How Sarah Kauss bootstrapped a billion-dollar bottle startup
If you work in tech or have attended a conference over the last ten years, you’ve likely come across S’well water bottles. Sarah Kauss, an accountant turned entrepreneur, invented the iconic, insulated vacuum flask as a sustainable and stylish alternative to single-use plastic water bottles. Sarah launched the product in 2010 with $30,000 in savings and grew the company to over $100 million in revenue annually while turning hydration into a form of sustainable haute couture. And she did it without a drop of venture capital.
Today, as an advisor and investor, Sarah helps other founders navigate the slippery terrain of entrepreneurship.
I recently spoke with her to see what advice she had to offer. Here are a few refreshing lessons for those thirsty for guidance.
You have to sell everyone – even muffler factories
Sarah searched far and wide for a factory to bring her vision to life. Most weren’t interested in working with her, but she found a manufacturer that produced car mufflers and sold the owner on the idea that auto parts and designer water bottles weren’t all that different. It would have been easy for this industrialist to pass on Sarah, but her story inspired him to take a chance. Most startup success stories have an instance of a founder being assisted well before they deserve it. Find yours.
Startup Founder = CEO, designer, and door-to-door salesperson
Founding a startup is far from glamorous. Sure, your title might be CEO, and you have the final say on the product design, but you must also take on the painful job of selling your product and deal with all the rejection that entails.
In the earliest days, Sarah took S’well bottles from store to store. If buyers were skeptical, she would offer to leave them behind on consignment. Some vendors said yes, but even the failed sales pitches helped Sarah refine her story, learn what motivated decision-makers, and even led to new product ideas or industry insights.
Smoke and mirrors are your friends
Sarah put forward a professional image when selling her product, but she was actually learning on the job. For example, after being stumped by a potential vendor who asked about “case pack” availability, Sarah Googled the term after the meeting and was prepared for the next sales call. When prompted for an invoice, she promptly created one in Excel. Active listening and lightning-quick learning can help you maintain an image that you have all the answers – even if you don’t.
Early on, hire for energy, not education or experience
“Cheap and cheerful” should be the chief criteria when hiring early on, according to Sarah. Assuming you have a clear vision for your business and can break it down into manageable tasks, you don’t need to hire experienced executives at the earliest stages. And you may be surprised at how quickly these folks can grow – an early shipping clerk worked her way up into the senior ranks of Sarah’s operations organization.
Don’t make bottles; make fashion accessories that hold water
Framing the product is one of the most important decisions you’ll make as a founder. Per Sarah, S’well didn’t make water bottles; they made hydration fashion accessories. This a critical distinction that convinced a buyer at Bloomingdales, who began to stock the line after initially scoffing at displaying a water bottle next to Burberry.
Stay close to your camp counselor
Sarah was named to Fortune Magazine’s 40 under 40 list in 2014, but it wasn’t a PR firm that helped her snag that honor, it was one of her employee’s former camp friends. It turned out that the person who taught Sarah’s marketer how to canoe was now in charge of curating this influential list. Networks are powerful things – don’t be shy about using yours.
You can get to $1M in revenue without a single employee
A great test of entrepreneurial aptitude is generating a million dollars in topline revenue without a team. Sarah bootstrapped her way to $1M in revenue and reached $10M before she had an experienced head of sales. It’s always worth asking what you can do today with only the resources at your disposal.
Technical skills are essential, but so is a willingness to fly coach
As your startup scales and revenues grow, hiring people who clash with your culture will be tempting because they bring relevant skills or relationships to the company. Unfortunately, accelerated hiring is almost always a mistake. For example, Sarah found an exceptional exec who checked all the right boxes, except that they wouldn’t fly coach. She nearly hired this person, but their insistence on this seemingly small negotiating point foreshadowed a whole host of potential problems.
You’re never too senior to schlep
Sarah modeled the kind of scrappiness she wanted to see at S’well. Most execs who can travel to the Sundance Film Festival are there to hobnob. Not Sarah, who schlepped boxes through the snow to set up a sample table before networking.
Retail is a marketing play, not always a revenue generator
A warning for founders who dream of seeing their product on a store’s shelves – it is exciting, but always remember that gross margin is what drives your business. Sarah’s POV is that retail is almost entirely a marketing play. In most situations, you’ll be lucky to break even, and in many cases, startups will lose money when selling to chain stores. Payment terms will be poor, and fees will drain your coffers. Retailers provide a fantastic route to introduce your wares to a broader audience, just know what you’re getting into before you sign the contract.
Partners > Customers (in some cases)
Partnerships with star showrunner Shonda Rhimes and the TED Conference, drove no revenue but put S’well bottles in the hands of some of the most influential people in the media, which opened other doors in turn.
Similarly, S’well scored a partnership with Starbucks giving millions of potential customers their first touchpoint with the S’well. Again, the bottles sold reasonably well at retail, but the real value was the brand awareness.
Be open to this sort of deal, but remember that you can’t pay invoices with exposure!
Look for Value-Added Retailers
The best sales partners will make it so you can spend less time selling or charge more. Often, these will be smaller partnerships in sheer volume but will provide a superior gross margin and ROI.
For example, collaborations with beloved fashion brands Lilly Pulitzer, Roller Rabbit, and Swarovski were much smaller in reach than big box stores, but the collaborations allowed for a higher selling price and more revenue with a side benefit of some exposure to fashion-forward audiences.
Ernst and Young, EY, who Sarah landed as a client when she had to find a buyer for thousands of yellow bottles, became a great customer who purchased huge volumes year after year and required very little support.
If you succeed, you will outgrow customers. That’s ok!
There may be a time servicing an account will be a net drain on your business, even if the financials are ever so slightly accretive. Because Sarah bootstrapped and didn’t have pressure to keep her topline artificially inflated, she sometimes parted ways with customers when they no longer provided a reasonable ROI.
I can’t recommend following Sarah on Twitter, Linkedin, and Instagram highly enough. She’s an extraordinary entrepreneur and this post is just the tip of the iceberg of her wisdom.
