Joe Heitzeberg is the CEO and co-founder of Crowd Cow, the company that sells meat online and strives to create a connection between the farmer and the customer. They are the number one online retailer of authentic Japanese Wagyu beef and have maintained a 4.9-star review on Google for four years.
We talked to Heitzeberg about how the Crowd Cow idea came about, what it is like to have Ashton Kutcher and Joe Montana as investors, and how to successfully create and run a subscription model.
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The Lightbulb Moment
Joe and his co-founder Ethan had the lightbulb moment during a conversation about a mutual friend who told them he was going to an island in Seattle to buy a cow. This friend couldn’t stop talking about the importance of the quality of grass they eat for the cattle to be healthy and the meat to taste better than anything else.
Joe began to question the meat he bought in the grocery store with an orange “special” sticker on its packaging. He realized it wasn’t special at all. But his friend had to drive a truck, take a ferry, and buy 500 pounds of meat a time to eat the truly special meat, which was too inconvenient.
It was at this point that Ethan told him, “You know what, there should be a website where you can meet the farmer virtually and buy a piece of the cow.”
As absurd as the idea of crowdfunding a cow was, Ethan and Joe started telling people about it. A lot of people thought it was a great idea.
Joe and Ethan sold their first cow in one day and invested the $5500 they earned from it back into the business. They had spent about $2500 on that cow, plus the butcher fee.
Five years later, Crowd Cow now offers its clients every meat product one can find in a grocery store, but with the same transparent system of day one.
Ethan and Joe built their website themselves because they wanted total control of their business operations such as text notifications of delivery steps. Thanks to their engineer backgrounds, they could afford to do so. Joe is certain that they owe their great reviews to the attention they were able to pay to customer experience from the start, thanks to their self-built website.
How did Joe snag Ashton Kutcher and Joe Montana as investors?
Joe and Ethan both invested their own money to kickstart their business and bootstrapped for the first one and a half years until they raised enough funding. Today, two of Crowd Cow’s investors are Ashton Kutcher and Joe Montana.
Joe Montana, the former professional football player, now has an investment fund named Liquid 2 Ventures that makes deals with businesses like Crowd Cow. Montana came into the Crowd Cow picture in the C round. Heitzeberg still remembers the first time he sat across Montana in an office in San Francisco.
“As a kid, you remember seeing him in commercials on TV, which is bizarre, but then you hear this very eloquent, very intelligent man asking you great questions about your business,” Joe says. Montana’s experience in working with other businesses significantly helped Crowd Cow to take the right steps starting in its early stages.
Actor Ashton Kutcher, who has founded the venture capital firm A-Grade Investments in 2010, joined the Crowd Cow project in the A round.
Joe Heitzeberg doesn’t know how Ashton Kutcher got a hold of his number, but one day toward the end of round A, he got a text message from Kutcher that said:
“Hey Joe, it’s Ashton Kutcher. I don’t know if you knew this but I actually worked at a butcher shop after high school and I love what you guys are doing. I’d love to talk.”
Kutcher subsequently upped his investment in Crowd Cow in the B round.
Not only did Ashton Kutcher work at a butcher shop once, but he was also recently on the show The Ranch, in which he featured Crowd Cow.
Heitzeberg says they don’t want to rely on their investors Montana and Kutcher for advertising, but he doesn’t deny the potential gain that could come from it.
A Curated Marketplace: “We’re building a brand around quality, trust, and transparency.”
Joe and his team want the best quality and best prices for their customers, which filters the world and slows down the growth process.
Crowd Cow is not simply a marketplace for cows. Joe and his team go to farms and evaluate them before they list each farm on their website. They do want to turn the business into a marketplace, but they are taking it slow so that they can keep their high standards. They are building a capability set so that in the future, individual farmers can tap into those standards.
“We can afford to wait,” Joe says. He is confident because Crowd Cow is the only marketplace that is building a supply chain of their own and it will be very hard for any new competitor to catch up with the capability they have been building.
Crowd Cow does everything in between picking the animals up from farms to delivering the meat to their customers.
“Our goal is to be the one and main meat supply in people’s lives,” Joe says.
“Since the beginning of the year until now, we’ve come down in prices in all categories by 10%. We’re getting ever-more closer to achieving our goal.”
Joe says Crowd Cow is a great alternative for those who buy their meat at Whole Foods. “You won’t be paying more, and it’ll be much higher quality, much more convenient.”
They have tens of thousands of customers now and half of them use Crowd Cow as their main meat source. Their revenue is in eight-figures.
Subscription boxes became half of their business this year. Crowd Cow customers can save by subscribing, but they also have the option to pick and choose each month.
“Do you want to build a lasting brand or do you want to just make a few extra dollars for the next quarter?”
“We’d rather be a profitable growing company than a growing and unprofitable company,” Joe says. That is why only about 10% of their revenue is spent on marketing.
“You have to diversify your growth strategy.”
Like most companies, Crowd Cow uses Facebook and Google for advertising. But they want to establish another main channel that is not one of the two. Currently, they are doing cross experiments on potential channels to see if they can make their number two and three channels one other than Facebook or Google.
SMS is one of the channels they are currently exploring. Joe underlines its challenges and emphasizes how important it is to send the right kind of text messages to customers. If a customer is going to receive a promotional text, it has to offer something to them. But this offer should not break the bank for the company itself.
Challenges of Being the First One to Do What You Do
The two other big challenges Crowd Cow faces now are the personalization of products and getting those perishable products shipped to their customers in the best way they can. Even though it hasn’t been easy, so far, they have been very successful at overcoming the latter.
They were able to keep their business going during Covid-19, even when all the big meat suppliers of the country were shutting down. “Because we were able to keep shipping orders because we built this platform that allows us to manage the whole supply chain,” Joe says.
For the first cow, Joe borrowed a storage space from a friend for half a day and hired a butcher. Now, they have employees, butchers, storage spaces of their own.
And finally, we asked Joe Heitzeberg the two questions that we ask all our guests.
Who are the entrepreneurs from the e-commerce age that you admire most?
Howard Schultz, because even today, Starbucks’ system for mobile experience and customer loyalty is the best.
What’s the one piece of e-commerce advice you’d like to share?
The one thing that you must know well is the CAC Payback formula. As an entrepreneur, you will eventually have to decide if you want to hire or invest in a creative person or a quant. My advice: get the quant.
A Bonus Pro-Grilling Tip from Joe Heitzeberg
“Not many people know this, but you can cook from frozen,” Joe says. “Just take a frozen New York steak. Take it out of your freezer and put it on your counter. Set your table while the surface thaws a little bit. Season it with salt and pepper. Get a cast iron pan, heat it in high heat, and put a light olive oil. Right when it starts to smoke and you think it’s too hot, take the frozen steak and put it in. One minute per side. Then throw that pan into the oven at 300 degrees for 7 minutes, and you’ll have the perfect medium-rare New York steak!”