Founding, scaling, and exiting Soma
Influencing the press, hacking growth, falling from grace, firing half of the team, and more
Mike Del Ponte is a serial entrepreneur, CEO coach, and investor. He is also the founder of Soma, a company that he launched in 2012 to develop more sustainable, healthier, and beautifully designed hydration products. In this episode of Founder Secrets, he provides an insider's view of his journey in riding the direct-to-consumer wave all the way to an acquisition in 2017.
We discussed some intriguing secrets, such as how they influenced the press to generate buzz about their launch, why they suffered a setback and had to fire half of their team shortly thereafter, and how they eventually discovered a growth strategy that was repeatable, scalable, and sustainable.
A proven formula
Dollar Shave Club, Warby Parker, Casper—different industries, same playbook. All of these brands rode the direct-to-consumer wave to $1B+ exits with the same simple formula: redefine an existing category, bring it online, and eliminate the middlemen. Today, it may seem obvious, but Mike recognized this pattern as far back as 2012, when Facebook Ads was a relatively new channel and the DTC revolution was just getting started.
“All of these brands were going DTC by redefining already existing categories,” explains Mike. “Harry’s did it with razors, Warby Parker did it with glasses. We decided to do it with water filters and designed a cooler, more sustainable, and healthier product.”
Playing the press game
The launch of Soma in 2013 was an incredible success. Every magazine, newspaper, blog, and influencer was talking about them, and the product sold out immediately. But that wasn't just a stroke of luck. Mike knew exactly how to play the press game and get everyone to talk about Soma.
"It doesn't matter if it's sales, fundraising, or the press. It's the same game," notes Mike. "It's about building deep relationships, telling a compelling story, and getting people excited. I was flying to New York, LA, Chicago, and hosting many influencer and media dinners in some really neat places.
I learned to be really good at getting people excited and interested in talking about Soma. You just need to understand their psychology and give them exactly what they need. Reporters need five good soundbites and some beautiful assets, but more importantly, they need to like the person they're writing about. When you can do that, you can repeat the process over and over.
We compiled a list of target magazines, newspapers, blogs, influencers, newsletters, and podcasts where we could reach our target customers. We managed to be featured in almost every one of them.” By doing so, Mike was able to create the perception that everyone was talking about Soma. Tim Ferris calls this the surround sound effect.
Fallen from grace
Things couldn't be better for Soma after their initial launch: "We were all over the place," recalls Mike. "We sold out. It was great. It felt like Soma was a sure bet, and that the rocket ship was never going to fall.” Feeling the momentum, Mike was persuaded to accelerate their hiring plan, invest in marketing, and expedite the release of their new product.
Mike was on top of the world and everything was going smoothly for Soma. However, there was one small detail that he had overlooked. That growth was the result of a one-time opportunity, and the press was soon going to forget about Soma. In his own words, "We were riding off the press, social buzz, and influencers, but that eventually died down as it inevitably does.”
What followed marked the rock bottom of Mike's entrepreneurial journey. "We were burning cash from that launch," he recalls. "We almost ran out of cash completely. I thought the company was going to die. I was just 28 years old with no experience, and I was cutting my teeth on the job. I remember my executive coach telling me that it was unsustainable, and that I needed to fire half of the team and stop the bleeding. I did it, and it was horrible.”
Honing the fundamentals
Mike will never forget that moment. "It was brutal,” he says. “It was one of those situations where you have to wake up, put one foot in front of the other, and keep going.” However, he learned a valuable lesson. They needed to get back to basics and work on the fundamentals. They had to find a growth strategy that was repeatable, scalable, and sustainable.
Eager to find that strategy, Mike and his team decided to test Facebook Ads. Not surprisingly, it worked like a charm. Their secret? Instead of using boring creatives that simply promoted their products, they created different ad sets with a killer offer optimized for specific personas. This led to the creation of their most successful campaign, which they called "Super Moms".
"We launched it on Mother's Day," Mike explains. The ad was specifically targeted towards busy moms. "We want to reward you for always working so selflessly for your family," it stated. Soma offered a free $50 water filter carafe as a gift, and customers only had to pay for shipping and filters. By selling the carafes at break-even, they acquired customers for their monthly subscription at no cost. The strategy was a home run. "It sold out immediately. All of the inventory in our warehouse was gone. We had to turn it off," Mike notes.
They had cracked the code. "It was a major inflection point for the business," observes Mike. "We ramped up our subscriber base significantly based on that.” After understanding what they needed, they began replicating the strategy with various audiences by creating tailored offers and creatives for each one. As Mike puts it, "That's how we were able to crack the code and make the economics work on our paid advertising.”
Advice from the board
Mike was able to turn things around at Soma and resume fast growth by seeking advice from experienced entrepreneurs who had been through similar challenges. At Founder Secrets, this is a recurring topic, and the lesson is clear: you don't have to learn all the lessons the hard way. Your board, according to Mike, is one of the best places to seek advice.
"When you have a board meeting,” notes Mike, “you have two hours with unbelievably talented and smart people. They have invested in your business and may have a valuable perspective on the market. Show them the good and the bad—not just the cool stuff. Your investors can help you identify blind spots, areas of focus, and opportunities for improvement. That's why I'm a huge fan of being hyper-transparent and leveraging your investors and board. You will help them to help you be more successful.”
After a decade as a founder and CEO, and after investing in and advising countless other founders, Mike was able to spot some patterns that led him to develop a framework that he calls 'Parabolic Leadership.' He explains, "The big pitfall of a startup CEO is getting too busy with day-to-day fire drills. Instead, you should spend most of your time on three things:
Vision: Craft, convey, and confirm your vision with all stakeholders. Founders are constantly thinking about the future, their business, and how they're going to disrupt their industry. They can also present it in a very compelling way. But they often forget the last step, which is confirming that vision. Founders might think about the business 24/7, saying something 10,000 times in their head but only saying it to the team twice.
Team: Recruit, develop, build a culture for your team, and make sure everyone is aligned. You have to be a broken record on the most important things. Ask for confirmation, have them tell you what they hear, ask them questions, and make sure they are aligned. You don't want your team running in 10 different directions.
Resources: Get resources through sales and fundraising and have decision-making frameworks to distribute those resources. This is important. Founders who don't always have the gift of discernment might want someone on their team who's really good at that. You will still decide, but they can get 80% of the work done by doing the research and presenting a few options."
From DTC to omni-channel
We started this episode by pointing out how companies like Dollar Shave Club and Warby Parker rode the direct-to-consumer wave to billion-dollar exits. But do you know what else these companies have in common? They all eventually adopted an omnichannel strategy.
Soma is no exception; they eventually decided to sell through retail, with their products available in thousands of stores across the United States. Mike notes, "Facebook Ads were working very well. It was a big deal. But it's also important to diversify your channels." Indeed, you really can't afford to invest all your resources in one channel. If it stops working, the entire company could be gone.
We have discussed this in depth in another episode of Founder Secrets, but diversification is not the only reason to adopt an omnichannel strategy. Another reason to distribute your product everywhere is that you want it to be readily available anywhere your customers are. This is precisely why Robert Woodruff, Coca-Cola's president from 1923 to 1985, promised to put Coke's products "within an arm's reach of desire.” And this is one of the main reasons why The Coca-Cola Company is a $250B+ giant.