Scrub Daddy: Aaron Krause. How a Failed Experiment Became a Billion-Dollar Sponge

0:10 Hey, I got this new product and you know this awesome sponge and I showed it to him and he said, Yeah, you know, I I it's not gonna sell. And I said, Oh no, you're wrong. It's a it's a bright yellow, smiley face in this neon box, like there's no way it's not gonna sell. And he said, Alright, so he went to the shelf and he just moved some sponges over and put it on the shelf and said Yeah, we'll see.

0:33 You know how many people bought it? Hum I Nobody. Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements. They built.

0:57 I'm Guy Raz, and on the show today, how an inventor who made products to clean cars wound up making a sponge to clean dishes. grew it into a massive brand. Scrub Daddy. Some of the best known products in the world didn't start out as great ideas. They were actually meant to do something different. Take bubble wrap, for example. It was supposed to be wallpaper. Yes, textured wallpaper. Post-it notes were the result of a failed attempt to create a super strong glue. The adhesive was actually too weak.

1:39 Terrible for permanence, but amazing for sticking something up short term. Even Viagra was invented to treat chest pain, but it had a side effect that, well, you know the rest of the story. The point is, sometimes the problem isn't the invention. It's the market. And today's story is about a guy who did not set out to reinvent the kitchen sponge. He wasn't even a consumer products entrepreneur.

2:06 Aaron Krauss was an auto detailer running a small business that made buffing pads for car washes and auto body shops. In the early 2000s, Aaron was looking for a scrubbing tool to clean his own hands after fixing greasy machinery. He found it in a foam material that he came across from a German manufacturer. The foam material worked great, and Aaron tried selling it to mechanics. But

2:31 No one wanted it. So P shelled the idea. literally put these sponges in a box and threw them in the back of his shop. But a few years later, he was cleaning stuff around the house, and he happened to pick up those old foam sponges. and he noticed something strange.

2:48 When you ran them under warm water. They got soft. But under cold water They got firm. And it was

2:56 Kind of magic. And what Aaron realized at that moment is that he didn't have a better hand scrubber. Get a better kitchen sponge. But the sponge market was dominated by a few huge players. And try to compete with those brands, especially for a small time entrepreneur.

3:14 Well. That's a fool's errand. So he took a somewhat unusual approach. Aaron hawked his sponges on TV. First on QVC.

3:24 And then He pitched Shark Tank. And that appearance would catapult Aaron's scrub daddy brand into the mainstream. Today, ScrubDaddy generates hundreds of millions of dollars a year in sales. And as you'll hear in this conversation, Aaron Krauss is not a shrinking violet.

3:42 He's relentless, he negotiates hard, he fights for his product, even when he doesn't hold all the cards. But We'll get there. Aaron Krauss grew up in the nineteen seventies and eighties in a suburb of Philadelphia. His family cared a lot about academics. His parents were both doctors, and he had two high achieving sisters.

4:03 But for Eren? School was never really his thing. I was a B C and every once in a while an A student. Um and my dad used to always say the same thing when I got my report card. Son, is that the best you could do? And I would my answer was yeah, because I'm on the soccer team or I'm on the basketball team too, and I have a girlfriend and you know, things that my other siblings really weren't interested in. I had so many other

4:27 Interest and was all over the place. And so I said, Yeah, that's the best I could do. And he he accepted it. I mean, given that your parents were both doctors, right, and th they were sort of encouraging you to go to into academia I imagine I mean you know, again You grew up growing up in the eighties and I should remind people, like, it's a different time. Like there the whole culture of entrepreneurship wasn't

4:49 What it is like. Today, right? Absolutely. And being an entrepreneur Especially I think for my parents was a very risky thing. And my parents really were very conservative people. You know, I grew up in an area, as you know the main line, a lot of people did have money. And my parents, you know, as two doctors, it's not like I grew up

5:07 poor. But my dad was a stickler for making me work for every single thing that I got. And up till the time I was thirteen. I used to get presents and a big party, you know, my birthday party, and at thirteen. I didn't have a party and I

5:22 was asking where's my party and where's my presence? And my dad said Well, your present from now on is you get to buy your own sneakers. I was like Wha what are you talking about? And uh and I didn't understand how I was gonna do that.

5:36 And so He started suggesting, you know, chores and jobs around the house. And I started earning my own money. He was basically saying, You want something? You gotta work for it and then you're gonna have to buy it. And I'm just I'm just not gonna give you cash for everything.

5:48 Yeah. So You know, uh one of the things that I I started doing, um,'cause my dad, you know, set up all these jobs around the house, and one of the jobs that I could get the most money for was washing cars. And I can make ten dollars washing his car and I end up going around the neighborhood and actually washing everyone's car and I go. Yeah, this is in high school. And I actually turned it into a business. And I loved it. And I was creating coupons and I I used my Macintosh to start using a business program to track my customers. Um, and so when I eventually and it it was a hundred percent expectation you're going to college, um, I went I was going for business.

6:24 Right. And I guess you you ended up at Syracuse, uh, for college where you did take business courses, but you actually I think majored in psychology. Yes. But while you were there, uh what happened to the car washing business and was that on hold for a few years? Actually, no, just the opposite. So um when I graduated high school I did think that was the end of my car washing career. And I actually sold the car washing business to one of my friends who was in eleventh grade so that he could have a business. And um

6:53 And then I went off to college and when I came home My mom, who's pediatrician, she got me a job working for one of her patients' parents who Who owns the largest uh manufacturer spiral staircases at the in the country at the time. And

7:09 I mean I knew that I knew the owner of the company, so I I went there in a suit and tie. You know,'cause I have an internship this summer with the owner of the company. And uh and I showed up and um I remember I I walked in and I said, You know, I'm here to to meet Rich and she went and she brought some guy up covered in soot, wearing those like you know gl those big leather gloves and like And and and he was wearing like a welding helmet and And I was like, I'm here to see Rich. And he's like and he said, I'm Rich, go home and change into clothes you never want to see again.

7:40 Yeah. And the next thing you know, I was on an assembly line. Welding staircases. And It was 120 degrees in this factory, it was the worst experience I'd ever had, I'm gonna tell say in life.

7:54 Um one day After about a week and a half. Rich came over to me. And said, Aaron, how how do you liking it? And I flipped up you know, my my helmet And I said, Oh my God, Rich, this is I I never expected this. This is really, really hard. Um and in fact the only thing I like is the way the welding torches, it smells like cinnamon. And he goes that oh don't breathe that in, it's highly toxic. And I I literally took the helmet off and I said, Th this isn't for me.

8:19 And I and I quit. And um and I went back to see my friend. And see what he was doing, he wasn't running the car washing business. And so I just picked it up right where I was and I started washing the cars again. And tell me a little I mean

8:34 Was it just you and you know, bucket and um sponges and soaps and, you know? Armor all and a bunch of things like Was that the business? You know At my graduation, my my grandmom, uh, my aunt, my parents, you know, they all came up for graduation and we were at the dinner table

8:53 And my dad said, So son, I just spent a hundred thousand dollars on your education and you have a degree in psychology What are you gonna do with your life? And I said, Well I I am gonna get a minor in marketing and I I'm gonna start my own business. And they said, Okay, well, what kind of business do you think you'll start? And I said, Well, I've been washing cars, you know, all of high school and and throughout college. I think I'm gonna make it into a real business.

9:16 So my mom is at the table, she's crying. And my grandmom says, Oh my God, just disown him. He's gonna be a car washer. And my dad said, Son, you have until the end of the summer to make it into a real business because I was running it out of my parents garage. Yeah. And and uh he said you have till the end of the summer to make it a real business and move it out of the house.

9:35 And however much money You can save in a bank account and show it to me. I'll match it at a loan. At two points higher than the bank'cause you're a bad credit risk. Alone to do what?

9:47 To start the business'cause I was gonna need I was gonna need seed money. I I had to rent a location, I had to put down payments, I had to Oh, you wanted to start an LSC? Uh, you want to start a car washing business, not like going door to door and washing on their property. You wanted like a a a location, a building where people would bring their cars in.

10:05 I wanted a detail shop, a real professional detail shop where we would pick up and deliver. So if you remember Domino's Pizza back in the eighties, they had this incredible campaign. It was uh they would Thirty minutes or less, they would deliver your pizza, or I think it was free. Or it's free. So I was gonna create the Domos Pizza of detailing. It was free pickup and delivery, and we get your car done in three hours or less, or there's a discount. And I was gonna franchise that. That was my whole business plan. And I saved up the eight thousand dollars in a bank account at the end of the summer. Showed it to my dad.

10:39 And he loaned me uh eight thousand dollars. Um I think it was at nine percent interest at the time And that was enough money to uh get a lease on a very small garage in Ardmore, Pennsylvania. And I started, you know, detailing cars in the that from my previous clients, and then I started getting dealerships. Right. And how did you I mean c clearly you must have liked

11:02 detailing cars. Like there was something about it that you actually enjoyed. Like the the work of like cleaning a car and getting it really To look nice. I mean you must have enjoyed that work. I l I loved it, to be honest. Um it's very hard work, very growing, but it's very, very satisfying. You know, you start with a car that's in a filthy condition that looks like it it's never gonna shine again. And you restore it to glory and then you bring it back to the client and they are in shock. So it's very satisfying work. But I also enjoyed the business side of that, like growing it. I I enjoyed having a computer. I enjoyed

11:36 creating all the systems and the processes and like at the time, you know, computers were pretty new and these business programs were coming out and you could do really unique things like you do someone's car and then you could set like a reminder for three months. To call that person back and say, it's time to get your car waxed again. And so I could come in in the morning and have a list of people that I knew I could call today. So all right, you get the money to to get the brick and mortar location, and um I imagine you have to start hiring people. So who are your first hires? Just anybody you could find? You know

12:11 The first hire was um a a business partner. I was kinda lonely doing the cars by myself and was one particular day I happened to be dropping a car off next to a friend that I knew growing up in the neighborhood. Uh we went to overnight camp together, we had mutual friends together. And uh I was dropping this car off right next to his house. And so I dropped the car off and I went and knocked on his door and it was probably about

12:34 1130, you know, in the morning. And he answered the door and he was still like in pajamas. Looked like he just rolled out of bed. And I was like, Oh my God, what are you doing? He's like, You just ruined my best Nintendo score. And I'm like, are you kidding me? Do you know what I'm doing all day? And he's like, Oh dude, it's in ninety two, we were in a recession. Pretty pretty serious recession. And he said, Yeah, I put a lot of applications out, no one's hiring. I said, You gotta come and see what I do for the day. And if you like it, I'm looking for a business partner, fifty fifty. And that was my first I don't want to say employee, but it was my first

13:06 person in the business that we were working together. And from there we started hiring local people to start washing the cars as we grew and grew. Alright, so you've got this business going and ha and I mean Yeah. It it must have been profitable pretty quickly, right? Because you're Your overhead and you got your you know, your

13:23 Your people. And probably the rent wasn't that high on on the place. And Uh a detail even probably in nineteen ninety two was at least a hundred bucks, right? It wasn't it wasn't that profitable. Um and the reason why there's a couple of reasons why. I I hadn't learned all my lessons in business yet.

13:41 And so you know, I wanted to get big and I wanted to do volume. And so I try to keep my prices as low as possible. And because my prices were as low as possible, I couldn't hire the best talent. So the people that I had doing the cars weren't really skilled laborers and they wouldn't do a great job or would take them too long to do a car. And every car is different. Every shape of every car is different. One car's got a total mess in the back'cause they had a baby. And other and the other car is a brand new Mercedes. And so the it was so variable that you had no idea how like what your profit was gonna be at the end of the the day or the week. Alright, so you were not

14:19 really making a whole lot of money in this business. But you you had a business, you were there, you had a place and and and I should mention you were You were living with your parents. I mean nothing no no shame in that, but like that's right, you were saving money on rent. I was saving money on rent and on laundry and everything, and I um I lived at my parents I'm ashamed to say this, this is so embarrassing. I lived at home until I was twenty nine. But it really gave me the opportunity to spend all my focus on growing the business and not worrying about where I was living or where I was getting food.

14:50 Uh and so uh I I owe my parents a huge debt of gratitude for doing that. Mm-hmm. Yeah. I guess why you were running this business

14:59 You kind of stumbled on a problem, which was from from what I understand, I'd I'd love to hear the story. You're Buffing a car and it It's damaging the vehicle, like the the buffing pad that you're using was not a good one and

15:15 It kind of sparked this idea maybe I imagine to find a new buffing pad initially, but eventually You would come up Up with your own. T what what's the story? It's really interesting. So

15:27 Cars have been polished, the paint's been polished. By Started out with like lambs wool. And then eventually people started using uh wool yarns and making like this hairy wool pad. And that's been the the standard forever. And when I started detailing cars, um, that's that's what it was. You had this hairy wool pad and you would attach it to a buffing machine and it would spin at 2000 RPM. And the problem with these pads are it's you know, it's like a it's like a carpet, right? And when it gets caked up with chemicals and it wears down, it doesn't become a buffing pad, it becomes a grinding wheel. And if you're not an absolute expert

16:01 It's very easy to burn the paint off the car. And they just bought someone a two thousand dollar paint job. And in around ninety two, ninety three. People started experimenting with polyester urethane foam. That's kind of like the same padding that's in like your seat cushions, and everyone's felt it, you know? Um and

16:19 It was like a sponge. And it would give. And so it was much more forgiving. I started experimenting with this and Instantly I was like Oh my God, this is the future of buffing pads. But the problem was there was no technology in them. So they were just taking a a piece of foam and die-cutting a cylindrical shape. So it was flat on the sides, flat on the bottom, flat on the top.

16:43 I'm doing this car. And I'm trying to get underneath this mirror. But the pad doesn't feather like a wool pad. And I end up hitting the backing plate against the mirror, and there's a big grinding sound, and I jump and I break the mirror off the car. And it was a Mercedes. I think the mirror cost a thousand dollars. Yeah. And and it I was just absolutely sickened. I was I was like, I can't believe and I I blamed the pet. I didn't blame myself. I'm like, that is the wrong shape.

17:10 Why is no one making these foam pads in the shape of the wool pad? It should have edges. And so I have this idea for this buffing pad that should have edges to it. And

17:24 I start asking around for it. You know, does anyone have this this kind of buffing pad? And nobody had it. And so I said, Oh my God, forget I mentioned it. And I went to the local library and I started reading about, you know, how do you patent something. And then I looked up patents on other buffing pads. And

17:42 Then I copied the format that they did and I I actually wrote my own patent and sent it in. And about two months later I got back a letter that wasn't even in English. I didn't know the language it was written in. It didn't say you got a patent, it didn't say you didn't get a patent. I had no idea what it said. You just couldn't understand it. It was like all this legal language that you couldn't understand. Legal mumbo jumbo that is, you know, p which which is patent law.

18:08 And I have a family friend who who was a patent attorney and I I Just went and called him I said, Hey, can you take a look at this? I I got this back. And uh every page that he flipped His face got redder and redder and he got angrier and angrier. And then he threw it down the table and said, Let me ask you a question here. If you had a toothache, would you take a drill and start drilling your own tooth? And I was like, No.

18:30 He was like, What makes you think you can write a patent? He's like, Here's my recommendation. We file with the US P TO and we beg them to rescind your application and pretend they never saw it. And then I will write you a patent. Application. And I was like

18:45 Okay. And we did that. And he got me my first patent. Got it. Okay. So you have you're working on a patent for this new This new design to to basically to for to buff

18:56 A car. And I guess around this time you decide to focus on this and and not the car washing and detailing business? Well we did both. Remember I had a business partner and he ran he ran the car washing business. I didn't completely, you know, leave the the the the company, but the only way to to make this happen was There was no internet. I opened up what we call the yellow pages and I started looking up, you know, foam, where do I buy foam and and who cuts foam. And this is where we find out why no one's done it. So I'm going fabricator to fabricator. And I'm getting laughed out of people's offices. And I'm you know, remember, I'm a twenty-three year old kid. Like I don't know people are laughing, they're like, You don't know what you're doing. And

19:37 They're like that shape can't be made. And eventually I found this one guy and he said, Listen. You're gonna need to build a a piece of robotic machinery. In order to make this happen. Okay. So I need like a hundred thousand dollars up front.

19:51 And then I'll try to make a piece of equipment to make this thing. Cause what you're trying to do is you're trying to cut this flexible foam pad. Into a circle with beveled edges that meet at a perfect point in space. And there's no equipment in the world that can make this. So give me$100,000 now. If I make the machine and it works, it's another hundred thousand. And that's before we talk about how much each pad is going to cost you to make. And you've got What kind of capital do you have to work with?

20:19 Uh, none. I'm using money from the company. We're on a shoestring budget. I already told you the car wash business is not making, you know, a lot of money. I had already borrowed another ten thousand from my dad for the patent. And uh there there was no money to do this and I I literally was at the verge of giving up. And then one day. I remembered.

20:40 This crazy guy that owns a spiral staircase manufacturing company that you worked for that I worked for as an intern after your freshman year of college. Yep. And I said Rich, I have this crazy idea. I want to make this buffing pad and I showed it to him and he said, You know what, come here every day after work when the sh the shop shuts down around five o'clock and I'll I'll work with you on it.

21:02 And We spent probably two months together working on this. And he m he did it. He he welded together a bunch of hand cranking machinery. And with two Cheap. I mean a hundred dollar

21:17 Drill presses. And a two hundred dollar band saw. we created the first edge buffing pad. And all my employees are in awe. They're like, dude, this is the best buffing pad we have ever used. And I knew right away.

21:30 We had something really unique. And so I put some ads in some local trade magazines. Not no not local, national trade magazines. It was called uh National Car Washing and Detailing Magazine. And I put a full page ad showing the edge buffing pad. So we started out selling direct on through you know, this uh this ad we put into the magazine. But very quickly.

21:52 Um some of the distributors started calling us. And there's a local company in Philadelphia that's a manufacturer of car washing and detailing chemicals called Ardex. And I knew them really well'cause they brought me all my car washing chemicals, and so I I asked to have a meeting with the owner. And I showed him our buffing pad.

22:12 And He gave me a check for$10,000 on the spot. And said Give me as many pads as I can get for ten thousand dollars. And I that was the first time I realized, oh my God, we're this is gonna be big. We're not just selling to individual shops now.

22:29 I'm selling to one of the manufacturers. of car washing and detailing chemicals and if this works, he's gonna start selling this and distributing it to all of his distributors. And that's what happened. It took off immediately from there. And in three months we were selling them all over the country. And so we knew right away.

22:46 This is the scale business. Not the car washing business. How much was the pad did a pad cost? Pad cost to make A dollar or something? And we were selling them for

22:57 Three or four dollars. So with this product did you start to think, okay this is really gonna be our business, or did you start to think we're gonna start making more things? Like this for the you know, the auto washing and detailing industry.

23:13 No. The only the only thing I could think of was that I couldn't keep Washing cars And doing this at the same time, and we needed to focus solely on this, and then we needed to focus

23:24 on how to produce this more efficiently. And so We went to an automation company that makes robots. And they built me This robot that would cut a pad.

23:35 In eleven seconds. With no one involved. Wow. So now you're really focusing on On this new product, this w what were you calling it again? So it was called the Edge Buffing Pads. Edge. Buffing Pass. Yeah. And the company name was called Dedication to Detail, which, by the way, my dad gave me that name.

23:52 Um and then we Yeah. And and then we needed to move into a a serious warehouse. And so we rented our first three thousand square foot um real like manufacturing for s uh site. So all right, so let's talk. So now you've got you're out of the car wash and detail business, and now you're on the buffing pad.

24:11 Manufacturing business. Give me a sense of how much you guys were doing it sales a year, like like Over a million, two million, like or or less? Yeah, we started I'd say by By ninety eight, we were doing uh over a million, million and a half.

24:27 But I could see the writing on the wall this was become multi million dollars. Like we were gonna be selling these. There's there's tens of millions of pads sold every year. It's and it's not something that you know you would use or many of the listeners may use. It's something that's used in every car wash, detail, body shop. It's also used to polish marble. Airplane, boots.

24:49 Statues. It's it's a huge business. Alright, so you're doing pretty well selling buffing pads. And and then I guess at one point, this is this is around two thousand six. Um you Come up with an idea for a totally what would become a totally different type of product, which is uh not even f for cars, but for cleaning your hands.

25:09 Um so so how did that happen? So You know, I used to build all these machinery, all this new equipment, and and I was the only one who knew how to fix them. Right. and I'd come back in the office and my hands were filthy dirty.

25:22 And I used to have this white, you know, keyboard that I would type on and I remember looking down one day and seeing it was like covered in soot and grease. And I was like, jeez, look at my hands, like I need a better way to clean my hands. And I started out using different kinds of soaps like lava or goat. Oh yeah, lava so does lava soap still it must still exist, right? I think it must still exist. I remember those ads in like the eighties and nineties, like It was always like car mechanics or something, you know, in the in those commercials, like using the lava soap.

25:51 always car mechanics because our hands are filthy dirty and I'm like a mechanic because my hands are like always under these machines and getting filthy and I couldn't get'em clean. And I couldn't use this soap anymore. I wanted to use my soap that smell good and bubbled up and foamed. So I started experimenting with different materials and then one day I just saw the wall of foam.

26:13 That we make our buffing pads out of and I was like I wonder if like our rough foam Could scrub my hands. And I tried it. And it didn't work.

26:22 But it worked a little bit. The problem was I was using buffing pad foam. Right? It's too soft. It's for rubbing on a car and not scratching it. I want something that's really gonna scru my hands. Well I know every company in the world makes foam. So I send out a request to everybody. Send me the roughest, toughest foam that you have.

26:41 And This company in Germany Sends me this rock hard yellow foam. So I cut like a a regular rectangular shape. and I start scrubbing my hands with it and it's hard to hold.

26:53 So I I cut a circle. And that was really easy to hold on to. And then I wanna get my fingers cleaned. Because it's hard to go around your fingers with this big, so I I cut a hole. And then I could stick my finger into that hole and just spin it. And it would scru your whole finger.

27:09 All the way around. And I scrub my hands with it with regular soap. And it comes completely clean. By the way, I'm only using cold water because in the back of the factories a lot of times you don't have a hot water heater. Right. So you're just using cold water out of the side. Really fun in the winter. Right. Really fun. Yeah. And uh so anyway, it works great. It's cleaning my fingers beautifully. And then I want to get underneath my fingernails.

27:31 So I I I cut some ridges on the top of it so it would fit underneath my fingernails, but it was hard to hold it. So I cut two holes. And I can put my two fingers in. And then the sponge stayed on my hand and I could just power Through my fingers.

27:46 So you're you're you're doing this thing with this piece of foam and And what, right right away like okay, this is it. This is great. This this is actually what I've been looking for. Well, it it needed to be a little bit stiffer and the pore sizes need to be a little bit wider and need to be a little denser. So I contacted the company. I said, Can you make this? Can you do that? And they said, Sure, sure. And they sent me prototypes. And I made some scrubbers and they were

28:09 They were the best thing I'd ever used and I love them and I use them every day. And then the light went on. What am I doing? I'm in the body shop industry. I'm selling to car washes and body shops and mechanic shops and detail shops. These guys all have dirty hands.

28:23 We should make this a product. Yeah. So we need a name. And we're sitting in the office and I'm I'm talking to my uh one of my office managers and he's looking at it and it it looks like a two eyes and some some hair. Looks like a radical skateboard guy, maybe and And he uh it looks a little bit like the go daddy symbol, you know, like the go daddy symbol with the spiky hair. And he's like, We should call it scrub daddy. And I said

28:48 Oh my god. That is the best name ever. That was your reaction right away. Oh, right away. Best name ever. That's the best name ever. And you're thinking of this as a hand scrubber. It's only for scrubbing your hands. That's it. So really for the mechanics and auto detailers, like it's again, it's for a very specific industry that you're thinking.

29:08 Well, I'm in that industry, right? That's what I know. I'm not even thinking outside of it. I'm thinking consumers, right? No, and and these and these are all my customers already, so And that was it. We we started trying to sell it and market it and uh no one wanted it. How much w were you trying to sell one of these sponges for? So that's the problem. It's a it's a really we call it a a highly engineered polymer and it was made in Germany. So we have to ship it across the ocean and then we had to cut it and shape it and it was four and a half dollars. And people like four and a dollars for a brush to scrub up. My guys can use can use lava soap.

29:41 Not only lava soap, but these guys, you're talking to the wrong market. Like they don't care about dirty hands. They they would rather go home with dirty hands and spend four dollars on a sponge. And so it died. It died right away. No one wanted it. I had made A hundred and fifty samples. And I'm a bit of a pack rat. I I always save things I'm working on and I think, oh, I'll I'll come to this, you know, one day later. So I I and I spend money on these, so I I can't throw them out with good conscience. So I put'em in a box, I labeled it scrap, and I put it in the in the back of the factory. So how long Did you try and sell these? So did you spend like months on this or a year? A year. Wow.

30:20 And you put it aside. Put it aside. Yeah. It died. Well we come back in just a moment.

30:29 Why Eren eventually gives the scrubbers another chance, and why he furiously hangs up the phone. On the company That wants to buy him. Stay with us, I'm Guy Roz, and you're listening to how I built this. Hey, welcome back to How I Built This. I'm Guy Raz. So it's the mid-2000s, and Erin has shelved his idea for a hand scrubber, but he's still designing lots of other things for the car industry, including something that'll become a hit product.

31:17 We had created the first double sided buffing pad. with a quick connect disconnect automatic centering reversible adapter. You'd snap it on. And it was like smooth as Butter.

31:29 And I I thought this was This was it was game changing and it was industry changing. And one of our customers Um

31:38 Who who was a a big Chemical manufacturer. for in the in the detailing business. They saw the technology. А не ваннеді ексклюсивіті.

31:48 For this систем. They wanted to exclusively license it or not to buy it out, just to exclusively so they basically they liked it and they said, All right, we'll do a deal with you, but you can't sell it to anybody else. We're gonna be your only customer. Yeah. Which is not. It could be great, but it could also be not great.

32:04 It was not great. It was uh I I was foolish and I signed a worldwide exclusivity. For this technology for very, very low minimum quantities. And you did that because I was well, I was desperate, uh to be honest at that point. I had dumped a huge amount of money into this project and we needed to get sales out of it. I mean, I had put the the company in a a little bit of a financial stress point.

32:28 So how long was the deal that you signed with them? It was in perpetuity. As long as they met their minimum requirements. And that was That became a real

32:38 major issue for us. Okay, and I guess we should explain why this became a major issue for you because Something else was going on. Right, which is that

32:49 That three M which is the this massive manufacturing company make they make b everything post it notes to scotch tape and and so so so much other stuff. Um, they also wanted to license some of your products, right? I mean I mean they sold buffing pads too. And I guess your your pads were eating into their market share.

33:10 Yes. And They came down and I toured them around my factory and They see this machine.

33:18 that I built this fully automated machine that makes buffing pads. And I I watch the three M engineers' eyes. Like blow out of his head. And he was like Where did you buy that?

33:28 And I said I I didn't, I built it. He was like, You're kidding me. I was like, No, I built it. He's like, Could you build another one? I'm like, Yeah, of course. And from that point

33:37 The discussions about them wanting to license our technology Or you know. use our buffing pad technology somehow. turned into we want to buy the company. We wanna buy dedication to detail. We wanna buy dedication to detail.

33:52 But There's a problem. Because The license to your hero product. Is

34:00 H somebody else has it in perpetuity. Correct. It's a huge problem. So It must have been

34:06 agonizing when 3M was like, we're interested in acquiring you And then you had to tell them Well, this is the situation and I guess what their response was, Ooh, that's tricky, where that changes the equation here. Yeah, they said we we we're not gonna be able to to to probably move forward. Um so I uh I'm pretty devastated'cause I I know this is this is the future of the company and it and it needs to be sold to to three M.

34:32 Um, but I I'll I'll say this. I didn't have a deal with 3M. I had nothing. They had expressed an interest, and I saw the interest, and I needed to be able to have the ability to do that, but I also needed to keep running my business as if it would never happen. And

34:48 I start looking through the contract, there's gotta be. some way out of this contract, no? So I said, listen, guys, We need to renegotiate this contract because it's really egregious. Like you have the worldwide exclusivity on a product, you have this in perpetuity. You know, and for for minimums that are not even one percent of the market share. Like none of this is fair. And in that negotiation I just need to find a way to make sure there's a clause. That if someone wants to buy me, there's a way out.

35:19 And the way out uh I let them negotiate themselves. I said, like what happens in the case that a company buys me? And they said We want this Amount of money.

35:29 paid to us and we want twelve month supply at a locked in price. You know, and then you know, if if that happens and you get bought out, we'll let you down. Арай, сюмень, exclusive contract. uh which finally I I guess allows you to start talking with 3M about an acquisition. Uh, and I think you negotiated with them for what, for like a year, right? Um

35:52 But uh from what I understand the the back and forth was was pretty heated, right? Like it it this did not go smoothly. No. Three M I had a very contentious negotiation and and due diligence. Um

36:07 The major sticking point with three M was the price. Like they you know. I I I I distinctly remember this. They have this thing called the zip code conversation, and it's when you get to the point with three um that they're gonna buy your business, that they throw out a number and you see if you're in the same the same zip code. And if you're not in the same zip code, the conversation's over. And I told them From the get-go.

36:30 Guys, I I know our sales aren't anything huge. But I'm not selling the company on our sales or our EBITDA. I'm selling the company based on a technology that's gonna change the entire industry. That I own the patents for the next f like fifteen years. But their formula, and I'm sure any acquisition is clear. It's Ibera

36:48 look at you know, multiple of revenue or m you know, or or Vida And they're looking at your business and they're saying Okay, here's a multiple of that. Yeah. Well I told him if you do that The conversation is over and I'll hang up on you.

37:02 And the day that we had our zip code meeting They called me up and I t I t had forbidden them to talk about Ibada. It had to be about the value proposition of what I was bringing them. And I get on with these finance guys, and the guy goes, So, Aaron, based on Ibada, we're gonna and I and I and I hung up. I hung up. And they and

37:21 They called back and said we got disconnected. I said, No we didn't. I and the conversation's over. Goodbye. And the business guy called me up and said, Aaron, I don't understand what happened. I said, I told you, do not come with that number. I'm not interested. If you're gonna base it on Ibada, there's nothing to talk about.

37:37 'Cause uh you know, our business is just getting off the ground. I'd rather keep going and I'll take all of your market share. And then we can talk about a multiple then. So he said, Aaron, what if we doubled the number? And I said, Not even close. He said triple the number. I said you're getting closer.

37:51 He said triple the number and We'll buy some of your accessories. Um we'll we'll make a contract to buy accessories from you as well. And I said, Okay. Now we have a conversation. We we started getting into that

38:04 Like d the depths of like what that number's gonna be. And they were like, Aaron, you need to justify Yeah, we're we have a board, we're shareholders, we're a public company. You need to justify literally every Like

38:16 Asset you have. And so I have to go through a list of everything. The desks The computers The patents, right? Every piece of equipment and

38:26 I have a patent on this thing called scrub daddy. I got a patent for the next, you know, fifteen years for this hand scrubber. And I'm l I'm going through a list of all of these things that I have patents on. I have a patent on a brush that has a an ergonomic shape that helps you clean the buffing pads that I invented called the edge conditioner brush. And I got a patent, I patented an apron. That has velcro cord holders. So when you're buffing the car, the cord doesn't fall and get wound up in the machine that's spinning at 2000 RPM. And how many patents did you have? More than ten or fifteen? Seven or eight at that time.

38:58 Okay. And and you have to justify all c all the assets you have,'cause you you've got machinery that you've created and you've got this buffing pad and and then the hard assets like office equipment, right? You've got to justify two them so they can go to their board and say, Hey, here's what he has. And here's why the company's worth this kind of money. And the patents were like the most important, right? Because You get a patent for you know a set period of time, you own the exclusive rights that you have a monopoly, and you can make your killing in that period of time. And so I'm like, Well, I have a patent on this brush.

39:30 you know, for the next fifteen years. And they're like, Yeah, not interested in that brush. You can just minus that off of the deal. Oh, you thought that brush was worth a million dollars, Aaron? Minus one million dollars. Oh, this apron? Really cool idea, by the way, not interested, minus a million dollars. What's this thing? Scrub Daddy for cleaning hands. What are your sales? Zero? Yeah, minus that off. They went through and carved out. five items and said, not interested in any of them. And they went through this list and literally show me the math and said, Okay, so we're taking these out and here's the number you said you'd sell the company for. And we're taking those items out of the deal, those are valuable, and here and you agreed on that price.

40:10 What was I gonna say? I said oh. I guess you're right. I guess we have a deal. And we'll sell the company.

40:16 I know the I know the number's undisclosed, right? But are we talking about Uh somewhere between uh Five and twenty million dollars? Yes. Okay. We're talking it's double digit millions.

40:30 Okay, so they said we don't need this, we don't need that. This is really what we want. And and among the things they did not need was the scrub daddy. Correct. And they're carving that out of the deal. And did you care I mean, but at this point You weren't like ha ha ha they carved it out. You were just thinking why. I I thought it was I thought it was kind of trash too. Like nobody wanted it. It's sitting in a box collecting dust. Like Yeah, of course they're not gonna buy that. And I think at one point they were like, you know

40:57 We're not paying you for it. If you want to leave it in the deal, you know, sure, we'll take it. And I was like, no, I'm if you're not buying it, we're taking out the deal. I'll I'll I'll start a separate company, you know, I'll make an accessories business and I'll sell my accessories to someone else. Right. So you piece together deal that is acceptable. And you and your partner. Finally, you both get some cash out of this deal.

41:20 So This is the craziest thing. I sign the papers. The money transfers. I literally go from

41:28 Not just paycheck to paycheck,'cause some you know, weeks I didn't get a paycheck. to a multi millionaire. Like Immediately. And it's the most shocking I spent all weekend opening up my bank account and just looking to make sure it was real. Looking at the zeros, yeah. Just to make sure it was real. Uh

41:46 And We had a great we had a great time that weekend. Um Yeah, we went out, did a bunch of great dinners and exciting uh And you had two kids by this point, two little kids. I had two little kids. I think they were three years old or something like that. You're almost forty at this point, right?

42:03 Yeah. Yeah. And uh On Monday morning. I come into the office and I get a call.

42:10 From the lead. M and A guy that we've been, you know, doing the whole deal with. At three M. At three M and he says, Oh my God, you are the luckiest guy I ever met. And I said, Why?'Cause I sold my company to three M?

42:22 He goes, No. Because I'm reading a memo. From the CEO of three M And it says shut down every acquisition, the world's coming to an end.

42:33 And that was September first, two thousand eight. Financial crisis. And the the you know, the entire markets uh just began to collapse collapse. And Yeah, we were Completely insulated. Because

42:46 We had sold the company. Um and I had a contract with 3M to to keep working with them. As a consultant. As a consultant. And and when you're acquired by a company with a prestige of 3M It's life altering. And I was so proud to work with that company and go to headquarters and and then I learned.

43:05 a lot about how corporations actually function, like big corporations. And I can't tell you how valuable that is to me now that I'm running a much larger organization. It sounds like you I mean, it sounds like you really took this job in, you know, in good faith and really like if I'm reading between the lines, you kind of felt like I really want them to know that they made a good decision. I'm glad you said that'cause it I have a lot of passion around Like that's my reputation. And I I felt like you know they bought this business and they did pay a a a huge multiple.

43:38 I mean A very, very double digit multiple. For this for this business. And I was like, I'm going to prove to them that they got not just what they bought, but every dime of it. And and and I also had a consulting contract.

43:52 And and I guess part of the agreement, right? Part of the the the way you could make this deal work was they allowed you to w do your own side work. Like you were a consultant for them, but you could start another business if you wanted. And and I guess they had already agreed that they would buy products from this new business, right? Exactly. So you you hit the nail on the head. I they knew I was starting a new business'cause they were already a customer of it. And so I was running the same factory. for them and

44:20 Under the same roof. I was running a totally separate company. Called uh innovative accessory products. And it was probably the most incredible deal. Ever because

44:30 I don't have any issues anymore. Like all I had to do was run the business. I didn't do the marketing. I didn't do the sales when the machine broke. It was their machine, I called them up and said Your machine broke. It's not my machine anymore. And it's gonna cost, you know, this is how much the new motor is. But I had to go and fix the machine, make sure that that the place was operating. And I had to transfer all the knowledge to them in year one and year two. And I had uh Северо лайк рекварниц. that we we had to achieve in order to get paid out our full earnout.

45:03 And some of them were that We had to hit a certain sales number. Um you know, and combined, like the of my new products we had to sell this amount, or I didn't get paid out millions of dollars. Right. Uh that's where I that's where I learned the frustrations of working

45:20 for a multi-billion dollar conglomerate. Um you know it's it's mired down in red tape and politics and It was extremely frustrating for someone as entrepreneurial and ADHD as me. And so I I There was parts of it that I loved.

45:36 And then there was parts of it that were like extremely frustrating for me. Okay. So you've got this going and you're you know, working for three M, but you've got the side business Uh, and three M was your main

45:50 one of your probably your biggest customer, real really, for that side business. So they were our biggest customers on the side of the business, uh, not our only customer. Um but our biggest. And um You know, interestingly enough, one of the products that wasn't selling was the sponge called uh a scrub daddy that was sitting in the back that no one had wanted. But we were selling the aprons and we were selling the the conditioning brushes. But the scrub daddy you were not selling.

46:12 No, no one no one wanted it. But it was on your mind clearly because You brought it back out again. I guess not to sell, but But

46:21 just to kind of use, right? Tell me tell me w what happened. Because f from what I understand this happens around two thousand eleven, where You kind of Take these scrub daddies that you'd made in like two thousand seven. Out of the box. And you start to

46:35 Play with them again. So it's exactly right. Like they're sitting in the box. Collecting dust. Every once in a while I probably grab one over the years to clean my own hands, but they last a long time. Um, so I wasn't, you know, pulling a lot of them, maybe one or two a year. In two thousand eleven

46:52 My beautiful wife was nagging me to clean the lawn furniture because uh it was gonna be spring soon and you know, the lawn furniture sits out there and gets all like moldy and gets allergy on it and stuff like that. So I started out using a traditional sponge. You know, it's that yellow stinky sponge and it's got that green. Scour all the time. And it scratches. things really easily, and I'm scrubbing this furniture and it's taking the paint off. And she's, you know, out there watching and she's like, You're you're scratching the paint. What are you doing? And I was like, Oh shoot, I can't use this.

47:26 Uh what am I gonna use to scrub this stuff off? And I remembered this box of rock hard scrubbing things at the office, and I thought, you know I'll bring a couple of those home. Yeah. And and so I brought, you know Two or three of them home. And I made a bucket of hot

47:41 soapy water because it was fifty degrees out and I didn't feel like working in cold you know, water. Yeah. And I had never really experimented with hot and cold temperatures with this sponge. It was always in the back of the factory scrubbing my hands with cold water. So I dunked it into this bucket of hot soapy water.

48:00 And it went completely soft. It literally squished down like a regular sponge. Mm. And I took it out and squeezed it a bunch of times and I was like, Well It's what I have, let me try. And I started scrubbing with it. And it started cleaning and and it wasn't it was pretty good.

48:15 But It was fifty degrees out. And so the longer I had it out. the harder it got, it started to crystallize in my hand. And the the cold air was making it rigid and firm again.

48:27 Correct. The cold air. was changing the the sponge into a a harder textured sponge and the harder it got, The better it scrubbed. And then when I, you know, took it with all this dirt and muck in it

48:40 I would put that back into the warm water and it would go completely soft. And I'd squeeze it and everything would rinse out of it. I did all the lawn furniture. and and held it up and looked at it and it looked like I hadn't used it. It was brand spankin' new.

48:56 So that night I go to do the dishes. And uh I'm scrubbing, you know. Around the kitchen.

49:03 With a regular sponge. And I see this thing sitting there. And then I remembered that texture change thing. And I thought Hm. I wonder, you know, does that work in the sink?

49:12 And so I made it warm and I started you know scrubbing some stuff and then I made it cold. When I made it cold, it scrubbed all the burnt spaghetti sauce off the plate in two seconds. And now I'm going into my engineering inventing mode. And what I'm noticing now. Is that everything is round. Pots?

49:31 Hands. Plates. Coffee pots, muffin tins. casserole dishes, they're all round. Why are we using a rectangular sponge with edges? Because this is

49:41 getting all the way to the sides of all these things and it's a perfect shape. So you're you're Cleaning the dishes, right? You've already cleaned the furniture. I mean I would be thinking at this point, I should revisit this thing. This thing is actually

49:58 This is interesting. I mean d is that what you're thinking that night? I'm enjoying washing the dishes and seeing it rinse clean. And I look at it. And I'm like Oh my god.

50:09 If it had a smile face on it. I could clean the silverware on both sides. And I grab a steak knife and I and I cut a smile in it and I stick the s the spaghetti spoon in the mouth and I squeeze it and pull and both sides come clean at the same time. And when I tell you this, I honestly heard the angels start to sing. I like her like I was like

50:33 Oh my God, we missed it. This has nothing to do with you cleaning your dirty hands in a body shop. This is the greatest kitchen scrubbing tool in the world. I just need to market this differently. And that's when Scrub Day

50:49 two point oh was born. Okay, you go back to your office, which is uh you've got your business with your partner. And you've got the the three M. Buffing business. I mean, were there still people uh presumably there are people working there who remembered

51:05 when this when you tried to sell this in two thousand eight And did you say hey guys Do you remember this thing? Well, remember I I I I told her like if you go back into history, I'm I'm constantly, you know, inventing, you know, new crazy ideas and concepts. So people are are always like, Aaron, are you kidding me? And this is a crazy idea. You come up with another one. And then, you know, uh my poor partner, like I would, you know, we'd finally make money. I'd be like, wait, I got a better idea if we do it this way and then we gotta reinvest all the money again and then there's no money. So

51:39 Yeah, I I knew it was gonna happen. And I went to my business partner And he said, I don't like it. I think we wasted a lot of time and money on it before and three M didn't want it. Uh and I'm not interested. Yeah.

51:51 And I say, Well look, it's it we we gotta move forward with it. It's a great product, great idea, and I know it's gonna be successful. And he was adamant. Uh that we're not gonna do anything with it. And I I kind of felt his pain because For eighteen years I had

52:06 made him spend every dime that we ever made in profit plowing it back into something. Yeah. And he could see the writing on the wall. Here, here we go again. Aaron's gonna gonna make us do this. And I was like, no, look, we we each we we'll each put in, you know, like seventy five, a hundred gram. And you know, we'll s we're gonna start this this whole new thing again. We need advertising, marketing, branding, packaging, and we're gonna blow this thing up. And he was Adamant. that he was not gonna do it. And it's really sad story'cause we had our first real blowout fight.

52:35 Ever We had in eighteen years we had never had a fight. We had always gotten to discussions and they could get, you know Hey, I want to do it this way, but ultimately It always resolved.

52:45 Um We got into it. We got into a yelling match. So Well, I I had the right to make the final decisions on everything as the CEO of the company.

52:59 And I pulled out the shareholder agreement and I said Here's the deal. You're a fifty percent shareholder and I'm a fifty percent sh shareholder, but I have the right to make the decision on this and I'm telling you what we're gonna do. And

53:11 Uh and he was He was very unhappy with that. And he opted to leave the company. So I I had to I had to buy him out of

53:22 of uh innovative accessory products. And uh I had to make a go of scrub dieting on my own. And and did that end your relationship? I g I guess you could say it did. Um We we had a we had a really

53:36 great talk. Um the day that I gave him the check and and he departed the company. I did say to him. And I have the exact words, I'll never forget it. We we smoked these cigars that we had bought years ago. uh in Hong Kong we got these Cuban cigars and we thought one day we're gonna smoke these and so I said, Well guess that this is the time we're gonna smoke the cigars and I said, You know, I gotta ask you, we did so much great stuff together and we grew this whole business and you know me. Like

54:01 I I'm never gonna stop until this thing becomes something. And he says, Yeah, I do. I know you. And for eighteen years. You plowed every dime we ever made, you know, into the company. And we finally did it and I have m you know money and a nest egg and I wanna I wanna go and do things on my own. I wanna invest in in other businesses now and

54:21 Um, you know, I I don't wanna like start a whole company over from scratch. And And I said, Okay, I I respect that and and with that, you know, we Shook hands, we hugged. And and he went on his way and I I

54:33 He never really looked back and and we we didn't really keep in touch um much after that. To be honest. Alright, so now you've got A This conviction in this

54:45 thing and in this product and and you're really for the first time gonna go into consumer Product. I guess the first f I've got a bunch of questions about this. I mean the first question I have is you had patented a design, right? You basically patented the design of this Sponge. But

55:03 the underlying material was not yours. You was you you were gonna have to depend on this German company. to give you the material. So In order to protect your product. Did you sign a exclusive deal with them? Like what did you do to make sure that somebody else couldn't just get this material and just cut it in a different shape?

55:25 Exactly. Um I negotiate with the company. And get A an exclusivity. on the material they can't sell it to anyone else but me.

55:34 And it turns out for some very specific reasons. Th no one else can make it. It's literally locked into this one particular facility in Germany. It's kind of like bread. You know, you ever eat bread at a s at a specific bakery, it's always different than the next bakery. And certain bakeries, they make a a special bread and it's like it comes down to their processes and their ovens and their temperatures, but it's very specifically at that facility makes that bread. And that's that's how I can liken it. This company had some technologies that This wasn't gonna be easily copied, and now I own the exclusivity.

56:09 Basically so the the deal was they would send out the raw material And you would cut them into shapes in the US. So it actually started in my own facility. Like I cut foam.

56:20 For buffing pads. I had all the equipment. Sure. And so they would send us the material and we would cut out scrub dyes one at a time by hand. And we created I spent, you know, a hundred and fifty thousand dollars on packaging and logos and Uh, and I created this beautiful product in a bright orange box called Scrub Daddy, and I started calling all of the retailers. And let just pause for a minute. You you cause you y your relationships were with People in the automotive industry, detailing and body shops.

56:52 Like you didn't have her. I imagine you didn't have relationships with like the Walmarts or Target or you know Kroger's of the world, right? Zero. Not only did I have not of not have contact. I had no experience in this market. I mean, I was in the OEM. industrial professional world.

57:09 You know, and my thought was I called Walmart. How far do you think you get when you call the reception of a Walmart? Right. I mean this is two thousand eleven, right? This is early days of direct to consumer, right? This is really when it started just starting to You know become eventually what it be would become. Did y I know you sold them on a website, but did you think all right this is the way we should do it, just let's just try to sell it online. Sure. We made a website, but there was no virality at that point yet. You know, there was not TikTok or Instagram and maybe Facebook was was just getting going and um

57:41 We made a website. I would tell my friends, you know, go and buy a scrub die. But it wasn't nothing was happening. You needed to get into a store. I need to get into a store. Okay, there was so you've got this This.

57:54 product. Where did you get Like who gave you a chance to to put this in a shop? So after I contacted everyone from Walmart to Target to Lowe's and Home Depot and Kroger and couldn't get past the receptionist I went to a a friend of mine.

58:10 Whose family owns five shop rights. It's a local, it's a small chain, maybe 250 grocery stores in the Philadelphia region. And I went to him I said Hey, I got this new product and you know it's this awesome sponge and I showed it to him and he said, Yeah, you know, I I it's not gonna sell. And I said, Oh no, you're wrong. It's a it's a bright yellow smiley face in this neon box, like there's no way it's not gonna sell. And he said, Alright. So he went to the shelf and he just moved some sponges over and put it on the shelf and said, Yeah, we'll see. Let's so you know, give me the price and I told him it would be three ninety nine. Um and he to ask me what, you know, he can buy it for, and I had to give it to him for, you know, less than half. And so, you know, he could make money. And we put on the shelf.

58:53 And I walk that aisle. for 10 hours a day waiting for a customer to buy it. Do you know how many people bought it? How many? Nobody.

59:03 Everyone would would walk down the aisle. wouldn't even turn, their hand would go out and grab the old Scotch Bright sponge that their grandmom's been using and just keep going. And I I went to my friend, I said, Wow, you're right. I mean, no one's even looking at it. He said, Look No one's coming to the store to look for the latest in sponge technology. They're coming here for their eggs, their milk, their cheese, and maybe a sponge and they're and then and they're getting out of here.

59:28 You're gonna get interest is if you set up a little display and do like live demos in the store. And I'll I'll give you some space. Do you want to try that? I said, Yeah. So I built this little booth. With hot and cold water. And a couple pans and a mug. And I wouldn't let you walk by me. I mean, if you were walk I mean, ma'am, ma'am, I I gotta show you this. You're not gonna believe this. And I would do a demo.

59:49 And every person That saw the demo. But one or two. And then after a couple of weeks, people would come back. And tell me.

59:59 I have never had a sponge that I love so much in my life. And my friend came to me and said, Aaron, I'm used to selling like Two, three sponges a day. You're selling a hundred.

1:00:10 You need to go to every one of my stores. All five of them. And sell sponges. But I couldn't do that'cause I was running another business. Right. And you couldn't constantly demo. And even if you're demoing in a one shop, right, I mean

1:00:23 You know, it's not it's not enough to to it's not scalable. Right, no. Not scalable. And I then I did the math and I couldn't even pay someone ten dollars an hour because I'm not making the four, you know, three ninety nine price. I'm selling to him for like a dollar something, you know? They're making all the profit. And I was like, Oh, this is crazy. I I can't even pay someone to do this. What am I gonna do? And it was it was frustrating and I was uh But I was really busy. You know, I was making buffing pads for three ham every day. I was running a factory that runs twenty-four hours a day. So I mean I was I was occupied, but I was really sad because I I felt this had a lot of potential. Um

1:00:57 And then one day. And you remember this is two thousand eleven. I'm in the middle of another recession. And if you remember eleven We're teetering on what they think might be depression. And there's all these stories that are coming out in the newspaper. And the the local paper is called the Philadelphia Inquire here. They have like a million and a half uh followers.

1:01:16 And um They're writing these articles about how bad the economy is and how many people are losing their jobs and that China's taking out our jobs and we might go into a depression. And I I I instantly am like I they need to write a positive story. So I I call up and I got through to an editor and I said Hey, I'm a business in the Philadelphia area.

1:01:36 I'm an entrepreneur and inventor. I'm creating more jobs in the Philadelphia, and I have this new product called Scrub Daddy that's gonna be the greatest kitchen sponge. And they said, Oh, that sounds interesting. They came down. It was supposed to be an hour interview. And I wouldn't let him go. So they spent the entire day with me.

1:01:52 And they wrote an article on the front page of the business section on the Sunday Inquirer that hits a 1.5 million people. And it's my big smiley face holding the sponges, and it says he's the daddy of the scrub daddy. And the phone started ringing off the hook. And I said. Here we go. It's about to start.

1:02:15 When we come back in just a moment, the phones may be ringing off the hook, but sales are still pretty limited and local, and Erin has to figure out how to get scrub daddies. in front of a bigger audience. Stay with us, I'm Guy Raz, and you're listening to how I built this. Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2011, and Aaron is finally starting to sell some scrub daddies because of a story that ran in the Philadelphia Enquirer. And pretty soon after.

1:03:03 He gets a phone call. The guy calls. And says Hey, I saw the article and I I love this this idea. Have you ever thought of selling this on QVC? And I said like

1:03:15 home shopping network? Like No one no one's gonna buy sponges on that. And he said, Oh no, you'd be surprised. You could sell millions of sponges on that. And I was like So do you work for QVC? He said no, I'm a broker.

1:03:27 I said, Well how's that work? He said, I can get you into QVC And then I get a cut of every one you sell. And I said, Well Isn't QVC down the street from me? He's like, Yeah.

1:03:38 I said well Why would I just go there and try to get in myself? And he said, sure, go ahead and do that. Here's my number. And when you can't get in, give me a call. So I went to QVC.

1:03:49 I got booted out the door. In ten seconds, they told me go online and fill out, you know, uh Yep. I filled out the form. I was rejected with in a bun within hours. It said this doesn't meet any of our marketing criteria and wouldn't sell on TV. Best of luck to you.

1:04:06 So I call the guy back. And I said, Well, I can't get in. You know, why do you think you can get me in? And he said Because they say no to everything.

1:04:15 'Cause everyone wants to sell on QVC. So they rely on a network of brokers and we waste our time. an arm a reputation. to bring a product to a buyer that we know could sell on T V. Mm-hmm. And I think this could sell on TV.

1:04:30 I said Okay. We'll give it a shot. So you get this opportunity to be on Q V C and I I from what I read You know, and this is normal. It took you

1:04:39 You know, Some time to warm up. But um like many products go on QVC, it did pretty well. Like it it you you reach a national audience and It it was probably huge. For huge. Right, for Scrum Daddy.

1:04:53 Do you c can you estimate like how much You sold as a result of your T V C appearances? Well To be honest, on the first show I failed. I was like a deer in the headlights and so I

1:05:05 I didn't know what to do. The cameras are all keep, you know, turning on and off and the the host can see I'm nervous. So she took the sponge out of my hand and tried to start doing demos herself, which she couldn't do. I got through no demos. And I think they had brought in twenty thousand sponges, maybe. And we only sold forty percent, which is a fail. And and when you fail on QVC, you don't get a second chance. Like it's airtime they gave you and they just kick you off and And my broker was livid.

1:05:31 And was like You didn't sell enough, they're kicking you off air, and I was devastated. Um I thought that was the end. And uh and I got really lucky.

1:05:41 The broker called me up after I failed and said, I've never seen this in all my years at QVC. He said, I just got a call from the buyer and the producer. And they loved your energy and the product and they wish that, you know, you had more time to talk. They're gonna give you another show. And so I got a chance to sell the other sixty percent. And um every time I went on, they would reorder like thirty to forty percent more. And give me another show.

1:06:06 By the fourth show. I loved it and I was addicted to it. I mean you're There's a high because they're talking in your ear and the producer can tell you, Oh my God, great demo, Aaron. Huge spike in the phone sales. You just got a thousand people on the phone line and like the it builds you up and you finish the show and you sell out of all your inventory and you're on cloud nine, you know, and then

1:06:29 The sales are incredible and then QVC reorders and by the fourth show. I'm directing the show. I'm like telling the I'm telling like the the cameraman which angle to come in and how to show the product right. Wow. Okay, so this was like an and I think a lot of people see QVC and they assume, well, that's it. You're you're you're set, you know, but that's actually not really the case, and I think that even with that success,

1:06:55 You had a tough time getting Scrub Daddy into Re you still like couldn't get it into stores. Yeah, at that point, none of the retailers still would call me back, and the only place we were selling it was at QVC and in five shop rights. But if so so could you theoretically just k have kept doing it on PVC and and even if you didn't get into stores? But was that not an

1:07:17 W I mean, would that have been enough to create a sustainable business? It would have been A spike? And then a saturation point. Yeah. And then they would the minute that you had a bad show, you would been kicked off. Yeah, you need it to get into stores. Hundred percent.

1:07:34 Alright, so So this is where and a lot of people will know this part of the story or or or may be familiar with This is where Shark Tank comes in, because I guess you are a fan of Shark Tank at this point and you you start to think, Well, if I'm gonna get more exposure, maybe I should try to get on Shark Tank. Is that what you start to think?

1:07:53 I think it was the QVC that did it. I started having television experience and being really comfortable in live TV. I would have never thought to apply for a show on television before, but now I'm not watching Shark Tank. like a c you know, a regular viewer. I'm watching it like Oh my god, look at that camera angle.

1:08:11 Can you imagine I could do a demo in front of seven to ten million people? Like It's gonna be the best show ever. And I'm bragging to my wife that I should have been a T V star, and I turned to my wife, I said, I could go on this show and kill the sharks. And I took my phone out and started searching how do you go on Shark Tank.

1:08:27 And I found a website. And I just filled out an application and the best thing was I told them. Here is a link. To my QVC my last QVC show, you can go watch how I do on TV.

1:08:40 And they obviously they responded. And they invited you to to film an episode of Shark Tank. Um I from from what I understand, your hope was that you would do a deal with Mark Cuban that'cause he was the guy that you thought could really help you make this into a nationally known product.

1:08:58 Well I thought we had a lot of synergies, you know, we're both entrepreneurs and he's like the billionaire of the show. And when I looked at the show, it was, you know, Barbara real estate and Damon is fashion and Kevin was, you know, nasty and Hersheyvik was technology and and Mark is like sports and entrepreneur and everybody knows him. He's a celebrity. I'm like, I'm going for Cuban. So you pitch He's not even interested.

1:09:23 In this product. It was a very shocking experience. I mean, I went in extremely confident into Shark Tank. Um, except for I didn't know Lori was gonna be in the show, and the producer told me that an hour before the show that they had sub Barbara out for someone new and this person gets products on the QVC and I'm already on QVC. So you don't need her for that. Yeah. Well I don't need her for that. Um I went in and I I I did what I thought was a flawless pitch.

1:09:50 Um Hershovik. starts out and tells me he doesn't see the retail value. And he's out. And I was like, Are you kidding me? It's

1:09:58 This is gonna be a huge retact. Like I'm like, you know what, he's in tech, he doesn't understand. But then Mark. you know, started telling me that, you know, I was just a one product company. I'm like, You don't understand, I'm an inventor. I'm an ex I actually said to Mark Cuban, You don't understand who you're dealing with. And and he said, look, you may be the scrub daddy, but I'm not a scrub pimp. So I'm out.

1:10:19 And I the only comeback I could think of to that was That hurts, Mark. I really wanted to work with you really bad. Yeah. And with Lori. It became really obvious that we were like kindred spirits. Not only is she on QVC, but she's a product presenter like me, and she has a hundred patents. And I it it instantly made sense for me.

1:10:40 But She actually called me out. And um and and said she thought that my pitch was a fraud. She said I just watched your pitch different than everyone else did, and you use two different sponges and two different weights to show the texture change. I think one of the sponges is hard and one of them is soft, or one of the weights is heavy and the other one's light. And I was like, no, it's a hundred percent real. And she said, Fine, let me come down off the set. And she came down.

1:11:05 standing right next to me, and she starts dipping it into the hot and cold water and all the sharks are screaming, Lori, does it work? Is it work? And she's like face to face with me, and she goes, Oh my God, it's magic. And I'm looking at her, I'm like, Oh my God, you might be my shark. And I can't wait for that to air on the episode. But they cut it. From the entire episode. Because they want to make it more dramatic, probably. Yep, they knew that they knew we were gonna do a deal.

1:11:31 So you end up doing a deal. Well you you you your I think you offered like hundred thousand dollars for ten percent. Yeah. Um and and we sh and I people listening to this show know know that the deals that are brokered on the show that we see are not actually the deals that uh get finalized'cause it there's a lot of negotiation and lawyering and papering and oftentimes it doesn't resemble what uh you agree to on TV, but Lori Griner Clearly. I mean she ca it makes total sense'cause she this is what she did. She m sold things and made things and and invented things on ke and sold them on KVC. She's interested and she wants to do a deal with you.

1:12:07 Absolutely. And and and you're a hundred percent right. The the deals just like every deal, like you negotiate for a house and then you, you know, make a deal and then you go do an inspection and the deals change. So I think you know, Shark Tank is very real like that. When 3M came to buy my business, Then they made an offer, that whole deal changed by the time we got through due diligence. So it's totally accurate. That episode I think you filmed it in earlier in in twenty twelve and it it aired in like October of twenty twelve. And what did it when it

1:12:35 Tell me what it did to your sales. Oh my God, we did a million dollars the night the show aired. Wow. It was the most transformative thing that could have ever happened to the company.

1:12:46 And I already heard the stories, the scare stories that you air on Shark Tank and your website blows up, and so you better have inventory. And you better have backup servers. And we had all of it. I had IT people sitting there watching, and when the traffic got too heavy on one site, they flipped it to the next one. And I had the inventory. Ready made in our factory, waiting for the show. Mm.

1:13:07 And the bedbath and beyond. Person that wouldn't talk to us before called us. And Walmart called us. And Lori was was really gracious and you know, she joined a bunch of the calls and brought star power and they were like blown away and instantly took the product in. And then and then she would have other experiences like with other entrepreneurs that she had and she'd be like, Oh, call the target buyer. I know that person, and she'd give me the number and I And I could just call them and and take it from there. And then

1:13:34 things just blew up and she turned into like monster celebrity and she invested in all these companies and she was like, Aaron, you good? You know what you're doing. I'm like, Lori, I got this. And we're now we're like more like good friends, then she doesn't like get involved day to day with the business. She doesn't need to Yeah, makes sense. All right, so it sounds like at by this point, right, Scrub Daddy is really starting to take off. But meantime, I mean, you are still working for three M. You've still got a pretty big job there. Making the buffing pads. And you're running the separate

1:14:05 accessories business. So How are you doing all of this stuff and Scrub Daddy at the same time. Yeah, so you know by two thousand fourteen. I was out of

1:14:18 Uh horsepower. I couldn't run the three M thing at the same time I was running Scrub Day and I had to make a choice and Scrub dye was exploding and it was much more lucrative and I couldn't control my own destiny. And that was really big for me. And I I told three M

1:14:34 I won't be renewing my contract and I'm moving on. And You know, by that time We really started to understand the retail landscape and we understood

1:14:46 You can't be a one product company. You need to create a brand block. And so even on the show, if you watch the show. Again, we were talking about Mark Cuban. Mark Cuban says to me, Well, you're just a one product company, right? I'm like, Not for long. We got Scrub Mommy, we got Scrub Baby for doing baby bottles. I got a holder. So I was already thinking this way. And then we came out with Scru Mommy. All based around the same foam material? Yes. So Scrub Mommy is a double sided foam. So instead of just being the hard scrubbing texture changing sponge, we put a really soft absorbing sponge on the other side that wasn't cellulose, that didn't smell, didn't stink. So it was still a unique material. And To this day.

1:15:24 Scrub Mommy outsells Scrub Daddy by about ten percent in every retailer. And I'm I'm wondering when you Even when you get them into stores, right? How are you able to like by twenty fourteen or fifteen, like how are you able to get people to

1:15:41 still know what it was because Shark Tank is it there's an audience, right? But if you hadn't seen Shark Tank and you weren't familiar with that episode, And you just pass by the scrub daddy's on Kroger in twenty fifteen.

1:15:55 How did you get people to know? what it did. Like didn't you have a similar problem that you didn't you know, in the shop rights in twenty twelve. So you know, Shark Tank is the gift that keeps on giving. They don't just air once, they have reruns. And then because of our success in two thousand and thirteen.

1:16:14 Like a few months later, they did our first follow up episode where we got into Bed Bath and Beyond. And that gave us another boost. And then the next year we had a huge bunch of sales and they gave me another follow up episode. I've been on Shark Tank almost fifteen times, and almost every year. They do some follow up and then CNBC. picked up all the reruns and started airing them all the time. And so I end up, you know In in episodes all the time on that, and so throughout all that time. We're constantly out there, and then people start uploading clips of me.

1:16:46 From Shark Tank. onto social media, and that gets a life of its own. And then we start going, Hold on, this social media thing, we should be involved in that. And so by like seventeen, eighteen, we start posting on Instagram, TikTok, Facebook. And Yeah.

1:17:01 Explode. Yeah. I mean I've we have almost five million followers on TikTok now, almost a million on Instagram, and some of our videos Get twenty million views. And and the videos that you also like one of your strategies is w I guess there's like these clean influencers, what are they called? Clean talk or Clean Talk yeah. Yeah. Like there's this whole I don't I'm not on TikTok, but there's a whole world like of people who just

1:17:25 Like clean stuff, right? Like influencers who It makes sense. There's influence over everything. And uh and you got into some of these people pretty early. Yeah, so the influencer marketing, I'm gonna credit my best friend, who is my chief strategy officer here at Scrub Day. He found two or three of these influencers who have become mega

1:17:43 mega influencers in the cleaning space. And you know, you know what happens in COVID, people start going crazy about cleaning. And they're watching these videos like religiously And these influencers take us to the next level. And so Basically, it was like a combination of the Shark Tank reruns and And then

1:18:03 you start to invest in social media and that and and so year over year over year you're just growing. Every year. I also started to do A lot of podcasts, a lot of interviews, and I also got myself

1:18:17 onto like every major publication. Lori got me onto the view. you know, Fortune magazine did an article. The Wall Street Journal did an article and put our sponges on top of a whole bunch of Scotch Bright sponges and said three M fights off upstart. And so all of this You know free media. All of it.

1:18:38 Yeah, and I consider social media, even though we paid, you know, some influencers, it's still very, very inexpensive and it gets you Mm. Broad. Broadcast to everybody. I I'm curious, I mean did you I I know that you sold

1:18:52 your previous business to a part of three M that was not in household cleaning supplies or consumer products. Did 3M a at at any point? Come and say, Oof, we blew that one, or or hey, should we you wanna talk again, or anything like that? So in uh two thousand fourteen when I

1:19:12 Resigned. I said my goodbyes. And they said Aaron, the um The home products division would like to talk to you.

1:19:20 I said, About what? And they said, Oh, I'm sure you know about what And I went and met with them. And they were all Loving Scrub Daddy. And It looked like that was going to lead.

1:19:33 to another acquisition. And I was more than happy to entertain that. I felt like three M was my friends, like family. And unfortunately One day the lead M and A person called me and said

1:19:47 We have to stop all of our discussions. The VP of the home products Division who loves you and loves your product and sees the vision, they got promoted to another part of 3M, which happens all the time. And they brought in someone new. who has no experience in the home products care and their first directive was shut down.

1:20:07 Every acquisition until I understand the business. And they stopped talking to us and gave back all our diligence information. And that was it. Well. I I I know that on a few occasions you've been public that you were like ready to sell.

1:20:24 And I think even in twenty twenty you told the Philadelphia Business Journal that you were ready to sell and T tell me about that. I mean, uh w uh has the right offer just not come around? I mean D'cause it sounds like maybe you would still sell today if the right offer came around. Everyone has to be that's one of your strategies, right? If you're not planning an exit strategy, I don't know what you're doing in business. There has to be some succession plan. Uh, I won't be here forever. I don't foresee my children running scrubbed outdy. It's uh far too uh complicated and sophisticated a business. And my daughter wants to be in education and my son is a social media influencer um and and hockey player. So

1:21:02 This isn't for them. Um, so what are we gonna do with it? So yeah, I'm I'm always open to sell. It's just a matter of the price. And you know, to date, um, we haven't gotten the right offer, although we know that we've been valued in multi-billion. And selling this to like

1:21:20 X Y Z private equity firm. doesn't tick it for me. Uh, and I have no interest in that. This this needs to go to the right home at some point, and that needs to be one of the largest companies in the world in the CPG space. That needs to be a Procter and Gamble, a Unilever, a Clorox, a Hankel. A three M.

1:21:39 It could be any of those or I'm left with The last piece which is we just go public. Right. How do you

1:21:47 Protect against copycats. Huh. That happens every single day. Um so the first thing is I told you our material is exclusive and really only one company in the world knows how to make it and can make it. So we've every day there's a Chinese knockoff and it's a piece of junk. So you know, a lot of people will try to copy us. Uh you can't get the smiley face, right?'Cause I have the patent on it, but they'll make some other shape, you know, and and um

1:22:13 When you copy our trade dress, which is you know our packaging designs or our color schemes, I will actively pursue you and defend vigorously. Um and so One way we protect it is we maintain our exclusivity. And we only sell the top. like products in the world and we we keep to the fact that Scrub Daddy if you want a cheap one dollar sponge, I'm not your company. Now

1:22:36 We also started seeing This is recent. Last year, we started seeing counterfeits. And I mean real actual counterfeits. That look just like it. Dude, it was my name on the box. It was it said scrub daddy, scrub mommy. It had my address, had my patent numbers on it.

1:22:52 They literally made a scrub daddy box, but they put cheap you know, Chinese sponges inside of it. And they were passing it off all over Amazon as if it was ours. We hired private investigator. We found the company in China. We sent a uh guy with a camera in on his lapel. He filmed the whole thing. We went to the Chinese government and said, This is fraud, someone's copying our brand, and they agreed and we raided the facility. and took all of their inventory.

1:23:20 And so We think that sets a good precedent. Some people start to see that we protect our brand. Uh and We'll continue to do that. Anywhere that uh it's possible.

1:23:31 You you have like uh I think over what But two hundred fifty employees or three hundred employees now? Aaron, you are I mean, you've been at this for a long time, right? what do you I mean, how long do you wanna keep running it? I mean it is it i uh i is it something that you wanna you could do for 10, 20 more years? Do you want to if you if you did sell it, would you start another business? Like, what are your

1:23:59 Sort of. ambitions at this point. So as long as I find it still fun and entertaining and interesting, um, which I am I'm still developing new products all the time, getting new patents. Uh we just got our eighth patent on a toilet scrubbing system that's coming out this year. Um so as long as I can keep doing that and I'm enjoying it, um I'm gonna I'm I can keep doing it until the right

1:24:24 Suitor comes along. Um and if it's not that I would consider going public, and at that point I would step down. I'm not I don't want to run a public company. It's far too much red tape for me. Um And as far as, you know, starting other businesses, I've already done it. Um I'm in the middle of uh a a brand new startup uh making this real unique hockey stick called Tovi T O V I. Um it's a revolutionary hockey stick that we have NHL approval for. And I love the sport of ice hockey. I've always loved it.

1:24:53 I've always played it. Um and I love to change that sport forever and so I've already started What will be my next business should I ever exit scrub diet. But

1:25:04 Until this becomes like too stressful and until my wife tells me that uh she's tired of sitting home by herself a lot of nights. Uh I I can keep doing this. When you think about Everything that's happened to you and You know

1:25:18 selling the three M right before the financial crisis and Yeah, even even selling to them and and then taking this product as part of the deal. Like them y allow you know you you got to keep it. They didn't care about the sponge

1:25:33 Yeah. And then where you are now. How how much of that this where you are now, do you attribute to the work you put in and how much do you think had to do with Getting lucky.

1:25:46 So I think it's the definition of luck. Right. And I think you know Luck would be someone just coming to my door and dropping off a boatload of cash. Like that's luck.

1:25:56 So I mean I attribute You more than ninety percent. is hard work. And then there's just like Great fortunes. Like you know, like

1:26:05 You're just fortunate. Because you worked that hard to put yourself into a position where you might get lucky. You know. In twenty twenty Um

1:26:15 I saw the writing on the wall and I got scared and sent everyone home and said, Well our working problem, we'll shut the factory down for however long And then I got letters from Walmart and Target and Lowe's that said, You're considered a essential product in the home cleaning business. And you're not to shut down. In fact, we're increasing our orders thirty percent. Like

1:26:35 We were the unintended beneficiary. Of like a pandemic where cleaning becomes paramount. But is that luck? Well, no, I created a cleaning product and I put a lot of time, money, and effort into making this brand. And because of that, I was in the position that

1:26:52 One day there happened to be a pandemic and cleaning became Essential. Yeah, I mean it it's it's You know, you were determined to make this work. Like you knew it was gonna work, but still, like

1:27:05 Uh I mean it on first glance, like the response was this is ridiculous. This is a smiley face sponge. Like what? It doesn't make sense. That's what Kevin O'Leary said on Shark Tech. He said, You're kidding me, a sponge with a smiley face cut out, that cost two cents to make in China and I was like

1:27:20 You're missing the whole thing. Every single person in the world uses some kind of sponge or cleaning tool. And so the market share's so big. that even if I didn't get the whole market. This was still a monstrous opportunity.

1:27:34 Like I knew this was gonna be something huge. And I would have put All my effort into it. Which I did.

1:27:42 That's Aaron Krauss, founder and s'io. of Scrub Daddy. By the way, it's actually one of the most successful Shark Tank companies. Which has led to some regrets from the sharks who did not do a deal with Aaron.

1:27:58 I'm very close with Damon John. And he's always making fun of the fact that he didn't get the deal and he he was on the Drew Barrymore show and she's like, uh you ever missed you know ever regret something? He's like, That stupid sponge and like I know he's kidding because he uses Scru Daddy and he loves my barbecue brush and we talk all the time. And uh all the sharks uh on my fiftieth did a video and gave me a happy birthday, so nice. It's pretty cool. 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 as always, it's totally free. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, sign up for my newsletter at guyros.com or on Substack.

1:28:43 This episode was researched and produced by Chris Massini with music composed by Ramtina Rablui. It was edited by Neva Grant. Our audio engineers were Patrick Murray and Jimmy Keeley. Our production staff also includes Alex Chung, Nor Gill, Casey Herman, Sam Paulson, Catherine, Carrie Thompson, Ramel Wood, John Isabella, and Elaine Coates. I'm Guy Raz, and you've been listening. to how I built this.

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