Episode 14 | Fostering the Entrepreneurial Spirit to Scale a Business with Jon Troutman & Nate Sherotter

Fostering the Entrepreneurial Spirit to Scale a Business with Jon Troutman and Nate Sherotter

Katie Hankinson (00:02): Hi, I’m Katie Hankinson.

Mickey Cloud (00:04): And I’m Mickey Cloud, and welcome to Building While Flying, a new podcast from The Sasha Group where we interview business leaders about how they tackle challenges, stay resilient, and navigate ever-changing skies.

Mickey Cloud (00:23): Charlie and Nate, welcome to Building While Flying. Thanks so much for joining us, John and Nate, joining us from Constellation Brands, a Fortune 500 wine, beer and spirits portfolio company where they’re both VPs of the direct to consumer businesses. They joined Constellation when the company required Empathy Wines, the digitally native winery that they co-founded with VaynerX chairman Gary Vaynerchuk. Full disclosure for our listeners, Nate and John, I consider both of you guys to be very close friends. We all worked together at VaynerMedia starting in 2011, ’12, when the agency was in hyper growth mode but for our audience, can you each share maybe a little bit of background and what led you to VaynerX’s doors that decade ago?

Nate (01:00): Yeah, so John and I have a pretty similar past on how we entered the VaynerX and Gary Vaynerchuk world. As a college kid I was quite interested in wine and was researching online just more about it, wanted to learn more about it, and stumbled across Gary’s Wine Library TV videos and got hooked, watched probably every episode and randomly I guess built up the courage to just send him an email saying … Introducing myself and asking if he offers internships at The Wine Library, which was his dad’s liquor store in New Jersey, and he responded and said, I think it was one word and said yes. But I saw he CC’d his assistant on the email and followed up with his assistant. We both were Arizona State graduates so we bonded over that. Flew out to New Jersey, had an internship at Wine Library, came back the next summer, did an internship at Cork’d which John can describe, John was the managing editor of Cork’d, and then just stuck with Gary throughout his career. He shifted more from wine to digital advertising with VaynerMedia and then held multiple positions at VaynerMedia over about eight years going from Gary’s assistant and then building more into operational roles within the agency.

John (02:18): Like Nate described, my story is pretty similar in that I finished school in ’07, fresh out of undergrad, bright-eyed, bushy-tailed, thought I was going to change the business world and needless to say I wasn’t getting a whole lot of phone calls back from potential employers just based on the state of the economy then. Instead, and this sounds like a total cliché, I made the kind of decision to follow my passion, which at the time was this very intensive budding interest in food and wine and so I recognized that what Gary was doing for the wine world was pretty radically different than just about what anyone else was doing and so a series of tweets turned into a couple of DMs with him. I was shooting my shot and asking for any job opportunities. Finally was able to get in front of him face to face at the Boston Wine Expo where he was one of the keynote speakers, kind of this big wine exhibit that goes on every year.

John (03:18): That was summer of 2008 and so at the time he had a little booth where he was promoting Wine Library and Wine Library TV and I literally offered to just help hand out at the time were DVDs of his videos which is so funny to think of in hindsight given where the worlds of YouTube and Netflix have gone but … I think he just liked the fact that I was willing to work for free which is a mantra that I know he has preached loud and proud since then. I’m probably living proof of kind of what that can turn into if you’re willing to do it. That’s how I started my career with him, which then ultimately turned into a job at Cork’d that Nate mentioned, wine social network in kind of the early days of Twitter and Facebook and all these different people trying to build like the niche versions of those platforms.

John (04:10): Needless to say we didn’t end up kind of scaling that business the way we intended to. Before I eventually landed at VaynerMedia where I was lucky to work with you and Nate and everyone else.

Mickey Cloud (04:19): Let’s start with what your worlds look like day at Constellation. Can you guys give us a little background on that?

Nate (04:25): Yeah, I’ll jump in there first. So John and I joined Constellation as you said in June, both as VPs, myself of VP of the direct consumer operations side of the business. So a lot of what I’m focused on is the fun stuff, inventory management, customer experience, regulations, compliance, but also how do we build an operationally efficient machine that can drive the marketing team so that we put together really efficient programs, we deliver on customer expectations with every single order and that our touchpoints with the customer are spot-on every time. So a lot of it again is … What I’m kind of working on building out in terms of operational efficiencies and operational offense.

John (05:15): Yeah. So I’m the [inaudible 00:05:18] in many ways at Constellation for the DTC Group. So I’m working with a lot of the marketing at Constellation, helping them drive consumer engagement, with ultimately an entirely new business model for this group of brands. So even just taking a quick step back, when you think about Constellation Brands, a lot of household, incredible wine and spirits brands between Corona and Skyy Vodka and then on the wine side which we’re closest to, names like The Prisoner Wine Company and Meiomi which are these really cult iconic brands.

John (05:56): For the first time ever, they’re looking for like a radically new way to actually sell those brands where they’ve traditionally been part of a three tier system, so if you’re familiar with this world, that might be a nerdy term but essentially it means they are wholesale oriented. So they sell to wholesalers and then wholesalers sell them to everyone from your local wine shop to Total Wine to Costco. Really what our group is being brought in is how do you sell DTC or direct to consumer and that means engaging those consumers in a whole new way, primarily through the digital channels that we know and love and have kind of built our previous business company wines on.

Mickey Cloud (06:39): Awesome. Awesome. Well I think the three of us have all worked pretty closely with Gary over the past decade and one of his POVs that I wanted to ask you guys about is kind of his definition of a purebred entrepreneur, which is in his world basically someone who can’t breathe if they’re not working for themselves. You guys have both been an employee of VaynerX with Gary as your direct boss and now you’ve been a co-founder with him, so I guess … Now you’re intrapreneurs within a Fortune 500, so you’ve kind of gotten that spectrum. Do you agree with his an entrepreneur? And how do you guys define yourselves in kind of the realm of entrepreneurship?

John (07:15): Yeah, I’ll go first. I think his definition, I think there’s a spectrum in the way that he defines it, like a purebred entrepreneur, I think he’s probably spot-on, but there is a subset of people that if they’re not working for themselves and building a business, that they drive with all the key decision making day to day, that they feel totally squashed and squandered and not feeling motivated to get out of bed. Then there’s the spectrum of what I’ll call is just like classic corporate executives, people that are maybe more predisposed or passionate about working for businesses that are already at scale and that are fine-tuned machines, like a Constellation Brands. I think personally I probably fall somewhere on that spectrum but probably much closer to the entrepreneurial DNA, but I wouldn’t say that I’m unable to operate without having that.

John (08:15): In many ways what our roles have become is intrapreneurs. It’s how do you foster change and drive innovation and have more of an entrepreneurial mindset within a company that the way it’s built is not catered to that. It’s at scale and it’s got a very … Kind of well-oiled system and way of working and frankly do I feel super gratified and excited about that? I do. Is it something that I think like makes me not an entrepreneur? I don’t think so. So I think all that said, long-winded way of saying I might question Gary’s definition over a beer.

Nate (08:57): I’ve settled on just calling myself entrepreneurial-adjacent because I’ve never really done something outside … Like I’ve always worked for someone and I’ve been part of early stage teams that have been growing, so I kind of say entrepreneurial-adjacent.

John (09:10): I’m going to steal that.

Nate (09:12): I would tend to agree with John. I think there is a spectrum. I do think everybody has some sense of entrepreneurialism on them. I think … I mean Gary’s such a purebred entrepreneur but I think he attracts those people that are interested in entrepreneurialism, whether they’re a purebred or not and so the people that he attracts in the organizations that he’s built and what John and I have built at Empathy Wines was about fostering that entrepreneurial spirit and having some semblance of infrastructure behind you to help scale. So yeah, I think it’s on a spectrum and I think I get the most kind of happiness of whatever I’m doing being able to be entrepreneurial in that role is kind of how I think about it as well.

Mickey Cloud (10:01): Well you brought up Empathy Wines. I’d love to get into that story a little bit more. You guys were both working really closely for Gary. How long were you guys discussing the idea of a digitally native direct to consumer wine brand with him and then … Can you give a little bit of like the background there?

Nate (10:18): So it probably was a conversation over about a year I think as John and I worked at VaynerMedia for six, seven years. Gary knew that both of us had that entrepreneurial spirit in us and that we wanted to do something outside of the agency world at some point. VaynerMedia has kind of skyrocketed in growth both in terms of clients, revenue, locations, myself not coming from the agency world before, it got to a place where it was the right time for at least myself and John to step away from the agency and do something new. So I think we discussed it for about a year over a few glasses of wine and it was just I think a timing thing. The timing was right for me and John, the timing was right for Gary to start something new and the idea was really not even too much of a strategic discussion. It was … This is what we know how to do, this is the backgrounds that we all have, and coming from VaynerMedia which is a digital storyteller, we thought that we had a leg up on wineries in that world that weren’t digitally storytelling.

Mickey Cloud (11:27): I guess once you kind of got into that seat and it was like, “All right, we’re doing this, we’re launching this,” how different was it being in it as an entrepreneur versus kind of being around it and working for someone like Gary?

John (11:40): Yeah. I think it’s a whole mindset shift where working for somebody in many ways while you’re supporting them and executing on their vision, at the end of the day they have all the accountability on their shoulders. Like you would bring them problems and help them solve those problems and kind of like help shape their decisions, but at the end of the day they’re the one who kind of like drives that. Then all of a sudden, kind of assuming that role, you’re like, “Wait, there’s nobody to go to with problems.” Like you are the person who at the end of the day needs to solve all of them.

John (12:16): I think we definitely had the benefit of somebody who’s started and operated lots of new companies from the ground up with Gary in more of like a chairman style role but really for the first time ever, it was like, “Hey you have accountability and opportunity too.” So all of the problems are on your shoulders but all of the good things and benefiting of the upside of the potential growth of that company is also squarely on you, which I think for me was probably the biggest change in mindset because I really recognized that the success of this company could unlock so many new things, as scary as it was too, to recognize that the failure could mean a lot of things. It’s kind of the thing that keeps your heart beating that much faster when you step into that role for the first time.

Mickey Cloud (13:08): Yep. You mentioned kind of Gary playing that kind of that chairman role. I mean I know you guys were the three co-founders of the company. I guess could you talk maybe a little bit about what were some of the advantages of having Gary as kind of the face of the business but in kind of that chairman role? I remember John at one point you telling me that when you guys were letting friends and family know that you were going to do a direct to consumer wine, all it took was like a few text messages to secure a seed round of funding from Gary just because … Obviously it was like, “Oh this guy who built this huge reputation around wine, and now he’s offering a product direct to consumer. Makes a lot of sense.” What were some of the challenges that came along with that as well?

John (13:49): Yeah, I think for me, and it’s funny. I feel like I listen to a lot of podcasts and hear a lot of founder success stories and I think the thing that I always walk away sometimes wondering, I’m like, it made it sound easier than it really was. I think for me I recognized that trying to build this same business without Gary’s involvement would have been radically different, and the anecdote you just told is maybe one example of it.

John (14:12): The other thing that Gary brought to the table for us and it was a huge strategic advantage was just the ability to build awareness and acquire customers at such a radically lower cost than it would take to just do it without the face and track record that he had coming into the wine world, where overnight when we announced this business and launched it, we had a built-in audience of millions of people who were … Many of which were predisposed wine lovers because they’d been following him for years, who were the first to sign up. So in many ways, it turned into how do we put Gary in a position to support us best versus just turning to him and saying, “You need to support this, period.” So different way of working with him that I don’t know that we had ever done prior to this, but I think it allowed us to … It gave us benefits that frankly other companies that maybe were trying to do the same thing wouldn’t have had. Or they would have had to invest a whole lot more in the upfront in order to build that awareness.

Mickey Cloud (15:18): How about on the flip side of that? You said you just made it sound easy. So what were some of the tough things in those early days?

Nate (15:27): Yeah. I think [inaudible 00:15:27] with a pretty large support system to a very small startup team with really no support system, right? Gary was co-founder and kind of call it chairman of Empathy Wines but it was John and myself running the business from a day to day standpoint. The wine business is a heavily regulated business. There’s a lot of intricacies and details inside that industry that are difficult work around, especially for a small team. As kind of a first time entrepreneur in this way, there was challenges from simply setting up the business, right? How do we pay people, how do we get benefits, how do we get health insurance, how do we get all of our state licensing and reporting and all that stuff set up, how do we appropriate charge for sales tax because it’s different in the wine world than some other places. So there’s so many details around just starting a business and John and I had to own. Gary was so great in terms of macro, like this is what we need to do, let’s implement this, let’s implement this, but then translating that down to a priority standpoint from a day to day standpoint became difficult with so many different things going on with such a small team. So it was kind of synthesizing where Gary could provide the most value versus what we actually just needed to accomplish.

Mickey Cloud (16:52): Right. So I mean you guys had … It was a fast journey that you guys were on from conception, launch to now exist. I guess could you talk about … Was that the game plan? Was an exit the game plan when you first started out? I know Gary talks a lot about build for as long as you want. I guess could you talk a little bit about like when did it … That process and the speed at which it happened and what that kind of decision was like?

Nate (17:19): I think, and Gary said this too, and we agree that building a business for the sole purpose of selling it is not the right way to build a sustainable business and so the decisions that we made were customer-centric decisions, what’s best in the longterm of the business and not how do we flip this quickly. That was the mission. We knew that what we were building would draw eyeballs in the industry that we were in just because we were thinking about things so differently in terms of digital storytelling, customer acquisition, business model, even tech stack. We built on top of Shopify which was very unique in the wine and spirits industry. So we knew it would draw eyeballs. We didn’t think it would be that quick but we were definitely building this for the longer term and to have as much leverage as possible in the market.

Mickey Cloud (18:13): So you talked about the tech stack and building on top of Shopify. What were some of the other things that you guys were doing that were considered just so different within the wine industry?

John (18:24): Yeah. I would say … So in general, I mentioned that this industry is wired to be more wholesale oriented in the way they do their distribution and as a result of that the way that they market and engage consumers is much more like a wholesale approach. With that they have very robust and significant sales teams that are really catering more B2B, right? They’re working with retailers and wholesale partners who are oftentimes gatekeepers to the types of products that they ultimately want to stock and what they can make margin on and there’s just so many … Kind of like rules of the road that a lot of these brands have had to cater to because we’re entirely obsessed with the consumer, right? Like it’s that one to one relationship. It allowed us to market in a totally different way so getting a little bit more specific in wine, we didn’t have to make a cabernet sauvignon or a pinot noir because it has that name recognition and respect of retailers. Instead we said, we think the consumer actually cares less about the name of the grape and just wants to care about the actual name of the product or the equity of empathy.

John (19:34): So for us, we said because of that we’re going to make a blend. It allows us to make the best possible wine. It gives us total flexibility year over year and so that was like one key decision that all of a sudden, it kind of opened the eyes to the industry that when you have that one to one consumer relationship, you can play by your own set of rules. So totally different mindset shift in the industry and one that I think we … We really kind of took advantage of in our early days.

Mickey Cloud (20:06): Awesome. Awesome, well one thing I wanted to ask you guys about it as well is in your entrepreneurial journeys, obviously now you’re part of this intrapreneurial team, you’re trying to bring some of these principles of consumer first marketing and tech stacks and direct to consumer and the intricacies Nate you were talking about the details you got to do, [inaudible 00:20:25], all these different things you’re bringing now to the constellation and helping them figure that out, I guess … But you also talk about, without going into the details of an earn-out or anything like that, just talk about I guess what the concept behind that so that if entrepreneurs out there are thinking about, “Hey maybe I’ve gotten the attention of some big players in my industry,” how do I take advantage of that and then help … Maybe talk about what was the best interest of the business longterm. What is Constellation bringing for you guys that you weren’t able to achieve on your own?

Nate (20:58): Yeah. From my end, Constellation brings scale. They bring expertise. They bring operational excellence and they bring a level of financial rigor that is not a part of the startup world in general, which are all really beneficial things in the long run. I think John and myself have learned a lot at Constellation over the past eight months. We knew how to grow a business, and now we’re running a large piece of business and I think those are two very different things when you think about the P&L of a startup versus the P&L of a corporation like Constellation Wines. They bring the ability to bring product to market quickly and they bring legal and regulatory excellence so you don’t have to think about that in the slightest which is awesome from an operator’s perspective.

Nate (21:55): The challenge within Constellation of taking what we did with Empathy Wines and bringing that to really a lot of other iconic brands and building those DTC businesses in a 2021 modern way was a very unique opportunity for John and myself to kind of say, “Okay, we did this for Empathy Wines, we did this with Gary. Now let’s do this in a very longterm, stable but high growth way for iconic brands,” was a really cool challenge for us.

Mickey Cloud (22:26): Awesome. Awesome. I guess the last kind of question for you guys, we love this concept of building while flying. It’s the name of our podcast because that analogy for entrepreneurs speaks to the nimbleness, the flexibility, the kind of foresight you kind of need to operate in business but also we like it because pilots are kind of renowned for their inflight checklists, the training that keeps them calm under pressure. So when your backs are against the wall, when you got to make a tough decision for the business, what’s that internal checklist or process to help you guys get through it?

John (22:57): Yeah. I’ll kick this off. That’s a tough question. I think for me, it’s what’s in the best interest of the people I work with. What’s in the best interest of the longterm success of the business as well as the short-term. So like when I think about the people, there’s a lot of different people that are involved. There’s employees, maybe the obvious ones, there’s investors, there’s business partners, Nate, Gary and now people at Constellation that I work with, so that’s maybe like the people checklist.

John (23:29): When it comes to the longterm success of the business, it’s like … Is this strategically the direction that we want to be going? That’s maybe the first checklist but then there’s the short-term realities too. Which especially when we were in the driver’s seat at Empathy as an independent small start-up that had raised relatively modest amounts of money, it’s, “Hey, are we going to be able to bring in the revenue in order to pay the bills, in order to make payroll,” and we maintain that runway.

John (24:02): So it’s kind of like balancing those last two checklist items and making sure that they’re never totally out of whack. Because otherwise you can make a decision with the short term in mind that doesn’t benefit you longterm or vice versa.

Nate (24:15): Yeah. Mickey, it’s funny that the podcast is named Building While Flying because I think John and I have said that about 50 times over the past six months. We’ve been working really hard at Constellation to hire a lot of people, to implement new technology, to build new systems and it’s felt a lot like building while flying. I think John said it nicely but I think simply on my end it’s understanding a problem or an opportunity and just understanding what that means for short-term versus longterm. We can’t make decisions in the short-term that will kill our opportunity in the longterm but at the same time, especially at Constellation, even with a startup with cashflow, short-term decisions and making sure that you can get through the quarter or get through the year are important. So it’s in my mind weighing short-term and longterm and where does it fall on that spectrum to make that right decision.

Mickey Cloud (25:12): Awesome awesome. Well appreciate you guys’ time today, super insightful and always love catching up with both of you so thanks so much.

John (25:21): Thanks for having us Mickey.

Nate (25:23): Thank you.

Katie Hankinson (25:25): Well, now that we’ve finished that thoroughly interesting interview, we’re getting ready to land, but before we do, Mickey and I spend some time unpacking some of the key takeaways that really stuck out to us.

Mickey Cloud (25:36): We liken this to the post-game show where we break down the really extraordinary nuggets that we can all benefit from, including us here at The Sasha Group. So get ready for The Sasha Sidebar.

Katie Hankinson (25:54): Mickey, let’s talk about empathy. Empathy in all of its forms. I am of course talking about your interview with Charlie and Nate.

Mickey Cloud (26:03): Yeah, my boys, Charlie and Nate. I did not have to do much research when thinking about questions to ask them.

Katie Hankinson (26:13): Yeah, so I mean what a roller-coaster story. I mean it’s so great to know like from the OG beginnings of when they picked up the phone and connected with Gary through to the sale of Empathy to Constellation Brands. There was just a really solid fascinating aspect to that business which it was really great to hear you get into. I felt like when you look at it on the surface, they were very transparent about … Obviously there’s a huge strategic advantage to having Gary as the kind of part-founder of the company and to be very much an air cover as you’re seeking investment, but if you scratch one tiny layer deeper, actually the fascinating thing about this one is just how they have built this brand in a way that is so true to like what contemporary DTC looks like and just bust a lot of assumptions about the wine business, so direct to consumer, working directly with the winemakers.

Mickey Cloud (27:13): Yeah, I mean I think to me the most interesting decision they made as a brand is the fact that they … Because they were consumer-centric, they made just a red blend, a white blend, and a rose, and it’s brilliant I think from a marketing perspective, it ties into Gary’s background as someone in the wine world who is bringing new users into the wine category, democratizing kind of how wine is talked about online and things like that. So there’s Empathy for … This one’s just red, this one’s white, this one’s rose, it’s simple to understand. But then it gives them a lot of operational flexibility on the backend where a) they don’t have to kind of cater to, “Oh this retailer says I’ve got to have them all back right now.” It’s like, “Well nope, we’re just going to focus on the consumer and make a brand that consumers just care so much about that they’re going to love the red, the white, and the rose,” but then also they’ve got flexibility to play with the blend so that if one year this certain grape is not … They don’t have as much distribution in for it, they can kind of play with the formulation to make it just … The 2022 red blend or the 2026 red blend and it gives them that flexibility which I think is … Year over year which is just so fascinating.

Katie Hankinson (28:28): I think as well, in the world of wine, the blend piece gives you so much more control over consistency and if you have something where this is a very brand-driven and experience-driven company and brand, the wine does that, the actual packaging does that, but they’ve done a great job of just that thread of continuity and consistency through how … All the touchpoints, not just the liquid in the bottle, but how they show up as a brand [inaudible 00:29:00] –

Mickey Cloud (29:00): Yeah, I mean your point about their packaging, the fact that they’re built on Shopify, it feels like a DTC brand, right? It very much has that kind of … They marketed the advantages of that. You’re getting a $40.00 wine for $20.00 and yeah, it’s a very compelling, very compelling product.

Katie Hankinson (29:22): Have you tried them? Which is your favorite?

Mickey Cloud (29:24): Oh yeah. Oh yeah. I’m the red, the red blend. I’m on the annual subscription where in the spring I get the rose, in the summer I get the white and then in the fall I get the red.

Katie Hankinson (29:35): I quite like rose. It’s very drinkable and I enjoy that in the spring. The red is so boozy, you’ve got to keep an eye out for that one. It’s got a pretty high alcoholic percentage.

Mickey Cloud (29:50): Did you have the rose can, the sparkling rose can?

Katie Hankinson (29:55): No I didn’t.

Mickey Cloud (29:56): Oh yeah.

Katie Hankinson (29:56): No, I need to get that one.

Mickey Cloud (29:58): There’s a fun backstory to that one where they … I’ll just quickly try to tell it, but they did a test run with Delta to have … A tie-in to Breast Cancer Awareness Month to have a rose kind of single serve in First Class or in Delta, the Skyy clubs and things like that. Didn’t actually pursue it, something kind of hit a snag at the end so they weren’t able to do that, but what they learned is they could do a production of a single kind of can and that led to last summer them being a little off for kind of a limited time rose in a can.

Katie Hankinson (30:36): Yeah, that’s fascinating. We’ve done quite a bit of work on that, on just like the beverage and booze side of things over the last couple of months, on the branding side of things and just the interesting single serve innovation, like what’s happening with sparkling, like how things like LaCroix and Selzer is impacting and influencing the wine world. Really interesting. So what’s our question?

Mickey Cloud (30:59): Have you tried Empathy Wine? [inaudible 00:31:03]

Katie Hankinson (31:04): What’s your favorite cheers [inaudible 00:31:06]?

Mickey Cloud (31:05): Yeah.

Mickey Cloud (31:09): Thanks for joining us gang, and for building while flying with The Sasha Group today. I hope you learned as much as we did. We’ll meet you right back here next time for another flight.

Mickey Cloud (31:21): If you’d like to hear more about how business owners and brands are navigating these times, tune into the next episode, and if you’re so kind, please rate and review us. Plus we’d love feedback, so let us know what you think, what you’d like us to dig into next on Building While Flying across brands, businesses, marketing and more.