Ridge founder Sean Frank on tariff pain for e-commerce, the solo-brand vs. holdco debate, and the Slate Auto truck launch

the wallet salesman here, uh, here to break it down. Talks tariffs. Uh, great to have you on the show, Sean. How you doing, dude? I'm excited to be here. You know, I typically watch at 2x speed and I got like two or three screens going, so you know, I feel I feel uh a little bit ahead of the curve here.

I I think I know what you guys are going to say next. Oh, yeah. That's that. Yeah. What are we going to say next? I mean, you guys are going to compliment my suit, I assume. It's a fantastic suit. It's a fantastic suit. He's got a suit. He's got a suit. He's got a suit. Let's go. Uh, looking great. Looking great.

I uh I want to run through a bunch of stuff. Yeah, there's so much to cover. Uh, how are you doing? First of all, how was the how was the private equity conference at, uh, Jeff? I thought it was a lit a little derivative of the TBPN format.

You said you spent the day talking to 20 uh to 14 different firms, 30 minute meetings, speed dating style. We do 30 minute segments on this show. What's going on? Are you copying us? What's what's happening? Dude, it wasn't me, but uh Venet, the uh senior vice president of Jeff is a huge TBPN fan.

He's like he's like, "Dude, I'm a day one listener. I'm in chat. I stole this from them. Don't tell them about it. " So, okay. Well, maybe we can have a truce then. That's great. He can he can borrow from us. The the the the official creator of the 30 minute segment over here to the end. Uh but yeah, how how was it?

What did you learn? Who' you talk to? Can you break it down for us? Yeah. So, it was a mid-market uh consumer conference. So, to break that down for the audience, I'm sure everyone here knows what that means. There probably a lot of LPs in funds, but mid-market is like a 100 million to uh like 500 million in revenue.

They're typically deploying checks of like 25 to hundred million dollars. Um on the equity side, right? Not obviously not the total round. Uh so so businesses are doing between 100 and 500 million. Is that right? Yeah. Typically that's the valuations that they target, right?

And then their their equity checks in are, you know, 25 to 150 million, something like that. These are smaller private equity funds. They're typically a billion dollars raised and deployed. Um, and this is like the first professional layer for private equity, right? Like small market private equity is very scrappy.

It is like guys who look like us like out there grinding it out trying to find deals where these these people are are professional bankers through and through. So they're they're going to go to good schools. They're going to have, you know, 5 to 10 years in the industry.

Um, and yeah, so like this is not your your mega funds. These people are not deploying $5 billion checks, right? The the fund size will be under $5 billion. Um, and they're very targeted on consumer. So, anything consumer discretionary.

What we've seen is that that segment of the market has been destroyed probably since 2022. It got really really hot in 2021. There was a bunch of spaxs in the space, right? Uh, famously, you have like, you know, Warby Parker, but then you also have Solo stuff that just got delisted on on Monday.

Um, so I mean there's a lot of great smart people and there's people who are on the Solo Stove deal. So Solo got taken public by Summit, but Summit's like a a little bit bigger than a mid-market fund. The first check into Summit was Bertrram. So Bertram Capital, really great firm based in the Bay.

Um, so they found Solo when Solo was doing 60 million in topline, right? They put a check in at like a hundred million valuation. They probably owned 40% of the business, maybe more. and then they sell it to a different fund. So that's typically how midmarket works.

You're going to be selling to a different fund to take them public. Um so Bertram made a ton of money. They sold all of their shares to Summit, right? Um they maybe they had a little bit more that they sold in the IPO. Um but then you know a a larger cap fund is going to take a company public.

So what's happened in the space? They are cold on consumer and the only categories that are interesting for them are services. So, like talked to a lot of funds who are buying like roofing rollups and uh you know they're trying to buy plumbers like that type of [ __ ] like because it's um non-discretionary spend.

If your roof [ __ ] up like you're going to get a new roof and they're but really into the pet space like pet is still really hot. I have a friend Bill who just announced today he sold his company to Morgan Stanley in in the pet space and it's on Twitter. You guys can engage with it. So check out Bill.

He he's crushing it. Yeah, I saw that. He's been grinding for a long time. So, that was great to see. Yeah. Um, it's funny.

Uh, there's there's a guy, uh, who works in in mid-market uh, PE who knew that I was friends, uh, and and and and associates associates with with Sean and he basically would email me once a week for like three years asking asking for an insurance. It's amazing. I want to stay I want to stay on on Solo Stove.

You broke down. Um, what happened? Is it a casualty of tariffs? Is it mismanagement? We've talked about it a little bit before, but can you give us the full postmortem, post NYC suspension, which we hate to see here. We want to see more IPOs, not more D-listings. Yeah. Yeah.

It's it's a lot market activity in the wrong way. Um, so what's happening with Solo? So, there's like the bigger third thing, and actually, I mean, I I'll break some news. I talked to uh the corporate dev buyer at Yeti who was at the conference yesterday and I asked her I'm like, "Oh, so are you going to buy Solo?

" And she's like, "Even if you gave it to me for free, I don't know what I'd do with it. " She's like, "Why is that? Isn't it making like 500 million? We looked in the numbers recently. It seemed like it was like even if revenues are declining, even if there's tariffs, like there are people buying stoves.

There must be a way to make some money out of that company, right? Am I crazy? " Yeah, there's there's a lot of debt. Um Okay. and and people there's there's two main problems. One, it was like the biggest COVID trend of all time, right?

There was there was a two-year period where all of us were uh stuck inside, couldn't travel, we all discovered the great outdoors. They sold a lot of stoves and there's a negative flywheel for that business. If you sell one stove, you're never going to buy a second stove.

Like it actually it removes a buyer from the market. So now it's harder to sell the second stove. So it's a horrible problem with that business. The second is massive tariff risk. They are 100% sourced in China. They are very tight with the manufacturer there. And you just cannot get stoves right now.

So you have a situation where they have their growth solution the past two years has been to go to mass market retail. They're in Costco, they're in, you know, Home Depot, whatever. And then those retailers won't let you raise prices. So you you have a contract to sell it to whatever price.

You're direct importing from China. You have stuff on the water. And now your inventory is essentially toxic, right? Like are you going to they cost 75 bucks to make are you going to give the government $125? Like probably not. So that's rough. Okay.

So uh casualty of tariffs then or mismanagement or I mean we talked about this months ago. Remember we were we were kind of looking and and it at first it was a debt issue and that issue was looming regardless of tariffs happening or not.

It seemed like it was so it seems like this was predictable from day one if you were really cleareyed about that fly that inverse flywheel you mentioned and then also like the co dynamic going how about chubbies though chubbies has to have some some broader if if positive fly you buy one pair of shorts you like them you buy more and then you're replacing those shorts every year right yeah look and I love all these guys so uh Kyle the founder of Chubbies is awesome he's building a software product won't plug them they they got to pay for that But um really really smart founder.

Uh and Chubbies is a good business. Like Chubbies does $100 million a year topwide. They do $10 million in IBIDA. Like that business is worth something to somebody. But uh John Maris was the CEO of of Solo. And his idea to solve the negative flywheel was to bolt-on acquisitions.

He's like, I'm going to, you know, I'll I'll fix my companywide LTV by having solo customers buy chubby shorts. And that just didn't happen, right? Like they they could never integrate it. It because somebody likes the outdoors doesn't make them more likely to be a Chubbies customer, right?

Now, it would make more sense if Chubbies, I don't know, started selling beer pong equipment or something, right?

Like there there could be some sort of like, you know, positive flywheel there, but their solution was to broaden uh the overall product offering with just like very distinct businesses that have no cross-sellability. So, yeah.

Can you talk about uh I I people have this idea that oh I'm gonna like I feel like everybody's in love with the idea of a consumer product holding company because like people just like consumer goods and they're like oh we have we're good at selling this we'll be good at selling that but then when you when I you know understanding you know the your focus and Connor's focus over the last you know coming up on a decade uh in not too long uh the idea that somebody could compete in the wallet space with you guys while being part-time is just like insane, right?

Uh because you guys are best in the world at what you do and you're just able to put more time into it than anyone else. Um is the idea I is the consumer product holding company model just like generally flawed?

Is it is it not something that people should be going after or is it just more about actually having like distinct businesses and ultra competent management in place in in each of them? So it's just really fallen out of vogue, right?

So very famously in the past two weeks, Hermes became the largest most valuable uh company in the in the consumer space, right? They're worth 300 whatever billion and they surpassed LVMH. So LVMH is the hold co model, right?

And that was the like everyone wanted to be a hold co because LVMH was and then curing became a holdco, right? They have Gucci, they have a bunch of assets. Well, Gucci just put out their earnings. They're down 25% year-over-year. that came out on Monday, right?

So, like the whole co model is just falling out of favor in favor of Hermes, single standalone band, super valuable. Uh Lululemon set the trend. Lululemon is worth more than Honda. So, Lululemon makes awesome leggings that we all love. They trade more than the best car company or one of the best car companies.

And then on Running is also I broke this trend, right? So, OnRunning is worth $10 billion today. Single brand just making shoes. So right now the markets are valuing beautiful brand, super clean focus, owning a category. That'll change again, right? Someone there's really great holds out there.

Um, you know, the people behind uh Crocs, Crocs owns Hey Dude, they're becoming a great hold. Uh, Deckers is another shoe company. Um, they're crushing it in the hold space.

But isn't there something about even the way that LVMH has approached their hold co which is like we we never share kind of creative resources across brands like there's very distinct kind of like firewalls in place uh is there something to that is that what you think you know is does Decker sort of benefit from scale as just being like a massive shoe manufacturer and then it's like when it when it comes to the kind of individual brand level like let's just make sure that people are ultra focused on on the sort of uh the the purity of the brand and sort of scaling that.

What I think LVMH does beautifully, LVMH calls them houses, right? So they're houses, but they're in the same neighborhood, right? Um and what they're able to do is they have El Caterton, which is like they're picking up B like imagine this is like uh basketball. There's like amazing high school players, right?

El Caterton is signing those high school players. El Caterton is their private equity arm, very much owned and controlled by the Arno family. Um So, you know, Chrome Hearts is the the greatest American accessory brand that's in the LCAN portfolio.

At some point, they get called up to the major leagues and then they get integrated into LVMH. And then LVMH has the spotlight light approach. So, of course, Louis Vuitton is always going to be the the best branded in the spotlight.

But when there's a challenger like Off-White, they can put that in the spotlight for a little bit and then that becomes their star player and they cycle out to somebody else. They just got caught flatfooted that they don't have a good star player right now. So like that's the challenge with LVMH.

Curing tried to do that, right? Richmont is the other big uh holdco in the European fashion space. Richmont's crushing it because they own Van Clee and they own Cardier. Those brands are very very hot right now. So LVMH is trying to take over Richmont because they want to be in the spotlight.

So that is the inside baseball, the inside basketball if you will of the luxury space. You need to have recruits and you need to have a star player you can cycle out. And LVMH just doesn't have a hot brand right now. I I I I like this idea of the pure play.

You know, it aligns with like the founder mode, the life's work entrepreneur, just not getting too scatterbrained and focusing on one thing. Um what is the post-mortem on some of the pure play companies in the fashion space that weren't able to reach escape velocity?

I'm thinking of uh All Birds and a few other brands in that space.

Is it is it just uh doing too much too early or or is it just like missing some fundamental insight or is it more of like a market segment and this maybe works in the high-end luxury market but it doesn't work when you're more uh in that $100 range competing directly with Nike? What what's your take on that?

Well, you can't be cool forever. So, that's that's like that's the biggest challenge. Mhm. Allirds was really cool, but San Francisco famously horribly dressed people, right? They have they have no sense of fashion. Why do we think they're going to tell us what's cool, right?

Um, and they were betting on a sustainability wave, right? So, like Nike is able to like they just benefited from people caring about athleticism, right? That was that took them from a billion dollar stock in the 80s to 180 billion today or whatever, right? But they were caught flatfooted by wellness, right?

And that and effectively Nike was the brand for sports enthusiasts, everything from fans to athletes. But then wellness kind of came out of nowhere, took the Alo, you know, the the Aloe crowd went over there on running in many in many ways. Lululemon obviously. Um, so it seems like Nike missed the wellness trend.

Uh, and that was again probably the biggest miss. Yeah. What's your take? Well, and their stock suffered for it, right? I mean, like Nike is down massively from all-time highs. They're down from their 5year mark and it's because they missed that trend and and they didn't pivot in fast enough.

Uh, the other thing that's happening is that's happening in beauty right now. So, if you go to Sephora, you're either a celebrity brand or you're a wellness brand. That's all the newness going into Sephora. So Sephora and beauty in general is going through this wellness craze right now as well.

Like skinc care is taking over everything. Um so we're going to watch more of those waves happen. Consumer trends change over time. You can't be cool forever. So the whole thing like and this is the biggest problem with venture capital coming into the consumer space.

Coca-Cola is the most popular drink in America and it doesn't even have 20% market share because people like different drinks right now. Uber is a service that is just great for everybody. They'll have 100% of like the the ride healing market, right? Google, it's just the best. So, I'm going to Google everything.

There's no second player in consumer taste. Power law outcomes. There's no monopoly outcomes. They're just inherently igopolistic markets. Interesting. So, uh, if you if you go back to the founders who do they focus on the pure plays. Well, I have a good I have a good example and something you brought up before.

I mean, Chromehearts, uh, I was about to ask needs to be studied and and one of the reasons why, you know, right now it's like they've never been they've never been hotter, but they've gone through periods where they certainly weren't nearly as hot. Uh, and I'm curious what you think they've done, right?

I think to my knowledge they've stayed mostly familyowned or certainly majority familyowned and is that do you think allowed them to kind of like ride different waves and and not uh if at any point they were overly fixated on just pure scale you know maybe they would have um not been able to kind of come back in the way that they have but I'm curious what your take is.

Yeah. I mean, the creative minds behind Chrome Hearts, they're artists. They're going to do what they're going to do with or with with or without you. If you think it's cool, if you don't think it's cool, like Sher was wearing Chrome Hearts in the 90s, bro. Like, they're owned by the Sinatra family.

Like, they're going to do what they're going to do. And it it'll come in and out of Oak, but they don't care, right? So, that that that's true authenticism. Like, they've never chased revenue. Like, they'll make pants that are like $112,000 because that's what they want. That's what they choose to do that day.

And then you know who buys him? Drake. It's like, well, I've heard they I've heard they they basically mo they'll mog Drake, too. They'll be like, Drake, like Drake will be like, I want some new pants. And they'll be like, cool. Like, get in line. Like other people want the pants, too.

And then Drake has to like, you know, try to cozy up with the, you know, the SA. Uh, but that's hilarious. Yeah. So, it's it's just like a commitment to the craft that like I mean this is the reason why the Europeans are so good at fashion is because they will do it for 50 years making no [ __ ] money, right?

Or Goryard. Goryard's another like amazing brand. They just don't have a website. You can't buy on their website. Now, it'd be awesome. They would make way more money and if private equity owned them, they would open a website immediately. But then they're like, "No, we want you to remember where you bought the bag.

That's important to us. " So like you have to go wait in line and you have to you can only buy what we have that day and it just creates like a very personal relationship with the products that is people are longing for in the internet age. So yeah the Europeans are the best at this.

I talk a lot of [ __ ] about Europe but they do have this figured out. Yeah. Uh I want to go to tariffs. Uh I saw a viral thread yesterday by Ramon Vanmir. Uh, he says, "Everyone says they'd pay more for made in the USA. I tested it. We make a $129 filtered shower head manufactured in China with tariffs surging to 170%.

We explored reshoring. We found a US supplier. Our costs nearly tripled. I ran a clean AB test. You had two options. There were 25,000 users that did this. The exact same landing page. You can choose made in China for $129 or made in the USA for $239. And they had zero conversions on the US version.

The add to cart rate for the US version was less than 1% and over 3,500 uh 3,500 people bought the Asiaade version. What how did you process that news? There's some community notes on it. I want to know what you think. Yeah, I think overall it was flawed experiment but uh it's a good story. But what do you got?

viral post. Yeah, we've seen this play out with sustainability, right? So people people had two options on their website like sustainable packaging and we'll buy carbon credits versus not and like people won't pay more than 5% for that.

So it ends up being the there's tons of cheap goods in the marketplace and there's tons of substitute goods in the marketplace and what you need you need value props to stand out. So like Ridge has you know best materials, we have a great warranty, we have a tons of reviews, we have social proof.

These are just value props. Made in the USA can or cannot be a value prop, right? And if he ran that experiment with a Japanese audience, what you'd see is the Japanese audience is more willing to pay for made in America goods. And if you go to Japan, there's entire stores built around made in the USA, right?

If you go to Dubai, it's the same thing. Let's hear it for the Japanese showing some love for the Americans. Um, yeah. Yeah. And so, and so paint me a broader picture about how the tariffs are affecting e-commerce. Um, is it a blood bath? Are people figuring out ways around it?

Is it is it going to put companies out of business? Are people going to lose jobs? Uh, with So, without a doubt, it's the most challenging self-imposed regulation we've ever seen, right? Like we went through COVID, that was hard for a lot of reasons. That that was external forces, right? We went through iOS 14.

We're we're peeons in that. We have no idea. We can't control that. Consumer demand has been up and down for [ __ ] years at this point. Um, I have a lot of friends who will go out of business because of the tariffs, right? And a lot of people on the internet, you know, are celebrating that.

They're like, well, [ __ ] them for buying from for China. But here's the thing. A year ago, it was encouraged. It's like, it's very hard to actually produce things in America. I've tried for years. I've put millions of dollars into it.

So like the government basically gave you a free pass to to you know buy international goods and then import them and then all of a sudden it's it's became very very difficult to get anything in from China. And I don't think small independent businesses should suffer for that. I've publicly appealed to JD Vance.

I'm like look I totally get you want to incentivize made in the USA stuff. Like don't just steal our money in like a massive tax. I have [ __ ] on the water. You're just making me give you money. like this is the government getting more revenue and getting bigger.

Let's put it into a fund where if if like I owe you that money unless I invest in American business. Yeah, I thought this I thought this was a really good take and a and a really good kind of concept especially too kind of basically extending out the timelines.

Uh the policy as it stands today is just like pure pain now like you're you're being like you know punished uh versus what you laid out. So maybe extrapolate on that a little bit. Yeah, like look, I mean I I understand the goals and this this is hurting China more than America.

Like I think I think people in America are whining and complaining because like TN shipments or or T-Mu shipments are more expensive. I'm like look, I do business in China. I talk to Chinese people. Factories are shutting down and you have youth unemployment of 25% in China.

Like it's going to hurt them way harder, way faster. We'll feel it in 30, 60, 90 days when [ __ ] in Walmart gets more expensive. They're feeling it right now, right? And there is there is ports that are just shut down and and it's it hasn't been good in China for like five years.

Like it's been a very difficult economic uh you know situation over there. So it will hurt them way more. But the flip side is we don't want to also bankrupt a bunch of American businesses, right? Like what we want to do is incentivize them to either nearshore or onshore production capacity.

That takes three to five years and takes millions of dollars. So look, charge me tariffs, but give me an ounce. If I take that money and I bring it to American manufacturing and I hire workers and I open factories, I don't have to give you the money, right?

So it's like a onetoone duty deferral to incentivize US investment. I mean, do you guys want the government to get more money or do you guys want [ __ ] more investment and factories built or whatever? Right. So that's that's my pitch to everybody. Makes sense. Um, I want to get your reaction to this Slate Auto launch.

Uh, have you seen this truck? Uh, TJ Parker was talking about it. Finally, someone built a simple, cheap, utilitarian truck, 20K, made in the USA, no touchscreen. Uh, lots of people are talking about it. Did you see the launch? Did you watch the video? Hell yeah, man. That guy's been working on it for a long time.

I think he's been documenting on YouTube. So, hell yeah, brother. I love to see that. Uh, and I was in China a year ago and I was at a big like electric vehicle uh, like you know, potentially sales summit.

Like they have 50, 100 brands all competing to sell little tiny electric vehicles and those actually can't pass US safety standards. So they're only sold to Africa. So it was me and a bunch of African buyers walking around and like you know they sell for 5 10 15 grand or whatever.

Now, if he can actually hit American safety standards and ship a $25,000 truck, I mean, this guy's I mean, he'll he'll he'll do10 billion dollars the first year, maybe more, right? Like, it's a sales gong. Let's do it. What do we got? Oh. Oh, the sound effects board is down. Brutal for a founder in founder mode.

I I I want to talk about the ad. People were very happy with that. Dynamic first second, clear initial framing in the first 5 seconds. Curiosity gap in the first 8 seconds.

frunk disarming anti-ad humor founder CEO curiosity gap uh in term you you obviously make a lot of ads you buy a lot of ads um what did you think of the actual launch video look people are saying inside that frunk there's actually ridge carryons so I'm not going to confirm or deny but there could be a cameo from ridge carryons I did see that yep those are trunks I love to see it I love to see it fantastic yeah how do you uh what what would your uh complete guess on what their what their margin profile could look like on a $20,000 made in America truck.

I know the $20,000 is like allegedly due to some EV incentives. Uh but but ultimately uh what how much are they actually going to make on on something like that? Yeah. So I think I think they said it's 27,000 and then you get a $7,000 credit if you buy an EV from a new manufacturer.

I think they're going to lose about three grand for the first million of them they make. And that's just how auto manufacturing works, right? Like the cost to set them up. You have all these [ __ ] machines. You have to depreciate them over time. Rivian still loses $20,000 on every Rivian they sell.

So it's it's a different model to higher price point, right? Um they're going to lose three to 10 grand for for each one they sell. But and and if you guys ever say to the auto market, the amazing thing about Tesla is every car manufacturer loses money on every car they sell.

They only make money off of the the parts and repairs. Tesla found out a way to not do that, right? Tesla found out a way to actually turn a profit on on the actual purchase of vehicles. Ferrari makes $80,000 per car they sell. Tesla makes I don't know, I think it's like it's like five grand or whatever.

Every other car manufacturer breaks even or loses money on the actual purchase of the vehicle. It's all about financing. It's all about parts. It's all about service. So, I it'd be it'd be crazy to think they're making any money on these things, but the demand shows that like they could make money over time.

I think they'll have trouble because if you have $20,000 burning your uh burning a hole in your pocket, you could get 200 Ridge wallets or something, right? That's true. So, I mean, it's like a trade-off. 200 Ridge wallets or a little truck. Yeah. You could buy every product on the Ridge website. Uh, for sure.

Well, yeah. It's an interesting dynamic where it's like he has to show so much demand that he can justify, you know, potentially raising lots of money 5 to10 billion dollars over time in order to just like actually get these to scale. But uh I think the thing looks awesome and uh also interesting is also in Rivian Bzos.

I'm surprised. I'm actually surprised they didn't go with a slightly higher reservation price point just given the history of Tesla charging 100 bucks. What is the reservation? It's 50 bucks. 50 bucks.

Um Tesla charged 100 bucks, you know, had this big demand signal and then obviously not many people showed up for a lot of people didn't show up. It's expensive. It's a much different price point. Yeah.

And I think this is a car that people would just buy as like I I would just get one and park it outside of my house and maybe do coffee runs in it, go surfing. I would put the $20,000 deposit down today. Like if they if they made Skip the Line, give us 20 grand today, I would totally do it.

Well, I would do it if they put a naturally aspirated V8 in it. I don't know about the electric stuff, but um I would I would be very pro this vehicle. If it had a really loud exhaust note, it was kind of like a more affordable Raptor. That's what I'm looking for. Yeah, man.

Well, you know, today I'll publicly announce if you buy a Slate, I'll have a partnership with them. Free Ridge wallets for every slight customer. We can get one to one. There you go. Let's go. And thank you for coming on. Hey, I've got this. It's great to have you, Sean. Awesome. We'll talk to you soon. I love you.

You're looking great in the suit. Don't take it off after this call. I'm gonna We're gonna we're gonna have our paparazzi, you know, outside your house confirming, "Oh, Sean Frank just puts on a suit to go on TBPN. Make it a part of your brand. " Okay, dude. It's custom, too.

So, you guys didn't even ask, but this is custom. All right, see you guys later. Made in USA, too. Bye. Later. Thank you. That was fantastic. Always a great time having Sean on the show. Sean is my favorite salesman. He's one of my favorite wallet salesman. He's up there with the best wallet in the world.

Next up, we got Seml Shaw coming in from Haystack. Seml, welcome to the show. Good to have you here. How are you doing? Doing great. I'm really excited about this because you're uh I've had like a hundred friends tell me that they