Frey—Co-Founder and Co-CEO, Erin Frey

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In this episode, we talk with Erin Frey, Co-CEO and Co-Founder of Frey, a sustainable clothing care company turning the detergent category on its head.

Walk down the aisle of the detergent section, and you’ll see the same thing on both sides—branding that perpetuates outdated stereotypes about who does the laundry.

The opportunity is huge. Think about it, the razor industry is a fraction of the size of the laundry detergent industry, and on top of that, Frey is expanding the market by appealing to groups outside of the laundry category.

Part of their approach to customer acquisition is partnering with high-end clothing retail partners. These partners are open to offering clothing care products in their stores because Frey’s brand skews luxurious and pairs well. How does it work? They charge a nominal fee for samples, and then continue the relationship with new customers online, and try to convert those sample users to full customers.

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There’s a review war happening between Frey’s customers. They’re trying to out do each other. Great problem to have.

They started in the basement with some chemistry sets. So it was a big milestone when they started working with a top chemical manufacturing company in the US, and then got a warehouse to store and ship their products.

Getting into Y Combinator was another milestone, which lead to a 2MM round (that took 10 days to close).

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Learn more about Frey’s eco-friendly detergent at frey.com.

Thank you for listening!

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I'm excited because today we're talking to Aaron Frey, co-founder and co-CEO at Frey. How's it going, Aaron?

Aaron Frey: Hi, Roger. It’s great to speak to you.

Can you tell us a little bit about Frey?

Aaron: Yeah. Yeah. So, Frey is a line of fragrance and clothing care products. We started off with laundry detergent that was tailored towards guys and it sort of just evolved from there.

So, we now have a full line of products with a variety of different scents that appeal to a large group of people. And we have a subscription service to sort of change the way that people go about purchasing these products.

Why do you think the world needed Frey?

For the past, however many decades, people have been using the same sorts of products with the same sorts of fragrances. And walking down a laundry detergent aisle, you would see that basically every single product that was there was tailored towards women and they all had the same fragrances and stuff and there wasn't really anything that that really resonated with us.

And so, we thought that in this day and age, people wanted to choose products which resonate with them. And we also thought that it was sort of about the branding of a lot of products was perpetuating outdated stereotypes about who does laundry.

So, along with that, people these those that like to have products delivered straight to them. We are bringing that sort of mentality to a different industry, sort of similar to how Harry's Razors and Dollar Shave Club did to upset the razor industry, which was before that dominated almost entirely by Gillette.

The razor industry is only a fraction of the size of the laundry and detergent industry and we appeal to groups outside of just laundry. So, that gives us potential; like market opportunity that is pretty fantastic.

We also, because of our branding style, we have a little bit of a slightly elevated brand. We try to keep it approachable, but also want people to really feel good using their products.

Because of that, we are able to get in to markets that standard laundry detergents would not be able to get into where we sell around 400 or so boutiques and clothing retail stores currently.

Even though we focus on direct-to-consumer, that was just something that we opened up to the idea, spend like one month doing it and got so much interest that we got in a bunch of stores and they were higher-end clothing retail stores that would never sell something that was just a laundry detergent, but they will sell like clothing and fragrance care products that come in bottles that don't look anything like a standard laundry detergent or anything like that.

When you're working with partners, how are you measuring conversions in sales and how does that tie into your digital effort?

Aaron: Oh, so most of our advertising is done through Facebook; in fact, almost entirely from Facebook. So, the retail stores is something we just use as a lead generation tool where if people see our, like you guys call it, our clothing care kit in the store, which they would likely be interested in purchasing, just to sort of protect their investment in their clothing that they're buying they're buying. But then they would to reorder the individual products from our website and as well as a lot of the time, sign up for a subscription.

But as far as online sales go, we do almost all of our marketing via our digital, and in particular, Facebook ads, some Instagram ads, some Snapchat, but mostly Facebook.

And Facebook is fantastic because it would let you have an in-depth analysis of all of your KPI’s and so you can see exactly like what the cost per purchase is for various ads.

And it's really interesting to see how a very small change can result in significantly higher or lower customer acquisition costs. So, that's where we pay attention to more than more than almost anything.

So, the store partnerships are a low barrier entry point for the customer, but then you're managing the rest of the relationship yourself directly.

Aaron: Yes. Yes. Exactly. So, if a customer is exposed to our products in a store, it’s basically a free marketing technique. They're exposed to our products in the store, then they will likely go and check it out online or something out there, especially considering that our focus is on online sales. We try and ship directly to people. Our subscription service is something that we have in particularly have been focusing on for the last little while.

In fact, most of our current Facebook ads, they push people towards purchasing our sample-to-subscription service, which is where people will pay like a like $1 to get samples of our different fragrances in the mail, just like small samples that have like a couple of loads in each of them.

And because there was a sample-to-subscription, they’ll receive several notifications and then they will have their subscription supply be initiated about 18 days after their initial purchase, which is just the amount of time that we have found people tend to have actually enough experience with our products for 18 days to be worth it. Because we want to give people time to cancel the subscription if they want. Luckily, the vast majority of our people stay on it. And then the customer acquisition costs for pushing people to the samples is a fraction of that and pushing them through our full-sized products.

So, you charge a nominal fee for the samples and then you work to convert them to full customers afterwards.

Aaron: Yeah, yeah, exactly.

You mentioned that you're talking to you high-end clothing stores as partners. How are you making sure that those partners align with your brand and what you believe in?

Aaron: So, as far as brand values go, we really focus on brands that are trying to have a positive impact. And luckily a lot of the clothes, like the boutique clothing retail stores, they are sort of focused more on having a positive impact more than some massive mainstream clothing store or something like that.

And so, we want the people that we work with to be representing our values where they will care about your clothing and fragrance and a little bit about style and yet also have positive impact on the environment and just sort of expose people to things that are a little bit newer.

How do you balance sustainability and building products the right way with profitability?

Aaron: So, a lot of it is just choosing of ingredients that are that are better for the environment. So, for example, a lot of brand they will use palm oil, which is actually really bad for the environment, just because palm trees are sort of -- they can only grow in a small area like only a few degrees of latitude. But the coconut oil, which is what we use instead, is much more abundant and it is much better for the environment in a lot of ways.

And so, that combined with the fact that for each order, we help plant a tree, makes us -- it balances out in a way. And I think that it probably more so than balances out because each tree that is planted will have more of a positive impact on the environment than using coconut oil would.

People love your stuff. Let me read this review here that I found online.

“Imagine if someone makes the smell of an understanding boyfriend, Alpine Lakes in a burning fireplace into a bottle of laundry detergent. That's the smell of Frey.”

That's a real review from Ali B. Why do you think people love this?

Aaron: Yeah, so people love it just because it is different. It allows them to feel like they are not just going with the things that people are telling them to do. Like a lot of people, they use the same products that their parents or their grandparents used. And there's nothing wrong with that, but they just didn't really resonate with them.

And so, when they receive our products, which has fragrances that are inspired by more of colognes, perfumes, those types of higher-end fragrances, people will smell it and they'll just sort of fall in love with it with the scent.

We also, however, have been very lucky that after a few people were writing some really sort of those fantastic reviews for us, it seemed like a lot of the people who were seeing these reviews on our ads were taking it as almost a challenge to write to write even better reviews.

So, that is something that we are very fortunate to have had happen. So, we have a lot of really crazy like reviews out there.

So, when you realize that there was an opportunity in the market that there was a gap that you could fill, what did you do to make sure that this idea turned into reality?

Aaron: Yeah. So, it's definitely been an evolution where when we started off, we definitely saw an opportunity in the market and we saw that there were a lot of things about the industry that should be changed because it's a modern age. And so, for that, we did a small Kickstarter campaign. It wasn't really too plan out or anything like that. It wasn't huge, but it was enough to get us our first purchase order.

But then Good Morning America picked up our -- like they found our products somehow. And so, we went on Good Morning America and we were on their Shark Tank Your Life segment. And so, that was a cool experience. And while we were up there, we realized that there were a lot of people who really did want something right like this.

And so, that was when we booked down, did our research, found all the other aspects of the industry that were outdated and needed change and started to take actions to really do that.

And so, at that point, we sort of rebranded, we concentrated our formulations, we sort of redid essentially everything and focused on having the highest quality possible where it wasn't anymore, just a pet project for something that we thought like there is a place in the market for, but it was more serious.

And the more that we researched it, the more passionate we got about making changes in an industry that hasn't seen changes in a long time.

Leading up to today, what do you think are some key milestones that you experienced that kept you motivated, that kept you going?

Aaron: So, we had originally started in our basement and we're mixing with formulations and stuff by hand. We had a bunch of chemistry sets and beakers and everything like that. But at the same time, that was very much like -- we had a lot of room to improve when we were at that stage.

And so, when we finally were able to start working with one of the top chemical manufacturing companies on the east coast of the US, and then we were able to get our warehouse where we could store and ship our products from. That was a big milestone. But we still started off as just laundry detergent.

But then another milestone was when we started to release these other products to really sort of expand our line. Another milestone was when we were accepted into Y Combinator and we had such great feedback about that that we closed around a little over 2 million in about 10 days. So, that was very encouraging as well.

Then we were able to launch another fragrance line about six months ago or so and we're just really excited to see where we go from here.

When you launched, how were you thinking about fundraising?

Aaron: We hadn't really thought about that much where we started again, like you know, from our basement on a very much bootstrapped budget, doing everything ourselves like by hand and everything.

So, we did not raise money for the first couple of years that we were around. We really only raised money at the mid-2018. So, before that it was almost entirely bootstrapped.

That was actually really good in some ways because it allowed us to be more in touch with our customers when we are not only producing all the products and stuff ourselves, but also handling all the customer service and feedback ourselves as well. So, we've really grown a lot since then, though, but it's been good.

We also, because of the things that we have done where there were times when we weren't able to actually pay people to fill our bottles by hand anymore and so we had to drive to and from across state lines about two hours each way for an extended period of time, just to make sure that we were able to fill our bottles and stuff.

And then, of course, like eventually we made it through that. So, we were happy and we were growing. But a lot of investors, as well as Y Combinator in particular, they look very favorably at the fact that they could see that we were really willing to do basically anything to make this company succeed, even if we were faced with what some people might consider an insurmountable obstacle in the way.

So, we are really happy that we started where we did and we are also very happy on where we have come since then.

How did the funding change what you were doing?

Aaron: So, it really changed things so that we were able to focus on marketing and branding and everything more as well as launching new products.

So, rather than necessarily focusing as much on the everyday production of the product sample, fulfillment of the products and everything like that, we were able to focus on the other aspects of our actual brand.

And so, that was really cool because we were able to start seeing these small little things that we may have been too busy to have noticed before were potential problems, but after raising the good money and having a little bit more mental space in some ways, it allowed us to really sort of address a lot of those little problems and continue the improvement of our brand.

And we are always trying to improve. We hope that all companies are trying to improve, but I know that a lot of them are sort of stagnant, which is again, why we want to sort of change things up in this industry.

So, fundraising freed up some headspace for you so that you weren't always thinking about money and you could think about other areas of the business.

Aaron: Yeah, yeah, exactly. So, cash flow is a big issue with companies like ours, where like it might take a lot of money in order to purchase a large enough purchase orders to have in order to get good rates on them.

But then if we spend all that money on the products, then that means that we have no money to advertise. And then if we have no money to advertise, and that means that we can't sell those products. So, that's not doing us any good. So, it's sort of a Catch 22-type situation.

So, by raising the money, it allowed us to both make purchase orders as well as continue our marketing efforts.

How did you connect with vendors in order to get them to a quantity that you were comfortable with so that you had enough in inventory, but you also had enough cash for sales and marketing?

Aaron: So, when we were first starting off, it was pretty hard where we could basically not get anybody to produce products or bottles or anything like that for purchase orders, less than five thousand. Otherwise, it became sort of like very, very expensive. But luckily, once we got past that point, then it became much, much easier.

And now, we are able to place purchasers and we're still growing. So, we're not a massive company yet, but we are now able to place orders for several hundred thousand dollars at a time and still have money to market and to then pay ourselves.

What were some of the channels that you were using in your early days to launch Frey?

Aaron: So, we started off mainly on Facebook, even back then. And when we first started off, it was a lot easier to advertise via Facebook because a lot of companies were still trying to figure out what types of advertisements actually worked best. And so, when we were starting off, it was great.

Then as we grew, we had to get more and more adept at creating our ads in order for them to be effective. But we still focus mainly on Facebook and digital ads.

We started to do some influencer marketing. So, we would pay people on Instagram to post pictures of our products and things like that. That is interesting for a direct-to-consumer company because it is extremely hard to track how effective those partnerships are. Whereas we might pay somebody, let's call it $10 thousand or something like that and the spike in sales that we see may not be statistically significant. So, it was hard to really tell how effective those partnerships actually are.

It is fantastic for brand recognition, though. I mean, we also know that the effects of those sorts of partnerships carry on into other marketing channels where if somebody has already seen our products in Instagram ad or something like that, then if they see it on Facebook, then they will have already been exposed to it and will be more likely to try it out.

So, you're using influencer marketing for brand awareness, which then provides air cover and support for your paid social on Facebook.

A lot of companies are reporting diminishing returns on Facebook. How are you thinking about addressing and protecting yourself from that at Frey?

Aaron: Just really trying to keep ahead of the game as well as hopefully expanding to other things.

There are other ways that we market as well where we would work with subscription box partnerships and stuff like that. So, we were in SprezzaBox a few times and things like that.

So, there are other channels that we could use for marketing. But digitalized, in general, still are like basically the number one most effective, even though you are right that it is getting harder to create ads that are cost effective.

But if we are like each you individually looking on these ads that we are creating and seeing how they perform ourselves, and it allows us to really sort of make micro adjustments very quickly.

And so, while some larger companies, it might place them several weeks to get one ad approved or another or something like that, we might be able to get it done in a fraction of the time. So, that allows us to sort of keep tailoring our ads towards what is being most effective.

I'm curious, what did the initial team look like at Fray?

Aaron: So, originally it was just my brother and I. So, we were the ones who quite came up with the idea originally and we were the ones who quite watched it from our basement and stuff.

Then we had a close friend from our hometown who started to help us, just sort of so fill bottles and stuff. And so that was fantastic to have a third set of hands on things.

And then we had another very close friend who we had known for ages. I had known him for basically my entire life, but he had moved when he was about 10 years old and so I didn't see him for about probably 15 years or so.

But in any case, still like he saw what we were doing; like our website and everything like that, and he called it us up and he was like, “Hey, guys. I like what you're doing, but your website kind of sucks.” At least that was the gist of it. And he's like, “I can definitely do better and help you out with this.”

And he was moonlighting for a while as well while he had his own job, but he was putting in extra hours and really helped create a pretty fantastic website. He's a brilliant coder. And so, that was fantastic.

Then we eventually started to work with an independent contractor who had started a whole lot of other companies before, just because he's sort of a serial entrepreneur. And so, he knew what he was doing.

So, we were getting him to work like a contractor to start just as almost on a consulting-type basis, but eventually we brought him on full-time.

So, now there's about five of us in our core team. But the reason why we are still able to handle as large volumes as we do is because we do work with a lot of subcontractors and stuff like that.

So, we work with companies that have hundreds of employees who are making the products and shipping them out and stuff like that. But by keeping our team lean, we are able to save a lot of -- for one thing, we don't have to have our own facilities. So, it doesn't really tie ups in one place as much.

It allows us to explore other options if we ever need to like look for a different manufacturer or something like that. We aren’t really stuck in one place. And then it also makes it so that we don't have to manage hundreds of people. We just have to manage our core team and then like the companies that we're working with.

And so, it's a lot easier to work with maybe let's call it five companies that have hundreds of employees versus working with hundreds of employees ourselves.

So, we've purposely kept our team small. Also, a lot of companies, when they're starting off, people spend so much on like salaries and wages and stuff that a lot of times, it's not really sustainable.

But we have kept our team lean enough that we haven't had to really raise that much money. And we have been able to continue our growth while maintaining equity and then everything.

So, as far as like how we compare to other companies in our stage, we probably have significantly more equity than they may.

Tell me this, Aaron, you're the co-CEO. How does that work, co-CEO?

Aaron: I mean, all of that stems from where we started from. Where when it was just my brother and I, we were handling basically all decisions together and so we would discuss everything.

And so, at that stage, I feel like even having the label of a CEO doesn't really seem like that significant or anything like that. But that is sort of where things originated from.

And then as we grew, we brought more people on, started working with more companies and stuff like that. And so, we sort of had our own sort of spheres or things that we were managing.

So, in that way, we were still making all big decisions together and stuff. And luckily, he and I are pretty fantastic with how effective we are at just talking through things and having a productive conversation that leads to a good decision.

And so, having two minds, at least in our case, because we worked so smoothly together on “Two minds is better than one.” And we don't really, you know, labels are so not really of super important thing at this stage, but we have kept them so far.

So, we do sort of how different roles as well. My background is more in science. So, I majored in neuroscience. I did pre-med. I have a little bit of background in chemistry and stuff like that. So, I handled a lot of the formulation-side of things.

And my brother, he was a business minor. He had a little bit more experience with that sort of stuff. And he is also very extroverted and he is a fantastic public speaker.

And so, we work well together because he can really sort of talk people up, get them excited about our products and then I can sort of talk about the actual reasons for why our products and our brand are superior.

What's the toughest business decision that you and your brother have had to make so far at Frey?

Aaron: So, honestly, Y Combinator was a pretty huge decision for us because Y Combinator takes 7 percent equity at a valuation that wasn't as high as we could have gotten elsewhere. So, we were giving up a lot more equity than we felt that we really should have.

But it still ended up being the best decision that we've made likely for our company as a whole, just because by being in Y Combinator, they have something called Demo Day at the end of the program. And so, there were probably about 600 investing groups that were there in-person and about another two thousand that were investing online. And Y Combinator made it really easy for them to just sort of mark the date or were interested in meeting us or wanted to invest.

And so, because we were doing fairly well and had a good revenue at the time and everything like that, we had over 100 different investing groups that reached out and wanted to invest. And that sort of drove our valuation of just as a supply and demand-type aspect. So, it drove our valuation up and also gave us the ability to be more selective about who we took on as investors.

So, even though it was a hard business decision to decide whether we wanted to do Y Combinator because there was a lot to feel like we were giving up a significant amount of equity and we were moving 3 thousand miles across the United States, then we would have to like find a place to stay for several months and everything like that.

And so, there were a lot of things that we were unsure about and we weren't sure that it was worth the expenses and timing and hassle while giving out more equity than we thought we necessarily should have.

But it really was the best decision that we could've made. Y Combinator was incredible. It was inspirational in a lot of ways.

So, you gave up a lot of equity, but you did a lot of learning in return. Sounds like it was worth it.

Aaron: Yeah.

Aaron, what's it direct-to-consumer brand that you look to for inspiration as a role model?

Aaron: So, from a business perspective, we have looked at Native Deodorant. So, they are inspirational because they have followed a similar lean business model to what we have, except they were able to, with basically just one founder essentially, who was able to take it from the very beginning until they exited. And they exited for $100 million after only two years and he's still had over 90 percent equity.

So, that was pretty inspirational just to see that a lot of people, when they have a company, they are really burning through money way too quickly. And a lot of people, they don't really value getting the unit economics right so that they are profitable on the first purchase.

But we saw that that was like the number one most important thing. Like rather than burning as much money as we could to grow as quick as possible for whatever reasons, really sort of focusing on the actual quality of our ad spend and everything like that was going to make a bigger difference in the long run.

What brand or founder do you think we should talk to here on the show? Who would you like to hear from?

Aaron: So, Honey Love was another company that was in Y Combinator with us. And that was founded by a woman who was very ambitious. And she's a great example of somebody who focused on the unit economics and got that right.

So, she had basically zero in sales at the start of Y Combinator. And at the end of that three-month period, she was doing about 500 thousand a month in revenue and has only continued to increase from there.

It is a company that really has done some pretty incredible things. So, I would suggest looking into them.

Aaron, thanks for taking the time to talk to us today. I really appreciate it.

Aaron: Yeah. It's been fantastic speaking to you.

If you haven't already, visit frey.com to see what all the fuss is about. That’s frey(F-R-E-Y).com.

Thank you for listening. Thank you for joining us. This is the DTC Growth Show by #paid.