Reformers [Episode 6]: Alex Klokus, Gravity Blanket and Futurism
The Co-Founder of Gravity Blanket (acquired by Win Brands Group) and Futurism (acquired by Singularity University) shares his thoughts on owned media as a competitive advantage, transitioning from DTC to omni-channel, and what founders should know about the M&A process
For our sixth episode of Reformers: The gritty details behind the world’s greatest bootstrap successes, we are excited to share our interview with Alex Klokus, the Co-Founder and Chairman of Gravity Blanket, which created the exploding weighted blankets category. Alex and his team launched Gravity in 2017 as a spinout of Futurism, a media business he founded in 2015 that focused on breakthrough science and technology. Gravity was a hit out of the gate and raised $4.7M on Kickstarter, making it one of the most successful crowdfunding campaigns of all time. After four years of operating Gravity without raising any outside equity, Alex and team decided to sell the business to Win Brands Group, a new holding company of leading e-commerce brands. Below are some of Alex’s key insights and lessons learned that he shared during the interview, which can be implemented in your own business. You can listen to the full interview here:
Owned media is a brand’s superpower
Having an owned and operated media asset is a massive competitive advantage for consumer brands. A media property with an engaged community can be used not only as a marketing tool for existing products, but also as a tool to figure out what other products (or even entirely new businesses) you might want to launch next.
Before founding Gravity, Alex was running Futurism, a media company focused on breakthrough science and technology. He admired what BuzzFeed — a peer in the media world — was doing in commerce at the time, launching products that catered to their audience (such as Homesick Candles), and became inspired to do the same with Futurism.
“We began polling our audience about different products related to science, technology, and wellness. We tested about 20 different product ideas through surveying and deploying ad campaigns, eventually building a handful of product landing pages for the most promising. We began directing traffic toward the landing pages leveraging our media property, and we closely monitored our click-through rates and other engagement metrics.”
When Alex and the Futurism team looked at the landing page performance for the weighted blanket product, the results were undeniable: their audience click-through-rates and engagement were off the charts. From this data, the Gravity Blanket was born.
Crowdfunding is only as good as your distribution
Crowdfunding is a low-risk method for further validation of your product idea, while also providing access to non-dilutive capital. Alex recommends crowdfunding platforms as a launchpad, however, he also provides a caveat:
“One thing that most founders overlook is the distribution needed to help your crowdfunding campaign succeed.”
Many companies that launch their products via crowdfunding campaigns lean on the social media platforms (Facebook, Instagram, Snap) to drive traffic to their landing page. Though this method can work, organic traffic is increasingly difficult to come by (since social media is oversaturated and the algorithms are unpredictable), and the cost associated with paid marketing on these channels is expensive. As a result, attracting eyeballs to your crowdfunding page becomes a difficult task without something to widen the distribution of your campaign.
In Gravity’s case, Alex had a hunch that their Kickstarter video could be seen by millions of people given their owned Futurism audience. Shortly after the Kickstarter launch, his hunch proved to be correct: within the first few days, the campaign went viral. [Note: While Futurism was immensely valuable for this first stage of growth, Alex notes that, after Kickstarter, he very quickly decoupled the reliance on Futurism and moved toward more traditional methods such as paid acquisition and influencer marketing once the Gravity Blanket was launched.]
Long live the lean startup
The lean startup method, once the talk of the town in the startup world, has become less practiced over time. Instead, many founders — channeling their inner Steve Jobs — rely on their personal conviction and internal team decision-making for new product or feature launches. Alex believes this is a mistake.
“People often overlook the feedback loop critical in developing a product and its corresponding product-market fit. I’d encourage companies to spend more time running tests before they launch and not believe they have this intuitive sense for what people want.”
Alex and team Gravity went from idea testing to being live on Kickstarter in 12 weeks, with the Gravity Blanket product fully born out of many series of tests, landing pages, and metrics benchmarking that showcased where customers’ interests lay via their views and clicks. Even after the launch of their product, the Gravity team stuck with the lean startup method in other areas. For instance, when it came time to showcasing their product to various media publications and potential retail buyers, Gravity had a single prototype of their blanket that the company was flying all around the US. Once they saw proof points that there was demand through the in-person feedback and reactions to their prototype, Gravity then proceeded to set up their supply chain and began producing more units.
Ride your hero product(s)
Many DTC brands launch with an initial product. If that product is successful, a key question then becomes: if (when) you should launch another product? On an earlier episode of Reformers, Laurie Ann Goldman, the former CEO of Spanx and Avon, shared her opinion that companies don’t ride their hero products long enough. It seems that Gravity aligned with Laurie Ann’s thinking.
“We rode our hero product — the weighted blanket — for a full year before even beginning to think about what our next product would look like. Ultimately, we didn’t explore launching another high-priced product for many years after the blanket. Relying on our hero product wound up being a major differentiator for us.“
Even though Gravity eventually launched their weighted sleep mask, it was a lower-priced item meant to be a complementary add-on to existing Gravity Blanket customers. Because Alex and team Gravity rode their weighted blanket for so long, they did not dilute their brand or confuse consumers with respect to what they were known for and, as a result, were able to create and own the weighted blanket product category.
“Prior to the launch of Gravity, nobody knew what a weighted blanket was. We were fortunate that the weighted blanket category became synonymous with Gravity Blanket.”
Eschewing outside capital
From the beginning, Alex knew he wanted to run Gravity as a very lean business and avoid taking on outside capital. He wanted the team to control the narrative and grow responsibly by riding organic interest in their product.
“When you raise too much VC from the beginning, you have these expectations of growth that will force you to grow even when the economics are broken. As a founder, you need to step back and ask yourself: does this model make sense for me? If I was starting a DTC company today, I’d be very conscious of that.“
In order to grow without VC funding, the team had to always be extremely conscious of their cash position and burn rate, as well as frugal in their capital allocation. When it came time to placing POs from retailers, for instance, the company used any cash on hand plus access to whatever credit line they could get. Their mantra was: wherever the company can find non-dilutive funding, that’s a great place to start.
Moving beyond DTC and into other channels
While Shopify continues to even the playing field for upstart consumer brands, founders must be aware that DTC is a channel, not a differentiator. In order to hedge risk of over-reliance on DTC, Alex believes that brands should diversify into other channels sooner rather than later.
“Competition for ads on Instagram and Facebook is fierce, so it’s common to see customer acquisition costs increase over time. You need to move to different platforms — be it traditional retail, Amazon, e-commerce marketplaces — and find new ways to acquire customers outside of that single DTC channel.“
For many consumer brands, traditional retail tends to be the logical (and most lucrative) next step; however, getting into the large retailers (e.g. Target) can be quite difficult and the lead time can be very long. In order to optimize the process of selling into retailers, brands must:
(1) begin these conversations early enough to account for the time it will take for a business relationship to materialize;
(2) first approach the right retailers for your brand (in Gravity’s case, they were a premium product and made sure to target retailers like Bloomingdale’s early on);
(3) utilize every single connection to the retailer that you have at your disposal: warm intros, cold emails, trade shows, and/or brokers are all valuable methods;
(4) showcase the strength of your brand awareness with the consumer — the “stronger” your brand awareness is, the more leverage you will have with retailers, which will result not only in getting into their stores, but also in getting better terms and placements within the store.
Lessons Learned from multiple M&A processes
As a serial entrepreneur, Alex has now had the benefit of going through two different M&A processes. For founders that are considering going through a process for their first time, Alex shared several takeaways from his experiences.
“M&A processes are intensely time consuming: they take 2x as long as you’d expect and take up 5x as much of your time as you’d expect. As a founder, you must ask yourself: is this the best use of my time?”
If there is someone who can facilitate the process or take some of the work off of the founder’s plate — whether that’s an advisor, investor, investment banker, or CFO — Alex’s recommendation is to get them deeply involved in the process. Another key takeaway: make sure to front-load all key criteria in the LOI to prevent the situation where a key negotiating point suddenly surfaces and surprises you at the tail end of the process. Lastly, Alex notes that M&A conversations can begin years before the transaction happens (and generally don’t even begin around the topic of M&A). As a founder, if you have a list of obvious potential buyers, there is a benefit to begin speaking and perhaps even working with them before you broach the topic of an acquisition.