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So here's something pretty cool to think about.
Have you ever been lying in bed at an AirBnB?
Maybe scrolling through your phone when you realize, wait a minute, could I do this too?
I recently stayed at an AirBnB with a pool that overlooked an olive grove, it was incredible!
Find out how much your place is worth at Airbnb .com slash host. I realized that even though the volumes were growing, I wasn't really able to make money because it was just so expensive to produce the product.
And so, at about five years in, I had kind of a come -to -Jesus moment because I was, at that time, I think I had dumped about $300 ,000 to $350 ,000 into the business just to keep it alive.
And I was taking a very minimal salary and my wife put up with that for five years and then it kind of came to a head, like, what are you doing?
Welcome to how I built this show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.
I'm Guy Raz, and on the show today, how Brad Baxter sidelined his promising career in the car business to build the Cadillac of cat litter boxes.
Litter Robot, now a multimillion -dollar brand.
Cats are divisive, I'll admit that.
I happen to have two cats and a dog and I love them all, but there is no question that the cats are just easier.
You don't have to walk them, they clean themselves, they don't demand our undying affection and love like our dog does, but the one area, the one department where the cats are a much bigger pain is the litter box.
Litter boxes are just gross and you have to clean them out every day or the cats will revolt and start peeing outside the box.
Cats love clean litter boxes.
And for millions of cat owners, scooping out the clumps of poop and pee on a daily basis is a huge pain.
This was a pain for Brad Baxter as well.
Brad is a mechanical engineer by training who spent much of his life working in the automotive industry.
One of his jobs was designing the plastic knobs and buttons that were used in car radios.
Anyway, back in the late 1990s, Brad bought an automated litter box.
It had a mechanical rake that would scoop through the litter and deposit the dirty bits into a box.
The problem is that that system just didn't work very well.
And so he got to thinking, could I design a better mouse trap?
Or in this case, a better mechanical litter box?
So he did. At nights, and on weekends, whenever he found time, Brad started working on an invention that would be more efficient.
With a relatively small loan from his dad, Brad managed to build a prototype and launch a product called the Litter -Robot.
And with no marketing budget, he started to sell them.
But it was a very, very slow rise.
For nearly twenty years, Brad sold Litter -Robots part -time, and worked as a consultant part -time in order to keep a salary.
But as you will hear, with a combination of tenacity, luck and smart strategy, Brad was able to turn Litter -Robot into a pretty significant brand.
Today, his company has been rebranded as Whisker and in 2024, it did more than $300 million in sales.
And at times along that journey, the Litter -Robot almost went belly up.
For now, what you need to know is that Brad Baxter grew up in the 60's and 70's in rural Dane County, Wisconsin.
His father was an entrepreneur but struggled to make ends meet.
Brad went to the University of Wisconsin in Madison where he was passionate about cars and dreamed of working for one of the big three auto companies.
As a teenager, I spent a lot of my time drawing cars, fixing cars, fantasizing about cars, and so I was a real car guy.
And I really wanted to get into designing vehicles.
And I had an artistic streak, so I thought that might be a really interesting path, but I knew that I'd probably want to get an engineering degree as well.
So that was kind of the path I took.
And once I figured out that you actually had to study in college and that you couldn't just kind of breeze on by like I did in high school, I started to do okay.
But I would say the first the first year and a half were pretty rough.
So you go, you study mechanical engineering with the goal of getting a job for one of the Big Three.
And indeed, you did you got a job with Ford after graduating and and I guess your dream was to be as you say car designer.
But that's not where you ended up at for you.
I'm sure a lot of people wanted to go to Ford and become car designers is 1989.
You joined Ford, what did you do there?
What was your job? But it was interesting because at the time, Ford was moving from what were analog displays like for the instrument clusters to digital.
So there was this big conversion going on and you had to package all this electronics and plastics.
So they were looking for engineers to work in that area within electronics division.
So this ended up being actually a great foundational start for me because that's ultimately what I've ended up doing over my career is working with plastics and electronics.
Yeah. And I, at first, I thought, well, it's not exactly what I wanted to do.
But you know what, I'm in Ford. I'm thrilled that I even got the job.
And I'm going to make the best of it.
All right, so you get this job and working on these component parts that are eventually going to, you know, replace the analog.
You know, the all the analog components of the car, including probably the radio and the speedometer and everything in the car.
How long did you stay at Ford?
I was at Ford about two and a half, three years, and coming into the third year I started to realize—and I had been told this by other people—that you've got to be careful about the golden handcuffs at Ford. The benefits, the pay—all that becomes so good that you just can't leave, even if you thought you might want to try something else.
So I knew that that was something kind of hanging over my head and I realized if I'm gonna do something different I better do it now before I really get those golden handcuffs.
That's amazing, I mean to have learned or to have realized out of 25 because by that point you were probably making a good salary and if you if you did everything right it's a job for life.
Yeah that's that's what scared me.
Talking about salary I remember my salary, it was 32 thousand dollars And I thought that was the most money in the world.
I mean, in 1989, that's a lot of money.
Yeah. Well what happened even with the salary and all the benefits is I realized that I kind of had some self -introspection and I realized that I'm not really the kind of person that wants to be a manager at Ford Motor Company and although I respected my managers and I thought they, you know, they did a great job and I learned a lot from them, I saw what they were doing and I knew, you know what, this really isn't for me.
This is moving too slowly for me.
And I think in larger companies a lot of times you end up being frustrated because a lot of times you can see the answer, or at least I feel that I could see the answer and it was a fairly common sense thing, but sometimes common sense is not the primary factor in a larger company.
And so there's a lot that I'd like to do and a lot that I'd like to learn.
And I'm not going to probably be able to do that as quickly as I'd like here at Ford Motor Company.
Yeah. All right. So you leave Ford and for a few years I guess, you went on to work for a few different European auto parts companies.
But eventually, you spin that specialty into your own consulting business, I guess, where you're the liaison in Detroit for some of these European suppliers helping out with engineering and logistical help and stuff like that?
Yeah, it wasn't really the path that I had wanted to take, but it was, it provided something that allowed me to be independent, to do something on my own in which I, I would have taken that any day over working for someone else.
You know, it could have been anything, as long as I'm independent and I'm working for myself, I'm setting the, you know, I'm, I'm charting the course of the business where I want to go.
That was the most important thing for me.
It wasn't always that important about exactly what it was.
And once you started that, you could probably could never go back.
Yeah, I mean, I couldn't.
I mean, I would die.
I would shrivel up and die.
Yeah, so you so get you're running your own business.
It's not exactly what you want to do.
But it's entrepreneurial, sort of just roughly, like, how much money, you know, could you were you were able to make from that business?
I think at the time I would have been able to bring home probably $80 ,000 to $100 ,000 a year.
So it was a good job?
You could raise a family on it?
Yeah. Based on what I've read about you, your mind is constantly looking around for something else, something that might, I don't know, you might develop more of a passion around, like a product.
Like, you were really thinking about being a product entrepreneur.
Is that right? Yeah, that's absolutely right.
I mean, I had had this dream to develop a product, to be an inventor for many years, and I dabbled in a number of different things, but never really hit on the one thing that I thought I could take to a business model.
And product design was really one of my core skillsets, too, is being able to take some kind of a functional requirement, and then create it either through pen and paper and then on to CAD.
And then, and then the other aspect was, it's one thing to design a product, but it's another to make it manufacturable, inexpensive, all those things are integrated into the process of product development.
And I had a, I think I had a knack for all of that and kind of integrating it all into a package.
So you had and just I think most people know this CAD is In computer -assisted design, you basically had the skill set because you had studied mechanical engineering and you'd been doing some of this work.
When you say you had like kind of dabbled in some ideas, what were some of the ideas you dabbled in or thought about?
I think one comes to mind, we had kids, young kids at the time, and so one of the ideas was basically a stand that you would put your...
you know, the bottles that have the bags in them with the formula, you always had to push the air out.
So, I designed a stand that you would push the air out of the baby bottle, and the stand was just a simple stand to do that that fit inside the bottle, and then it had like a hexagonal shape on the bottom of it so that if it tipped over it wouldn't roll off the table, and just simple stuff like that.
But the truth of the matter was is I had a lot of things kind of floating around in the back of my mind, but I was so busy running the business.
I mean, it was a it was a much more than even a full time job getting that that business up and running, supporting these these European suppliers.
So there wasn't a lot of extra time to experiment with that stuff.
All right, so you have the and you know, I'm thinking like is the late 90s.
Who was like a famous and Dean Kaman, right?
the guy who made the segue.
He was, I remember, he was all over the news, and he's invented a bunch of stuff.
And so, yeah, I mean, you're, you're just kind of keeping your eyes open.
And, in in one day, you, you start to think about cats and litter, litter.
Tell me how, what, what what happened?
How that sort of idea starts to percolate in your mind?
Well I had had a couple of cats and I had been having some trouble with them.
They were actually not going in their litter box.
They were peeing outside of the litter box and the reason for that is I wasn't getting down there quick enough, or often enough, to clean the litter box.
I was going down maybe every other day and that was not enough for my cats and so they would protest by peeing outside the box and so one day I'm down there and I'm cleaning up the I've got a bucket of water and bleach water.
I'm on my hands and knees, I'm wiping up this urine and this is not a fun task.
And I'm thinking, man, I've got to figure out a way to keep this box clean all the time because this is just driving me nuts.
So that got me thinking about, well, how can I automate this?
And it was more really about just solving my own problem at the time.
And the more I thought about it, the more I thought, wow, this could really be an interesting opportunity because there's really nothing out there that addresses this concern fully.
There was at the time, there was another automatic litter box on the market and it just come out recently.
It was litter made and it was okay, but I ended up getting it to check it out and it really did not work well with my cats.
And that even prompted me to look into this even further.
And I think people who have cats know this is I'm a cat lover and a dog lover.
I've got a dog and two cats.
cats are super clean.
They do not like mess.
And if the litter box is not clean, they do not like it.
And by the way, I can totally relate to this because around that time, maybe a couple years later, maybe like 2003, my wife and I bought a litter mate and it was like a litter box with like teeth in it.
Like, imagine a bunch of metal teeth at the bottom and then when the cat would leave it would go shhh and it would sort of, the teeth would kind of sweep through the clumping litter and then it would open up a box at the end of the litter box and it would dump the stuff in there and then the box would close and the box was a disposable plastic container.
But in fact it didn't work well and the box would constantly leak and be messy and gross and they were, you had to throw them away, they were just like these big pieces of plastic, You were constantly throwing away and refilling.
Yeah that's a great description.
You got it right. Yeah the, the litter maid was, and again not to trash them or anything but it was a very literal approach to the problem, but it doesn't really break down into it's functions and you know how can we best solve this problem, and that's what I try to do.
I try to step away and look at it from a different perspective and say hey what am I really trying to do here.
I'm trying to separate these clumps from this litter.
What's the best way to do that?
And so that that's how I came up with the Litter -Robot idea was through sifting, not through raking.
Right. Because the human hand actually is an incredibly efficient tool, right?
The wrist and the hand.
And so when you're just scooping up the litter and you're shaking it, and you can do a great job.
But to have a rake just do that, it's like a sledge hammer.
It's just There's not gonna, it's not, it's not going to be an elegant fix, right?
And so you're looking at this and you're thinking, well, all this is trying to do is to automate the human hand, right?
Or a version of the hand, a rake system, but it might be better if there's like a sifting system rather than a rake system.
Yeah. You are absolutely right.
I mean, the dexterity that a human has using a scoop like that is so complicated compared to just moving a rake laterally through the litter I mean ultimately you're just pushing a clump which is like a snow plow and it pushes all kinds of clean litter into the tray at the end as well as the waste and so it's very wasteful there's a lot of things like going against it that don't work very well so again there may be an easier way a more convenient way and a better way for you in a better way for your pet alright so before you actually went to your computer assisted design to design this we'll talk
about in a moment you you start to think okay this litter made thing this rake system is not working maybe their should maybe the litter box should be more like a drum that rotates and then sifts out the clumps of litter yeah a drum like in a cement mixer yeah the cat would go in do its thing jump out and then the cement mixer would to rotate and filter out the dirty litter.
Yep, I was trying to think of ways to gently separate the clump from the clean litter because one of the things that happens with the rake mechanism is that it breaks up the clump, and once the clump breaks up, you're leaving behind all these little nuggets that they're gonna smell.
Yeah, it's nasty. So just by turning the globe, you lift that litter bed up, and then it starts cascading down, and then if you keep rotating, You can bring a screen around that starts passing into that litter that's cascading down very gently It's kind of magical to watch it.
I mean this is a litter box, but okay It is kind of magical to watch that screen just kind of rise up through the litter The clump has been floating in there.
The litter is cascading through the screen and then within a couple of seconds The clump is all of a sudden just sitting on top of the screen.
It's not like the screen pushed it And if it's going to break up, it breaks up on a solid surface, and then it goes through the waste port.
So everything is removed.
Ok, so you have this idea, but you are also a mechanical engineer, and you know that there's a possibility that somebody might have already thought about this.
You must have gotten pretty excited about this possibility because you ran a patent check.
You looked to see if somebody had patented this idea.
Yeah, that's right.
But I did get excited about the idea and I thought, well, if I'm going to pursue this, I'd better see if there's anything out there that I might bump into.
And sure enough, I found a patent that was very similar to what I had been thinking about.
And at first I was really disappointed because I thought that was the end of it, but I thought more about it and I thought, well, you know what?
It's not really that important to me who owns or who has the patent.
I mean, that really wasn't the driving force here.
It was, I wanted to build a business around a great product idea.
And if I could license this patent, that would allow me to do it.
So that was really the path then that I took.
Okay, so the patent that you came across, it was not developed, it was just somebody had put the patent down and registered the patent, but it was not ever realized.
Right, I mean, it was, he had done some prototyping which was helpful and I contacted him and I said look I I've got an idea for a business and I'd like to take your idea to production.
This was just to clarify, this was a guy named Don Reitz I believe?
that's right yep he was actually very happy with the fact that there was interest and it was relatively low risk for him because if I succeeded he succeed.
If I didn't, it wasn't any skin off his nose.
So I think he was, he was happy that there was a chance.
So you guys come to an agreement, and you start trying to design something.
How long did you did you begin to work on something before you felt like, okay, this could be a prototype?
Well, Don had developed a few prototypes.
And so I brought those home with me.
And I started modifying his prototypes, because there were, there were a few things that had to be worked out.
So I was modifying his prototypes.
And And once I got those things figured out, I kind of moved then into the CAD design.
And I think the CAD design took me, I don't know, maybe three, four months, something like that.
I was doing it in the evenings.
I was still working the other job, of course.
All right. So, you come up with something that you think is pretty good or good enough to make, and it's going to require a lot of plastic.
But you're like an expert in plastic manufacturing.
You have all of these connections from the automotive industry.
That's right. And I think if I understand this correctly, to make this thing, you decide to use a technique called vacuum molding, where I guess the plastic sheets are heated and then it's kind of sucked onto a shape.
Yeah. It's wasteful and expensive in the long run, but in the short term it's better because the alternative, I guess, would be injection molding, which means you'd have to like cast all of these different, you know, shapes and precision tooling, and that's really expensive at the beginning is that right?
Yes, injection molding is really expensive.
And you want to make sure that you've got the design right?
Because if you have to change it, it's very expensive.
And I just I didn't have that kind of capital at the time.
And even though I was making okay money, I was funneling a lot of that money back into the business to grow the business.
So I think I think at the time, actually, I was taking a salary of about $50 ,000 and the rest was being poured back into the business.
Did you go out and raise any money?
Did you ask people to help you out?
Well, the first person I went to was my dad.
And I said, Dad, I've got this crazy idea.
I want to develop this litter box and I think I need about $30 ,000 to invest in the initial set of tooling.
are you interested in providing a loan for that?
And he said that he was and that he would actually, if I was interested, he would be interested in becoming a partner, taking some equity in the company, and so for $35 ,000, which they actually had to refinance their home to get the cash, for that $35 ,000 he got 35 % of the business.
So it was a big risk, I mean $35 ,000 you have to refinance his home.
I don't think your parents were wealthy at all, but I mean, he's your dad.
Yeah. These are very modest investments, I mean 35 grand, even in 1999, 1998.
But, given your financial situation and his, huge, and risky, and scary.
And you're also a dad, at this point you have three kids?
Let's see. Our first was born in 1995.
We had two kids at that point.
Okay. But you're, again, mid -40s.
You're not a twenty -five -year -old kid with no mortgage and no responsibility.
Like, you are going to put some considerable money into this thing.
Your wife's got a job, so you could depend on her income.
And then you've got your consulting job, so there's a lot going on.
You're basically signing up to be a very busy person by pursuing this idea.
Yeah, it was. I think when you talk about the risk standpoint, I think my dad figured that, look, my kid's not gonna stiff me on this loan or on this investment, so I think there was that.
And then yeah, my wife was a big part of the support mechanism that allowed me to do a lot of this because without her, it would have been a lot more difficult for me if I was the sole provider for the family, for sure.
Okay, so you have a plastics manufacturer that can make you the sort of the outer walls, but there's still other components in there.
I mean, there are electronics and they're in their sensors, right?
Because it has to sense when the cat leaves the box.
This is a complex piece of machinery already in the late 90s 98, where did you get all of the different parts and and how did you start to put them together?
Because you weren't I mean, you didn't have a factory.
Were you doing this in your garage at home?
Yeah, I working in automotive, I had contacts that were back at Ford Motor Company, working in electronics division, I had contacts that knew how to make circuit boards, I, I was able to tap into that.
As far as you know, the building the product, we did that in Pontiac, Michigan for a while.
And I was actually the sole assembler for probably the first three or four months doing it where in Pontiac, Michigan?
At like a warehouse you rented?
Yeah, the building we were in actually was an old automotive factory.
It was the original Oakland automotive company, and which eventually became Pontiac.
And so we were in this, I think it's like a 1910 structure, and it's a concrete building four stories tall.
And it was on that fourth floor that we started building litter robots.
And it was in the summertime and I can remember it being very hot up there because, again, it was a concrete building.
It didn't have any central air conditioning or anything like that.
We had a window air conditioner, but that barely kept up because the concrete would heat up in the sun and it would just bake.
And just again, when you, you're a respected guy in a very respected industry, automotive, supply chain.
This is like, people are, these are a country club set people, obviously the executives.
When you went to some of your contacts and you said hey I've got a side project.
I want to make a litter box.
Can I work with you guys on unlike?
Did did any of those people say?
What what what what?
Yeah, there were they were times when people kind of gave me a strange look but look I think they they were happy to help me out They they may have thought whatever they thought but as long as I was willing to pay them for their time and their effort I think they didn't really mind or care what it was for and I have to admit there were times when I when I did feel a little embarrassed around it and But I was just so driven to do it and I thought it was you know it the concept works So well, and I knew that there was a place for it.
So I was driven to make it work My kids were also very embarrassed They never really wanted to say what their dad did Yeah, they didn't really understand the other business But they knew that I had something to do with cat boxes and they didn't want to say that my dad made cat boxes.
When we come back in just a moment, how a tough conversation with his wife leads Brad to completely retool the Litter robot.
Stay with us, I'm Guy Raz, and you're listening to How I Built This.
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Hey, welcome back to How I Built This.
I'm Guy Raz. So, it's the spring of 2000, and Brad is splitting his time between his day job in consulting and his daily obsession, making a better cat litter box.
He hand assembles a few of them at an old car factory and eventually brings one of them to a trade show.
So in April of 2000, we went to a pet show out in California.
I think it was in Orange County.
Yeah, it would be Anaheim Convention Center, probably.
The convention center there and we took the Litter -Robot there and it was the first time the Litter -Robot had ever been out in public and that show was really interesting because people would come by and say, what is that?
And I would tell them, and then they would immediately say, oh, my cat would never go in there.
So it wasn't very, in some ways, very positive and uplifting, because I was getting a lot of pushback on how weird it looked and, but there were a few people that would come by and want to see how it worked, and as they watched it work, you could just see their eyes light up when the unit cycled and they saw exactly how it worked and how simple it was.
So, you know, I was getting kind of a mix of positive, positive feedback, as well as sort of the, my cat would never use that kind of feedback.
But also just curiosity because it was so different, and kind of weird, And big too, it was quite large compared to what they were typically used to.
And, and you didn't have like a live cat on scene to like, to demonstrate?
No, we were recycling clumps made with coffee or whatever we had.
um and and just to just to get a sense of like the technology the cat had to go in there right and and it did make sure it was gonna rotate with the cat inside like a laundry machine so was the with the sensors like light sensors kind of like when you walk past a closing garage door it stops because the sensor sides is it that similar kind of technology well we have that technology today but at the time no at the time it was just wait oh it was a wait activator so it feel the weight of the cat when it jumped out it will rotate.
Right, it was just a very simple weight activated trigger switch and that was it.
Yeah. Got it. Okay, so you go to this trade show and do you sell any any units there?
I think we came away with about five orders and so I came home and immediately started making those five units and it was shortly thereafter that we had launched our website which is a complete homegrown type thing.
There weren't any out of the box options at the time, I think we worked with a friend, a neighbor down the road that helped us with our very first website.
And so we were into e -commerce very early just kind of by necessity due to the size of the product and we didn't have a lot of margin in the product either.
This is 2001, I think.
By the way, I went to the Wayback Machine and my team got me your original website.
It is janky. Like I would look at this and think, this is a scam.
This is not written.
It's so funny to see it because it's ecommerce was so weird and different even in 2000 -2001 it was like you know not a lot of people still trusted putting the website their credit card into a website and And Amazon was around you could and I think you also started to sell on Amazon initially, right?
I think Amazon came a bit later, but right but you're right I mean the websites at the time were all basically homegrown.
They all look different there were no standards.
And we certainly fell into that category.
And a lot of people would look at the website, but then they would call us they wouldn't want to place an order on the website, they want to call in.
So we took a lot of phone orders during those days.
And I think the early models were like 300 bucks right.
So, not a cheap product, certainly more expensive than a litter pan.
How, I mean, I can't imagine you are selling that many, in 2000, 2001.
We weren't in it, in it was in some ways by design because like I mentioned before, we were trying to refine the product, trying to understand exactly how it would work the best, how the cats would use it.
I mean, we would have certainly taken more volume if we could have gotten it but it was kind of a blessing that the volumes were low because it allowed us to kind of take our time and learn and to adjust some things about the product.
Certainly quite a few things that we learned early on about cat behavior, how the cats would use it and a lot of those changes got incorporated into the early models.
How much time, Brad, do you estimate you spent on the litter robot at the beginning and on your consulting business for your income to support your family?
Well, my wife will tell you that at the time I was spending very little time at home.
I was probably spending 12 to 14, maybe sometimes more hours a day working on both jobs.
I can recall sometimes spending time in Pontiac late into the night and then realizing how late it was.
And instead of going home, I just actually just slept on the floor.
So you're working crazy hours and trying to sort of grow this business, but you weren't making any money.
So how are you financing the business?
How are you paying for anything?
Well, it was the other business that helped keep it alive.
I mean, without that other business, it would have died very quickly because we would have run out of cash and there just wasn't enough.
There was no profit for the first five years and because of the manufacturing method that I chose, there wasn't a real strong possibility that I was gonna be able to make a lot of profit on it going forward plus it wasn't very scalable.
Because you were hand assembling each one.
Yeah, it was hand assembly.
Each one was kind of an individual project because of the inconsistencies of the parts from the vacuum forming, so it was kind of by design in the beginning but then as the volume started to grow, I realized that even though the volumes were growing, I wasn't really able to make money because it was just so expensive to produce the product.
And so, at about five years in, I had kind of a come to Jesus moment with my wife about, what am I doing?
Because I was, at that time, I think I had dumped about 300 to $350 ,000 into the business just to keep it alive, and that was all coming from the other business.
and I was taking a very minimal salary so that I could dump everything back into the automated pet care business and keep that alive.
And my wife put up with that for five years and then it kinda came to a head, and like, what are you doing?
Where is all this money going and what's the end game?
Yeah. I mean, you could have been putting that money in an index fund for your financial future, right?
So from a fiscal responsibility, and by the way, no entrepreneurs, This is what you have to do.
But from that perspective, right, from a risk -mitigation perspective, you were not doing a responsible thing because at this point, you're now getting into your 50s, and you're not taking the money that you could save and putting it into a retirement fund.
You're putting it into a business that could die, that could be worth nothing.
Yeah, it was starting to feel irresponsible, especially to her, I think.
and I certainly recognized it and knew that I had to do something fairly quickly.
And I did, I managed to work through some of my previous contacts and without any kind of financing, without a bank loan, without investors, I was actually able to retool the product by amortizing the cost of the tooling with one supplier that I worked with And then I was able to take out a loan, a two year loan at 12 % interest with another supplier that I'd worked with.
And through those connections, I was able to retool the product.
Essentially to create the, the molds that would make it more cost effective.
Right. Yeah, that was the big expense.
Thing your wife is saying, what's your wife's name, by the way, Margaret, Margaret saying, Brad, you know, we put all this money into this business, I don't know whether this is the right thing to keep doing." And your response was, hang on, actually, let me see if we can retool the manufacturing process and I'll take a 12 percent loan out and I think that could do it.
It wasn't, you know what?
You're right. Let's just you know, pack it in here.
I don't think it ever really crossed my mind to do that to Fold.
I, you know, I got pushed a little bit and I think that helped because once I got pushed and I kind of went over the edge and decided I really got to do this, I was super motivated to get it done.
So I retooled that thing.
I designed it and retooled it in the course of about 12 to 18 months, so I essentially took what was the previous design and just converted it to injection molding with a few things that I knew that I could add, but it was all about a race to getting it done as quickly as possible so that I could start making money on the product and keep the business alive.
So these are the choices and the balancing act that you have to make as an entrepreneur.
What am I going to do here?
Am I going to take some extra time and improve the design, or do I take what is a good design and just replicate it so that I can at least start making money and move on from there?
Basically, this thing was costing you $299.
You were selling it for $299.
Before this change, it cost you roughly $299 just to build or more?
It wasn't that bad.
But with overhead, and you know, I guess when you boil it all down, and you include everything, yeah, we were not making, we're not making anything.
You were subsidizing the consumer.
Yep. And so you knew that that was not sustainable.
So you, you sit, you decide to shift to this more efficient, cost effective of manufacturing process, which of course makes sense.
But still, that's not guaranteed.
Even if you could reduce the price by, I don't know, 20, 30 % or your costs or 40%, you still weren't selling these things like gangbusters, right?
No, the volumes were still pretty low, but we were growing organically and I could see the trajectory was moving in the right direction.
And when we retooled, the product came out looking like a more refined product.
I mean, when I look at it today, it looks pretty clunky compared to what we're producing today.
But at that time, it was a refinement over what we had been producing, so we got a bump in sales from that.
Right, right. Roughly, do you remember what were your sales like in 2005?
Were you more than 10 million less?
More than 5? We were one just under 1 .5 million for the year.
Right, and this is six years into the business.
Yeah. Yeah, 2004 was the first year that we hit a million dollars, and that was a huge milestone for us.
Prior to that, you know, the numbers were pretty small.
Did you at any point during this time think maybe we should, you know, because direct -to -consumer was so new, it was so niche.
I mean, I'm sure a lot of people that you knew in Wisconsin would say, oh, where can I buy it?
And you would say, oh, we're selling it on the internet.
And they'd say the internet?
You're selling it on the internet?
Well, what about in the stores?
Did you ever try and pursue that path at the time?
We did. I mean, we were trying to get into the stores all the time.
And then at the time, I thought that was our path to success was to get into retail, because then we'd have these eyeballs looking at the product and all these retail stores out there that would, you know, if they had 2 ,000 stores and you supply them each with two units, you know that's pretty high volume.
And so that was really what I was focused on but we really didn't have the margin and the product and most of the retailers wanted 50 points on the product and there just wasn't a way that we could provide that.
We were maybe making 30 points at most on the product at the So there's no way really to make it attractive to the retailer.
Plus the unit was quite large.
Big, yeah. Shelf space would be tricky.
And so when push came to shove, when you really looked at it, it was actually quite ideal for direct to consumer because the product was quite large.
And does the consumer really want to drag it home from the store, or would they prefer to have it show up on their doorstep?
I guess by 2005 with the relaunch and the Robot 2, the litter box 2, You start to hit profitability and I imagine very small amount of profits.
I mean, one and a half million dollars.
You have five or six employees.
You're running a really tight ship and I imagine you're still far away from paying yourself anything at all.
I wonder whether at this point you start to think, you know, maybe to sort of supercharge our growth.
I should see if there's anyone willing to put money into this thing.
Did you start to do that or have conversations with people or even seek that out?
You know, we really didn't.
I wasn't looking for investors.
I wasn't looking to supercharge the business.
I was kind of going for the long game on this and I had a couple of offers to buy the business early on.
What did people offer you?
One was from the competitor, Litter Made.
And if I recall, I think it was a number around 200 ,000 to buy the patents.
And I got the impression that they essentially wanted to just buy it and shut it down and not pursue it.
And it really wasn't attractive to me because I thought it could be way so much more than that in the future, and so I really didn't consider that.
Wow, because they were much bigger than you.
Yeah, they were huge compared to us at the time.
I mean, it's crazy because it doesn't exist anymore.
But they offer you 200 grand and forget it.
And you've already poured all this money into it.
But you were comfortable with a sort of a slow growth model.
You weren't worried at any point that somebody might come in and try and compete with what you were doing like create something that was differentiated enough or they weren't violating any patents?
Well, certainly there was a worry about that but not a strong worry.
And I knew how hard it was to do what we were doing.
And the other thing that I understood too is that with this kind of a product and something that's new like this, you have to have a very strong customer service presence.
And from, from day one, whatever we could provide for customer service, we were doing it.
It was a major pillar of our business and part of the whole process.
So, and I knew that that would be difficult to replicate for somebody trying to come in and compete with us.
I mean, sure. It could have happened, but I just kind of stuck to my guns and I knew what was going to make it work long -term.
How were you doing customer service with six people?
Was everybody answering calls?
Were you answering calls?
Yeah, I was answering calls.
Eventually, I had a person dedicated to answering calls, but I've answered hundreds, if not thousands, of customer service calls over the years.
How were you balancing your life by 2010?
I think 2012 is when you're still selling the Litter Robot 2 and starting to think about maybe the next iteration.
But how are you, again, you're living in Michigan and you're also doing consulting.
You're still running the consulting business, working with European auto parts makers.
Was it just, that was your life?
It was 12, 14 hour days, even 10, 12 years into the business?
Yeah, yeah. It was really a grind for a while, but you know going back to what I said earlier, I'd rather die than not be independent.
So that's what it took to remain independent.
And I had this dream of building a great business around a great product idea.
And if I wanted to do that, I had to keep the other business going.
I think over those years, one of the things I was able to do is compartmentalize things, so I can focus and that's maybe a problem I have is I can focus on something and I won't hear anything else going on around me.
And so the house can be burning down over here and I'm focusing on this to get it done even though this is happening over here.
And I think you had to do some of that during those years where there are a lot of things happening and you just had to, it would be overwhelming if you thought about them all together.
But by breaking them down and focusing on things, knocking them out one at a time, just focusing on it, finishing it going on to the next thing.
Over time, that starts to build some momentum.
Where you can really get in trouble is if you start trying to do too much all at once and you start thinking about all the things you have to do, it can just bury you.
All right, so you're growing slowly, but growing every year, right?
There's growth now for 2005 onward, and it was moderate growth, We're not talking about 100, 200 % growth, maybe 5, 10, 20 % growth year over year?
Yeah, from 2005 through 2010, I think on average about 25 to 30 % per year.
Okay. So, so great.
I mean, it's pretty good.
Can you estimate how many of these things you'd sold by 2010, more than 10 ,000?
By 2010 we had sold probably about 40 to 50 ,000 units.
All right, okay. So that's pretty great, right?
But still you're 10 years in and did you see this in any way as just a multi -million, maybe billion dollar company?
Was that even in the way you thought about the potential for this business?
I definitely thought of it as a multimillion dollar business.
I can remember at the time, the number that we were shooting for, the pie in the sky number was was 20 million.
That's where we wanted to take the business, but that was that was the long shot.
When we come back in just a moment, how Brad takes that long shot number and grows the business 10 times bigger and beyond.
Stay with us, I'm Guy Raz and you're listening to How I Built This.
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Hey, welcome back to How I Built This.
I'm Guy Raz. So it's 2015 and Brad's business, AutoPeds, is doing about $7 .5 million dollars a year.
Not bad, but he knows that in order to grow it, he needs someone who's better at marketing than he is.
So he hires a guy named Jacob Zupke to help.
And you know, I've looked at your website how it looked over many, many years.
And the comparison between what it looked like the year before you brought in Jacob Zabki and then the year after is dramatic.
Yeah I think you know revamping the website was one of the first big steps that we had to take.
We had sort of a retro look to our website prior to that I believe.
Yeah, yeah, it varies like the cartoon of like the Judy Jetson kind of woman on there.
Yeah. Yeah and so it definitely needed some help and you're right I'm not a marketing guy, and the percent of revenue that you have to spend on marketing is usually more than you would imagine.
I think at the time when Jacob came on board, we were spending about 8 % of our revenue on marketing, which I thought was just god awful amount.
Then Jacob was coming to me and saying, Well, can we bump it up to 10?
Can we bump it up to 12?
Can we bump it up to 15?
And every time we did that we were seeing results because we're we're applying it in the right way then in combination with a brand new product that we were launching.
Yeah, the combination of those two at the time really were very impactful for the company.
Yeah, the Little Robot 3 was more sleek.
It looks more like a futuristic kind of product.
And so he was pushing you to spend more on marketing, which is nerve -racking.
But you started, you would see results pretty quickly.
Yeah, I think one of the breakout moments for us was really that Christmas holiday season, and this was kind of a unique idea that the Jacob had, and it was called the 25 Days of Christmas, and what we did is we were sending litter robots to what you would call today as influencers, and every day we would have an event where we would, the influencer would talk about the little robot, how they're using it, and then we would be doing a giveaway as well.
They would talk about it where?
On YouTube, Instagram?
Okay, yep. So they would promote it.
And then we would do a giveaway.
And this proved to be very successful.
I think coming into that promotion, we had about 30 ,000 visitors to our site per month.
And then I think we bumped that up to three over 300 ,000 due to that promotion.
So it's just a huge increase in visitation to our site.
Did that also did you start to just see the growth of the business supercharged within a year or within less time than that?
Yeah, we definitely did.
I mean, we doubled our sales from 2015 to 2016.
Wow. And we maintained profitability, so really started to understand the importance of marketing and doing it the right way, targeted, focused, as well as sort of high funnel marketing, which is bringing people in that are unsure about the product.
And it might take six months, six to nine months to get that person to convert, but you've gotta be spending money on that as well.
You can't just be spending all your money on the conversions.
I'm curious about something.
And I think to this day, they're all designed and assembled in the US.
I think many of the components are made in the US, I'm assuming some of them are imported, but given so much of the component parts, the plastics are made in Wisconsin to this day, was there ever a point, you know, when you're doubling sales, and you're where you were, and somebody approached you, you thought, you know, maybe we should just move all this overseas.
I mean, this is when so much offshoring was happening.
You could have, I imagine just found a factory in China, found a broker, an agent there and and really, increased your margins if you did everything in China.
That's right. There were there was a lot of pressure at the time.
And I remember this even and automotive for automotive suppliers to move a lot of their production offshore.
And we studied this and we found out that what it would cost us to ship the product from overseas to our warehouse is what it would cost us to assemble it locally.
So it was kind of a wash in that regard. And then just having more control over the supply chain where we could be a little bit more just in time with our suppliers being local.
And we had to have a warehouse anyway, for fulfillment.
So it just kind of made sense to be vertically integrated for a lot of reasons.
Yeah, I mean, I wanna go back to your consulting business because I think you stepped down running your consulting business if I'm not mistaken in 2017.
I think it was actually 2019 by.
The last three or four years were a bit slower and kind of winding some things down.
Right. I mean, you were the CEO. When could you start paying yourself more money than you were making as a consultant?
That was probably 2016, 2017.
So, 17 years into the business.
Well, you know, it's a matter of priorities.
I mean, I could have paid myself more, but I opted.
I chose to turn everything back into the business as much as I could.
And you owned, I mean, your dad owned 35%, and you owned the rest. So you had that, but still no outside investors until 2019, the same year you shutter your consulting business, it's amazing, 2019, December of that year an investor comes in Pondera Holdings, they put in $31 million, you kept about 40, 43%, your dad was able to cash out Because he had 35%.
So his initial 35 ,000 probably turned into, if I'm just doing back -of -the -envelope math, maybe 9 million?
8 million? Yeah, it was a bit more than that.
Wow, a bit more or a lot more?
Well, the business at the time was valued at 55 million.
Wow. That 35 ,000? That was one of the greatest investments in modern times.
Yeah, it wasn't too bad.
But through that deal, we were able to get my dad cashed out.
I took a few chips off the table, but nothing was put on the balance sheet of the company.
The company was operating profitably and it didn't need outside funding necessarily.
So just kind of an interesting point to make is that none of those funds were put on the balance sheet of the company.
And just to clarify, too, it wasn't a majority ownership share.
they actually bought 50 % exactly, right of the company and then Jacob and I own the other 50%.
All right, so now but with this new involvement, you guys I think could start to reinvest profits back into the growth of the business right to into you bought like a new building in Auburn Hills and and you could really start to accelerate the manufacturing process.
Bringing on Pondera, our partners, kind of helped us, I would say mature a little bit and having another set of eyes on the business that are looking at it from a purely business standpoint and being a little bit outside of the day to day stuff because when you're in the business, I mean sometimes you don't see some of the things you need to see.
So I think it was helpful to have them as partners and to this day it's been helpful to have them as partners.
And one of the things that they helped us with was to see that the trajectory of the business was going to outgrow the building that we were in.
I mean, we already saw that, but it was more of a fact, it was more around, you know, how big are we gonna go.
And so we ended up adding another 160 ,000 square feet.
And I think that also coincided, that time or after that time, with the latest, the Litter Robot 4.
And also, I mean, now, it's a high -tech product.
It's connected to an app, you can see the cat's weight, you can track their usage, you can track the cleanliness of the whole box.
There's a bunch of things that you can do now.
And I mean, you're not just a Litter Robot company, you're like a data collection, you can collect data on animals, and you'd sell a bunch of other things too.
But that, it seems to me, like the data side really became an important focus.
Yes, it certainly has.
So it's getting even more difficult now because it used to be, just provide a great piece of hardware.
Okay, that's, that's great, but now you have to provide a great piece of hardware and match it with a great digital experience as well.
And also, I mean, I guess it makes sense, right?
You focus on brand and then you focus on product innovation and you expanded what you sell.
It wasn't just these automated litter boxes, but automated feeders.
And then you got into the business of litter, sprays, wipes, you know, all these things, and you did it just in time for COVID, not knowing that would happen, but COVID actually turned into a blessing in disguise for a lot of companies, including yours, because all of a sudden, pet ownership begins to spike during COVID.
It was a very interesting time, there were a lot of things that we had to do to keep keep the lines running.
And I think, if I recall, we were considered an essential business because we provided pet supplies so we could keep our business running.
Sales did dip for a while.
But that was only for maybe a month.
And then after that, they started coming back up again.
And then through the whole pandemic, they just spiked.
It was it was quite a quite a crazy time.
Um, you and of course that I mean, it's, it just to put this into perspective, between 2015 and 2021, the business grew from seven and a half million dollars in revenue to over 150 million in revenue during that time.
So we're talking 25 employees to 300, right?
And and the other thing that's amazing is the vast majority of your sales are direct consumer.
So you don't even have like a retail middle and you have some but it's, it's, you're not dealing with middlemen here, you're able, probably able to maximize your margins.
Yeah, I think I think we were doing about 80%, direct consumer, and international was maybe five to 8%, something like that.
And the rest was, you know, read the small amount of retail that we had at the time.
So yeah, direct consumer is huge part of our business, still is today.
All right, 22 years after launching this business, you decided to step down, a CEO. And Jacob becomes CEO, he's now the CEO of the company.
Tell me a little bit about that decision.
Did you feel like you sort of, I mean you grinded for most of those 22 years, maybe all of them, really.
Did you just feel like I did everything I wanted to do and now I just kind of want to – I don't know – chill out a little bit?
No. It wasn't really about that.
It was recognizing that the business was changing.
My skill set was being able to do a lot of different things fairly well, and wear a lot of different hats in the business.
and that was how I was able to survive for so long without having to hire a lot of people is because I was able to do a lot of different things and kind of fill the gaps and just, you know, do everything.
And I will say that there's probably nothing in the business that I haven't done, including cleaning the toilets.
And when the company gets larger, it's, it's more about building teams. It's more about hiring the right people.
It's not about that one individual person that can do it all.
It's, it's, you know, how do we bring in the right people?
How do we collaborate more effectively?
And I felt like, you know, Jacob really, he really wanted this and he had proven himself as the operations officer.
And I always kind of described him as the glue that kind of held everybody together as we were growing.
And you know, I'm still there, I'm still here today, I'm in my office.
And I'm, you know, I'm still active in product development.
And I still have my opinion about things, you know, that the hills that I need to die on, I'm still going to die on But there's a lot of hills that I used to want to die on that I, you know, it's okay, I'm going to let somebody else figure that out.
So, for me, it was just recognizing that I'm not the guy that probably is the best person to take the business from, you know, 150 million forward. Right.
It's a sensitive question, but I think it's worth asking because a lot of people who listen to the shows, you know, are starting their own businesses, are in the middle of it, the thick of it, and I meet them all the time.
And given what happened and how this business has really become extremely successful, would you have done it the same way?
Would you have, if you could go back and do it again, is there anything you would change or modify?
I think one of the things that maybe we could have done differently is I never actively went out and looked for funding to help accelerate the business.
You know, maybe I could have brought it to the level that it's at now more quickly, especially when there's competition around the corner.
Sometimes speed is important.
You've got to come to market quickly.
And if you're taking your time and you're doing it organically, you can get beat out of the market pretty quickly if you're not careful.
You know, Brad, I can imagine with all the time that you you've had to put into building this business, right?
There was obviously a lot of sacrifice, right?
And I'm thinking Margaret, your wife, she really picked up a lot of the slack when when you were running everything and traveling and not able to be at home.
Yeah, she did. And I, again, I'll say that this would not have been possible without her and and not from the standpoint of, you know, I don't want to give the wrong impression, because she had a full -time job.
I mean she was, she was working.
She's always worked full -time, and on top of that she was, you know, carting the kids around to the various schools and picking up after dance.
And, and I was, I was too when I could, but she definitely filled a lot of the, lot of the gaps while maintaining a professional career herself, and So I have a lot of respect for her and being able to do that and supporting my dream to build this business, because without her, it would have been a lot tougher.
Yeah. When you think about this journey that you took, how crazy it was to start a litter box company when you had this, you know, all this experience in the automotive industry.
and you could really have gone in that direction.
It was such a risk.
It was so... It's this weird idea.
And look what it is today, how much of what happened do you attribute to the grind, the work you put in?
And how much of the success do you think had to do with just luck and timing?
And I don't know, just being there, waiting it out.
When you talk about luck, we've certainly had our share of what I would say, you know, some bad luck things happened, and you know, there's some good luck things that have happened, and I think all those kind of balance out.
The timing part of it, I think, was kind of essential because we kind of grew up with our business during the time that e -commerce was coming into play, and, you know, without e -commerce, this business would not have existed.
And as far as luck is concerned, I think you generate your own luck just from the hard work and trying to do things the right way and good luck follows you when you're trying to do the right thing and you're trying to do what matters versus just hoping that something's going to land in your lap.
That's Brad Baxter, founder of the Litter -Robot and Whisker.
By the way, last year, he had kind of a cool side hustle.
Brad served as the mayor of Bloomfield Hills, Michigan, population around 4 ,500.
The position only lasts a year, so right now Brad is back to his regular side -hustle of being a city commissioner.
And you will pay 60 bucks a year.
Hey, thanks so much for listening to the show this week.
Please make sure to click the follow button on your podcast app so you never miss a new episode of the show.
And sign up for my newsletter at gyroz .com or on Substack.
This episode was produced by Sam Paulson with music composed by Ramtien Perablui.
It was edited by Neva Grant with research help from Carla Estevez.
Our audio engineers were Patrick Murray and Kwesi Lee.
Our production staff also includes Katherine Cipher, Alex Chung, J .C.
Howard, Iman Ma 'ani, Casey Herman, Chris Messini, Kerry Thompson, John Isabella, and Elaine Coates.
I'm Guy Raz and you've been listening to How I Built This.
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I'm David McCloskey, former CIA analyst, turned spy novelist. And I'm Gordon Carrera, national security journalist. And together we're the hosts of The Rest Is Classified, where we bring you brilliant stories from the world of spies.
This week, we're talking about one of the most significant stories of the 21st century, Edward Snowden and how he orchestrated the biggest leak of classified secrets in modern American and British history.
Snowden revealed that the American government was mass -collecting data on its own citizens, and it was really the first time that Americans and so many others around the world understood the extent of the US government's mass surveillance.
That's right, it's a story I covered at the time, and it also really gets to wider questions about what privacy means, how technology has changed our lives, and what the government and companies can do with data we might have thought was private, and we'll take you through the whole story from Snowden's early career in the CIA and the NSA to his life in exile in Russia.
So to hear more search for The Rest Is Classified wherever you get your podcasts.
