I went from $1/day to billionaire in 10 years... here's how

That was a disaster. When I say we were naive, I feel like that is even an understatement. But to be fair, success is a bad teacher. And in our business now, I'm a huge believer in firing bullets and failing fast. And then if the bullet works, it's a cannonball and we invest and we build the recipe around that.

So we're over $2.5 billion US in revenue.

That's quite accurate. That's quite a good way to summarize it quite quickly. If I was to frame up our probably first 10 years, it's that famous saying that success is going from failure to failure with no loss of enthusiasm. I think that actually really does sum us up. Grew up more or less on a farm and then we moved north for our schooling. And my brother won the New Zealand Science Fair with a model hot air balloon. And then we decided, or he decided, he was 12, that we should make these kit set balloons and sell them door to door on the festivals when we're at school. And I'm slightly younger than him. So he kind of hired me as the, when I say hire, I was the free labor to help make the hot air balloons. And yeah, we used to make these model hot air balloons and sell them door to door. I used to. When I was quite young, get my friends together and backpack around New Zealand and sell door-to-door. And I can tell you that learning how to sell door-to-door is a great life lesson because you never know who's behind that door and you never know what response you're getting. And on top of that, selling a flying, burning plastic bag is particularly hard to sell. So it really hones your skills early on.

Yeah, I used to be like, we're just a small company trying to get off the ground. Wink wink, like no pun intended. We were young kids, so that always helped. And, uh, you know, we'd often like, we'd sort of build theses around which neighborhoods were more likely to buy. It was usually not the, the richest neighborhoods. They were all maybe a little too smart. And so it was sort of somewhere in between. We'd always look for, you know, signs of children in the backyards, um, of houses. And I always remember that one of my good friends, still one of my very good friends today, Frasier, he used to always outsell me. I don't think there was a day where I outsold him. And I always thought I was a much better salesperson than him when the door opened, but he just did not care about being rejected. He'd go from each house, he'd get yelled and shouted at and sweared at, and he'd come out laughing and he'd be knocking on the next door within seconds. And I always had to build myself up after getting rejected, which was most of the time, to knock on another door. And it just kind of taught me, I guess, the power of just persistence, right? And you kind of keep going. And if you keep going and have that level of grit and perseverance, then your chances of winning or your chances of success are much higher. So I was certainly learning that at a very, I guess, young age. Yeah, from there, we, we, we kind of met, Matt went to university as well. And then he dropped out after a year to set up and make or develop this hot air balloon through to a little bit more of a professional level. And Matt said, why don't we start, why don't we explore going to India or China to try and manufacture our hot air balloon? And given I was making them, I thought that was a great idea. And so Matt actually went off to India and China, did a little scouting trip, came back and he said, China, let's go to China. And my, let's go to China. He said, you go to China. So I packed up, didn't go my second year law, found the most entrepreneurial guy from my first year at university, a guy called Joe, dragged Joe to China. And we had no money, really no contacts. We went to a little place called Shantou. It was the middle of nowhere. There were no other Westerners. And we had an apartment. I think it was like probably the equivalent of $8 a month. To rent. It was 8th floor, no lift. So whenever you're thirsty, had to get water, you had to like walk down 8 flights of stairs to go and get water and come back up. And that's where we started. But we ended up getting ourselves into all sorts of trouble and strife, and there's a lot of funny stories.

Well, we understood that most of the toys in the world were made in China, but when I say we were naive, I feel like that is even an understatement. Like we were trying to make our hot air balloon, but we didn't even realize that we couldn't sell it to any toy chains or large retailers around the world because of course it didn't meet any of the regulatory standards. I mean, it had a burning can under it. So we were super naive. So then we started looking up products that we could maybe make in our little factory. And we saw this company in America making a light up a Frisbee with LEDs and it could be thrown at night. And we thought, oh, that's cool. So we made. This night frisbee in our factory. And I started hustling to try and sell this thing as in like I would email every buyer in the world of every major retailer in every country I possibly could. And I remember I sold it to a distributor called Schilling in the US and we spent what was a lot of money at the time. And I went to New York Toy Fair and we'd made this night frisbee and we'd also made this other product or copied this other product called a Money Gobbler. Which is a money bank in the shape of an animal, and you'd feed the coins into its mouth, it would go down the throat into the stomach. So we started making these two products. Matt decided he wanted to set up a wooden, wooden toy factory for this money gobler. We had our production line for making this frisbee. So I sold them to this company called Schilling. I, so I go to New York Toy Fair to be on their booth to start selling these two products. And I start selling these products and this guy comes flying onto the booth. And starts yelling at our distributor. So he's obviously got wind that we've made a product that's identical to his and he had multiple patents for how the LED connected to the fiber optics and how this all worked. And of course we're, again, we were naive. We didn't even really know what IP was. So he comes and so Dave comes up to me off the booth, the owner of the distributor says, hey Matt, we need to pull that Frisbee off the booth. This is probably an hour into New York Toy Show starting. So I'm pretty disappointed because one of our products is gone, but I'm like, that's okay. I'll sell the money, but blah, blah. Well, if I thought the first guy was crazy, about 3 hours later, this lady, she has a whole business she's built over 25 years building these money animal banks, and she has this big booth on the ground floor of Javits. And she comes up and she screams onto the booth and she's yelling and screaming and swearing at Dave. And Dave sort of, I can see this from where I am, and Dave sort of wanders over to me sheepishly and says, Nick, you need to take The money gobbled off the booth as well. So within the first morning of New York Toy Fair, both our products have been taken off the booth of the distributor. I flew back to China. I said to my brother, I said, have you ever heard of this whole, you know, IP thing, this whole patent thing? I think we need to start innovating and coming up with our own ideas. And then we ended up getting into a lawsuit on the Nightflyer. They sued us. We had no money to defend ourselves. I remember going to Colorado because that's where they sued us to try and find a law firm to defend us. And I was going to all these firms and they were saying, well, that'll be a million or $2 million. We had like maybe a few thousand dollars between us at that stage. I was thinking, how are we going to defend ourselves? I ended up actually hiring a lawyer, convincing him, his name was Chad, he later got disbarred, that we would write the whole suit. He just had to put his name to it. And Chad did the whole case for us, but didn't really do it. We did it ourselves. We learned how to become lawyers. So we did it incredibly cheaply, but he did, he ended up getting disbarred later on, but that was our only way because again, we had no money. And I was so enthusiastic. We had no other choice that we had to sell this product. And I remember selling the Night Frisbee to the department store chain in the US, Kohl's, with the K. I know we have Coles down here in Australia with a C. Never forget the buyer's name. I actually still work with her today. This is, you know, 19 years ago. Her name was Jen Serra. She was the buyer at Kohl's and I would email her every single day. And one day I got an email reply from her and it was all in capitals. It said, Nick, I do not have time for your daily email communication. Please stop emailing me every single day. And then I'll always write back, oh, I'm so sorry, Jim, but you know, I just think our product's really great. And at this stage, we knew we were in a little legal trouble, but we had to sell something to survive. So I was like pushing and pushing. And then eventually I get this email back from her. It was just two words, nothing else. It said, send the sample. So we send the sample to her and she ends up ordering a full container. I think it was 20,000 units of this Night Frisbee. So we're pretty happy at this stage. It was a big celebration. We never had a full container order. Of any product. And so we ship this full container of Night Frisbees. Uh, and of course, uh, she gets enjoined in the lawsuit as well, um, at Kohl's and didn't speak to me again for a long time. The irony is today she's the director of Family Dollar stores in the US and we're their second biggest toy supplier after Mattel. So that's the funny thing.

it was, it was, we didn't eat McDonald's. McDonald's was a treat. So me and Nat were in China and for Christmas, of course, I think my brother didn't come back to New Zealand for 8 years. He lived in a factory for 10 years. He had a tiny little room in a factory for 10 years, which is crazy in itself. Um, but for Christmas, we would celebrate by going to McDonald's. And probably the equivalent of a combo is probably $2.50 in China at that time. So that's how frugal we were. We wouldn't even go to McDonald's. So, but we'd go and we'd celebrate Christmas. And I always remember going, Merry Christmas, bro. Merry Christmas, bro. And, you know, finally eat some good food. I looked like, you know, I was so skinny at this point, but I'd always play a trick in order to get extra fries is I'd always eat half of them and then I'd take them up to the counter and say, hey, you only filled my fries, you know, half full and they'd give me another one so I could get more for free. But we were so, we were like, even, you know, when we'd go on the train, we'd use a concessionary or children's pass and hope we wouldn't get caught because it was half the price. But I look back on it, it was like, you know, a fare would only be 12 RMB or a couple of dollars and we'd be saving a dollar. So by getting a concessionary fare, and we did that for years.

I reflect back on it. And it's, it is a little bit hard to understand, in all honesty, when you reflect back on it. But I think when you're in it together, you kind of hold each other accountable and you push each other because you don't want to fail. And I would say me and my brother are equally as competitive. And so I don't think you want to let the other person down in a sense. And so you just keep fighting because if one of you gave up, You're kind of admitting defeat. And so in a sense, you hold each other accountable to continue to fight and push forward. And as well as that, I think we didn't really have another option. We didn't understand like back then that there was even such a thing as going and raising money to build a company or, you know, again, I look back at the extreme naivety. I used to write emails to my mum. From China. And she was beside herself that, you know, I was up there. I was so young, I was 18. And I read these emails and to understand how little we understood even about the world, but just about business and how things worked is quite scary. And so I just think we didn't know any better. We just thought we'll just keep fighting and try and get these little wins and little wins and little wins. And, you know, we started to get, you know, a little win after a little win. And then we started to get a little bit more momentum and then you started to learn. One of my favorite sayings is you win or you learn, you never lose, you never fail.

Well, there are a few stories along the way, and I remember just sitting there every day harassing and thinking really big early. So thinking, I've just got to get Walmart, I've just got to get Kmart at that time, or I've just got to get these big retailers. And, you know, one story, I remember ringing Walmart every single day and because of the time zones, it was late at night and to month after month after month after month. And I always remember all the early names because I just see it in my memory. And I remember one night my brother was basically telling me to give up. He was like, you're not going to get Walmart. And eventually the buyer, Ryan Halford, answered. And I was on the phone to the Walmart buyer from China. And again, I was up with this young company, we're just in China, we're trying to get off the ground, we've got these products. And he said, do you have a showroom in Hong Kong? And I said, didn't know, I didn't know what a showroom in Hong Kong was, but of course I said, yes, I'll get back to you with the address. We started to learn that the toy industry at the time revolved around these showrooms in a place called Tsim Sha Tsui in Hong Kong. All the big companies had showrooms there and all the buyers from around the world congregated in Hong Kong twice a year to come to these showrooms. So I got on a train the next day to Hong Kong and had researched where these toy companies were and sort of knocking on toy company doors and trying to do a deal with them. I said, I'll bring the Walmart buyer in if you just give me some space to use and your address. And then, you know, hopefully you could sell some of your products to them as well. And every company denied me and denied me and denied me. So I thought, okay. We need to rent a showroom. And at the time it was a lot of money, but we found these little glass cubicles in a place called Southsea Centre. And they were just a few meters by a few meters, like tiny little cubicles. But I think they would have been like, I don't know, $2,000 or $3,000 a month to rent because Hong Kong was so expensive. And so at the time we didn't have that money. It was, we were so poor, but I thought we don't have an option. We've got this chance to get the Walmart buy coming in. And so we, we, we, we just said we have to do it. So we rent this little tiny cubicle and it kind of had curtains on the inside of it. And we, I, I found some shelving that someone was throwing out from another showroom. So I put this little shelving in there. We bought like a table and then I had a little roll-up mattress and I would sleep in the showroom under the table each night because there's no other room to sleep. So I'd unroll the mattress under the table, sleep in that, and then I'd wash in the little bathroom in the, in Southsea Centre in the morning. But I had the showroom and I start kind of realizing that the buyers come to Hong Kong in January and October every year. So that was good because now I have this kind of like base to like invite people to. So I get, you know, I get Walmart to come in. I actually got a guy called Frank D'Amico who was from Walmart Canada. And I'll never forget because he came in and I think he was so shocked that he'd given me a meeting when he saw this 2 meter by 2 meter showroom that he came with his 2 merchandisers. I went to shake his hand, didn't shake my hand. He didn't even sit down and he just yelled at me. He goes, "Kotz." across the table and I'd filled out the quotes for our 2 or 3 products at the stage. He kind of reads the quotes and I'd filled something out wrong and he just throws the quotes down on the table and just walks out and leaves us 2 Hong Kong merchandisers standing there staring at me. I think that was my second ever meeting and I'm just like in shock. I'm like, wow, where it's going to be? And he just storms out. And then I contacted his boss and said, hey, I had this really like bad experience with this guy, Frank. Like, I genuinely think he was really rude and like, I didn't, and his boss made him meet me again in their procurement, in Walmart's procurement center in Shenzhen. So I was like, screw this, I'm going to go up and meet him again. Meet him for a second time. And he ended up ordering, and at this stage we had a night ball along with our night of frisbee, but I think he ordered about $70,000 of this night ball. But it was another good example of persistence. And then I remember one day I had a meeting with Kmart Australia, but I was sleeping under my table and the door was only about a meter. From my head because this is such a little small showroom and the buyer came an hour early and I was still asleep under the table and she was knocking on the door and I'm sort of like there, like looking at her feet under the door thinking, shit, I'm still in bed under my table. So I had to wait for her to go away and then message her afterwards and say, hey, you didn't show up at 10 o'clock meeting. She says, oh, I thought it was 9 AM. And so I had all sorts of experiences, but I used to crash buyers' hotels. I used to post samples under their you know, under their hotel room doors. But really, we did what it would take. The first break we got is— and this was a crazy story— is there was a— I was in the UK at a company called Recreation, and they were selling our night sports balls at the time. So we developed this other product. It was instead of our night frisbee, we've made a night football, lit up at night, and a night soccer ball. So we'd sold this company called Recreation. I met a guy called Sean on their booth and he'd developed a soccer Tamagotchi. And so it was, it was kind of like a Tamagotchi, but you trained your player and then through infrared you could play against each other. And he had like the Manchester United license and it was selling reasonably okay in the UK, but he was having troubles with manufacturing. And I was like, well, we can make that for you. Like, no problem. And he was like, great, great, great. You guys can help me make it. Cause we were really, you know, anything was sort of wink at the time. We were trying to find a way to win anywhere. So we're like, sure, we can make this. And then we started talking, well, maybe, you know, David Beckham, he's moving to the US to play in the US. What if we could get the David Beckham license and we could try and sell this in the US? And he thought this was a great idea. So we went and pitched at the time. I think it was Simon, uh, Simon Fuller, who started American Idol, had the David Beckham, um, rights at the time. And I'm like a, I'm a super young kid, right? And they said, well, we'll give you the David Beckham license, but it'll cost you $1.5 million. Of course, we don't have a million and a half dollars, but then we go to Walmart and Walmart, the buyer, her name, Danielle Primadell, never forget it. She loved David Beckham and he was moving to the US and she was just obsessed by David Beckham and we probably blew a few bubbles, but anyway, as it turned out, Walmart turned around and ordered 2.2 million units of this David Beckham Tamagotchi, which I think they were like $14.50 or something. It was almost $30 million US. So keep in mind, we'd probably never had an order more than $70,000 at this point. And our total revenue is like in the hundreds of thousands. Suddenly we get this order for almost $30 million US dollars. And then we're like, holy shit. We thought we were going to make a lot of money because we had huge margin. We were making this thing for $3 and we were going to make this thing for $3 or $3.20 or whatever it was and sell it for $14.50. So we were sort of counting our pennies and super excited. We didn't even understand that Sell-through was a big thing, but then we were like, oh no, we have to work out how to make this product. Like, you know, we've got our tiny little factory with, you know, 20 people in it. There's no chance we can make 2.2 million units. So when I'd first gone to China, I'd been on a tour with, he's one of the wealthiest guys in Hong Kong, a guy called Francis Choi, he owns Burly Light International, they're the contract manufacturer for Hasbro and Mattel and all the toy companies. One of the first factories I ever toured, I somehow got in touch with his 2IC, a guy called Wilson. And he'd taken me on a tour as an 18-year-old of their factory. And you can imagine me coming from New Zealand and then going to these factories with hundreds of thousands of people and just being like, oh, what, this is like insane. So I still had this contact with Wilson from early light. So I got a meeting with Wilson. I said, hey, we've got this huge order, 2.2 million pieces. Can you help us make it? And he said, yep. And then I said, oh, and by the way, can you also pay for it as well? He said, let me check with Francis, come back to you. Came back to me, said, yeah, if you transfer the letter of credit to us. You know, we'll help you pay for it as well. Great. So we start making this product, 2.2 million ICs, 2.2 million LCD screens to produce. So they all the components and then Walmart turns around and cancels. Uh, they cancel it from 2.2 million pieces down to 8, no, 1.2 million pieces. And I was like, no, no, no, no, they can't do that. We've got a letter of credit. They've made it all. And then I'm flying back and forth at this point. Sean's kind of like in the background on this, like. I don't know, 20-year-old, and I'm thinking, there's no way. But I was thinking, well, it's still fine. 1.2 million pieces. We've got so much margin in this. We can still make like good money out of it. But then they turned around and canceled it all the way down to 300,000 pieces. Yet Francis was making all of this product. And I was just like, oh no, that's where I'm going back and forward. It reads like some kind of soap opera because Danielle got fired. Obviously part of this was part of it. And with Francis, I was like, there's no way I can tell Francis. That, you know, that they've canceled this many pieces and he's paying for it all. So I'm going back and forth to Walmart and I calculated that if I get the order back to 800,000 pieces, we could still pay Francis off because we had so much margin and still make like a million and a half dollars. And eventually I convinced Walmart to get the order back to $800,000, us to 800,000 or 900,000 pieces, whatever it was. And we shipped this Prolite. And it was a disaster. Like, it hit the shelf and it was cold, pretty on the shelf. Like, no one would buy it. I think they retailed it at $30, they discounted it to $25, then $20, then $15. No one would still buy it. Then $10, no one bought it. Then $5, no one bought it. And then they eventually sold it to the dollar and discount channels for like 50 cents on it, like 50 cents apiece. And then of course Walmart came back to us and said, you have to fund all the markdown money from $30 to 50 cents. And we were like, what's markdown money? And we were determined to keep our little bit of margin and refused to give them any money back. And so we had this, we were like, no, but you cancel these pieces and like, da da da da da, this huge thing. Anyway, we got blackballed from Walmart for like 5 years. We never did business with Walmart after that. And it was not till years later that I met Danielle's boss at New York Toy Fair, dear Laura. Shiloh's, and I wrote this big long email of everything that happened and like, and we started to work together again. But that was sort of our, as crazy as it was, that crazy story was our first break to actually make a little bit of money. And then from there, I started doing deals with US companies that only sold product in the US but didn't sell internationally. So I started doing deals with them because we were really bad at designing and developing toys, terrible in fact. So we needed good product so I could open up these channels. So I'd do these deals with American companies like Zing or Zoka. I did deal with the Australian company called Yoho to take their products and sell them internationally. And that kind of, and I'd tell a big story that I could get their products in everywhere. They don't have to go out and hustle. So we had a product called ZDZ, which became really successful. We had a product called Schnooks, which was out of Australia that became really successful. So we started kind of taking other people's products.

Yeah, well, we would sell, I would sell a product to someone and then we wouldn't get a reorder. We didn't know what a reorder was because the product would sell through. And then we'd just sell a new product to a new customer and we wouldn't get, and I'd just sell to another customer. And we didn't know for probably 7 or 8 years what a reorder was, like when a product actually sold off the shelf and the customer came back to buy more of them. But we could like continually hustle to all these different customers. But we did crazy things like we, like a little back on it and it was kind of nuts. Like we sold this product, the Night Ball. We got a distributor in the US called Spin Master, one of the biggest toy companies in the world. Now, very similar story to our own, 3 Canadians built this, this this, this toy company, very similar to us. And Spin Master had agreed to take our Night Sports balls for distribution in the US. And I'd kind of hustled a few retailers. And so it was this, it was this, should we sell direct to retail? Should we use Spin Master? They'll really put lots of TV marketing on. TV marketing at the time was the thing. And they said, well, we'll run this test in Cincinnati. So we'll put your night balls into all the Walmarts in Cincinnati and we'll run media in that. In that city and then we'll decide whether to roll this thing out. And whether or not it was dishonest, I think it was more desperation at the time, but of course I flew to where the test was. I got to New York and I couldn't get a flight to Cincinnati. Well, I could, but it was too expensive. It was summer holidays. I went down to the bus station. I remember the bus station in New York at the start of summer holidays. It's like nothing I've ever seen. It was absolutely chaos, but I got a Greyhound to Cincinnati. I think it took like 30 hours. It broke down. Stocked different places, Greyhound to Cincinnati, stayed in this absolute, like, horrific place. But every day, and yes, this is a little bit dishonest, but we were desperate back then. I would bus, I'd get the bus schedule, I'd bus to each Walmart. I'd give people cash to go buy a ball. I'd go on and buy them on different credit cards myself. I was so paranoid that we'd get caught just to help our test sales go up a little bit. And I'd buy all these Knight Sports balls, but it was a long day because the Walmarts were all so far apart and I was taking this bus schedule to get to each one. I stayed there for a month and I almost got killed at a place called Over the Rhine. If you look it up, it was the most dangerous neighborhood in America at the time. Over the Rhine. It's like wild. It was over these railway tracks. And I managed to walk down there in the middle of the day and it was the scariest thing in my life. And I had a guy come up to me and he said, what the fuck are you doing here, white boy? And, and I was like, I'm just a tourist. And I hadn't realized I was in this like area. And then I managed to somehow like weeks later walk into it. I was walking back from downtown. There's no such thing as Uber back then or taxi. So I was trying to walk back to where I was staying, which was very close to over the Rhine. And I walked in the wrong direction. I walked in there in the middle of the night and I got chased and had to hide. That was very funny. But, um, yeah, we were doing this to, to get our test results up, which we had a good test and then Spinmaster rolled the product out. Of course, it wasn't, it wasn't a great product in terms of its construction. It was the same thing. But my God, did we have to hustle. We had to scrap and fight so hard to, to, like, literally just survive. But we got to a point where we were selling enough to each new customer of each new product and we weren't getting reorders, but we were profitable. And it was actually funny because after the David Beckham thing, we made like that million and a half dollars or whatever it was. We got a little bit fat and happy and we had a month where we lost $200,000. And I remember sitting, we sat down and we were like, oh my God, we lost money this month. And we were like, from this day on, we will never have a day, a month, a week a year will we lose money. Like if we're losing money in a month, we will like sit down, we will like eat nothing or we will like get rid of people or we will like live on nothing just to ensure that we're like profitable. Because people wonder how do we get to, you know, a few billion in a few billion dollars a year in sales now. And we've built it completely organically. And the truth is we just, because we like, we're so frugal and we start building, our business got more and more and more profitable just every year for 20 years. So it was almost this cognitive process to how do we remain profitable. And then that's just compounded over 20 years and we've just gotten more and more and more profitable to the point where percentage-wise, by far the most profitable toy company in the world where we run at like 40% net profits, which is unheard of in any industry in the world and the product industry in the world, let alone in software companies. So, so we just built a very, very different model. That's why I reflect on it now. It was almost like we built something from first principles, the way we set up factories, the way now we automate all of our production, the way we don't do domestic Shipping, we do all FOB, the way we centralize all of our content and data systems around marketing globally. We've almost built this company from a first principles approach because it's so different to how everyone else does it. But we did that more through naivety than through planning.

So it was sort of a parallel path. We were taking other people's products, and that was helping us really open up distribution. I would hustle and get them into all the big retailers across all the countries. There's an email that I've seen internally that I had from like 20 years ago and it kind of lists every country in the world and all the retailers and distributors I was working with at the time trying to sell our products to. So we're really like pushing out to everyone. And at the same time, we were starting to learn how to make better products ourselves. We were sort of building a team in China and engineers and like some designers and we're starting to sort of parallel path, uh, building our own products as well. But I think our big break after Zeebees came when we did Robo Fish. And Robo Fish is still, we still sell about 8 million of them a year today. And this was a Chinese inventor. We ended up getting sued for this as well. We were in a 5-year lawsuit, but a Chinese inventor called Xiaoping. And I met a guy in Hong Kong, a French guy who had a factory in China, was running a factory in China. And he was doing some brokering for some inventions. And he showed me this Robo Fish. I actually didn't I thought, eh, that's cool. Didn't think too much of it. Then he showed my brother and my brother loved it. He's like, we've got to make this RoboFish Promite. And part of the deal was we had to make it in their factory if we licensed it from, from them. So we licensed this fish and it was like, it's got little carbon sensors, very, very clever design. It has an electromagnetic coil in it. So when it touches water, it's all micro, it swims and looks like a, like a real fish, swims in all directions and it's water activated. So we start making this fish and then. The guy who was the inventor had worked in a US company before and he had tried to sell the invention to them. They'd said no. He'd signed a release on the invention saying, no problem, you can go sell it to anyone else. Of course, Robo Flush blew up, became one of the best-selling toys in the world. And then he decided that actually the inventor had designed some schematics or diagrams while he was under employment and he would sue us because they were still on his computer systems. And so we were in this long, long lawsuit. But even worse, we finally had like this massive hit. It was like the number one selling toy in lots of countries around the world. It was, it took us to, I think we did like $100 million US. So this was like a big break for us, but unfortunately there's always a curveball. The factory that we were bound to make it with went bankrupt in the middle of production, but we'd had to design so much specialist production, not just the tools, but all of these fish were tested. Underwater for pressure so they didn't leak. And there was just a ton of like specialized equipment that had been built to produce a Robo Fish. They were all slightly— the weights had to be perfect. So this whole factory gets shut down. And of course the laws in China mean that the factory workers are the first creditors essentially. So they send the army in to like stop anything or any assets being taken from this factory. So we're like peak Robo Fish production, peak demand. Finally, we've got products that are selling and everyone's scrambling. There were retailers that wouldn't talk to me for like 7 years. Actually, one of my good friends today, it's one of the biggest independent retail chains in the UK called The Entertainer. And the son of the owner, Stu, one of my closest, close friends today, he wouldn't even talk to me for 8 years. Like I couldn't even get an appointment with him. But suddenly when RoboFish took off, suddenly all these buyers were coming to us and hey, like, like that RoboFish. So you've got to imagine we finally had this momentum and then this happens to the factory and we are like, we're like, shit. And it was crazy. We could not get into the factory. So my brother, we had to do, and this again, there's so many of these stories, but we were like, we have no other option. We have to get our tooling. We have to get all our equipment. We have to get everything out of that factory and relocate it to another factory. But the army was there. Everyone was there. You couldn't get in. So in the middle of the night, my brother got like 8 trucks, got all of our team from one of our little factories, filled these trucks with people in like 2, 3 AM in the morning when there were less people like camped out at the factory, pulled up to the factory, paid a bunch of bribes to go in, took all the trucks into the factory. All our people went in, picked up all of the tooling and all of the equipment, loaded up all the trucks in the middle of the night. Left and we went and relocated to a new factory so we could continue production. So it was, uh, it was crazy, but that was like, again, like nothing ever happens without a hiccup, right? Like it was sort of like we finally felt like we had momentum and then this happened.

Not so much buying. I actually got Crohn's, so I got sick. In China and Hong Kong, and I had to have my bowel, my large intestine removed. This probably has something to do with living in China for all those years, eating incredibly poorly. I'm not sure, but I had to move home to New Zealand to get surgery about 6 years ago, and it ended up being a great thing. So I was in Hong Kong. I came home for the surgery. I was meant to rest for a while. And I was sitting at home and I was getting restless trying to rest as I had my bowel, my large bowel removed. And I had a friend who had started a small diaper business and he was doing like 50 grand a year D2C in New Zealand. So really, really small. He'd been mapping away at it for 3 years. And I thought, well, I might as well help with this. But I'd always thought like toys is this industry where there really is a ceiling to the size of the business you can grow just because of the, you know, the addressable market, the size of the market. Also, you've got brands like Hot Wheels, which are super hard to disrupt. And I was looking at FMCG and I started to realize that there's like 9 companies that dominate 80% of it globally. And when you build a toy business, you work in every material form. You work at speed, like speed of innovation is your DNA. You build this muscle for speed and working fast and innovating because you reinvent 40, 50% of your entire product line every single year. But because you invent so much from your product line every year, it becomes really hard to keep growing, right? Because it's a reinvent to catch up every year. And so I started to form this thesis about 6 years ago. I thought, man, we're so good at automating. And we sort of, I would classify Zuru today as more of an automation company than anything else. Like the product is almost secondary. We build incredibly sophisticated automation. We had a huge automation team. So whether that's building a house on production lines with robots or a dart blaster, with robots. It's, um, you know, a big part of what we do. So, you know, I was like, we've built this automation muscle and the speed of innovation muscle. And I feel like these big FMCG companies, they, one, they don't innovate. Two, they have a lot of duopolies. So if you look at pet food, it's Mars and Nestlé. If you look at baby, it's Kimberly-Clark and Procter Gamble. If you look at beauty or personal care, it's L'Oréal and Procter Gamble, a little bit Unilever. So there's a lot of them. If you look at laundry, it's pretty much just Procter Gamble, a tiny bit of Unilever. So all these duopolies and monopolies. Across the board. And through that, they were delivering much margin to their retail partners. They really held the power. And I mapped, I remember mapping out Walmart's revenue and I mapped it against the top 8 FMCG companies in the world. So Walmart did more revenue than all of them combined.

FMCG, fast moving consumer goods. So FMCG, CPG, consumer packaged goods. So. So if I looked at Procter Gamble, Nestlé, Mars, all the biggest FMCG companies, collectively their revenue is less than Walmart, who does $611 billion. But then Walmart makes only a fraction of the profit. They're all public companies and the big FMCG companies make the lion's share, 75% of the profits. So I thought, is there a world in which we can be disruptive in FMCG, fast moving consumer goods? Can we deliver more margin to our retail partners? Can we innovate faster, bring our speed of innovation mindset to, to these categories? And can we reach customer in a far more efficient way? And can we move at the speed of culture? And obviously at the time, digital and data-driven advertising was starting to become a bigger thing. And targeted advertising, I was sort of looking at Baby and I was thinking, well, you've really got a mum, a mum who's an incredibly targeted audience or a parent who's incredibly targeted audience. How can we serve them an ad every single day in a targeted way rather than just like blanket media? So that's a super efficient way to reach our customer. What if we build a better product, deliver more margin, and position it at a better price? And that was kind of my overall thesis. Can we do this? And can we run our same kind of first principles toy model like FOB so we don't hold products, super lean, large advertising dollars spent, but in a really centralized, controlled way. And I thought, okay, I can do this. So I worked with my, with my friend and I said, okay, let's launch this diaper brand in New Zealand as a test market. And within one year, I think we're taking 40% market share in New Zealand, launching a diaper. And I remember meeting Greg Foren, who was CEO of Walmart at the time, and he's a New Zealander, and I met him in New York, and I was like, Greg, you know, toys is great, and it's been this, it's this incredible university for us, because it really allows us to, you know, it's built, we built skill sets that is very hard to build in any other industry. And I said, we're going to take on diapers. And he turned to me and he said, Nit, ever heard of Coke and Pepsi? Like you were saying that it was going to be that hard to crack, like Pampers and Huggies are going to be that hard to go and disrupt. And I said, I get you, but I think we can do this. I'm going to give it a go. So we launched in New Zealand. The second biggest brand in New Zealand was Treasures. Huggies was number one. Treasures was a local brand. Their share just plummeted. They ended up going out of business and having to sell the brand for pennies on the dollar.

Is it luck? Diapers was, is driven by price and performance. And we were the first one in the world to take a China diaper to the world. And China's making the best diapers in the world. So in China, there's like 1,000 domestic brands all competing. So the technology and non-wovens and substrates and SAP and machine technology has just gone like that because of all the domestic competition. So we took the best product in the world to market at the best price in a category which is price and performance driven. So it's either you've got to be price and performance driven in a performance driven category. Or you've got to be innovation driven. So we launched Gummy Yum, which is super innovative to victory product, like really innovative. And that was just pure innovation that made that like take off. So innovation, or it's got to be design and creative. So Monday was, you know, it's still a bottle of shampoo, but incredible design and creative. And then we just owned TikTok as in it is the number one haircare brand in the world on TikTok. And by a long way. Um, and it was just. The right design, creative positioning, branding, marketing, and it just took off. And I think last year in the US, it was second only in total growth in hair care to Procter Gamble's total hair care portfolio, just the Monday brand. And so then I started to learn kind of which categories would work for us. And we've gone super deep in those categories and we've applied our same model. So building all the factories and diapers, we built a factory, I think it was 9 months to produce, and we're doubling the size of it right now. So we'll have 4 billion diaper capacity by next year. In beauty, we built the whole factory, everything under one roof, injection molding, roto molding, filling, mixing, all of it. We built all the lab in Shanghai. We've got L'Oréal formulation specialists over, Unilever formulation specialists. So as soon as we found something that was working, so it was outsourcing to begin with, then we do the Zuru thing, which is go super deep, automate everything we possibly can, put all AGVs in. So every little part of it, we want to like automate as much as possible. And then pet food, I started at the same time. I brought a young guy who won New Zealand's high school entrepreneurial program out, a guy called Alistair. He's incredible. I said, let's start a pet food business together. Actually, we were at the supermarket and we said, let's do pet food. And so now we're getting huge momentum there. Um, one of our brands, I think Bulkers was, drove 30% of all cat treat growth in America last year. And then we experimented in supplements, which has been a little bit hard. I built a brand with the Kardashians called Dose and Co. We ended up selling that last year. It just, it worked everywhere else in the world. It failed in the US. And so as soon as we don't have the scale of the US, it's sort of, let's exit it. Um, and supplements, we're sort of struggling with our brand Habit, which is sort of ticking away. And then very much, um, home care, we're building a bunch of brands as well. So sort of, and confectionery. So we've built this, what I call our 5 vertical strategy. Um, and we're going very, very deep within all of these, um, verticals. And I think all of them individually can be bigger than our toy company within, you know, 2 or 3 years.

So ZuroTech, the thesis really was, if you look at the construction industry, it's been done the same for hundreds of years. It's also the biggest segment or market in the world, construction and property development.. And the idea was, how do we build the first factory in the world that has a customized input, so the design of a building, and a fully automated output? So how do we build buildings for a small fraction of the cost of what you build a building for today? And, and we're now, we, we started off, so we built a software which is called Dreamcatcher. Which is built on Unreal Engine. It has an incredibly simple UI, sort of user interface, but the logic layer or the coding layer below that is incredibly, incredibly complex. We've cataloged every building code in the world, so you can drop a pin on any location in the world that maps the terrain, it does the building code, and then you can design your house or building or whatever building you want in our Dreamcatcher software. We've also built our own AI assistant or on our own large language model, um, called Quera, which is basically training, it's training our model on all the great architects. So you can talk to your building and it builds it in front of you. You can put a 2D plan in, you can decide on this room, I want it to be Stockholm style and furniture, and it maps all the furniture and does it for you. So it's incredibly intuitive software. Basically a 10-year-old can design on Dreamcatcher. And then it does all the structural side. It does all the MEP, the mechanical, the electrical, the plumbing. It does it all in a super intelligent way. Wherever you've dropped the pin where you're building the building, it works out the orientation of the building for the sun. It works out how many HVAC units you need. It works out how many solar panels you need. So basically then the software translates every part into our factory. Our factory builds every single part and it's completely automated and the factory is designed from start to finish. So originally we built a 1/5 scale factory. So that's to test the software with the hardware and how that all integrates together. So it builds these mini houses that are 1/5 in every dimension. And then we, once we got that working, we built a, it's about a 3-hectare factory and it's a test production line. And that right now is producing, that's, we're testing the software at full scale with full scale houses and we're building a house about every 2 weeks right now, which is test. And then we have like 100 little changes and we go in software and changing it. And then we bought a factory or a building. 25 acres in size, which is our first commercial factory for producing commercial houses. And then Phase 4 will be building one of the biggest factories in the world. I think second only to Boeing is the plan. So that's all planned out now. But we are building a house for $500 a square meter, and it's the best quality in the world. Aerated concrete, ceramic tile. But we have innovated every single part of the process. So we have the wall module, the tile module, the window module, the lighting module, the smart home module. And every single team I think is the best in the world at what they're doing. So it is a huge project. It is a massive undertaking. I think we have about 700 software and hardware engineers working on it.

It's getting a lot for sure. So the software— so we have 3 offices in India on the software side, Pune, Kolkata, and Ahmedabad. And we have 2 in Italy, Milan and Modena. The reason in Italy is we actually acquired years ago the software part of it. It was 2 guys, Martin and Alessio, they're Paris-born architects that decided that architectural software was built on incredibly old software stacks. And so they were like, well, gaming engines are like going like this. And so they decided to build software or architectural software on Unreal Engine. And so we acquired them and that's sort of the reason I think we have about 160, 160 or so people sitting in Italy on the, on the software side. And then they work with India on the software side. And then in China, we built all the hardware side out. So we have 3 sites where we're doing all of the hardware and automation development. But we kind of parallel our automation team has sort of grown in parallel. We, you know, they automate, for example, we produce 57 million dart and water blasters a year, but we produce a dart blaster from a plastic granule through the finished product with no people. Our competitors like Hasbro, they outsource to factories who still produce with drills on production lines. We're now building our Automation 2.0 where we're using vision and machine learning so we can actually change out any model of blaster on the same production line. It can see the molds and it can see the shape and where all the screw holes are and it adapts completely. So we've kind of paralleled, like, paralleled our automation with building a housing project, but also taking all that expertise and building across our Zuru agent and toys business, which makes us so, so disruptive. But the big difference is, is when we automate a Polite, in FMCG or toys, you're making the same product over and over and over again with robots. This is incredibly complex because you're building a tailored product for every building site in the world and every building code in the world, and it's different every time. And so having that fully automated output with a fully customized input has never really been— or has never been done before in the world.

Uh, I had a chance to meet him and then I had to fly home for an emergency. And so I actually don't know him. Um, but my brother, my brother was very similar to Elon. So my brother was sort of the driver behind Mzuru Tech and our building project. He's very similar in his way of thinking, I think. Like Eon calls it the idiot index, for example, right? And the idiot index is when you look at the cost of a rocket. Well, he looked at the cost of what a rocket used to cost to build, and then he looked at the cost of the materials, and it's like, you know, hundreds of times the cost of materials to build a rocket. And he's like, well, then he takes a first principles approach. He breaks it down and he works out effectively. You know, how to build a rocket at a price that makes sense based on the cost of the raw materials. I mean, we're having a similar approach to how we build a building, whether it's one story or 100 stories. It's look at the cost of materials out of the ground and look at the final cost of the building. The idiot index is really high. And so it's same or similar type of thinking. So how do you go back to a first principles approach and do it from the ground up in a completely different way?

Definitely boots on the ground. What I would say is in our business is a through line through it all, right? We're essentially making a product, whether it's a house, a bowl of shampoo, a laundry pod or a dart blaster. I mean, it's essentially still making product, building factories, selling it into retail. So we've built such a big flywheel. Like if you look at our Shenzhen office, we have 3,500 people there, right? It's such a big flywheel that it just becomes easier and easier to plug into that flywheel regardless of, you know, what category. And yes, they're all different industries, but we're still effectively trying to make the best product in the world at the best price. We set ourselves the goal of making a product to $0. I know that's impossible, but that's our goal. How do we make this product to $0 and how do we make it the best in the world? So there's a through line through it all. So very much boots on the ground. I believe, you know, leadership has to be on the dance floor, have to have your hands dirty. That's where you get the most insights. And in our business now, I'm, you know, I'm a huge believer in firing bullets and failing fast. So I always say, get an actionable insight. Where's an insight? Find an insight somewhere in the world. And an insight forms a bullet, and a bullet is a minimal viable investment into testing something. And then if the bullet works, it's a cannonball and we invest and we build the recipe around that. And once the recipe is working, you can pull a lot more things into that recipe and build that recipe out. So our mindset around fast fail, we actually have what we call fast starts now in FMCG. So we're trying to build minimal viable products to test quickly, as fast as possible. And so we can really speed, like speed of innovation is probably the biggest thing for us. And we're trying to test more things in these categories faster and learn what works and what doesn't. Because in my experience, things either just like hit the ground and start working or they don't. And then we have a mindset around continuous improvement. So we call it 2% improvement a week, the power of compounding. I know 2% improvement a week is nothing you can measure, but that's the mindset. That's what we put into our DNA. And we always say to the team, we suck now. Compared to where we'll be in the future. So we had this relentless mindset of being able to look back on ourselves a year ago and be like, we weren't even good then. And I think that compounding improvement is such a big part of what we do. And then from, you know, when I look at team members, I'm trying to, people say they try and build talent density in their business. Yes, we try and build talent density, but for us, we're trying to build like grit density. And I say, when we hire, we're looking for grit, smarts, and someone with a bias to action, like real doers, right? People that just like, we fast mail, we go in, we do it. We either win or we learn. If it doesn't work, we're getting heaps of insights out of that on how to improve next time. So our mindset or our DNA in the business works across any of those verticals or categories that we're in. We have the same mindset and the same approach and the same DNA as to how we approach them.

It was a lot of fun. And yeah, I don't often share our story all that often, but Yeah, I totally agree if it can help inspire people. And I always say it, right? It's not really how capable you are. It's how willing you are. And I think it's the willing people that stick at it for a long, consistent period of time and continually improve that actually are the most successful. It's not necessarily about how smart you are. It really is just grit and perseverance and you end up getting there. So I think that's the big lesson for any entrepreneurs out there, really.