Q&A Series: CEO of Pela
In September 2019, Kensington Capital Partners added Pela Case, the makers of the first compostable and eco-friendly phone case into our portfolio. The company has been experiencing tremendous growth this year. We had the pleasure of chatting with the CEO of Pela, Matt Bertulli, to reflect on the company’s most recent activities and learn about how it all started.
Q: How is Pela disrupting the mobile phone case industry?
I think the biggest thing we are trying to do is to reframe the conversation around waste. To illustrate, people are always swapping their mobile phone cases. Even though its not a single-use plastic, its pretty close. Phone cases alone are a $20 billion dollar market. All we are trying to do is, make stuff that is ultimately zero waste. We call it, a graceful end of life. We are looking at all industries, not just mobile phone and accessories. We believe a lot of products don’t need to be made to be throw away. It can be made to go away gracefully. I think that’s the biggest thing we’ve stumbled upon, the most innovative part of our company is this idea that things can be made with a graceful end of life. For example, Patagonia is super focused on a sustainable beginning and making stuff that lasts for a very long time. We are focused on a sustainable beginning, a valuable middle, and most importantly, it has got to go away gracefully and that is how we are disrupting it.
Q: What is your vision for the company?
Our vision is to create a waste-free future. That’s the BIG crazy idea. Everything that every person on the planet interacts with on a given day doesn’t need to create waste. We think its early days in material science and other things that are going to come together and give us a new generation of the supply chain. We look at the entire consumer economy and its just one giant waste stream and there is so much opportunity in it. I think when we say, we can create a waste free future, I really don’t think we are crazy. I think its just a matter of time.
Q: Why do you think Pela’s mission resonates with so many people today? Is Pela changing the behaviours of the older generation?
I am not trying to change the older generation. I think trying to change people’s behaviours is futile. They are set in their ways and it would cost too much to change their ways.
What we are doing is we are looking towards the younger generation, Millennial and Gen-Z mostly. That’s our customer base. Its mostly female. We focus on them. They are not changing their behavior. That’s the big thing. We are not looking to do that. What we are looking to do is to offer people an easy swap for what they are already going to do. If we came out with a phone case or sunglasses that was an inferior product to something they are already buying, that’s a bad idea. Everything we make must be equal in quality and value to the thing that people are already buying. Ultimately, that’s why people are choosing this. We are not asking them to sacrifice anything. We are saying, you are going to buy this anyway, might as well buy this one. This one is better. Customers now, at least the younger customers will always choose better, for almost all of them.
Q: What’s the best way to target Gen-Z and Millennials?
We are a heavy direct to consumer business. We spend a lot of time and money and resources on telling great stories. Social media and digital advertising take a big chunk of that. Your classic brand building exercises. We are just telling a story that people have not seen yet.
Q: How did you get started in the eCommerce business? How is your expertise helping to shape Pela today?
I grew up around it. My grandparents and my parents were all somewhat involved in the retail business. I grew up wanting to be a software engineer, but this eCommerce thing blew up. I understood the language, software and data paired with this old retail world. I got lucky and it became my career.
My experience has enabled us to do everything with a lot less learning than a company in our position must do. For Pela, it has shaped our go-to-market for sure. Ultimately, I know how to reach people online. That helped us with finding product-market fit and doing so quickly and cost effectively, growing the business to a decent size and getting traction. Overall, less time and less money were spent since I sold a lot of stuff on the internet. Let’s just say its been an advantage.
Also, part of it is, my network is gigantic. I am not just stuck trying to figure out what works for Pela, but I have dozens of friends who are also doing the same thing I am doing. I can talk to them and share experiences and cross pollinate. Those relationships only exist because I spent so long in this industry that I now know all the players. We all respect each other and we all like to share.
Q: What did the eCommerce space looked like when you first started compared to now? Did you imagine it to be like this today?
In Canada, when I started, it was nonexistent. Around 13 years ago, it was nothing. In 2005 and 2006, a lot of things were happening in the States but up here, our retailers were barely online. Some pulled it off like Canadian Tire so famously did. Being in it so early and learning it early on has just been a tremendous help.
I worked for NetSuite in Canada, pre-IPO. Working with eCommerce companies in the States and just seeing how big it was there. I thought this is going to be huge. This was way before Amazon, where there were problems with security and trust. Slowly, you can see those were going away and certain industries were obvious winners. Our main product is phone cases, but like sunglasses, its much harder to sell online because people want to try them on. Even that’s changing. If the price is fair, people will trust it.
It fits your phone case, or it doesn’t. There’s no fashion element in this business. Its not like trying to buy jeans. There are certain industries that can only do well.
Q: What other items are you looking to do aside from cases and sunglasses? Are you looking to go global?
So, the brand’s key line and key thesis is everyday products without everyday waste. So far, we have acquired half a million customers, mainly female, Millennial and Gen-Z. The phone case is the perfect entry point, its an everyday item. Its with you all the time. Sunglasses, same thing. Things that are not obvious sources of waste in the world, but big sources of waste. You probably hear a lot of waste coming out of the fashion industry. Things you use in your house, things you use everyday and carry with you all the time. Those categories are all super interesting to us.
In the past year, we have been trying to build our retail business as well. On March 2019, we were in 30 retail doors. We had no retail presence. Now, we are in 5,000 retailers in Canada, U.K., U.S.A., Germany, etc. Standing this business up from nothing has been a big challenge. The greatest opportunity in front of us is building out our retail business.
Q: Can you talk about the explosive growth Pela has experienced in the past few months and some of the growing pains that you have experienced?
The problem is, in the last two years, we’ve gone from $0 dollars in revenue to experiencing 300% growth within the last year. Most of our issues are supply chain systems and operations based. When we must make things while keeping costs under control and ship them around the world, challenges will arise. Supply chain and inventory management becomes tricky. There are billion-dollar companies that still haven’t gotten this right.
On the other hand, people and culture is always a concern. We have been extremely lucky or maybe we know what we are doing now since its not our first company, but we have attracted amazing people. But part of that is, we are a mission with a company, not a company with a mission. That goes a long way to attract younger, very intelligent and ambitious people. People side has been the least worrisome in the growth process. We have gotten that right so far and we hope we keep getting that right.
The cost of digital advertising is also growing so fast. How do you evolve the company to outpace the cost of acquisition? That’s on the mind of everyone right now. Staying on the leading edge of that world is a huge challenge but also a great opportunity.
Q: How did you come across Kensington? What role did Kensington play in terms of growth for the company?
Brad Pedersen, Chairman of Pela has known Tom Kennedy, the Chairman of Kensington Capital, for several years and early last year, we reached out to Tom since many VC firms from the States started messaging us. Brad and I were bootstrapped and sold to PE. We didn’t take any money. So, we reached out to Tom for some advice, since this was new territory.
Tom had introduced us to Marcy Venture Partners, we went down to see Jay Brown and Larry Marcus and they loved it and it basically triggered the whole thing. So, all of it came together because of Tom. It has been a huge help having Kensington in our corner. Its good to know that people around us know how to do this. The people and the process piece, I got that. The how-to capitalize on something that grows this fast, that’s where you guys come in.
Last year, Marcy Venture Partners and Kensington coming on board as investors was also a form of social proof for us. When you are trying to do business-to-business deals with large companies. People saw we were real. We are not just a fly by company. We have real investors, we have a real company, you should pay attention. The social proof signaling thing really helped.
We’d like to thank Matt Bertulli for his time, and we can’t wait to see what happens next for Pela!
Visit us at www.kcpl.ca for more information. Follow us on Twitter @kensingtonfunds.
