shave seconds off of something and we kept uh beating our head around like on this problem of like there's a particular customer very large customer they have to ship uhund I forget the exact number maybe 140 or 160,000 units a day during peak um but have very low volume uh the rest of the year and um we were trying to figure out how to do that without uh you know with trying to make that realistic. It's with so you couldn't really afford like a lot of automation because you can't just use automation for three weeks of the year, right? Like the ROI is never there, right? Um, and then but if you do fully manual, like we tried on software, but like you can only go so far and you end up having um it's really hard to get that many orders out again. Go from like or these units out. Go from like 2,000 to 150,000 um for three weeks and then go back down to 2,000, right? Um but we wanted to solve it and um we we we thought through a lot of software solutions couldn't quite and then we're like what if we add a little bit of hardware like what can we do if we do a little bit of hardware and what we did was um you know one of the hard there's a lot of picks they're very they're um they're very fast to grab the item but it's actually very slow to know which item because they have uh I guess part of the things that I mentioned is they have over a thousand SKs

so to figure out which of the thousand SKs to pick um and you got to do 140,000 or whatever it is uh in a day. You have to look at your computer screen 140,000 times to know which skew to pick. And by the way, you know, the the location numbers are not always so easy to remember. So some you look once, you go to grab it and what was he looked? So it's not even 140,000. It's more than that. We're like we need to eliminate those 140,000 looks at the computer screen. And um and we decided we'll do that with a little just we're going to light up. We'll just pick the light. We're just going to light up which one to pick.

Um and um

that's great.

Something like doubled

uh the output. So have the number of people um and allowed that customer to hit their goal for that year at a very low cost because um

lights are cheap compared to

robotic arms, right? You know, or whatever other hardware solutions. So that's that's the reason why I came. It was really just solve a customer problem. Uh it wasn't a grand vision around AI or anything.

Okay. Well, very good. Um since we're on AI, um I remember reading one of your post um talking about um your total net worth being in shape hero. Yeah.

And talking about the fact that SAS

is dead, right? I mean, there is a lot of uh we talked about this earlier actually, you know, um many of the stocks are really really impacted right now. Um, I personally don't think SAS is dead. Um, is SAS dead?

It's a great question. Um, and I don't think that I know the answer of SAS is dead or not. Um, I think time will tell if SAS is dead. You know, the I I I I'm a believer in the repricing of SAS. Um because if you look at something that trades at a 10x multiple of revenue, you're really thinking about 15 20 years, right? Really to get that money back. So it really has to be around for a very long time. And um you're making a very long-term bet. So now if you start thinking, okay, you know, yeah, I'm not worried about next quarter. I'm worried about 5, 10, 15 years from now. some companies that are SAS companies will not exist, right? Um, so if I'm an investor, which I'm not, but if I pretend I'm an investor, I think if I don't understand the business, just because they have great numbers today, doesn't mean they're worth 10x revenue because I need to be confident that they're still going to exist in 10 years from now. Mhm.

And in order to be confident in that, I have to understand what they do, why they have value, what is AI going to do to that business. And I think that's just something most investors don't do, right? They don't understand, you know, which is makes sense if you're, you know, investing in the stocks and you're also working a day job, like you're not understanding exactly what the difference between data bricks and figma and workday is, right? Or Salesforce. So which one of these is gonna be disrupted by SAS by AI? I don't know. So I'll just take my money out of them and I'll put in real estate which is not going to be affected by AI. And then in a few years from now maybe we'll it'll be more obvious and I'll go back into to software. So that's why I think it's totally logical for investors to take a step back and and take their money out of SAS. Um what's going to happen to SAS? Like if you want my theory, I can give you my theory, but it might be wrong.

Yeah. I mean I mean yeah I mean you you um go ahead. Yeah. Like uh so um ecosystems are going to define I think the winners. Uh so like I I give you I I put a a post where I I listed all the companies that I would you know potentially vibe code a solution because we spend millions of dollars a year on um SAS,

right? So I'm like I'm a buyer of SAS. So which one of these am I going to eliminate? Right. Um

I didn't see the post. So, uh yeah.

So, um

we put it on the

I go through the list. Um so, but as an example, we have an ERP. We spend a lot of money on our ERP. Um when it comes contract renewal, you know, they they don't lower the price, they raise it. Um and uh I can't say I love that. However, there's a 0% chance I'm going to switch my ERP because it's just too painful all the other things, right? Even if you tell me there's going to be a better ERP, I'm not going to switch. Uh, and I'm certainly not going to vibe code my own solution. However, what actually I will do is let's say my ERP can also give me some other less important functions that I have now. So like um you know my my people management or some other things that right now are disjointed and they're in other they're they're using other software. If my ERP can give me a cheaper solution to my people management, I might actually buy more from them, right? Because like hey it's cheaper, it's integrated, it's going to work. Yeah, maybe the the specialty people management software is is better at it, but like it doesn't really matter that much and it's going to save me money. one procurement. You know, procurement is hard and security and all that stuff. So, they're just going to go with one solution. So, I think ERPs are going to get bigger because now they're going to build more solutions because with AI, it's faster to build technology and they'll capture more of the value and a lot of the ones that lived on the outskirts of ERP um because ERP couldn't do all these other things well. So, they like all these other software come around it. I think a lot of them will will lose because um the ERP can come up with a good enough solution at a far cheaper price because they already have you. So like they don't care. They can upsell something for 20 cents on the dollar because it's free 20 cents for them versus the add-on company now it's 100% of their their their revenue. So they need to charge the full price, right? Um so I think you're going to get pe companies that are the center of their their ecosystem are going to get much bigger. Um, but the ones that are on the outskirts are going to they're going to going to fall and become smaller. Um, and also the competition is so much something like a thousand Shopify apps got added in the last month.

Something crazy, right? It's incomprehensible and unmanageable for people to evaluate nearly that many solutions. And I think that actually hurts the newer company. So, when I look at a new um customer service solution, for example, there's so many right now. I I can't it's just overwhelming. So, in some ways that actually has me just like I'm just going to stick with Zenesk. Um because there there's just there's just too many choices. Um and you're like, but maybe this one's better and this one's better. This one's better. Yes, but Zenesk has been doing customer service for decades and is going to keep doing customer service for decades. So, I can rely that they're going to keep doing customer service reasonably well or help desk reasonably well for a very long long time, which is what I want to think about. I want to think about switching software. If I go with a new solution that's, you know, Zenesk 2, it looks exactly like Zenesk. It was vibe coded by a guy three months ago. It's 20% of the price, exact feature parody. and I go give them my money. I migrate all my users. I do all that. I move all my stuff over. It's a three, six month project. How do I know that that company is going to be in the business of help desk in a year from now? They might not because they just started three months ago. So, they don't have a big investment. They don't have a big pool of customers.

So, that's actually more dangerous.

Risk exposure is high. Yeah.

Yeah. the and I have no way of there's so many of them that it's going to be very hard for any of them to get enough market share to become a real company you could dep rely on and when it comes to enterprise which is where most of the software spending happens is from big companies right it's not from individuals big companies they the thing you want to minimize is risk you don't want to make a bad if you're doing procurement you're making a software decision the most important thing for you is that you don't look bad where it's a horrible decision Yeah.

Manager in the Fortune 2000 is going to be very comfortable that I can use Zenesk. Zenesk 2, yeah, I save my company 80 cents on the dollar, but if they shut down tomorrow,

that's not me.

The risk is

and I don't keep the 80 cents.

No.

And therefore, I think the bigger companies get bigger. And um I think in the end of I think in the end SAS as a basket is going to be worth way more in the future,

but individual ones will go to zero.

Interesting. Interesting.

But I'm probably wrong cuz

Yeah, I think we um definitely I mean for sure some of the dimension you mentioned around like behavior of buyers and so on. I mean I think you're you you're certainly spot on in the sense of like yeah if you have software in place especially at the enterprise level and that's the reason why I say I don't think software software as such is dead because I do think that in the enterprise level in the high complex environment and so on it's a very different

you know if you are if you're like a free people you know and you're using like a basic tool on yeah this you know it's okay but like like most of the most of the SAS out there the ones that are very very impacted right now they are enterprise software right I think it's going to take much much much longer. Um and I think these companies are also going to fight back and they're going to adopt this as well. So um we're getting close to the end. So um one of the thing that um I think you have done very different um is building a community of people around around cheap hero right and when I say community I really use the word community on purpose because I don't think you're just building a business but I think you're building a community online but also you talked about the the event and the event is the uh sheep hero inside the summit which you know I think people can look it up there a lot of great comment online which is not a sales event. It's not um it's not an event um you know just to commercialize more of the software that's really bringing people from from everywhere. Tell us Aron I think you told me one time that you had a WhatsApp group with many of the free PL owners and I saw you uh I remember last year at one of the events um sharing your your P&L like you you presented your P&L and I was like

that took some people by surprise.

Yeah. I was like what is it doing? like why why is he showing his like fully open P&L by warehouse and by line item. I was like I was in his mind you know like and so and so but but when I saw that I really understood that you know um you know I don't think I I ever told you this but I really understood that like you were like you were all in in this right you know because you know people obviously everybody said like yeah I want to bring a community I want to help you know everybody and this and that but then when you look at what they do you're like well yeah but you're trying to sell me something right away right like you know like that's that's the most common but I was I was like I was I was quite impressed really called my attention. Um why why is that important? Why do you because you spend also a meaningful amount of time that you know is is very valuable you know sharing knowledge online and sharing updates and so why is that important? Um and do you think other CEOs and entrep entrepreneurs should do that?

Oh yeah I mean for me it it feels great. So I think that's the main reason um it it's very rewarding um and you know as maybe again coming from my background of not having a network at all of peers building software right because just again didn't have that um I think it it allowed me when I was speaking to 3PL owners to you And I would talk to three bill owners and they would talk to me about uh more about business and family and things other than my software, right? You know, I expected them to mostly talk about like have you thought about this? What if you do this? You know, like technical things and what we're building or or or they're you know, and it was more it seemed very clear um that they were just looking for uh people going through the same thing as them. um the business challenges, the family challenges. Um you know, having uh you have no peers in your company as an owner of a 3PL or of any business, right? Maybe you have a co-founder, but if you don't have a co-founder, you have no peers. And um you cannot complain to almost anyone because um if things are going poorly, you can't tell your subordinates that things are going poorly, right? Like you need to you need to keep a a positive attitude and you need to be uh optimistic. um if things are going great and you're like uh you know you have the champagne problems, you know, you also can't uh put that on your subordinates, right? Because they're going to look at you like, you know, you you know, you're asking if you should fly, you know, first class or private, like I can't fly, you know, flying coach. Like it just doesn't work. Like you just don't have that that you can't do it. You can't complain to them. Um now, some people are fortunate fortunate like um I talked to my wife about it. Um but not everyone has that and um and that can be also be stressful on your on your spouse. Um so people look to other business owners. Um and when I talk to other business owners, we talk about a broad range of subjects, but 50% of the time is probably spent on family, which is shocking to me because I'm no expert on family at all. Right? But it's just

you're like a you're like a a business partner, a software partner and uh uh uh it's just there's those family uh you know it is is a little different as an entrepreneur having a family, right? Because um the the money pressure is different, right? You don't have a steady paycheck, right? Sometimes the money's up which creates lots of challenges with your family as well. Uh again, champagne problems. I don't complain to anyone, but like there's still things you want to talk about, right? Uh, you know, and then there's um and then there's the times where you don't get paid. Like I mean, I've went many times um with no paycheck

and it's very stressful because um a it's hard to not have money uh and not know when the next money is going to come. Um, but you have people around you who have an expectation of a certain thing and um, you don't really want to tell them, "Yeah, last year, you know, I I paid for everyone to go on this amazing trip and this year like I haven't taken a paycheck in six months. Like I have nothing." Um, and and you you know, that conversation is something you don't want to have with with the people in your life uh, often times and you have to you don't know how to approach it. Um, so I found that when people talked to me, it was those sort of things, not WMS, not uh, you know, whatever my my my opinion on Ryan or or uh or or Jeff Bezos that they wanted to talk about. They want to talk about family stuff. And um, and the idea was, okay, I get these 3PL owners don't have uh, and business owners in general, the people they like to talk to is other people going through the same thing.

Yeah.

Right. because then they don't sound like a jerk and sounds great. And um the idea was okay well like what if we just like let people get together and they're like okay how do we do that you know there has to be some sort of agenda but we leave it you know really really quite uh open a lot of room just just space to do you know just have lunch and breaks and just whatever right there's no structure do anything you want um but also do it in a you know really nice venue um we don't charge people to go um so there's no cost for the event we eat all the cost for the event So there's no financial

it removes the financial aspect of it. Um uh so you know they don't feel like oh yeah they're inviting me here but they're just trying to get my like no you're not pay we're losing money on this. We sponsor the whole thing. Um so you know it's just let people relax a little bit connect with their peers and I think um

95% of the value they get is from talking to other 3PL owners. Now, you need a business reason because we're all very, you know, most of us are very driven and we have a hard time, you know, saying, "I am just going to do this trip just to chat with other people like come by." So, we pretend it's it's about business, but really it's about connecting with peers,

talking about challenges, being able to like let your guard down. Um, and I think it's just it's super healthy. Uh, it's super helpful. We are uh very fortunate in that, you know, we you know, we're a profitable company and we're not lavish. We don't have offices, we're remote, like we're a very cheap company um as a company and um that gives us the budget to be able to to just pull this off and then we don't need to hard sell people. We don't need to get a lot of sponsors. We don't need to do anything. We just eat the cost. So

capital efficient capital efficient and uh and push and pushing great great events. Well, I don't know if John uh the the VP of marketing is that cheap on on the event. I mean, I heard he was pretty nice. So,

we spent a lot long a lot.

Hey, John, I'm joking. I'm not I'm not bitching about you. So, just so you know, I heard it was amazing. So, congratulation on the

It was a beautiful estate.

It was Last year we did at the Abbey, which was like old convent, and this year we did it in um this house that was owned, I think, by like the guy from Otis Elevator. Okay. And then like the Duke family from like Duke University and like Gilded Age, they had all their parties, all that stuff. Like this was one of those houses. It's like this historic super cool place.

Nice.

Beautiful.

So next one in September. Oh, it's not announced yet.

Uh we'll probably do one in Vegas in September. That's what we tend to do. Try to get it after it's too hot, but before peak season. So yeah, we'll probably do one then as well. It's more of like an AI event, but

Okay. Yeah. Yeah, that's that one is is is focused on the ice. So, um, stay tuned on that one and and follow Aaron on on LinkedIn, you'll get, uh, the news and and, um, if you can make it and your free PL might might be a good a good one to join. Um, I'll close on, um, one question that I'm sure the audience has.

Yeah.

What is this?

Oh,

so you have to know something. Aaron is in transformation to become Argentinian. Mhm.

So, um, tell tell the audience. I think many people will will know or might guess what it is, but what is it?

Yeah, it's a Argentinian I think Uruguay and some Uruguay and some other places drink it as well. I mean, it's south of Brazil. Um, but it's kind of like a tea. Um, yeah, it's like a green tea. Uh, I have a half Argentinian daughter, so I'm slowly adopting. I'm from Brooklyn, but

and and the wife Marina, good job. He's like a a uh he almost came with the Argentinian jersey.

So uh so that will have been it will have been that will be for the after the World Cup. So last prediction.

Yes. I'm not predict who's going to who's going to win.

I'm going to anger everyone about

who's going to who's going to let's say not who's going to win maybe. Let's do this. Who's going to win the World Cup?

I'm not I'm not not thinking that. I can be bold and talk about all these other things but that's a place that I'm not that's not okay.

Feel free to predict friends. Brazil.

Let's let's do a simpler one because I I I also I think it's a hard one to to predict who goes further, France or Argentina in in the World Cup.

I mean, you know, I I think France has a very good shot, but I hope Argentina goes as fast as as far as possible. It'll be great if I can if I can see it. But they have an amazing team and and France is uh yeah I mean we won't beat last I I doubt we'll beat last last World Cup for a great a great game. I mean if we can get anything close to that sort of uh amazing World Cup uh I'll be very happy whoever the winner is.

Okay, last one then on this. So if um if you have US Argentina, how do you do?

Oh I got to root for Argentina. I I'm sleeping with my wife. I'm not sleeping with you know I don't know who else. So hopefully I root for Argentina.

Oh yeah. No, I think the the Argentinian passion is you have no choice. So

yeah, I'm not getting stabbed because I was rooting for the wrong team that I am.

Yeah. And I I I watched the game with um with some some Argentine friend the final of the last World Cup which was French France Argentina and uh there was a this woman this Argentinian woman she was pregnant but like like you know about to to about to give birth and at the at the penalty final she's like I can't I can't I have to go out. She went out and she literally sat in the corner. She was like this you know and she waited to see until we came out with the results. I was like, man, like this this like this level of passion is is is crazy.

We saw one of the Copa America games and um my wife's uh uh watch Apple watch had an alert that she might be having a like a medical like a heart attack because

at the game it started to beep like seek medical assistance.

Yeah, that's that doesn't surprise me. doesn't surprise me. Well, we'll chat

the World Cup.

We'll chat, Marina. We'll chat during the games and hopefully we can we get a good good results for France and and to Argentina and to the US as well. And uh and um yeah, Aaron, thank you so much for for coming. It was great. I think we could go on and on, but uh we'll we'll do another episode in couple of months. And uh and thank you so much for coming. Uh all the best with Shapiro. Amazing company, amazing progress. Um, I love what you're doing in term of like really helping the community and uplifting everybody. So, so more to come, guys. If you want to follow Aaron, I think uh LinkedIn and of course, if you want to reach out to the team at Chief Hero, um Aaron or Rick, uh we'll put the we'll put the contacts in the description of the video.

Perfect. Thanks.

Great. Thank you very much.

Thank you all for coming. Thank you for joining. We'll see you in the next episode. Cheers. Bye.