So unfortunately because we’re public, I’m not able to disclose the number of customers that we have. I think we’ve done a lot of different things over the years to really build that subscriber base. Obviously, performance marketing has been instrumental in helping develop that user base but so has less traditional avenues such as direct mail. We’ve found a lot of success with that as well as OTT and then a really robust referral program. I think people tend to overlook finding ways to really engage your existing user base to amplify growth through incentives either to the existing customers or to new customers.
As part of our series about ‘5 Things You Need To Know To Create a Profitable Subscription Business’ I had the pleasure to interview Matt Thelen at the 2022 SubSummit hosted by SUBTA. The SubSummit connects industry leaders, innovators, and partners who are driving the rapid evolution of how consumers discover, buy, and experience new products.
Matt Thelen serves as the General Counsel & SVP of Corporate Development of Winc Wines. Matt currently resides in the Greater Los Angeles Area.
Our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’ and how you got started?
Yeah, so I was a JD MBA in graduate school and did that because I really knew I wanted to work in the intersection of law and business and where those two worlds overlap. What really fascinated me was how businesses react to an ever changing regulatory landscape and how regulators attempt to keep up in market dynamics and things of that nature. So that was really the core of what I was studying in graduate school focused on corporate law and corporate governance. I really enjoyed that time and then graduated at a very poor time to graduate law school, just following the Great Recession. So I took a job at a litigation firm, but not exactly what I wanted to be doing.
So I kind of decided to move to San Francisco and work in more of a consulting capacity and lean on my MBA a little bit more. I had the opportunity to work with a lot of early stage startups all the way up to Fortune 100’s. I quickly realized that all of them needed legal help, much more than they realized they did, but probably didn’t have enough work to justify a full-time in-house counsel. So I sat back and thought that given my legal background, as well as experience with corporate finance and strategy that I could provide a lot of value to these early stage startups.
So while I was thinking about this simultaneously Bessemer Venture Partners’ was leading Winc’s series A and really wanted to professionalize the organization and take a lot of the beverage alcohol compliance work off of the existing executive team. So they introduced me to the leadership at Winc and I sold them on the vision of being able to provide a lot of bandwidth throughout the organization and really facilitate organizational growth by allowing the rest of the executive team to focus on the areas of their expertise, as opposed to kind of operating out of their comfort zone. They weren’t necessarily looking for an attorney at the time, but they realized the value that I could bring. So they recruited me down and I thought it would be a year or two engagement, and I could move back to San Francisco and not have to uproot my life entirely but eight years later here we are and during that time I’ve overseen obviously beverage alcohol compliance and the legal department, but also culture and people, as well as facilities, corporate development including geographic expansion, new product development M&A and then corporate finance strategy. So I helped lead all of our financing rounds as well as our IPO last November and I currently oversee IR as well.
Can you tell us a story about the hard times that you faced when you first started your journey? Where did you get the drive to continue even though things were so hard?
I think anytime you’re thrust into a position maybe above your experience level it could be challenging because there’s just so much you don’t know and so much that you have to learn and that was certainly the case for me. I had some experiences as an attorney, but it was certainly the first time I’d ever run a legal department especially within a category as complex as beverage alcohol regulation and so I think a lot of it is you just have to be really willing to continue to learn and continue to adapt to an ever-changing environment. Don’t get too rigid or too overwhelmed by the amount of information you have, or the ever changing landscape and you have to just be able to roll with the punches for lack of a better term.
How did your grit and resilience lead to your eventual success?
You have to be willing to be very even keeled. The good times are never as good as they seem, and the bad times may be bad as they seem, but there’s always better days ahead. You have to be able to continue to find creative solutions to challenging problems.
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lessons or ‘take aways’ you learned from that?
I certainly said a lot of really dumb things in meetings early on. It was my first job in the DTC e-commerce space. So a lot of the acronyms and the core metrics that you track as a subscription business were foreign to me and so I’m sure a lot of the people on the marketing team or the growth team got a good laugh at my expense on multiple occasions. But that goes back to what I was saying before is that the only way you really continue to learn and continue to grow is by asking some dumb questions sometimes so that you know it for next time and understand the context and the important levers that need to be pulled.
What do you think makes your company stand out? Can you share a story?
I think within our industry nobody is really focused on younger consumers in the way that they should be. There’s a lot of incumbents that have had a lot of success over the past 30 or 40 years focused on specific demographics and specific generations, but as that landscape shifts in the economy, generally they’re not very well positioned to connect with consumers, to develop products or brands that resonate with those consumers or even to deliver products to those consumers in modern shopping avenues. There’s not great e-commerce solutions in the beverage alcohol space, so I think that creates a lot of opportunities for us, but I also don’t think that it is the only thing that differentiates us. Another important aspect of what we’re doing at Winc is that we’re using e-commerce and DTC as a tool for brand development, as opposed to the business itself. We want to leverage our direct connection with consumers to create great products that can live both online and in the broad market, and I think that’s a really unique perspective on the industry and something that sets us apart.
Which tips would you recommend to your colleagues in the subscription commerce economy to help them to thrive and not “burn out”?
I think it’s continue to try new things and adapt to the changing landscape, but people in the e-commerce space I’m sure are certainly aware that marketing has gotten very expensive over the past 6 to 12 months and so you have to be continue to innovate and continue to find interesting customer acquisition channels and unique ways to differentiate your product, which obviously improves all the traditional KPIs if you’re able to do that. You can’t ever get complacent, you have to continue to push and continue to find in innovative ways to attract and retain customers.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are?
I think she’d kill me if I didn’t say my wife. I think she provides a really good balance for me. I am a little bit of a workaholic, so she helps keep me grounded and helps me stay in reality a little bit more than I think I would on my own. I’ve had several good mentors, both from law school and in my professional career that really helped guide me away from the traditional legal path to more of a hybrid business legal role.
Ok thank you for all that. Now let’s shift to the main focus of this interview. Approximately how many users or subscribers does your company currently have? Can you share with our readers three of the main steps you’ve taken to build such a large community?
So unfortunately because we’re public, I’m not able to disclose the number of customers that we have. I think we’ve done a lot of different things over the years to really build that subscriber base. Obviously, performance marketing has been instrumental in helping develop that user base but so has less traditional avenues such as direct mail. We’ve found a lot of success with that as well as OTT and then a really robust referral program. I think people tend to overlook finding ways to really engage your existing user base to amplify growth through incentives either to the existing customers or to new customers.
One of the interesting things that we’ve found in our research is that you actually get better referral activity both in acquisition and in the number of referrals being made by incentivizing the recipient more than the giver. You would think that people would be if they were incentivized themselves to make those referrals, but what we found is that the people that are making the referrals actually want to create benefit for the recipient more than for themselves. So that was an interesting AB test that we did and found some interesting results which had a significant impact for our business.
What is your monetization model? How do you monetize your community of users?
It’s the easiest way to understand, and a little bit like Audible where we charge a monthly fee to customers in exchange for credits. Those customers can then redeem their credits at any time in exchange for product and so it creates a nice recurring revenue stream obviously, but it also creates a couple unique advantages versus the kind of autoship model. In beverage, alcohol recipients have to be home to sign for the product. So, in an autoship model, a lot of times they forget about the fact that their order is coming or they’re not prepared for it, or it slips through the cracks which ends up creating significant deliverability issues. Conversely, if they are engaged, be through a credit model and they’re making the purchasing decisions themselves and are actively checking out, the deliverability rates go way up.
That’s obviously a huge advantage for our margins. We’ve also found that customers tend to purchase larger orders even when they are checking out, they will just say, well, I already spent $60, I might as well spend an extra $15 or $20 to buy more wine or buy higher priced wine. The last important thing that we’ve found is that we want to leverage the data that we are collecting from our website in order to develop great products and to improve those products over time, as well as to understand market trends and market data within the industry.
Based on your experience and success, what are the five most important things one should know in order to create a very successful subscription business?
I would say really understand your unit economics and what your tolerance can be around customer acquisition. You’ll not always be able to be profitable on the first order, but understand what payback it has to be and what the horizon is on payback.
Number two is understanding economics. Understand and work to cultivate a competitive differentiator. I think that there are a lot of subscription companies in today’s marketplace and historically convenience and discoverability are basically being able to introduce customers to new or foreign products. Those two concepts were enough to acquire customers into a subscription business but those days are long gone. Those two concepts are table stakes today.
So you have to find other ways to differentiate your product beyond just convenience and discoverability.
I would say the fourth one would be to figure out how to diversify your customer acquisition channels as much as possible in order to ever-changing landscapes. As painful as the Facebook privacy and iOS updates have been, those types of platforms make dramatic changes, and it will have a significant impact on advertisers and so you have to be ready to adapt to those market conditions and lean into channels where you’re getting low tax and high LTVs.
The last one I would say is to understand what your roadmap is to improve unit economics over time. Your margins might not be where you want them today, but you should have a very clearly defined path in both how you scale product margins and how you scale your overall unit economics as you approach different levels and what that means for your advertising budget and what that means for your overall business.
How can our readers follow your company online?
It’s Winc.com. Our ticker for the stock is WBEV. We appreciate the support.
This was very inspiring, Matt. Thank you.