Join us for VISIONS Summit NYC  - June 11
April 23, 2021

"Headless with a Brain"

Bryan Mahoney and Henry Davis from Chord join the show today to chat about their name change from Arfa to Chord, headless commerce, and the technological evolution.

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this episode sponsored by

The Big Pivot: From Physical Products to Headless Commerce

  • The core idea of the pivot from physical products to software was the basis of our piece in Insiders #070: Phenomenological Brands, which is how we booked Arfa (now Chord) to the Show.
  • The Chord team’s background in deploying technology at Glossier informed the need for unique eCommerce experiences, and headless represents a shift from the template-driven sameness of eCommerce today, to a new limitless future
  • Henry breaks down a new announcement, the name change from Arfa to Chord, a stronger  focus on business software, as well as acquiring business intelligence company, Yaguara.
  • Arfa was rated as #4 in our “Amazon Prime Challengers” category in our Spring 2020 Nine by Nine report
  • The technological evolution of headless commerce allows for a fundamental revolution in direct to consumer 
  • “To make real value at some point, you’ve got to walk away from something that's worth something.” - Henry 
  • Proprietary competitive advantage is a meaningful way to make your entire business better, and what will impact everything else.
  • “We need to move the conversation beyond build versus buy. It's really buy the right thing and then build around it. And if you can't build around it, then it's not the right thing.” - Bryan M.
  • “Our very unique position on this is not just about headless, it's about the brain as well. Having the tools is half the battle. Knowing what to do with them is the other half. And that's our very strong position that we arrived at as operators.” - Henry 

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Phillip: [00:00:14] Hello and welcome to Future Commerce, the podcast about the next generation of commerce. I am Phillip.

Brian: [00:01:13] And I'm Brian. And today we have two incredibly interesting guests with us, Henry Davis, COO and Chairman of Chord, and Bryan Mahoney, CEO of Chord. Welcome, Henry and Brian.

Henry: [00:01:29] Thank you for having us.

Bryan: [00:01:30] Thanks for having us.

Phillip: [00:01:31] It's not going to be confusing at all to have two Brians, Brian.

Brian: [00:01:34] Oh, my gosh. Wait. Who are you talking to?

Phillip: [00:01:37] Yeah, exactly. For folks that may not know, Chord recently had some news. Henry, would you like to help orient us around what the news was? Because you might be familiar with Henry. I mean, you should know Henry Davis by his name. But tell us a little bit about the news and what brings you to the show this week.

Bryan: [00:01:56] Well, thank you for the chance to share. We announced very recently that we had changed our name from Arfa to Chord as a result of focusing our business on software offering, which is around Headless eCommerce, a product for direct to consumer businesses. And as part of that announcement, we also announced that we had acquired a business intelligence company called Yaguara and raised an 18 million dollar Series A. So lots of announcements all at once. And where that leaves us is as Chord, this Headless eCommerce software business, which Bryan and I have co-founded together and we've worked together for years across a number of things. And Arfa was the most recent, which is now Chord.

Phillip: [00:02:50] Wow.

Brian: [00:02:52] Congratulations.

Phillip: [00:02:52] Yeah, congrats on all of that. We'll dig into some of that. For those who may not know you and your pedigree, I mean, we have to say, I mean, you come from a long lineage of great success in the world of direct to consumer. Of course, I'm mentioning that you were President and COO at Glossier. And so when you went off to start Arfa, it was such a huge story and one that we tracked and certainly one that we've mentioned and will probably come up once or twice during this show. So this move to Chord is quite notable, not just because of what it is that you're doing and the validation you're bringing to the world of headless eCommerce and the world of direct to consumer, but also because of who you are. Is any of that too bombastic? Did I step out of, did I say too much, Henry?

Henry: [00:03:46] No. Only the sort of flattery of who I am, which is the only other person I hear that from, is my mom. So I appreciate it. Thank you. But actually, in some ways it's notable, and I'm really happy to have a notable moment to talk about. But actually, when I look back across my direct to consumer career, which started many years ago, although time is a construct these days, but it started many years ago when I was a venture capitalist. The reason I left the cushy world of nice salaries and business class flights and venture capital to join what was then a very early stage business, when early stage meant early stage... I feel nowadays the lines are all very blurred and check closes are much bigger. But the reason I left venture capital to join Emily and then to launch Glossier was I believed that direct to consumer was going to usher in a new way of brands and customers interacting with each other. Because brands could now communicate with customers at scale and deeply understand them, what it meant to be a brand and what it meant to be a customer were going to fundamentally change, and I'm very proud of what we did at Glossier to push that forward. The reason I started Arfa was a continuation, or the reason I wanted to start off with Bryan and some others was a continuation of that thesis. Look, we are engaging with people in new and interesting ways, and that is both changing what it means to be a brand at the same time as it's changing what it means to be a customer. The idea of intersectional identity was so much more prevalent then. It's even more so now. People want to be met where they are and seen for who they are. And brands now have the ability to understand those people and what they want and build businesses that can meet those needs. So Arfa was started on the basis that there were going to be many, many, many more brands that are focused on much more targeted groups and their underserved needs. And so we set out to create a platform that would allow us to launch a bunch of those brands. What we realized in 2020 was the thesis is right, and it's happening way quicker than we thought. And in large part, I think 2020, for all that it was, was a huge catalyst of it happening quicker. And if it's happening way quicker than we thought and we've got all these tools, particularly in technology, and Bryan and I had worked together through all those years of Glossier as well, so we're very aligned on those points in that thesis. We've got all these tools that can help these brands. Why don't we make those tools available to all the brands and try to help everybody who's trying to find and serve those more targeted groups and facilitate what we see as the ultimate evolution or revolution in direct to consumer?

Phillip: [00:06:52] I think that's such an interesting point there, which is... And Bryan Mahoney, I'll kind of direct this over to you. None of what has been possible over the last five years from your time at Glossier and what you've built at Arfa and now Chord would be possible without your ability to build the tech in which you engage customers in that channel. The question that comes up over and over again, you know, you look at 2PM's DTC lists and you say, "Why are there so many at the top with a custom cart? Aren't carts just a commodity at this point? Isn't the differentiation just brand? Why build software?" I guess that's the question that someone would come along and ask.

Bryan: [00:07:38] Yeah, it's a great question. And Henry said before this sort of like that we have no notion of time these days. I am feeling a little bit nostalgic today. I look back through my calendar. I think Henry and I met nearly seven years ago, almost to the day. I think he'd been on the job at a glossy for exactly a day. And maybe his the first order of business there was to find a team to design and develop that very first version of Glossier. And his first call was to me, and I was working at an agency at the time, an agency that really focused on direct to consumer infrastructure, and we largely did it in a custom cart and headless sort of way, and it's no surprise we're still working together today because we just really hit it off. We saw the world the same way, and it seemed like we'd known each other sort of forever. And after that call, not a long time after Henry and Emily came to Montreal and where I was stationed, and we started to talk about what Glossier could be, and I remember him saying, we have this opportunity to build the channel of the future. And I was like, "That's really interesting. I've never heard of eCommerce referred to as the channel of the future," and as we're talking about the thesis being right and the transition from what we learned at Glossier to how we applied that at Arfa, it fundamentally has remained the same, which is how do we use technology in a way that the customer's interaction with it becomes a part of the brand's value prop. And a few years ago that was needed to build a custom cart. You needed to build a custom cart because that was the only way you could decouple that customer experience from this more monolithic approach that most eCommerce companies took. So you either built it yourself or you ended up using a tool like Magento or WooCommerce or even Shopify, which was obviously popular in 2014 and increasingly popular today. So I look at those custom carts now, and I look at that 2PM list, and I think it's not just about trying to create a customized checkout experience because you're absolutely right. That has become commoditized. It's really about I want to own the entire experience of the surface area of what my customer is seeing and touching and feeling across all of my channels. And that means rolling your own solution. Hasn't always been easy. When we launched the very first version of Glossier back in 2014, it was a single page application powered by APIs, what is commonly referred to today as headless. It just there wasn't as much momentum behind the term. And we did that because we had aspirations that we were going to build the channel of the future.

Henry: [00:10:28] I think also to jump and piggyback on the question around the Power List. there's an evolution and time based answer to that, too, evolution of the industry and time based answer, where the companies at the top of the list, for the most part, there are some outliers to this, but for the most part, are the ones that have been around long enough to build up a head of steam to get to the top, that Power List. The era that they were born in was one where technological differentiation was key to being a direct to consumer player. So this is a 20... I'm going to guess from whenever Warby started in 2012 through to 2015/2016, there was a big competitive advantage in getting out there with technology that was leading the game.

Phillip: [00:11:16] Yep.

Henry: [00:11:16] Shopify caught up and made all of that available to everybody. So from 2016, 2018/2019, even to today, Shopify has done an incredible job and built an absolutely huge business on the back of making all those tools available to everybody. [00:11:35] We've now reached the point where everybody has the same tools. And what that means, I think, I'm not sure I said it before when we were talking about that 2PM list, we're sampling on the dependent variable. The Power List sort of is sampling on the dependent variable. That's spoken like someone who understands math, which I don't. I have a degree in history. And if you look at the First World War, what happens when you've got people fighting each other with exactly the same weapons and the same tools and the same tactics is no one wins and everybody dies. And that's sort of where we're at in direct to consumer at the moment. And it just so happens that the technological evolution that's taking place on the headless side will allow for a fundamental revolution in the way that people do direct to consumer and do eCommerce and differentiate. And we view this as fundamental as the second generation re-platforming of payments. So there will be businesses created in this space that look like Stripe does to PayPal. [00:12:44]

Brian: [00:12:47] I want to go back to something that a Bryan said earlier, and it relates to my thought process, at least my perception about what made Glossier and then eventually Arfa so special and so exciting, which was, it seemed built into your thesis that community building and connection to customer and product ultimately resulted in the best possible products and the best possible experience. And that process seemed part of the DNA of Arfa. And Bryan just said something to the effect of that has to be built into the technology and tools. Is this sort of part of that next evolution as well? What does that actually look like practically in terms of technology to help facilitate that that process?

Bryan: [00:13:44] Yeah, it's a great question, and we used to get this question all the time at Glossier. How do you do content and commerce? Or how do you do community and commerce? And there is no off the shelf piece of technology that's going to allow you to do it. I think you need to have a willingness to meet customers where they are. There needs to be a real emphasis on creating those moments, using content to deepen the relationship with the brand. And that's where I think this notion of, it's one of the true advantages of a headless architecture is that you can be nimble, you can be opportunistic, you can create community in a certain area. And then you can go there. You can show up in a more meaningful way. But  [00:14:30]you need to have like the appetite to do it and then the tooling, but you need to be willing to really shape those tools, and I think like what we've seen as people try to to put the ability to do that into a box where you're not really thinking about how to apply the tools, you're rather thinking about how to customize them, like how to change the color of the logo, is that everyone's sort of content building or community building looks the same. And that's not the magic. Like, if you look at what Glossier did so well, they really celebrated the connection they had with their customer, and it wasn't magic, it wasn't powered by Al or ML. It was really just like grassroots getting to know our customers, using technology in ways that was surprising and somewhat unexpected, but not groundbreaking. It was just hard honest work. [00:15:37]

Phillip: [00:15:39] I appreciate you indulging our having to take a trip down memory lane to kind of explain the context in which you make this decision. This is not a light decision. Where were you, and maybe you could replace some of the conversation that you had in the room where it happened... Hamilton reference. Where you two had a conversation, "Hey, we may have something here that's bigger than launching the next brand. It's another opportunity. Do we do that in parallel or do we shift mission? What was that conversation like to make this decision that you're taking a hard left turn? Because that's how to us who, to tell you where we were, we spent the summer last year putting together our first quantitative and qualitative assessment of the totality of the direct to consumer space. It was a report that we called Nine by Nine. And when we did our qualitative interviews, five of the expert interviews mentioned Arfa by name saying it was like the future of brand building and community building, some very notable people that we trust. And so we highly rated Arfa in that report as this is a great... Basically, I'm asking, why did you make us look bad by putting you on a list and then changing your mission?

Brian: [00:17:10] {laughter}

Henry: [00:17:12] {laughter}

Phillip: [00:17:12] Number four, by the way, in Prime Challengers, challenging Amazon Prime and people's expectations of how they should engage in retail.

Henry: [00:17:21] And I remember, I actually remember seeing that and being very proud of it. And I hope that actually we're going to make you look even more right. Yeah, more right. And the point being, we are doing the same thing with the same fundamental thesis, just making it available to more people. And ultimately, you ask where were you when this happened.

Phillip: [00:17:48] Yeah.

Henry: [00:17:50] I don't want to over romanticize that this happened in one moment. Where would like "Eureka! Let's go do it." Obviously there were a lot of hard conversations that happened. I do remember one in particular because I was on vacation, whatever that looked like in 2020. We'd rented a place last minute on Airbnb, which ended up being there was a reason it was available last minute when we had bats flying around our bedroom, so I remember it very well because I took a call from that room, which subsequently was sort of bat infested later that night. And the sort of as close as we can get to a Eureka moment was we've got this tool that can fundamentally bring our vision to a huge market. And that is just such for people who spend most of their careers in the consumer side of DTC, the market opportunity is so much bigger. It's such an order of magnitude bigger. And the conversation sort of had a two sided lens to it. One was well we can really make the impact that we wanted on a bigger scale. So sort of scale, so let's call that the more generous side of it and then the more selfish side was we're never going to get credit for that if we have the brands ourselves. We're always going to be looked at and valued as a brand business, which would not allow what we think is the more fundamental part of what we have built to flourish. And so that was the moment where ultimately, we decided that focus was important. [00:19:33] I want to be clear that that decision is tough and not taken lightly, because you're talking about your babies and brands, ones that hadn't been launched yet, that we'd still put a ton of time into and effort and really felt strongly about and believed in the process by which we'd got to where we got to. So it was a conversation after that that I remember as well with one of our board members who said, "To make real value at some point you've got to walk away from something that's worth something." And that stuck with me. And I think every business that's done well will have a version of that story to tell. Ours involves, you know, a fancy branding exercise that makes it seem different than if we stayed the course with the name, but fundamentally, I think every business ends up having to walk away from something valuable to pursue something else they believe can be more impactful. And that's what happened for us. [00:20:42]

Bryan: [00:20:42] And we found ourselves in a position to be able to have that conversation, because underpinning all of this was the reality that we had built this platform. It's not like we had learned an awful lot through the creation of brands one and brands two and thinking through the eventual launch of brands three through ten that we like, "Wow. There's a real need for software here." Before we even started working in any of the brands, we started working on this platform. Very early in 2019, we had a vision for creating something that at the time was going to be proprietary, but that was the first thing that we worked on. And so I love how Henry said to create real value, you need to walk away from something that is valuable. We had two things that were valuable, and I think there was some consideration given to can we continue to try to do both? But given the stage at which we were at and some of the advice that we got, our ability to go and create meaningful impact, we felt like we were improving our chances if we focused. And focus meant that tough choice of saying goodbye and finding a home for those brands and really just doubling down on the software that we have been creating since the earliest days of 2019.

Henry: [00:21:53] And to bring this back to Amazon Prime, because I think I want to do justice to you here. My whole antithesis to Amazon in general, and I'm not sure Amazon as they were, actually I think there's a tremendous amount of growth there. But I think Amazon's growth directly fuels the growth of the anti Amazon. Amazon commoditizes everything to make it things. How do I get you things as cheaply and quickly as possible? And that will necessarily lead to the side of consumerism that is about feeling, and that's something we believe in very much. And that's why we're very focused on customer experience and customer understanding and how you do that in a way that provides the counterbalance to just getting your stuff. And I used to give this talk in the days when we all got in rooms and listened to each other. And I'd ask the audience, "How many of you are going to get home and find a brown box on your doorstep and not have a clue what's inside it because you forgot what you ordered?" And that's the point. That is valuable for certain things. But equally, I also sometimes want to get home and find a box and know what's in it and be really excited about it, and that's the side that we believe in. So I think...

Bryan: [00:23:18] There's room for both.

Henry: [00:23:19] Exactly. And I think the anti Amazon side is directly fueled by the growth of Amazon. So they're not necessarily at odds with each other in that regard. But I do believe that we will prove you right is the short...

Phillip: [00:25:16] I love that your mission is going to be to prove us right, is what I heard you just say.

Henry: [00:25:21] Pretty much.

Bryan: [00:25:22] And it's recorded. There's no going back now.

Brian: [00:25:25] It's on the internet forever.

Henry: [00:25:27] Yeah.

Phillip: [00:25:28] I have to ask a question. As a technologist, I spent a decade as an engineer building eCommerce platforms from scratch back before we said "direct to consumer." It was just called eCommerce back then. I have to ask, do folks launching brands today go in search of the word headless? Like is headless a thing that brands are seeking out, or is that something that technologists build for other technologists? I'm curious, why lead with the word headless commerce as a service?

Bryan: [00:26:02] Yeah, it's a really good question. I think it's still a term that is somewhat misunderstood. There's clearly an awful lot more interest in it now. Technologist first, of course, because it's less about, in my mind, it's less about headless and it's more about API first. And one of the advantages of that is just the sort of the buffet of point solutions that now exists that are really excellent and that can take care of functionality that has largely been commoditized. And if you build in an API first way, it means that you can really use the best parts of those platforms, but still bring the best parts of your brand to them. That wasn't always the case. So I still think that you have the technologist as purist that want to build in that way, and so heedless is right, and headless is the sort of like the buzzy term that they can use to sell through to the rest of the organization. The good news for us is that given all of the recent interest and investment in the space, headless has moved up the food chain within the organization. It's no longer something that gets exclusively sold in through the technology or engineering department. You are starting to see, and we're chatting with founders of brands that haven't launched yet and that believe that they want to have a single place to tell their stories. They want to be able to syndicate that content everywhere. They want to be able to have a deep understanding of their customer. They want to have portability. They want to allow their... They want to make an infrastructure investment today that they can continue to to bend as their business grows and scales, but never need to re platform. And the way to do that is to lead into API first. So we are starting to see the evangelization of the approach start to make its way throughout the organization. But for better or worse, it is still better understood within the walls of the technology department.

Henry: [00:28:13] The branding person in me likes "headless" because we get to use it to show our point of differentiation and our perspective that's slightly different to the sort of mainstream, if we can call it that, headless right now. We talk about headless with a brain. We love the juxtaposition of headless with a brain. And that was in a very early conversation about the services. This will date me, but that was a slide where we put Krang from the Teenage Mutant Ninja Turtles.

Phillip: [00:28:42] Yes. {laughter}

Henry: [00:28:42] And headless with the brain was the point. So, yes, headless gives you all this amazing flexibility to do stuff. I think that's increasingly understood even by business people and bear in mind in another world I'm the target customer here as that business person overseeing a technology led organization. But then we got to talk about the brain, so having all that flexibility is great, knowing what to do with it is the key that makes the business successful. And meaningful insights, first party insights, are what make direct to consumer really the channel of the future and always have. The ability to have a conversation. And a conversation isn't always a literal conversation. It's feedback loops between both sides. So understanding your customer and them seeing you understand them by representing that in everything you do from the digital experience through to the products and brands that you create and put out there and the unmet needs that you go and meet. And so our baked in data infrastructure is such a key part of this. So headless with the brain works. That's why I like "headless" as a phrase, because it allows us to say that. API first with data infrastructure doesn't quite sound as polished.

Bryan: [00:30:02] And we've now been talking about headless for a few minutes and none of us, or Henry and myself, haven't said the word "performance." I think you see so much like the reason that brands reach for headless is because their site experience has been ground to a halt and it's really slow. And that's no problem. I'm just going to build into a "headless way" and suddenly all my performance problems are going to be solved. That's not true. Full stop. Not true. But there is an awful lot, like case in point, there's some education that needs to continue to happen that headless can allow you to go and fetch more performance benefits. And you absolutely should be thinking that way because that's going to help your conversion rate, and it's going to deliver a better experience on mobile. But some of these conversations are hopefully quickly becoming sort of like table stakes. And what we really love to focus on is how do you use these infrastructure decisions specifically around data and first party data to create those more meaningful customer experiences, because before long, everyone will have a fast website. That will be solved, and it won't be enough to have blazing page experiences. The content is going to matter much more. The experience is going to matter much more, and that's just going to require a real investment both in terms of time and money in data.

Henry: [00:31:29]  [00:31:29]You've got to win with proprietary competitive advantages. As you said earlier, if everyone's got the same tools, you've got some advantage while you're first to the new tools. But then, as Bryan says, there's arbitraged away. [00:31:40] We're seeing that in paid marketing, and the way to differentiate yourself there where a large amount of direct to consumer energy and money is going is trying to compete on a marketplace where your counter party owns the marketplace. And if you think about that for a second, it's no surprise that a lot of people's contribution margin, if not all of it, if not all of it and some more, is getting sucked into those marketplaces. The way to differentiate is to have proprietary competitive advantage. [00:32:16] We believe that proprietary competitive advantage is that first party data, and that's the truly meaningful way to make your entire business better, and that will impact everything from the long term, so your product development or your brand development, through to the short term. Which campaigns you run. Which channels you run them on. The more you know, the better you will be, the better your business will be. And so this revolution in technology will make you fundamentally better in a sustainable way, not just in an arms race way. [00:32:50]

Brian: [00:32:51] I have so many questions right now, but I'm going to focus on one thing for a second here. I think about what the two of you have done in the past and the quality way you've gone to market with your brands and the way that you've sort of positioned yourselves and your brands. And I think about successful eCommerce platforms of today and sort of how they came to market. We think about, you mentioned Magento, Shopify, and Woo. And I think those are three really good platforms to look at in how they built their businesses. And they all have very strong, very broad communities. They sort of started at the bottom. Now they're here. They sort of built these sort of downmarket, community minded sort of experiences where people got on the platforms for free or cheap and they sort of worked their way up and kind of grew up with the platform. But when I think about what you're talking about, the way to differentiate yourself, and just thinking about how you roll out your platform and your strategic plan to sort of get it into the hands of merchants, how are you going to sort of ensure that those that join your platform or use your platform are going to sort of represent the thesis you're talking about and represent the way that you've gone to market in the past? Or does that matter to you? I guess what I'm saying is, is Joe's coffee mug emporium going to be on Chord? And how are you going to handle sort of that kind of community that comes on board where you've got to have a very broad range of experiences using your platform, which especially when you're talking about headless and the flexibility and the level of investment required to create a good experience... I'm concerned, or my question is how are you going to prevent a whole bunch of really crappy experiences from popping up on Chord? Or better yet, how are you going to ensure that Chord represents the thesis that you're bringing to the market?

Henry: [00:35:22] So I think the way I love to answer that is to talk about the key part of our mission, which is to make the economics of direct to consumer make sense for everybody. And we feel that they don't right now. And I think if you... I'm sure someone has done this, but I have seen it. The amount of venture dollars that have gone into direct to consumer and the return on those, I'm not sure that we can yet say this has made sense. And a large part of that is marketing costs. And a large part of that is technology costs. And so back to that 2PM DTC Power List, the amount of money spent on building technology and technological differentiation is pretty extraordinary. It's tens of millions of dollars per meaningful company on that list. And what we're trying to do is offer the next generation of those tools. So those tools but newer and better and more flexible with more ability to understand your customers without the need to be a technology company. Yes, you need to want to invest in technology and data and see both of those things as a crucial part of your business. So I think there is a true line in the sand there which you have to view direct to consumer and the digital channel has something that will differentiate your business. But once you do that, we want to give you the tools that allow you to focus on what you're good at, which is product and brand most likely, and not have to build a team of dozens of engineers in order to get to the top tier of experience and scalability as well. So a lot of those engineering hours are spent on just making things scale, not even making them better. So we want to really make that accessible, and as I said, make the economics work. So you no longer, as a direct to consumer entrepreneur, need to think how am I going to raise twenty five million dollars? You can focus on how am I going to fund my working capital? And yes, you need some technology resources, but nothing like what you used to need. So, yes, you need some technology resources. This is not a tool where a non-technical person like me could spin up a site on my own. That's not what it's designed to do. But what it does allow is for non-technical entrepreneurs, founders, business leaders, general managers to save significantly on tech overhead and also to make the business model more viable. As I spoke about earlier, by using proprietary data, by using the flexibility of the tools to really deliver a targeted and differentiated customer experience.

Brian: [00:38:20] Yeah, that makes sense, I think so what I hear you saying is that this is an offering that could apply to a lot of different brands at different scales, and you could kind of use the platform how you need to use it. Like you said before, like Magento and Woo like sort of require that technical expertise, whereas Shopify didn't, but everyone has Shopify now. This is the tool that gives you the best of both worlds. You're getting the tools you need, you don't need a technical team, and it's flexible enough where you can sort of build it out to be what you need it to be for your business.

Bryan: [00:39:07] Yeah. What your customers are asking you to make it. I think that's what's most important here. Instead of what can I do within the constraints that these sort of suite of apps that I've chained together will allow me to do? It's really more like listening to your customers and then responding to them. And we have a version of our platform that works alongside of our own commerce APIs and our own multichannel order management system. But we also have a version of our tools that is very complementary to Shopify's infrastructure. And I think we, as far as I understand, are the only software option out there that really, truly operates Shopify in a completely headless fashion, where Shopify becomes a simple cart and a simple order management system. And I say simple it not in a derogatory, but rather in a very complimentary way. If you're using Shopify in that capacity, it's incredibly powerful. If you're using it for everything and you have relying on templates and apps, you're more likely to look like everyone else. And you're going to have a tougher time responding to what you're learning and hearing from your customers.

Brian: [00:40:22] Does that mean... So I think the key word there is investment. So I think the reason why a lot of Shopify stores use apps and sort of templates is because it's really cost effective.

Bryan: [00:40:36] Yup. So there's a hidden cost to that that you need to ask yourself.

Phillip: [00:40:39] There it is.

Brian: [00:40:40] Yeah.

Bryan: [00:40:40] In terms of performance, inevitably the more you add, the slower you're going to go. But also, you're increasingly allowing your business to be pulled in the direction of a series of app developers that you don't have a relationship with. So long as you're willing to bend your business to their will, fine. But I don't think that that's where the future of direct to consumer founders need to go in order to be successful, but I think that that's a totally adequate place for people where the direct to consumer channel is just a part of their business, but it isn't their business. You can do pretty interesting and sophisticated things without requiring any sort of technology resources. You just have to understand how far you can push that, how far you should push that. Encouragingly for us, we're seeing this next wave of founders understanding or demonstrating a willingness to make infrastructure investments on day one, and so that they have that flexibility in years two, three, and four to be able to take their business where they need to take it. The wrong time to think about doing a re platform is when you're struggling to keep up with scale. You're doing 30 million dollars, 40 million dollars, 50 million dollars of revenue. You have a clear line of sight to one hundred million dollars. And you're like, do you want to think about re platform at that point? Probably not.

Phillip: [00:42:09] Mm hmm. Yeah, and that's how you get lapped by the rest of the industry and you're stuck with legacy infrastructure because you spend the next 18 months if you do commit to the re platform, that's 18 months of focus lost. And the most expensive thing you've got is time. You don't want to waste that time.

Bryan: [00:42:31] Yup. Yup.

Henry: [00:42:31] I think it's about repositioning the sense of cost. So if you treat technology like an overhead and a cost center, you put it in OPEX, then there are always going to be cheaper ways to do things than the most innovative. If you treat it as part of your contribution margin and you look at a holistic approach to [00:42:54]... Contribution margin people define in all sorts of ways. I think about it as sort of gross margin less identifiable marketing costs. If you put technology, all technology spend, in there and then you think about your holistic margins as a business, using our technology will make your business more profitable. And if you're thinking about technology as a variable cost, now it's a growth lever for you. It's not just a cost center. And that's the key here. And that's underpinning our philosophy is technology should not be something you have to spend money on to be online. It should be something that you want to spend money on to make your business better. [00:43:39] And once you're at that level, working with a tool like the one we can provide, will meaningfully impact the outcome for your business.

Brian: [00:43:49] I think that's a great gate right there, because I do think you're right. I think that a lot of merchants in the US market, at least, tend to really struggle with investing to make their business better. It's a lot easier for American businesses to invest in things that save them money. And they're constantly thinking about how to reduce cost, not how to build a good business.

Phillip: [00:44:16] I mean, that's one particular take, Brian. I think that's a little bit of a generalization. But I know what you're saying because I've had the same experience.

Brian: [00:44:24] Yep.

Phillip: [00:44:25] Well, I'm curious...

Henry: [00:44:26] I might frame it in a different way and say if you think about retail, offline retail, so stores. The best brands invest in the in-store experience as a driver of their business. They view it as a marketing cost. It makes their brand better, makes the conversion better, make customers happier and increases their lifetime value. Why should we think about technology any differently? It's the same thing, albeit at a much, much, much bigger scale. Your ability to impact more customers and to learn more and therefore the sort of virtuous cycle begins. That's how I view it.

Brian: [00:45:01] Yes, it's your ultimate flagship.

Phillip: [00:45:02] Yeah, I was going to say Brian's going to say it's your flagship.

Brian: [00:45:04] It is.

Henry: [00:45:06] {laughter} You guys have been hanging out a long time, I take it.

Phillip: [00:45:12] You guys know a thing or two about that. I want to spend the the remainder of the time, if we can, sort of talking about what is the work you have to accomplish and what are the things you've got to get right to make Chord successful? Because you're right at the beginning here. You have a working product. You've done a stellar job raising. What do you have to go to work to do to bring the product to market and to bring folks onto the platform? Let's talk about that.

Bryan: [00:45:44] Yeah, it's a great question, something that we obviously think about every single day. And we've touched on it, I think, a little bit throughout this. But there's a continued evangelization of the approach, not just headless, but API first, and then what headless with a brain can actually unlock for you. And here's where we're very inspired by companies like Stripe and Segment that have sold infrastructure plays largely through developer evangelists. And they did that by focusing on great SDKs, great documentation, a great community. And so we're really doubling down there. We want to make sure that the investment that you're making in technology, the headcount that you will have, albeit much smaller than the headcount that the Glossiers, the Warbys, and the Harrys had. But they're actually using the tools that they want to use. They have a first class developer experience. That is true. You get that from from Chord. But then also agencies. One of the things that we've seen in the sort of the rise of popularity of Shopify is that the agency ecosystem has just exploded. And a lot of those agencies have the same playbook. And what they're starting to hear from their team is that there's an openness and a willingness to do things a little bit differently. And so we need to create tools that agencies are really going to enjoy using, help them to sell this approach to API first, make them better at their jobs. And I think largely our go to market strategy this year runs through there.

Phillip: [00:47:30] I've heard of B2B and B2C. I recently read a report that was talking about B2D, business to developer marketing. It's this incredible opportunity that I think is often overlooked as a go to market strategy and is the thing... Again, we think of Stripe in the modern context, but it's also the thing that made PayPal very successful early on, was developer relations.

Bryan: [00:47:56] That's a great point.

Phillip: [00:47:58] I think that there's a commonality there that we're missing the mark on. If there is a huge gap right now, it's that in the developer community, there are developers that solve problems in a way that make the developer experience harder for others than it should be.

Bryan: [00:48:20] Yeah.

Phillip: [00:48:21] And because these high level systems engineers are creating, you know, systems for other high level systems engineers and not consumers of, you know, people that are generalists effectively who implement and solve problems of varied nature in an organization, like a direct to consumer business. I come from that world, so I can relate on the need for a modern toolkit to do it. I think the challenge here is, and the thing I'd be rooting you on to see is, how do we reach those those folks? Because they are the adopters of technology. They're the ones who championed an organization. We have this... The way that eCommerce technology is bought is not necessarily, is a little different to the way that we've romanticized it as you have a solopreneur founder who has this vision and Shopify has enabled it. I don't know that it quite works that way.

Bryan: [00:49:19] Well, you know, what's exciting about the era that we live in now is that [00:49:22] I think organizations in the past have been afraid of making these investments because it's like, well, how do I answer the question, "Build versus buy?" And build is really expensive. And then I got to maintain that. And then there's this looming potential nightmare of tech debt. And I think that that question is now flawed, it's not build versus buy. I think the companies that are going to excel and create the types of customer experiences that we believe customers deserve understand it's more nuanced. It's what do I buy and then build around? What are those key infrastructure decisions that I can make that allow me to apply my craft as a developer to go in and create these really bespoke experiences? And that wasn't always the case. And so there is that kind of like retraining that needs to happen. We need to move that conversation beyond build versus buy. It's really like buy the right thing and then build around it. And if you can't build around it, then it's not the right thing. [00:50:20]

Phillip: [00:50:23] Oooh.

Brian: [00:50:23] That is I think something that we've been preaching for a while, but not as concisely stated as you just put it.

Phillip: [00:50:33] That's fantastic. Henry, I guess we could give you the last word here and maybe you could also plug where people could get in touch with the folks at Chord.

Henry: [00:50:43] Yeah. Thank you very much for the opportunity to speak and for the last word. So we are at Every trendy startup is his dot co these days, so I hear. And come find us there. You can learn more about our products and reach out to us through the website. Ultimately, we view this as a massive second generation re platforming. As we said earlier, this is going to be where the industry moves. If anyone wants evidence of that, the people we're having conversations with are definitely not people that you would necessarily assume would be at the vanguard or the forefront of a technological shift like this. eCommerce is now very, very, very much on the radar of all businesses because you've got insurgent brands who see the opportunity to build something. But now the incumbents realize that the insurgents are eating their lunch and they are not scared to respond anymore. So if technology was something they had to do and not mess up, now it's something they realize they have to compete on. So the amount of inbound calls I've taken recently from businesses that are very legacy, that are thinking, OK, how do I do what Glossier did? How do I think like an insurgent brand going forward? And what that means is that everyone's got to up their game. Everyone's going to have to up their game and really start thinking in this customer first approach. And to think in a customer first way requires tools that allow you to respond. And so anyone building a commerce business or thinking about growing an existing commerce business should really be thinking, OK, what do I need to achieve in the next 12 months? But really, what do I need to achieve in the next 12 months that's going to power my next five to 10 years? And that will require next generation technology. So we do see this fundamental shift happening across the board. And I think once the snowball starts to roll, it will get pretty big, pretty quick [00:52:42]. Our very unique position on this is not just about headless, it's about the brain as well. Having the tools is half the battle. Knowing what to do with them is the other half. And that's our very strong position that we arrived at as operators. [00:52:57] And I think that's a really important finishing line for us, is we built this product for ourselves as operators, and so we built it the way we would want it to be, not in a lab. It was built sort of on the street, as it were. And so we really believe that we can offer all commerce operators, be they legacy brands that need to figure out how to be online in a more meaningful way or insurgent entrepreneurs with a crazy vision. We can give them the tools to achieve what they want.

Phillip: [00:53:30] And in some sort of poetic way, Henry, the promise of Arfa kind of lives on in that you created the very product that you wish existed in the world, and you did it because of a true need and desire to have it for yourself. And that's I feel like that's core to what you were trying to do. Building it alongside a community is what's going to really bring that into fruition. And we wish you the best of luck. And, hey, I'd love to have you back on the show to hear about all the success that you're going to have in the future, too.

Henry: [00:54:01] Well, thank you. And we'd love to come back on and talk about how right you were also.

Phillip: [00:54:07] So would I. {laughter} Well thank you so much. And Henry, Bryan, hey, always welcome back and appreciate what you're doing in the world. And cheers.

Bryan: [00:54:19] We appreciate being here. Thanks so much for having us.

Brian: [00:54:20] Thank you.

Henry: [00:54:22] Thank you.

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