Ismail Salhi and Johanna Hartzheim, co-founders of Qleek, have been through the wringer. They first pitched their company on our show in 2017, when an investment from a listener helped bring them back from the brink. Today we hear the rest of the story. Ismail shares the not-so-happy ending of Qleek and what it's like to pick up the pieces and try again.
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Ismail Salhi: Nothing could take away our success, except there was a thing and that thing was completely unexpected and it wasn't investors. It wasn't other people. It was something else.
Today on The Pitch, a postmortem. And a comeback. This is a story you don’t usually hear, because frankly nobody wants to talk about it. What happens when your business fails? And what’s it like to pick up the pieces and try again.
It all started in 2017, episode 16 of The Pitch. Longtime listeners will remember these founders.
Jillian Manus: What are your names?
Ismail: My name is Ismail
Johanna Hartzheim: And I’m Johanna
Johanna: And we’re the founders of Qleek
The pitch they gave on our show… was for these little wooden collectible hexagons that made gifting music a thing again. They were trying to marry the convenience of streaming with the nostalgia of vinyl.
Ismail: If you want to gift something to someone, any content, a podcast that you like, a playlist that you love, an artist that you really like, there’s no way to do it. You can only buy a CD, or you can buy a gift card.
Daniel Gulatil: It’s kind of a better iTunes gift card.
Ismail: It’s a mix between iTunes, a gift card and a record.
Phil Nadel: So if people can play it from the app, why do you need that player?
Johanna: It’s either/or.
The investors… didn’t get Qleek. They were making generalized statements about millennials…
Jillian: One of the mentalities of millennials is that they don't want to have things. They're trying to get rid of their things. So they're investing more in experiences. Everybody knows that
Then they couldn't pronounce the name right.
Jillian: And your company is Click?
Ismail and Johanna left the pitch room without any funding. But then, their episode goes live… Reception from listeners was very polarized. People either thought it was the dumbest idea ever. Or they were like, holy crap I need this in my life get me a Qleek right now.
One listener in particular, Matteo Terrevazzi, heard their episode and said, not only do I want a Qleek, I like this so much that I want to invest. So he emails his friends and said
Matteo Terrevazzi: stop investing in bitcoins, invest in the future of the CD
Matteo ended up running a syndicate and he and his friends invested over 50k in the company. That’s episode 27, if you want to hear that story. Matteo’s syndicate, plus a couple hundred thousand they got from Bose brought Qleek back from the brink.
And in the midst of all of that, we found out Ismail and Johanna fell in love and got married.
Ismail: Johanna and I were like, you know what, let's get drunk and go dancing. And so we did it. And so we were the only ones dancing on the dance floor. And the rest is history I guess.
Here we are 6 years later. We called up Ismail to find out how they went from a fresh $250k in funding to… shutting down the company. And then, what it looked like to pick up the breadcrumbs and start again. That’s coming up right after this.
Welcome back. When we last heard from Ismail and Johanna it was early 2018. They had raised enough money to give Qleek a second chance. and get a new run of Qleek players made. Which if you remember, that’s what actually plugged into the stereo and played your Qleek. Like a record player, but digital. And the players…needed to be assembled. Which they did themselves.
Ismail: We were literally in a sm- in, we called it “room” in Paris. We didn't have much money. We were completely broke. And so we were in a room as big as this studio. It's a very small room. We slept in it, we ate in it, and we assembled the players and, and the Qleeks in it. And it was insane. It was just insane to just like, we had a sanding machine and we had this like epoxy glue in there. It was probably, we lost a bunch of years of our lives just doing that, but we were obsessed with getting the product out and so we made it happen just by like staying up at night and assembling the Qleeks, assembling the players, and then shipping them to other customers.
Josh: That sounds stressful.
Ismail: Yes. I mean, the stress wasn't, it was just like it was a race. It wasn't, you know, it was stressful. Like you're racing, not like you're panicking.
And then in 2019 Apple opens up NFC on the iPhone. NFC’s the technology that allows you to pay directly from your phone with just a tap. Apple made it available for developers to use NFC on their own apps.
Ismail and Johanna had been waiting for this moment. Their little hexagon shaped Qleeks were built on NFC technology. So now customers could play their favorite album, podcast, or audiobook by just tapping their iPhone on a Qleek.
Ismail: And that was a game changer and forced us to pivot. We didn't need to invest that much time and money in the player. We just needed to focus on the great phone experience with the Qleeks. What we were building with this new technology for the Qleeks was really a whole system to manage your content as an artist, as a podcaster, as a musician, to push content to, to the Qleeks over time.
Josh: I mean, I'm sure you could have integrated with the blockchain and NFTs like this is, this is where this is going.
Josh: Did it take off? Did it work?
Ismail: It started, yeah. We got Amazon, Audible was buying our stuff. We got Tidal to buy our stuff.
Josh: No way.
Ismail: We worked with hotels. We worked with sports venues, we worked with music venues. We worked with event planners.
Josh: That's huge.
Ismail: Yeah. We were about to launch a $200,000 project with a major rapper in the US. and he wanted to use our technology to put them in their apparel. And then you could scan basically the hoodie or, or the hat. Or the hat or whatever
Josh: You were gonna put Qleeks, like NFC technology in clothes?
Ismail: Yeah. Mm-hmm.
Josh: And what did it say on the shirt? Did it say like, tap your phone here.
Ismail: Yes. Yeah, exactly. We built the whole technology. We had stickers, we had even tags, you know, clothing tags that had our NFC things in them, and you can program thousands and millions of them remotely.
Josh: Oh, interesting
Ismail: Yeah. We built a crazy platform. It was huge. It was awesome. It was working. It was just starting to happen. We, it felt good. And we didn't even have a salesperson or anybody. We were just getting deals organically like that by just literally like sending messages on LinkedIn to people. We kept, I mean, we kept at it. We were still broke, we were still underfunded. You know, we raised maybe a total of 2 million in like four years, which is nothing in hardware. You can't imagine how many pitch meetings that went into.
Josh: If you had to take a guess, how many?
Ismail: Probably like 150.
Josh: Oh wow.
Ismail: Yeah. Yeah. And all of them, like 99% said no.
Josh: Despite the traction with tidal?
Josh: With Amazon? Like these are big, these are big names that tend to draw in investors when you can say, they're signed up, they're using our technology. Then you've got that marketing and sales piece already solved because of the partnerships you are forging
Josh: Well, but that didn't make a difference?
Ismail: It didn't. We were kind of in that weird phase post hardware where hardware has crashed, so nobody wanted to invest in hardware, and NFTs and, and blockchain was not taking off yet. It was just in between.
Without additional funding from investors, Ismail and Johanna had to get super scrappy to keep Qleek alive.
Ismail: Our baby was about to be born. I am doing consulting for like 10 different companies. It's killing me trying to run a company and do consulting work. Our third co-founder couldn't keep working with us full-time because we didn't have money anymore. And then, but guess what?
Ismail: We were working with music events, sports. So anything that was happening in crowds outside or indoors.
Josh: Oh, freaking A, another story about covid. Damn it.
Ismail: Yeah. It hit China first. So all our supply chain was dead and we were struggling to fulfill orders for our customers. And then once we fixed that, cuz we found some suppliers here in the US. Well, guess what happened?
Josh: The US closed down.
Ismail: Yeah. And then all our customers stopped ordering and we didn't have money and nobody would invest at that point.
Josh: Did you ever go back to your investors and say, will you invest more in us?
Ismail: No, no I, I, it was, it was kind, it felt wrong to ask for more money because we didn't know what was about to happen. I mean, our entire business was gone. There was no customers for us. Yeah, I don't think it would've been fair to ask for more money.
Josh: What was the moment when you realized Qleek wasn't gonna make it?
Ismail: I guess, the real moment where we had to stop was when Covid hit the US and we had to really pull the plug and it was kind of like, okay, we can't keep sustainably doing this. It was, you know, it's like you're drowning. It's your last efforts, and there is just like a shoreline here where you can just walk away
Ismail: We need to like, get our act together. And now it's, there's a family and it's, it can't be just me and Johanna eating Ramen and like every night. And so we started to think about telling the investors that this is not gonna work.
Josh: What was it like watching the thing you’d poured so much into with you and your partner? Like what was it like watching the thing slowly die?
Ismail: It was painful, it was very painful. It was, you know, years of our lives, like a lot of blood, sweat, and tears. And it was a beautiful thing. Like it is a legitimately a good product. And knowing what happened in blockchain after that, I was just like, this is a joke.
Ismail: The universe is making fun of us, like if we would have survived Covid or if Covid didn't happen, NFT thing would've happened and then we would've raised so much money with that platform.
Josh: You think so?
Ismail: Oh yeah. We had a head start on everybody. On NFT.
Josh: Do you think it was a failure of execution on your part, or do you really think it was Covid?
Ismail: No. Absolutely not. I'm still extremely proud. I see other companies and how the pace at, at which they move. We were moving fast and we were building pretty cool things. Like I could show you the platform today. Three years later and it's, it will blow your mind. We were three people, we built an Android app, an iPhone app. We built a backend entirely to manage these things and we built a whole supply chain to do this, and just three people.
Josh: That is incredible.
Ismail: So I don't think it was a failure of execution at any point. It was just bad luck.
Josh: How did you tell your investors that you were shutting down Qleek?
Ismail: I called Matteo. I felt the worst for the Matteo syndicate because it was not a fund, it was actual money from actual people, personal money.
Josh: You knew these people
Ismail: yeah, and I knew them, and I was talking to them every couple of weeks. Matteo was so excited but it just, yeah. Couldn't work. And he was understanding, same thing, a bit disappointed because he knew we had potential.
Ismail: But he didn't push back or anything. He was very understanding and, you know, understood the risks and understood the situation. This guy Axel was the first investor who invested in Qleek. I went to his office. And told him, hey, listen, we can't do this anymore. And I remember him telling us, I'm surprised you guys made it this far. Like most people would've abandoned a lot earlier than this. Let me know what your next thing is. We loved watching you do this.
Ismail: Yeah, I was surprised too because I, I thought like, I just failed this guy.
Josh: Yeah. Did you ever think you would start another company?
Josh: You thought you would just keep doing consulting?
Ismail: No. No. God, no.
Ismail: No. No, no, I was lost when I was doing the consulting work, I was lost. And also I wanted to work with Johanna. That was the thing, that was the saddest part, honestly, of the entire Qleek thing was just, we weren't working together and it felt wrong.
Josh: Wow. That is really special. Like, I don't know how else to describe it. That sounds really unique.
Ismail: I remember sitting with Johanna and like, dude, we gotta, we gotta do something together. You can't be like working at a design thing with coworkers, and me with other coworkers and like, reporting to other people and not doing our own thing. Like, we work so well together, we gotta do it again.
Ismail: But the trauma of Qleek made me think if I have to start a new business, it has to be completely or very, very independent from VC funding. That we could try it and if it fails, we'll know it quickly, but if it succeeds, it can fund itself.
Ismail: Without external, additional external money. We were playing with this idea of launching an e-commerce subscription business.
Josh: Let me make sure I'm getting this right, what I know about subscription boxes is. Really hard to make work. Like the economics of acquiring a new customer and the amount of churn that you get, it's really hard. Gosh, what are the ones that poured hundreds of millions into marketing and still the business is struggling? HelloFresh.
Ismail: Yeah. Like Blue Apron
Josh: Yeah. But you saw that and said, no, that's what I want to do. I want to do that.
Ismail: So here's where our other mentor came into the picture. We, this guy Mike, Mike Salguero, launched Butcher Box in from Boston without external money
Josh: Butcher Box. I've heard of it
Ismail: But it's a huge business now. It's a subscription box for grass fed beef. And they were extremely successful and laser focused on profitability, and a different way of managing your cash than the Blue Aprons of the world. And the other highly VC backed companies. And their strategy was, you know, you grow as much as you can afford to grow.
Ismail: And we started bouncing off ideas. A lot of them were very stupid. And then one day Johanna was in Germany. And I was hiking with a friend and she sent me a text of a loaf of bread that she, that she just baked, a sourdough loaf of bread with a friend. And I looked at my friend on the hike and I was like, this is it. This is what we need to do. It's a commodity that people love. It's the oldest product on earth. Literally
Josh: The oldest product on Earth
Ismail: It's one of the first things we've done as a civilization was to just make sourdough bread. Think about it like, people eat bread a lot. People who eat bread eat it regularly. So there is frequency there and there is a case for subscription. It's hard to find good bread in the US. We know it because we came from Europe where bread is a lot better. And I lived in Paris for 10 years
Josh: Uh huh. Yes, I'm super jealous of European bread
Ismail: [laughs] A warm, fresh loaf of bread tastes exponentially better than the same loaf three hours later.
Josh: So you kind of had this idea baking in the oven for a little while.
Josh: When did you decide to pull this idea out of the oven?
Ismail: I was like, okay, let's try to send dough to people and they bake it and see what they think. And so we started sending, like raw dough sourdough to, to people, friends in New York City. And we would just test if it ships well to Chicago and see if it like it can arrive and it was not working. We would freeze it, we would ship it with dry ice.
Josh: But that still didn't work.
Ismail: That still didn't work because freezing kills the bacteria that are in the yeast and the, the sourdough.
Josh: Yeah. I guess that's a problem when you're making sourdough.
Ismail: Yeah. And so we kind of said, all right, this is not working. And then one day, I don't even remember if it was my idea or her idea, we would Bake the loaf until it fully risen and then stop the bake, put it straight in the freezer, and then two days later pull it out and finish the bake. So it's baked around 75%. and then finish the 25% in the oven. It just develops the crust. The loaf is a little whitish still.
Josh: Oh, and then it just gets golden brown then.
Ismail: Exactly. And it, it didn't change anything. It was perfect. The taste was amazing. The house smelled like fresh bread.
Josh: Hmm. I love that smell.
Ismail: And who doesn't? It's wired in us. And then we moved into pastries as well, and we started realizing, oh, you could have like, what about fresh croissants? That was the holy grail was the, a fresh croissant baked at home.
Ismail: because they were very hard to make. I mean, it's the best thing you can eat in a morning when you wake up with a coffee. There's nothing that could beat that.
Ismail and Johanna slowly worked on this idea, on nights and weekends, coming up with more recipes for fresh pasta…biscuits…. More pastries…. They also named their company. At first they called it gluten box, but eventually they settled on Wildgrain.
Months later, they were ready to go back and pitch their first investor in Qleek, Axel at Bolt Ventures.
Ismail: And so when we were ready, we went on and took a bunch of loaves of breads, some butter, a pitch deck, an operating plan, and pitched him and his team.
Josh: If you show up in my office with a bunch of bread and croissants, I’m giving you money.
Ismail: Yeah, they were very, they were just like eating and like, I can't believe, because we got it warm to the pitch meeting and they were like, I can't believe how good this is.
Ismail: If you can replicate this, this is great.
Josh: What did that pitch sound like? Do you remember what you said?
Ismail: Yeah. We want to become America's online bakery. The idea is healthy, clean carbs delivered to your door, that you can bake in less than 30 minutes, and you know, have them on your table warm for your family, your friends, yourself.
Josh: So what was his pushback? Do you remember?
Ismail: there was no pushback. They were like, we're excited about this. It makes sense. We wonder if the market is as big as you say it is. So they did their own due diligence and found out that it is.
Josh: How much, how much did they invest?
Josh: Oh, wow. That's a, that's a big first check.
Ismail: Yeah. Very different from our first big check at Qleek, which was 50 grand.
Josh: What did you do?
Ismail: like, oh, she was laying in bed with the baby and I was just having my, my desk in the bedroom with the baby. Working in that apartment in Boston, and I started jumping around like a madman, because it was the, that's the news that I wanted. Like Johanna and I are gonna work on a new thing.
Ismail: It wasn't the money. It was, it was just like, all right, we're safe. Yeah. We're gonna work together again and we're going to do this.
Josh: So this is still 2020
Ismail: This was beginning of 2020, I think it was February or March. End of February or March.
Josh: Oh, got it. Just before. So I mean you made that pitch just in time. .
Ismail: Yeah, just in time.
Ismail: We just had our first baby and incorporated WildGrain the same week our baby was born.
Josh: I guess after that maybe there's even more of a case for Bread sold on the internet because people aren't going shopping as much, people aren't leaving their homes.
Ismail: Yeah. And if you remember, well there was no flour anymore in the supermarkets and there was nothing. And so we just got the money in, and my, this friend who is an advisor is like, Hey, you gotta go out and buy all the flour you can find, otherwise you guys won't be able to launch. And so we transform our baby room into a storage room full of like 25 pound bags of flour.
Josh: Of course you did.
Ismail: and you know, nuts and eggs and it was insane. And so the baby was sleeping with us. We had a commercial kitchen that we would go to every morning, so nobody on the highway cuz it was covid. It was the only commercial kitchen that was still open. We would walk in and Johanna would make 500 croissants, still nursing. I'm making the pasta, the bread, and then we walk back home exhausted, pass out and start again. And that was so crazy.
Josh: So tell me like when. When the orders started rolling in for fresh baked bread, what was that like? Like how many orders were coming in?
Ismail: The beginning was very small in retrospect, but seemed huge for us. We were shipping hundreds of boxes a month, and then we started shipping thousands of boxes a month. We couldn't sustain the demand and we couldn't hire people to come in.
Ismail: because it was Covid and there was lockdown.
Ismail: We started reaching out to bakeries who lost a ton of business because of Covid, because they were making bread for hotels, you know, restaurants. All their wholesale business kind of fell by a lot. And we started pitching them the idea, and a lot of them told us, Hey, That will never work. Par baked is not a thing and they never heard of it.
Josh: Wait, you just started pitching them the idea of basically being a supplier of yours, right?
Ismail: Yeah. We would teach them the recipes, teach them the process of par baking and then sending them reefer trucks and taking the bread from them.
Josh: And they were like, no, you can't freeze bread when it's halfway baked.
Ismail: Yeah. You know, it's a craft thing. Like a lot of the bakers control every single thing, and I respect that. But a few of them believed in us and started supporting us. And so we started partnering with bakeries across the US and now we have more than, I think, 15 bakeries, all artisanal working with us.
Josh: You're like Amazon, right? Where you're disrupting an existing business. But what's interesting here is you're actually supporting local businesses while doing it.
Ismail: Yeah. Please don't compare us to Amazon. We're, yeah. It's the opposite of what they did to the bookstore business.
Josh: Right. But it's just interesting how you can have a business model based on the internet that does scale, but doesn't destroy local businesses.
Ismail: I think subscriptions are the future of a healthier internet in general because they allow for better quality, you know
Ismail: We could only do this because we're a subscription business.
Josh: Incredible. Was there a moment where you realized like, this is going to work?
Ismail: It was a year after we launched, so May, 2020. We are seeing that in the reviews. We have it like in theory, but when you see people repeat your pitch word for word and saying like, it's so convenient, so delicious, it's great for my family. You get like, okay, this is starting to work. And then you go into the data 12 months later and you see that people are actually staying and ordering box after box after box, we had like 60% of the members still ordering boxes. And, and so the business is sustainable. It shows great promise and we decide to double down and, you know, start investing more on growth.
Josh: Yeah. Like sustainable growth. Not based on outside capital, but just cash generated by the business itself.
Ismail: Exactly. It was funny cuz our VC was, at the beginning this idea of not raising money seems like, kind of delusional. You, you guys will have to, you'll see.
Josh: Oh yeah. I mean, building a subscription box, I mean, traditionally it is just a marketing game. Yeah. And it's like, see how many customers you can get? How fast. Right. And sometimes pouring marketing dollars into a business where you aren't even sure if retention is gonna be what it needs to be months down the road to make sense for all the money you're spending now.
Josh: But you're saying, The opposite. Like, I'm not gonna spend money until I know that the retention is where it needs to be.
Ismail:Yeah, if we want to go real technical, we like set an acquisition cost that we were comfortable with and we wouldn't go beyond it.
Josh: What was that cost?
Ismail: It was $60. So you, we spent $60 to acquire a customer and then we Don't spend more than that. Even if spending more than that would bringing a lot more customers, we don't, because we want to make sure that we break even in box two then.
Josh: So in two months you're profitable on that customer.
Ismail: Yeah, exactly.
Josh: How close are you to profitability At Wildgrain?
Ismail: We are actually turning into profit this month.
Josh: No way.
Josh: That has to be an incredible feeling. What is it though, other than just like, is it just simply owning your own destiny? Like why does it feel so great?
Ismail: So in, in addition to that and having, you know, a sustainable company that can run and not be scared of running outta money, which is the worst stress I had in my professional life.
Ismail: It's also now that we have employees and partners and vendors and all of that, it's just the fact that I know we're there for them. Like we're not gonna let them down. We are here for profitability not to raise again. We don't wanna overpay them with VC money and then tell them goodbye when we can't raise anymore.
Ismail: And so we, they believed in that and now we're seeing the fruit of that which makes me incredibly proud. And that's why I think
Ismail: Seeing that and also it was kind of, a pipe dream in my head, everybody told me that it wasn't possible and that you need to raise again.
Ismail: But I kept being stubborn and I was like, no, we're not. And we used debt, we used some other financial techniques until we got to profitability.
Josh: Did you ever go back to Matteo and, and the syndicate and, and tell him what you were doing next?
Ismail: I talked to Matteo, just Matteo once. I told him we're doing the Wildgrain thing and he wished me luck. I didn't ask him to invest. It was just a friendly conversation and a catch up call.
Josh: Huh. You wanna know something cool about Matteo?
Josh: He's an LP in the pitch fund now.
Ismail: Oh, of course he is.
Josh: Isn't that perfect?
Ismail: That's awesome. That's amazing.
Josh: Gosh. Do you ever think back on Qleek about what could have been?
Ismail: Yeah. Every day. I have a Qleek player in my living room sitting there nagging at me every night. And every now and then Johanna and I are sitting on the couch watching tv and I'm like, oh God. It would've been nice if it worked. It still holds up. Like it's a pretty beautiful object, in a living room. We had very enthusiastic customers. We just never marketed that product properly. Never.
Ismail: because we never had the resources and the opportunity to do so. Yeah, it is what it is
Josh: Yeah. Do you have any regrets about Qleek?
Ismail: No. No. I honestly don't. We got lucky thanks to you guys to give it a second try. And we did, and then just, you know, act of God, like, what am I gonna like, regret that Covid happened? I think there's other reasons to regret that Covid happened.
Ismail: It did more harm and way more harm than this. Yeah, no regrets really. We gave, it allowed me to meet my wife. It allowed me to meet amazing people that I'm still friends with till this day, allowed me to know you guys, allowed me to know Matteo, and all the investors we have, allowed me to build a career being an entrepreneur. What's to regret? I don't see anything.
Josh: Lisa's messaging me. She goes, I'm checking out now. Do we want a box every month or two months? What's the correct answer to that?
Ismail: Business wise, every month.
Josh: Every month. [laughs]
Ismail: How many people are in your household?
Ismail: Oh, so yeah every month is good.
Josh: So could we potentially be the customer? Lisa, right now, checking out, be the customer that tips you over into profitability.
Ismail: Maybe! I hope so.
Josh: If we are, how, what are we gonna do to celebrate?
Ismail: I can't give you a free box cuz that would cancel it.
If you want to hear all the episodes in our Qleek trilogy, there’s a playlist on our website at pitch.show/qleek. And if you don’t know how to spell Qleek because it’s been a long time, it’s q-l-e-e-k.
And if you’d like to try out one of Ismail’s bread boxes, you can use the coupon code THEPITCH for $10 off your first order from Wildgrain.
Next week on The Pitch…a founder takes on Yeti
Ali Kaminetsky: I think it's worth noting I was 22 years old when I came up with the idea for Modern Picnic and was able to successfully launch a company within two years, highlighting my ability to make things happen for not only myself, but most importantly, the company.
Neal: What year was that?
Ali: I graduated in 2016.
Jillian: When did you launch the business?
Ali: 2018. So I thought of the idea like first week of work.
That’s next week in The Pitch Room. See you next Wednesday!
The Pitch is me, Josh Muccio, Lisa Muccio, Kerrianne Thomas, Anna Ladd, and Enoch Kim.
Music in today’s show is from The Muse Maker, Breakmaster Cylinder, Boxwood Orchestra, Onders, 1939 Ensemble and Imagined Nostalgia.
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