Originally posted on https://www.projecthatch.co/interview/temporary-bad-decisions-with-inkbox-ceo-tyler-handley

 

For thousands of years tribes across South America have used a special fruit to dye their skin. Tyler Handley and his brother Braden Handley brought the fruit further north to launch Inkbox. Their technology makes the ink easy to apply and the brothers partner with top artists to create their designs. They launched on kickstarter, raised $275k and managed to lose money. It didn’t matter however as they proved the business idea was more than just a “Temporary Bad Decision“.

Prior to Inkbox had you started any companies and then what led you to create Inkbox?

Yeah, I started a company before Inkbox called Blurbi, a social contact marketplace. We saw this gap in the market where brands that had multiple sub-brands who wanted to be on Facebook, on Twitter, Instagram didn’t really have the resources internally to create content. So we matched them with a network of freelance copywriters, graphic designers and general content creators that they could work with.

It was my first business and I think we got the model wrong. It was on a pay per use model, and it turned into more of an agency, which is not something I wanted. So while was doing that I had the idea for Inkbox.

So once you had the idea, how did you make it reality? Did you immediately go for funding? Did you look for partnerships? Did you create a founding team? What was step one?

So step one with any business is that you obviously do a bunch of research first and then you just start testing the waters. You ask a bunch of people that you trust whose opinion you trust and see if they think it’s a good idea as well. Fortunately, by that time I had met some pretty smart people through the tech ecosystem here in Toronto. They gave me some good feedback and thought it was actually a great idea. Then I started asking people who would actually use it if they thought it was a good idea and they liked it too. So you want to confirm your own intuition and then I think once you confirm it to some extent you actually think about starting.

So my brother and I went in together. We’ve always wanted to work together on something which made it a pretty easy decision to start out together. We didn’t even have product yet, the first thing we did was actually just start getting the word out there about what we were doing. We started an Instagram account and started posting a bunch of content and I think we had 3,000 or 4,000 followers by the time we launched the product and that helped us drive a little revenue. Then we realized that the product we had wasn’t good enough and that we needed to develop a more scalable consumer product. So we commissioned some chemists to work with us and they ended up ideating this new version of the product that allowed us to create consumer friendly product at scale.

At that time we had no access to capital. We didn’t know any investors, we had no family money, none of our friends had money, we were all poor. So we did a bunch of research and realized that our only approach could be Kickstarter. So we created a Kickstarter campaign and we wanted to raise $20,000 and we ended up raising to $275,000 which gave us the early capital to at least figure out how to manufacture the product at scale. We then leveraged that to raise financing. The beauty of Kickstarter for us was that we had like 7,000 backers, it wasn’t just the fact that we be that we’ve got pledged $275,000. It was that we validated that there was demand for this product. That validation allowed us to go to investors or traditional institutional investors and be like, “hey, people are obviously interested in this, we just need more capital. We need to go and get this off the ground and start getting in front of more people.”

Was the Kickstarter profitable for you?

Yeah, we lost a little bit on Kickstarter. I think it’s pretty common for a first time Kickstarter campaign creators to lose a bit of money. We didn’t know what we’re doing. We didn’t know that there’d be really high tooling costs for the machinery we’d need. The investment in minimum order quantities was a lot higher than we were looking to spend we didn’t charge enough for shipping. It was the combination of all those things together that actually had us losing money. We didn’t lose too much but it was definitely a little deflating to put all that work in and then to see it not actually drive any profits for you.

So you found the dye from a South American fruit? How did you go from finding this fruit that dies skin to being able to put that on people’s skin in the United States? Were there regulatory challenges?

I mean, there’s not a lot of regulations in the space. It’s kind of a blessing and a curse for the general public that you can get products quick-to-market because the FDA, for example, doesn’t regulate cosmetic products. It’s all about lawsuits. So you have to protect yourself legally and make sure that you’re abiding by cosmetic industry standard testing and of course we did that. Beyond that, no, there’s really no regulation.

So the process was getting chemists involved, figuring out how to extract the active molecule and then figuring out how to integrate that into some sort of applicator. And that was really the tricky part, you’re not just creating a new product that people know how to use, it’s a completely different method of applying a product and then looking after it.

We didn’t do this enough at the start but we’re now doing user testing with consumers at every step of the R&D journey to make sure that all our variables are in check for application and success.

We’re building a new product at the moment and this one took us a lot longer. It’s a lot more sophisticated and we learned from our previous mistakes. This time around the content and design thinking have been user tested. In addition, the way those two are applied together has been so critical in the development of this product. Because again, the application method is changing a bit and how do we tell consumers that? Is it through texts? How many images do you use? Do you link them to the video up front? Are people going to use the video? What do they want to see in the video? Are they concerned about the packaging? How it’s being presented to them? When it’s a new product there’s all these considerations that a more typical product, like a cosmetic eyeliner or something has gone through iterations for decades from many different countries to come up with the optimal usage and packaging, things like that. For us it’s about having to do it from scratch every time.

I see you have a patent for the applicator.  Did it help you raise capital and how has it protected you from competition?

It’s a question that investors always ask. It’s always one of the first question. Revenue matters, but so does defensibility and investors will always ask in the first meeting, how is this defensible and obviously we have patents on the product.

Patents, are defensible to an extent. I think now we’re focused on defensibility beyond just patents. Creating moats that are more about community and network. I think those will be stronger over longer periods of time. But yeah, it definitely helps you raise money when you have patents. It just looks more professional too. The fact that you can come with something that’s been approved by the US government. There’s something about having that seal of approval definitely lends some sort of credibility to what you’re working on. You do have to work to get one. If you want to actually write a good patent, you have to work with a good patent lawyer. So that definitely helps.

But a patent can only protect you so far. There’s always ways around patents I think, but they definitely, just in our opinion and in our experience, dissuade less sophisticated competitors in the market. If you’re like a first time or second time entrepreneur and you don’t really know what you’re doing but you think there’s a market here and you want to get in on it, but you see we have patents. You’re just like, “F**k, I don’t want to deal with that.” If we didn’t have a patent, they might be like, “Okay, there’s an opportunity here – I can go and nibble away at the edges of what they’re doing or something.”

So I think it’s definitely dissuaded the less sophisticated entrepreneurs. But I imagine that if a larger conglomerate or a larger company or a super sophisticated team came along and worked on it, they might be able to find some way around some part of the patents. Of course we’d go after them and see what happens. But it’s always risky to create a business when you have a lawsuit hanging over your head immediately from the get go. So I think it definitely dissuades people.

You’ve worked with a lot of celebrities for endorsements and also worked with or partnered with people like the NBA and there’s been various other partnerships. Do you see sales spikes on these or are they more about awareness?

More about awareness. The NBA collection was a bit more of a sales driver, but again, I think more about awareness. The NBA was our first licensed deal, so we treated it as a test run for future ones, we didn’t really put too much weight behind it to be honest. It was pretty convenient for us to do. The Stranger Things and the TV shows and movies that used Inkbox, there’s no partnership there. It’s literally just the makeup department using Inkbox because it makes sense for the production, but it’s just cool national exposure for us.

To be frank I think the coolest part is just for the team here at the company to be able to see something that they put their blood, sweat and tears into on a TV show that they would be naturally watching anyways. That’s always rewarding.

You recently rebranded or changed your brand colors from black to yellow. What effect has that had, if any?

Brand is tough. We weren’t expecting any sort of change immediately, we call it a brand elevation and it wasn’t just a cosmetic, it was actually very deep. So our messaging changed, our positioning has changed slightly. We really went back to the drawing board and talked to a bunch of consumers about what Inkbox means to them, how it fits into their lives and built the new brand off of that. You can see what it is, it’s now yellow, it’s quite bold and distinct and there’s a lot of emotion and fluidity to it.

When we launched the new website with the new branding, we ran it first, to a segment of about 10% of visitors to make sure that it wasn’t affecting conversions at all.

I mean, it would be nice if it positively affected conversions but then we saw no difference. So after about a week of doing that, we flipped the switch, put it live and it didn’t really have much of an impact, but weren’t expecting it to immediately. I think brand takes time because you have to understand and feel what it is. A lot of those changes for the deeper pieces are coming later at the same time as we’re launching our new product – in a few months.

So when that’s out in the market then the brand will start to feel very real, very different and we’re expecting to see some impact. The way we measure that is by taking baselines from now and a year ago – we have to make sure that we have a really representative baseline to compare the rebranded site experience to.

Are the real life shops you have profitable more for branding?

It’s profitable, but the aim of it is not to drive significant amounts of revenue yet. That first one is exploratory but it’s going well and I’m looking to expand more markets now and those would be revenue drivers and so when we’re thinking about retail, we’re not thinking about just a store. No, it’s an experience and it’s integrated across everything else we do.

We’re not just looking at this in terms store sales, we’re looking at the indirect sales locally in that market too. So our first stores here in Toronto and we’re looking at the traffic that the store is driving. The storefront itself is like bold and yellow. It’s pretty easy to spot. For us, especially in our hometown, a lot of people have heard of Inkbox and they’ve seen our Instagram ads a couple of times maybe so they had like a passing awareness of it, but not a real strong brand affinity or brand awareness.

A store makes things feel real. You pass by it in person, it’s like, “Oh this is legitimate! This is real, I can trust this.” I might go in and check it out, and then they come in and it’s just completely branded experience and environment that brings so much more to the table than just a website visit can. It’s a lot more personal and I think that’s where a lot of power of retail comes in and why a lot of Gen Z consumers are increasingly shopping in real life rather than online, which is always a surprising thing to me.

In the shop, how does the experience differ to the online one? Are there certain lines that you push? Do you have artists in there doing freehand and what are the costs associated? Are they the same or are they more expensive to get someone to apply it for you?

Yeah. The costs are very similar. The experience is quite a bit different because you’re not browsing 4,000 designs like you would on our website. We have a curated selection of around 300 designs in store. When you’re looking at a phone, you have a limited screen size. But when everything’s just laid out in front of you, it’s a lot easier to find what you’re looking for, so it’s a nicer browsing experience in that respect.

Then we have Instagram moments in there so you can go in and take some cool photos and really feel the brand in a way that you wouldn’t online because it can’t surround you in the same way a physical space can.

So I see that you’re ranking well on keywords for temporary tattoos and things like that. How did you achieve those top spots there? And then what, what are the other significant drivers? Do you use Facebook, Instagram etc… What channel is working best?

Yeah. So for us, the primary drivers of growth have typically been performance marketing and the associated word of mouth and the organic and return off that. So Facebook, Instagram, Pinterest, Snap and we’re experimenting with TicToc right now. Those all drive traffic and conversion to different extents and they all have different types of traffic that convert differently.

We’ve done that holistically by putting people into the top of the funnel and then converting them somewhere later down the line through maybe email or a retargeting campaign, something like that. So that’s been our primary driver of growth.

In the future, retail will play a larger part of that and the associated indirect revenue from retail in local markets as well.

In terms of SEO, for us it’s never been a large driver of growth. I mean it’s there and obviously contributes some revenue, but now we’re searched more than temporary tattoos. It was pretty funny, three years into the company,( we’re at almost four and a half now,) we looked at Google trends and then compared it to temporary tattoos and we’re like, “Oh, okay way more people search for Inkbox now than they do temporary tattoos.” So we quickly surpassed the ability to drive a lot of traffic through search because we ended up outpacing it.

For the Instagram and Facebook ads, are you making those in-house or are you working with agencies? How do you create the videos?

Yeah, for our performance marketing on Facebook, Instagram and Pinterest, we do it all in house. We’ve only got in-house, we do work with representatives at some companies, but our creative team, performance marketing team and product team integrates with them as well.

I saw you’re also selling on Amazon. Does that perform well for you or just bumbles over?

Yeah it bumbles over. It’s the same as the SEO thing. Just this week we surpassed the search volume on Amazon.

What products are you working on at the moment? You mentioned a few minutes ago that there are product releases coming out soon. Are you able to share information on them?

Yeah at a high level. We’ve been hard at work the past year on a next version of our product that’s  just effortless to apply. It enables an artist’s artwork to be replicated exactly as drawn on the skin. We can’t really be true to the artist’s artwork to the extent that we want to be. The new product enables us to do that. It’s really easy to apply as well. So that’s the core development.

We have some other products in the pipeline to. We’re looking at things like color, always making it easier to apply, Making the tattoos last longer as well.

I think a lot of the products improvement would be around education too because it is a new product and our challenge has always been that everybody and every body is unique. They’re so unique and their skin is so unique. So creating a product that works great on everyone’s skin is actually really challenging to do because no one’s ever developed a technology that perfectly translates artwork into the skin.

There’s tattoo machines, but that’s an artist handling a needle and putting it in the skin which is very different from a consumer product that you just slap on. The absorbed ink has different effects and colours on everyone because everyone’s skin maybe different thickness, different density and produce different amounts of sweat. Even the places they put the tattoos matter due to things like hydration of the skin. There’s all these factors that play into how the tattoo will appear so it’s been a challenge to develop one that can work for everyone. Part of that will be educating consumers on knowing that if you are a sweaty person that your application might differ slightly from someone who doesn’t sweat a lot.

On the point you were saying about color, that almost felt like a natural step quite early on. Are there patents or other things holding it up?

No, those patents are pretty junk actually. They’re just people who had an idea to put it out there. We’ve actually experimented with it. It doesn’t work the way they say those patents claimed they would.

70% of tattoos are black and the next most popular color is red. So it’s not of paramount importance to develop colours at this point in time. The colors we will develop, they’re not going to be all types of shapes and colors. It’s going to be like one or two different reds, one or two different blues, one or two different greens.

The big challenge is that you’re not putting ink into their skin that you can physically see and will then appear as you will see it. You actually have to find molecules that react with the skin to create a new color. And then that’s challenging because there’s lots of them out there that are toxic too. So you’ve got to do a lot of pre-testing before you even understand whether it could work on the skin. And we don’t test on animals, we don’t test on human cadavers or anything like that. But I can say that we test on founders. So I’m not going to put anything on my skin that is going mess me up. It’s been challenging, but we do have a team on it and we have a couple of colors in the works right now.

Back to the retail kits, so you may create more stores, but would you ever create a kit that could be sold in someone else’s store? Would you sell an Inkbox kit in Walmart, for example?

Yeah. There’s the potential there. I think what’s really unique about Inkbox is that it’s like I said before, every body is unique. Well everybody is unique as well. If you’re putting something on your skin that’s going to the last more than two weeks, it should probably say something about you. So when they have like 10 designs in the store, we’re not confident that it would sell as much. I think we’re more interested in the analog experience that we then transform into retail converts. Having artists there creating an experience for the consumer. That’s really cool.

In terms of the investment you’ve taken on, is there anything that you would’ve done differently in terms of taking your money and what recommendations do you have to other founders who are looking for investment?

I mean, I would’ve given less the company away. Every founder would like to say that. I think frankly one early mistake (perhaps not necessarily a mistage) we made was just a consequence of the circumstances because we were first time founders. We took money from a lot of unsophisticated people in our market, investors who didn’t really know what they were talking about for our market. They would try to give us advice and it wasn’t right for us and for a time it felt like we were being gaslit because they’re telling us one thing and then we actually test it and find it’s not working. We thought, “why aren’t the things that they’re telling us working?” And we realize because they don’t have the expertise.

So my advice would be make sure that investors actually know something about your market if they’re going to be involved. You could take money from people who don’t know as long as they’re keeping their distance – we have those investors too and they’re fine.

Another suggestion I would make is to not value yourself too high. I think you always want to give away less of the company, of course. But I see far too many companies who take on way, way too much capital with a way too high evaluation and you have to grow so fast into that evaluation. It’s f*****g hard to build a business, a big business, without getting really lucky and there’s going to be ups and downs. If you have a really high evaluation, you have to grow into it fast.

And if you can’t grow into it fast you’re going to have to do a down round and that’s a really bad signal. Then you’re going to be up s**t’s creek and then you might have to fold. Way too many companies fold because they just value themselves way too high and they’re not in it for the long run.

The advice I would give would be to build for long term stability and sustainability and make sure that you’re valuing yourself in a fair regard that you can actually grow into by the end of the runway you have with that finance.

And then take on investors that actually add value rather than, and have expertise in the area as well?

Yeah, I mean it depends who you are. If you’re experienced enough in that market, if you worked in an industry for a decade or five years or something you’re like, I know this can work. I know this industry inside and out. It doesn’t matter who I take the money from, that’s fine.

But if you’re taking money in a vertical that you don’t have a lot of experience in then you probably want investors who can help you navigate the waters. I think that the biggest value I’ve received from investors is more on the business side. Things like just team culture, leadership, but basically any kind of internal business objective we would have, has been really valuable to have investors giving us advice on because they’ve seen so much. I think that’s the true value of a really good value-add investors, they’ve just seen so many things that any problem you have or question you have, they probably have some kind of answer or context they can give you.

In terms of global expansion, you’re predominantly in the US and Canada at the moment I think. Are you looking to have distribution centers in other big markets for your brand, say like the UK, Australia, those kind of places?

Yeah, yeah for sure. What’s unique about us is we have no natural competitors. So we don’t really have competitors in other markets and we don’t really have to position the product too differently in other markets as well. So it is a matter of setting up local operations and local teams to work in those markets. We’re planning that for the near future.

What apps are you using to streamline your business? Are there any that people might not have heard of that you find particularly useful?

Yeah, I mean Google Suites are awesome. We use Google Drive for sharing, we tried a third party but ended up going back to Google Drive. Google Drive just works. For analytics and stuff, just Google analytics is honestly really good. Eventually you need to move up to GA 360 when you have too much data. So we did that. Slack obviously, Trello, Asana, we’re using a project management platform called Wrike. I think we moved off it but our team really liked Mondays as well. If you’re a smaller team especially, Mondays was a really good app for a task management and project planning. Just a really nice piece of software – user friendly.

With a product that seems like it could go wrong, have you had any funny stories of from customer support?

Oh, so many! One thing about the product is if you fall asleep, your body heat can actually transfer the tattoo to different areas of your body. There’s a ton of stories where people got a tattoo on their wrist and then fell asleep that night. They sleep with their wrist on their face and then have a face tattoo. That happens pretty often. You get people out at parties with freehand ink and basically you can draw anything. Everyone’s drinking, you’re getting a little loose, the ink starts flowing and the designs never look great. People wake up the next day, with a hangover are like, “Oh s**t what did I do?”