From Studio Apartment to $100M+: Spot & Tango’s DTC Breakout with Founder Russell Breuer

In this episode of Growth Mavericks, Adam Callinan sits down with Russell Breuer, Co-Founder and CEO of Spot & Tango, to break down what it really takes to build and scale a nine-figure direct-to-consumer brand.

Russell shares the unfiltered story of Spot & Tango’s journey—from cooking dog food in a 700-square-foot NYC apartment to navigating hypergrowth during COVID and making the bold decision to vertically integrate by building their own manufacturing facility.

This conversation goes deep into the realities most founders don’t talk about, including:

• Finding real product-market fit (before the metrics look good)
• Why contribution margin matters more than gross margin
• How CAC, LTV, and payback periods actually guide decision-making
• The operational chaos of scaling physical products
• Why vertical integration became a long-term competitive moat
• The mental and emotional toll of entrepreneurship—and how to survive it
• How customer feedback directly shaped product innovation
• What “growth at all costs” got wrong in DTC

If you’re building a subscription business, a physical product brand, or navigating the messy middle between early traction and real scale, this episode is a masterclass in disciplined growth and founder resilience.

Learn more about what we’re building at Pentane: https://www.pentane.com

Learn more about Spot & Tango: https://www.spotandtango.com

Creators and Guests

Host

Adam Callinan

Adam Callinan is the founder of Pentane, a financial and advertising command center that empowers brands to drive predictable revenue and intentional profit. Previously, Adam co-founded BottleKeeper, a bootstrapped consumer brand that scaled to $8M in sales within three years – without employees – and was later acquired in 2021 as an eight-figure business with a team of four, marking Adam's second successful exit.

What is Growth Mavericks?

This podcast dives deep into the tactical moves that drive business success, as well as the mental and physical resilience required to sustain it.

Hosted by Adam Callinan, a seasoned entrepreneur with multiple exits, an avid outdoorsman, and an family man with crystal-clear priorities, each episode unpacks real-world challenges, actionable insights, and the mental and physical disciplines that fuel long-term personal and professional growth.

Whether you’re scaling a startup or refining your mindset, disrupting your default is how business and life strike a balance.

Folder highlights
Transcript details Russell Breuer's journey building Spot & Tango, focusing on Unkibble launch in Apr 2020 and factory verticalization.

Adam Callinan (00:00)
All right, I'm hit record and we'll edit all this stuff out, but awesome. Also real quick, will you pronounce your last name? Just so I have record. Brewer.

Russell Breuer (00:00)
Great.

Brewer like brew like

like B R E W I N G although it's yep.

Adam Callinan (00:10)
Perfect.

Awesome. My last name is Callanan. So that's always kind of a disaster for pronunciations. Sweet. Well, thanks for being here. I really appreciate it. You're calling in from New York. How's the weather in New York here in December?

Russell Breuer (00:17)
Yes.

You win.

Cold,

frigid, it's gonna be raining tomorrow, so it's inclement weather season.

Adam Callinan (00:28)
Yeah, we're doing, doing the exact same in Montana. It's raining, which is just so weird in mid December. It's like the freezing rain. No one.

Russell Breuer (00:34)
Yeah, well.

Seasonal depression is real. I need like vitamin D lamp, you know?

Adam Callinan (00:38)
Hahaha, yeah.

Yeah, where are you from originally Russell? Okay.

Russell Breuer (00:45)
Cleveland, Ohio.

Born and raised Rust Belt Midwest. My wife is as well and she was part of the kind founding story of Spontangos so we can dive into that if you wish. yeah, originally from Cleveland, so I have a family there and lived in Washington DC, then moved to London for eight years in the UK, working in more of traditional career path and consulting in private equity and then moved to New York in kind of 2012 and haven't left.

Adam Callinan (01:10)
When you went to London, did you go there straight into private equity or did you go to school out there and then end up in private equity?

Russell Breuer (01:18)
I went there for work. I was with a management consulting firm in the US and they transferred me to their London office and then from there ended up in finance.

Adam Callinan (01:27)
What kind of private equity were you doing?

Russell Breuer (01:30)
Emerging markets, so dollars invested in places like Sri Lanka, India, like small to medium sized businesses.

Adam Callinan (01:37)
Got it, okay. So fast forward from there, you were in London, came back, ended up in New York. Did you go straight back into private equity? Was that like a company transfer or a new job thing?

Russell Breuer (01:49)
It was a co- Yes, it was a company transfer. So my wife and I were dating long distance. Obviously we've known each other since we were young kids and did long distance thing and then got transferred back. And so I had kind of the, you know, suit every day Midtown Manhattan office career path and her background's in finance as well. In fact, she's still working in finance but.

The inspiration for everything was, as bottom tanker related, was her mini golden doodle, Jack. And she had been cooking fresh human-grade meals for Jack. using ingredients like ground beef, ground turkey, ground lamb, French cut green beans, brown rice, fruit, veg, would put them in Tupperware containers and then into the freezer. And that was his meal. And in fact, my wife's mother, my mother-in-law, she cooked human-grade meals for her dog, George. And so...

Adam Callinan (02:35)
Hmm.

Russell Breuer (02:35)
Lighting

is actually my in-laws. I have to give them full credit for the idea and I've always dreamed of being kind of an entrepreneur and an operator and then took that concept, that product concept, and then we turned it into a business on the side and then ultimately I've been scaling for the past eight years.

Adam Callinan (02:49)
When you moved, there's a lot in there that we're gonna dig into. So when you moved back into New York, you were in private equity doing the same thing, emerging markets, just doing it from New York and not London or doing something different.

Russell Breuer (02:59)
⁓

Yes, effectively. There was two firms that I'd worked for in PE. So yes, was kind of an international venue within both of those companies.

Adam Callinan (03:11)
Okay, got it. So.

Someone's got a problem and the problem is that the dog food on the shelves that were buying from the store sucks. So someone saw this is like how all startups happen, right? Solve the, you generally solve your own problem and you have this thing and you have this idea and then you think, I bet other people have the same problem and we should probably try to find those other people. Is that kind of how it went for you all?

Russell Breuer (03:34)
That's it. In a nutshell, was within the industry, which is very large. I there's no ceiling in pets, depending on the report you read. Six or seven in 10 households own a dog. And we're living in this, the epicenter of health and wellness. Obviously, people think about their own health and wellness. Organic wasn't really a thing 20 years ago. Nor was gluten-free. has CPG industries evolved quite a bit, even in the past three or four years.

Direct to consumer commerce, the convenience. Skip the trip to the pet food store. Buying a 50 pound bag of kibble is cumbersome. And yes, the dog used to sleep outside, now the dog sleeps in the bed. People treat dogs like family. given a lot of kind of macro thematics, a lot of folks are thinking like, there's gotta be a better way up the mountain for my dog, which is jolly beloved. And what I've been feeding historically could be causing allergies.

or obesity, this is like the pet health epidemic that people all do too. And usually the vet's the first line of defense. When you visit the vet, go, there's an issue. The first question is, what are you feeding your dog? Always. And that leads to optionality of like, well, you could have an allergy or these are highly extruded, capable diets. There could be other options here. And that's where kind of fresh human grade diets, which are formulated by the way for dogs' dietary needs, kind of have evolved.

And then the kind of tech enabled model has been a game change, you know, on subscription, personalized. But yes, to your original point, problem, we solved it in a studio apartment on the Upper East Side, which is a very cliche thing to say, but it's true. It was like 700 square feet. And we were kind of cooking and product and packaging it ourselves, bootstrapped it, side hustled it in the early days, and then realized that like millions of Americans felt the same way that we did and that we turned it into a company.

Adam Callinan (05:00)
you

In those early days when you were, you know, hardcore grinding bootstrapping it out of 700 square foot apartment in the upper East side, how did you find your first customer? That that was okay. I was going to say that wasn't like somebody you immediately knew, but that's a good one. Okay.

Russell Breuer (05:25)
the neighbor next door.

Hey man, New York, we're talking like high population density in the five boroughs like Manhattan. You only need to walk out of your apartment, look left, look right and look across the hall. And again, like dog ownership high. You know, New York City, historically there used to be, you know, certain riders and leases, i.e. like

Adam Callinan (05:36)
Yeah.

Russell Breuer (05:51)
Dog greater than 20 pounds not allowed or no dogs allowed. That's all changed. And so those were easy early adopters and of course like family and friends and they're like, what do you do? Most of my friends said, whatever you're doing in this pet food thing, don't do that. Like bad, okay? You know, there's like stop signs in life and it's like, here, make a decision. You know, most of the advice was like, stick to your day job. That's good. Do that. Don't do the other thing, which is...

Obviously there's like the zero to one, you know this, you're an entrepreneur. It's like eating glass every day. It's highly unbearable. And most people don't want to do that. It takes this, you know, unbelievable grit and persistence every single day just to break through over years. It's not like overnight oats. It's like years. And that's too hard for most people for all the reasons. And these journeys are not linear. They move different directions. And so

Adam Callinan (06:28)
Yeah.

Russell Breuer (06:52)
Yeah, it was kind of grind every single day, but very rewarding in hindsight.

Adam Callinan (06:55)
As you started to, I mean, there's so much in there as well. mean, eating glass is like, that's my phrase. It is the constant eating glass. The glass just starts to taste a little different over time, but it doesn't ever completely go away. There's always just a little bit of glass left no matter how well things are going, but it's absolutely true. mean, we'll definitely spend some time talking about the ups and downs of all of that because that's where companies...

Russell Breuer (07:05)
Yeah! ⁓

Adam Callinan (07:20)
fail, right? I mean, it's generally in those early stages where the people can't, for good reason or bad or whatever, they don't have the structure and the things in place to deal with those wild up and down swings and the mental challenge that comes with that just constant chewing on glass. Yeah.

Russell Breuer (07:36)
That's it. Yeah, I think

the there is an emotional element of entrepreneurship because you're living in the ambiguity. And when we hire people on the team and, you know, we now have 150 people at the company, our headquarters is Midtown Manhattan, our factories in Allentown, we've got 100 people on staff there. It's a lot of bodies. Some people don't like dealing with ambiguity. So when things change, like company doubles in size. Yet that's a great headline.

Operationalizing growth is a whole nother consideration. Equipment, capex, team, process, quality. That's really hard to do. Investors want, you know, top line grow, grow, grow, grow, grow. But not many people talk about the execution required to do that. And then along that evolution, roles change. know, someone in finance may be working in FP &A one day and doing accounting the next. Or some people in marketing that may be doing brand marketing are now doing like lower funnel DTC.

your engineers may be working on product A that doesn't work and they got to shift and work on product B. And so I think there's there's a general ambiguity within startup, I would say generally, which is tough because I think human nature is such that understanding exactly what you're going to do every day, like wake up, teeth, make bed, maybe yes, no, go to work. There's like 20 tasks you clock out by five. That's convenient. Like you can box that and

That's conscious and very logical. Entrepreneurship, as you know, is there's a lot of ambiguity, which sometimes weighs on. So there's like that the eating glass, if you like double click on it, there is this emotional reality of like, I'm not sure, or like, I'm going to try. This may not work. Or we've put a great deal of effort into doing something and it may lead to a bad result. And I people who are successful generally are naturally curious people.

And we're big believers in fail fast fail often like you've got to try you've got to do you've got an a b test and like We'll get in a room and debate a topic internally You know should the checkout button be you know, making this up It should be red or blue and over time. We've we've kind of developed this muscle where it's like your our opinions don't really matter It's the customer will tell us what the right answer is and it's that kind of meant. So again, there's this

Adam Callinan (09:43)
Yeah.

Russell Breuer (09:48)
The emotionality again is just, and again, the glass, that's interesting, the glass is still there, but it tastes a little bit better. That's true, but every day is a little bit different. It's like, what challenge, and I'm rambling now, but every day something breaks. Literally every day. Like, I get an email, it could be something big breaks, tech breaks, in our case, we're a manufacturer, trucks break down, equipment breaks, all that stuff. So there's that.

Adam Callinan (10:02)
Thank

Yep.

Russell Breuer (10:15)
That's the ambiguity in part of the glass piece too.

Adam Callinan (10:18)
But part of the reality though is you can't create, short of winning the lottery, you can't create an outside outcome without having some of that ambiguity. You can't do it without this risk imbalance, right? There needs to be some capacity for maximum upside with some downside. And that lives inside of that ambiguity. That's what the ambiguity is, right? It's like, it is the unknown.

Russell Breuer (10:39)
Yes. Yeah, that's interesting. You can't get to like net new without risk for sure. You you're like Lewis and Clark out there chopping down trees in a canoe. Rations are low. Storm. That's it. That's it. And there's like storms on the horizon. But look, thank you, Lewis and Clark. Like did good things. Right. And so again, that's very much part of it.

Adam Callinan (10:50)
Yeah. Yeah. Pushing a boat, pushing a boat up a river for thousands of miles. Yeah.

So early on, you've got your first couple of customers. They're from the neighborhood. They're in the building. They're down the street. Did you pop up a Shopify store immediately or did you wait, give it some time and before you had people to order?

Russell Breuer (11:17)
So

great question. we it was like studio apartment, you know, one ordered kind of turned into 20 or 30 or 50 orders like pretty rapidly. And again, back to my that that's not a lot of orders objectively. But again, like it's all relative. A ton. It was a ton. But then it's like operationalized and that's like, well, how do you make so let's let's just say you own a German shepherd. A German shepherd needs to eat.

Adam Callinan (11:31)
It's all relative though. To you then, it was probably a ton. Yeah.

Russell Breuer (11:46)
you know, 50 pounds of food per month, we'll go make all that times 50. That's a lot, like the pots and pans in this studio apartment weren't big enough for that. So we found an incubator kitchen in Queens, New York. We hired a team of five people. And again, like, this is like side hustle, cash out of pocket, margin, like forget the margin. We were just seeking product market fit, right? Like making stuff, like getting it to the customer. So in those days we had bike messengers that would pick up the product the next day.

and then deliver direct to consumer to people throughout the five boroughs. In fact, we had a retail model then too. We no longer sell on shelf or exclusively direct to consumer, but we had branded freezers by point of sale in independent pet food stores. So I found the owners of all these pet food stores. I'd buy them a coffee and pitch. Here's what we're doing. It's better for you. And at that stage, of course, we'd work with the animal nutritionist community and vets to develop these recipes that are completely balanced for dogs' needs.

pitched a product that was drastically different than anything on the shelf. they're yeah, great. We'd love it. Sure, we'd order a case or a pallet order of the case, Now it's like, oh, now we got to make all this stuff. And I was in the kitchen. So think of suit in Midtown. I had to get a food handler's license, which is administered in four different languages. Now, a food handler, that exam teaches you about the temperature danger zone. Don't put finished.

Adam Callinan (12:58)
Mmm.

Russell Breuer (13:08)
product under raw product in the refrigerator, right? For like QA reasons and pathogen control, et cetera. The test is actually very difficult. Not everyone pass. So I get that, get my license and I leave my office, go to the kitchen and put on, you know, apron, hat, t-shirt, and it goes like an eight hour shift. used to look at my step count. We'd walk like six or seven miles in this. It was like a 5,000 square foot kitchen. There are other entrepreneurs there building.

Adam Callinan (13:14)
Yeah.

Russell Breuer (13:35)
know, chip companies, cookies, pickles, see they're selling on shelf at farmers markets. A cool community. And that was like the first iteration of out of the apartment, having messengers deliver the and again, so it was kind of this test of e-commerce, small, medium, large offerings in terms of and then and then kind of the brick and mortar piece and had all these bike messengers, which was fine for a while. And I think the again, that kind of came to a head because I was still working a full time job. And so is my wife.

Adam Callinan (13:43)
Mm.

Thank

Russell Breuer (14:06)
and had two young kids and then it turned into this moment of my wife saying like, look, this side also is, it's real, but like, we both can't do this on the side. Like if we're gonna do this, like you've gotta do it full time or I'll do it full time or like it's over. was like, it was, actually I refer to those days as like the dark times. It was like nights and weekends, like 4 a.m. wake up calls and it was this.

Adam Callinan (14:23)
You

Russell Breuer (14:27)
Some people have asked me in the past, like, what kept driving you? think it was like that person, that desire to win. The guy was in, he was in and nothing, even though like the revenues were thousands, not even tens of thousands, like thousands of dollars. Were we making any money? No, we were making no money. We were like losing money. But desire to win, we saw demand and we saw product market fit signal from those in our community. It was like, there's something here. Like this thing is happening.

because the demand is there, we'll figure out all the rest along the

Adam Callinan (14:59)
So did you quit or did she quit? Okay.

Russell Breuer (15:01)
I quit. quit.

So my wife, she has still working full-time finance. And I then found a former co-founder and a founding team, and we've been scaling full-time since 2018. kind of in summary, we're direct to consumer, pet health and wellness. make awesome food for dogs, nothing synthetic, nothing artificial. It's all human-grade, family and friends.

And over time we've developed what we call ancillary products or treats supplements and dental care products as well So it's product platform health and wellness and it's all delivered To two homes across the US and it's all personalized. So we learn a lot about your dog's weight and activity level which informs The portions so your the calories consumed per day and that was a big kind of breakthrough moment. So And we can kind of talk about the verticalization piece because there was a big

shift in the company when we changed into and developed an entirely new category of pet food, ⁓ which is another kind of story entirely of how we went from this small incubator kitchen to our own dedicated factory, which was another kind of contrarian, very big lift, but paid off in spades.

Adam Callinan (15:52)
Hmm.

Yeah, I mean, let's go down that rabbit hole. You had at what point, I guess, for context, maybe from a revenue standpoint, at what point in revenue did you decide to make the decision to add or adjust that vertical? Because this is a problem early stage companies have a lot. They do this way, way too early.

Russell Breuer (16:25)
Yes, so that is a great question. So it took us a year to get to a million dollars of revenue run rate. that's so gross revenue per month times 12. So where it's like.

Adam Callinan (16:35)
From a year from your first sale or a year from what?

Russell Breuer (16:41)
a year from when I went full time.

Adam Callinan (16:44)
Okay. I mean, that's

not bad. That's pretty good. I know it may seem like a long time, but a million dollars in a year is good.

Russell Breuer (16:48)
Love it.

But that's $100,000 a month. And again, we rebuilt the website, headless Shopify store. We built the personal algorithm. We moved into a bigger kind of incubator kitchen, commercial co-manufacturer. So here is the shift. And there's other brands, by the way, in our category that offer this fresh frozen product. So the original recipe, which we still have to this day, it's a cooked product. You flash freeze. You ship direct to consumer with insulation and dry ice.

Adam Callinan (16:57)
Yeah.

you

Russell Breuer (17:20)
You store it in the freezer, defrost, and it's ready to serve. Great. There's two inherent challenges with that product. It's really expensive because cold chain costs money. Dry ice is not cheap. Insulation is not cheap. And it's really inconvenient. So if you forget to defrost your dog's food, you're busy on the go with pet parent. It's kind of like game over. You're either like running 100 degrees in the tap in the kitchen and you're feeding your dog like slowly defrosted product.

Adam Callinan (17:31)
Yeah.

Russell Breuer (17:48)
I don't know, reaching for a shelf table option. So internally, we thought to ourselves, like, how do we maintain the mission and the integrity of the brand? And that led to what we call Unkibble. Same ingredient inputs. We take out the water through a fresh dry process. it's freeze drying is a technology. Our process we call fresh dry. So what you get is a product that can be stored in the pantry. It's shelf stable.

Adam Callinan (18:02)
Mm-hmm.

Russell Breuer (18:12)
We have a personalized scoop, so you're scooping the exact amount of food that your dog needs per meal. And that is Unkibble. We launched that product in April of 2020. So we've been around for kind of 18 months or so. And it was just like, again, we still have the fresh business, but it was like rapid innovation. And the kind of...

round out the story. We were a five person team. I think we all had COVID. I mean, we were laughing because we went remote. We couldn't smell a thing and we're like, oh, it's COVID. We don't know. We launched this product and we, my co-founder and I debated whether to order, you know, like a 70 or $80,000 purchased order for product, which we thought would last three or four months. And that's, those are material dollars for a company at our stage. We sold out in four days. And then we placed a $500,000 purchased order for more product. We didn't have 500.

Adam Callinan (18:52)
Yeah, sure.

Wow.

Russell Breuer (19:01)
We didn't even know how we were going to come up with it, but we just knew we needed that much stuff. What happened then was that our business went from kind of one to 10 to 20 to $40 million in months. So we went very rapidly up the growth curve because the subscription model, and so if there's strong palatability of product, there's high retention, and there's, as we discussed earlier, there's many dogs in the U.S. That was awesome and very challenging.

Adam Callinan (19:07)
you

I bet.

Russell Breuer (19:30)
How do you, so we went from like five customer service tickets a day to 500. We had two agents. We went to 25 agents in a matter of weeks. So now you've introduced all this complexity, training, culture, managing people, being responsive to customer, production timelines. We're shipping products all over the US. In fact, we got to a point where we had six co-manufacturers working with us concurrently across the US at our peak. And then there was this...

know, introspection of this is not sustainable. You know, and everyone says in COVID, you know, people either won or lost on the supply or demand side of the equation. we, yay, we got demand. Supply was very difficult. And any company will tell you that story. Restaurants lost on demand. We lost on supply. So we then made a decision, we're like, guys, we've got to control our own destiny. Let's build a factory, which is...

Adam Callinan (20:10)
Mm.

Russell Breuer (20:21)
And thanks to our institutional investor, their partner of ours, they are incredibly talented at verticalization and building factories. We made that decision. So it was kind of a two year project and we launched our facility in 2022. So we've celebrated now three years, but very contrarian because it's easier to outsource than to insource. And people don't do it because it takes a long while and it's really expensive.

And I look back now in hindsight and it was tough. I this is, we always tell the stories, bathroom trailers, break room trailers, office trailers, like poor wifi signal, trying to hire, trying to build the plane while we fly, trying to meet demand. it's like, we're putting up walls and freezers and you know, $30 million worth of capital equipment and like trying to do all of that in real time and like maintain sanity, emotion, family at home. Now I have three kids and the dog and the mortgage. And so kind of doing that all.

at the same time was was not easy. And again, this is a team story. I share the stories, but this is credit to lot of members of our team. And that transformed the business from that point on. We rapidly accelerated to nine figures. The factory transformed the P &L, were profitable, unlocked huge margin wins. And now that's that's kind of what's the driving force on the supply chain side of the company. But that was

kind of earlier question, think most companies don't do vertical. Depends on the category. Pet, very few people do it. Most of the people in our cohort or category, they're marketeers. They don't make the product. And customers, the number one purchase consideration is the ingredients. The customers will ask like, well, where are your ingredients from? Well, we know the answer because we control that massive supply. No one else does.

Adam Callinan (21:58)
Yeah.

Russell Breuer (22:01)
They don't know where it comes from. They don't know quality control. They don't know food safety, HACCP, GMPs, SQF. They have like no idea. They're like, well, that guy does it. And it's like, well, this is the member of the family and you're talking about all of the value propositions of the brand. Like, so that's where we stand out from the pack. And it's an incredible competitive moat, which will enable us for future success.

Adam Callinan (22:21)
I'm sure it is. When you had the idea for that product, I guess, quick question, are you rehydrating that product or is it served dry? Interesting.

Russell Breuer (22:29)
No, it's served dry.

You can rehydrate. you know, sometimes folks want to add water, you can certainly do that, but that's not required for consumption. I think, I think I would say on par most people don't.

Adam Callinan (22:39)
Okay.

Yeah, obviously the, the digestive track in a dog is quite different because we use D higher up flash fry or flash frozen, freeze dried meals in the back country and you got to put, they have to be rehydrated with hot, hot water for a certain period of time to be palatable. So clearly a different situation with dogs. When you had the idea for that product, where did that come from? Did you get feedback from customers that recommended, or did you have the idea and test it against something? What, what made you go down that rabbit hole? Okay.

Russell Breuer (22:52)
Yeah. Yeah. Yeah. Yeah. Yeah.

Customer feedback, absolutely.

And that's the beauty of a DDC model is the customers tell you like, what's going well, what's not. FedEx delays or that's That's informed our entire strategy. Customers would say like, hey, we love food. I can't, this frozen stuff is so expensive. I would honestly order this product into perpetuity. But do you have a version that's I can put in the pantry and we're like, wow, that's interesting.

And they tell us about supplements. like, yeah, we treat and we buy these types of treats and say, can we do a version that's the spot and not go away with human-grade ingredients? so it was all of that customer feedback, that whole loop of, and these are like the, in early days, these are like the very passionate, low-hanging fruit early adopters who are like puritanical about health and wellness. And they're like, yeah, you could figure that, we'll be, that would be receptive. And so Unkibble plays from a price perspective.

its higher price point than premium kibble, but lower than raw and the fresh frozen. So we're occupying this white space and we're offering affordable health and wellness. Health and wellness generally is not affordable because health and wellness, you think of Whole Foods, people adoringly call Whole Paycheck. Most people can't afford that. kibble is playing. So again, it was...

Adam Callinan (24:04)
Mm-hmm.

Yep.

Russell Breuer (24:20)
customer feedback and then the product iteration process which we've kind of dialed in over time is like sending out samples, we do feeding trials, we work with several partners that have like 40 or 50 beagles, beagles as agreed on staff because they have like, they're a good, because they have like very high palatability, like they're olfactory in their noses, like there's like a high sensitivity to like food and flavor and so if you do like blind taste test, they'll pick the one that wins generally and so we use a lot of that data.

Adam Callinan (24:30)
.

Thank you.

Russell Breuer (24:49)
in experience to inform product development.

Adam Callinan (24:51)
That's fascinating and kind

of funny. That's awesome.

your shift into fact into that vertical where you built physically built the factory there there I guess two parts of this one was that the first capital that you took into the business and the second you mentioned there being this significant positive impact on margin and going vertical like that how big was that impact I mean you saved 30 % in cogs or how did you qualify that

Russell Breuer (25:17)
Great question.

yes, we'd raise capital at that stage. were kind of further along the capital curve. The early days was kind of family and friends, know, grandma, uncle, colleagues, myself, et cetera. And then, yes, we'd raise kind of institutional capital, but staging appropriately, know, rounds increase in size to contingent on scale and ability to deploy capital.

We had reached kind of this escape velocity stage where the growth was so high and capex requirements that we obviously were we were an attractive opportunity for the fund management community. So, yes, we've done that. And then from a margin perspective, you know, like fully loaded. When we talk about margin, we we always use the word like contribution margin. Sometimes we use we use growth. We use contribution. So it's like and oftentimes people mention.

Adam Callinan (25:53)
Yep.

Good. It's great.

Russell Breuer (26:10)
margin numbers where it's like gross and like, depending on the audience, it's like, well, what, how do you calculate? We load with like, cost of goods sold, pick and pack, shipping, delivery, last mile, like all in. I'm not going to tell you our margin, but I will, I will just say that, you know, 30 plus points, fully loaded, fully loaded on the P &L plus. And done a lot of things along the way over the past eight years where we like found wins. But

Adam Callinan (26:16)
Yeah.

That's epic.

Yeah.

Russell Breuer (26:37)
You know, in the early days, were price takers because we were scaling so rapidly, but working with a variety of partners in the supply chain side that we took what we could get. You know, and we're working with meat processors. We work with folks selling vegetables and starches. And so it's a wide array of vendors and suppliers. And when you don't have scale, there's no leverage. You know the game. It's like you show up.

Adam Callinan (26:59)
Yeah.

Russell Breuer (27:00)
And it's like, well, can I have, you know, a thousand pounds? It's like, well, yeah, you're going to pay list price and probably more for that. When then when you show up and say, want five million pounds, then the conversation is like very different. So I think and I think for any entrepreneur and founder, like that's part of the journey, too. And I think that comes with margin usually come unless you're like a SaaS business. But if you're like developing physical product, the margin story comes later as you reach scale and you can unlock those wins. But along the way, you kind of have to eat dirt.

unfortunately. At least that was our experience. And Vertigo is a big unlock and there's been other unlocks along the way. But yeah, that really benefited us economically.

Adam Callinan (27:38)
Yeah.

Yeah. And so let, let's clarify to the listener to two points here. One is that contribution margin versus gross margin. The definition there, your gross margin is your revenue minus your cost of good, just the cost to physically make the product and get it to a point where you can ship it to a customer. Your contribution margin is all the other related sales expenses, shipping and fulfillment, credit card fees, Shopify fees, marketing and advertising. I generally put those in a separate bucket because they're more useful to use as fuel, but that

but they are absolutely part of your variable expense structure, which is where your contribution margin comes from. So for Russell to say that they saved 30 points in contribution margin, it's hard to express the positive impact that has on a business and its capacity to acquire customers with advertising dollars. Like this is a big challenge at early stage to your point. So you get to scale, it's hard because you know, your contribution margin without advertising might be 20 % or 25%.

Russell Breuer (28:37)
That's it.

Adam Callinan (28:37)
In which

case you can only spend, if you spend a dollar to acquire a customer, you have to hit a four return on ad spend to get to break even. Like to get to, just to get to break even. That is fantastically difficult. So that margin expansion is huge.

Russell Breuer (28:45)
That's it. Yeah, it is.

Yeah, that's a great articulation, Adam. so the way we look at our marketing spend in particular, so we use the word kind of return on invested capital. the simple math is if I spend a million dollars on lower funnel paid performance ads, Meta, TikTok, Google, et cetera. So on day one, I minus a million bucks, right? My marketing.

How long does it to get back to zero? Is it three months, six months, 12 months? And then how long does it take me to get to plus a million dollars of margin? We're talking about margin, right? And so for us, and this is how the whole company works in our business, we look at contribution margin LTV on a net basis divided by customer acquisition costs. We take the average amount of money a customer spends net per year. We look at 12 months. Depending on...

Adam Callinan (29:38)
Okay.

Russell Breuer (29:38)
it's been on the audience, some folks look at like the 24 month LTV or 36 month or they start going out for it or then you're like, yeah. We look at a year, it's like, okay, on app, it's net lifetime value, but the layman language is like, how much does a customer spend at 12 months times your margin, your contribution margin dollars divided by your customer acquisition costs. And that informs.

Adam Callinan (29:44)
Yeah, that's a long time. Yeah.

Yeah.

Russell Breuer (30:06)
how quickly you repay those marking dollars. And our whole company, so our ops team is focusing on getting that contribution margin as high as possible. It's like looking at wins in freight and pick and pack, cost of goods, all the things we just discussed. The marketeers are pushing those dollars on paid performance spend, but they're capped. They can't spend dollars if the CAC goes too high. There's like an inefficient period of time during seasonality or...

Adam Callinan (30:29)
Okay.

Russell Breuer (30:32)
If competitions like running deep promotions and like CAC spikes, if there's issues on the website or what have you, like they're capped because we live within this framework and our paybacks are much less than a year. so marketing will only make those investments when CAC is efficient. And then LTV is really informed by retention and average order value. So retention is our customer service team. So customer service is like in our job as a business is deliver excellent product and over serve customer service.

Adam Callinan (30:53)
Yeah.

Russell Breuer (31:01)
people can reach us on SMS, voice, email, messenger pigeon, like whatever it is, we respond in like three minutes, like high CSAT scores, we want to retain those customers, and obviously they're dogs, and so all of those pieces, and we train people on this, is like day one training at the company, it's like we all speak that same language, so when we sit in a meeting and someone says, because a lot of companies figured out in the early days, I refer to this as like DTC 1.0, people have figured out how to grow, like if you're a digital marketer,

Adam Callinan (31:06)
Okay.

Russell Breuer (31:28)
You can be selling t-shirts, shoes, hats, whatever. We have been able to sell dog food. You can get big, kind of, if you have access to capital, you can build a very high revenue, revenue-rendering business in a very short period of time. great. Are you actually making any money? People kind of, people like forgot about that. And there's a lot. Yeah, exactly. Anyway, that's a little bit of just a further explanation of this and how we kind of.

Adam Callinan (31:37)
Yep. Yep. The growth at all costs thesis. Yeah.

Russell Breuer (31:55)
place contribution margin in the framework of these other metrics, which is honestly core to any subscription business. That's like the lifeblood. We can rabbit hole data and the importance of building a data stack early, because it's all about understanding how to read those signals early in the business. That was another piece of the success, understanding what... And in the early days, all those numbers were bad, by the way. CAC was high, LTB was low.

Adam Callinan (32:19)
Yeah, of course. Yeah. Yeah.

Russell Breuer (32:22)
margin was low, churn was high. And it's like, okay, well, at least we know. Okay, now how do we fix those things? That was the question.

Adam Callinan (32:34)
Yeah,

I mean, the reality is they just take time. So the question becomes, how do you get the time? Part of that becomes a capital constraint issue. So clearly that's why companies raise money. The other, as we kind of shift here a little bit, is the the mental fortitude it takes to be able to stick with it through that time, just knowing we're in many cases not knowing how long it's going to take. I mean, it could take months, it could take years.

Russell Breuer (32:37)
Yeah.

Adam Callinan (33:04)
So for you early on, you know, maybe it was when you were still packing orders out of a 700 square foot apartment. Maybe it was, you know, in your first like co-packing space. How did you deal with those like wild up and down swings? What are some things that you have built into your life to be able to manage that?

Russell Breuer (33:24)
Yeah, that's a great question. Over time, I've built up a really strong community of other like-minded founders, folks I've met along the way, and being vulnerable and transparent of like, I'm really strong. This is either a topic or an issue, and soliciting feedback. think that's, knowing that you're not going it alone, I think is really valuable for folks. talking it through, think oftentimes people are like,

They're stuck in the cube with their computer going, oh my God, how do I figure this out? It's like, airing it out is healthy. It's like you unburden yourself. That was like one thing. Two, I have like an incredibly supportive family. My wife speaks the language, so at home there's just a lot of exchange of venting or thinking through the next stage or decision making. And then working out, work out a lot.

Adam Callinan (34:02)
Mm.

Russell Breuer (34:16)
I think like getting out of the, you know, we've talked a little bit about Montana and kind of the pre-show, like finding those escapes. I fish a lot, I hike a lot, I work out a lot. And those have been great like motivators and like staying like healthy. Cause every day is, and now I do it in particular because every day there is a decision to make and it's, it, that,

The stakes have changed given the stage of the company and so staying like really physically fit and getting my sleep is like those are all things and now I sound like some health and wellness boomer. It's really important man. It's like get your Z's, get up, like get an exercise and like you're ready to go. Those are some of the tips that, I'm not saying that works for everybody but that's kind of how I've figured out, know, and there's been some, we've had some very low moments. We have failed a ton. I mean we are,

Adam Callinan (34:40)
Yeah. Yeah.

Russell Breuer (35:07)
But yeah, those are

some of the things that I've done over time.

Adam Callinan (35:12)
Yeah, I mean, there's no question any company, whether big or small that has been alive for any period of time, just, you know, it is like eating glass, right? It is that there is going to be so much failure in there that nobody ever sees. And nobody ever hears about all your readers, the headline. And that's why I think it's important to talk about, frankly, because I think it is so much more helpful to other operators, particularly early stage operators that are just, you know, maybe in their first startup, trying to figure it out to understand that like

It hurts everybody. We're all doing it. We're all in the same place. It just we're at different stages of that.

Russell Breuer (35:38)
Yeah. Yeah.

And then some of the macros, like, I think for me, it was always like, okay, how do I build the team? Let's talk about that. So I'll give you a very simple example. We were hiring like my COO co-founder. In the early days, I had people who said, oh, I've got a few recommendations for you. It's, you know, this 55 year old guy from Arkansas. I'm like, 55? Like, we're a start. It's like, my co-founder at the time was 25.

and unbelievably talented. And we spent a great deal of time figuring out how to hire a team. We talked to lot of people about how to do that. What archetype of person are you looking for? What are the skill sets? How do you screen for those people? What's your interview process like? Now we give people case studies. We have our own process, but we learn a ton from that. Or in these founder exchanges, it's like, what are you guys using for data? Literally, I have no idea. Knowledge, zero.

Oh, and people with, oh, you can use segment BI tools like Looker or Omni. You can bolt these in. Oh, how do I do, how do we do that? You need like a data engineer. Oh, okay. Let's go find one of those. Great. So honestly, a lot of this stuff is seemingly so obvious. It's like we've just, ask a lot of questions. We ask a lot of dumb questions too. And over time, it's like, how do you measure? Like I didn't come up with that ROIC framework on day one. I can assure you of that. I've learned that through.

conversation, talking to later stage founders, you know, looking at the P &L, it's like, well, that doesn't make sense. Or like, I can't scale these markets, the CAC goes too high. They're like, okay, well, why is CAC high? Let's talk about that. And we can have a whole session on that. But it's those things, we're like, okay, and then there have been so many tools, we even do it now. I had a call with a founder friend of mine an hour ago, talking about capital strategy, you know.

Adam Callinan (37:13)
Yeah.

Russell Breuer (37:27)
And we're just sharing what war stories. Okay, cool. Ask a lot like 10, 15 minute call. It wasn't like a three minute, three hour, no. 15 minutes, hey man, I got like 10 questions. You have like 15 minutes? He's like, yeah, let's roll. I got what I need, I'm out. And I do that a lot too now. If folks want to meet for a coffee, you have a chat, like to share war stories, I'm also a resource. So that's been, that's part of the kind of community. I think there's kind of shared learning there.

Adam Callinan (37:52)
Yeah, super important. Very last question for your community. When you first found it, did you can you define what you mean by community? Was that an organization like an ECOM fuel thing or how did you how did you define that first community?

Russell Breuer (38:05)
That's interesting. No, it wasn't like an incubator or like a formal, you know, group or association. It was that one of our early investors brought some other founders to the table and through them. And I would kind of cold outreach folks. So it was ad hoc. It was kind of like hand to hand combat. I certainly if there was a I would have gravitated towards if there was a and there are a number of them now, but maybe fewer when we started the company where it's like, hey, have you.

Adam Callinan (38:20)
Okay. Yeah.

Russell Breuer (38:33)
Here's access to a community and people know some stuff. I probably would have gravitated towards that.

Adam Callinan (38:38)
Yeah, there, are a few really good ones and a boatload of really bad ones. So, so like, like all things, you got to be careful where you, where you choose to spend your time. But so where do you want people to find you and spot and tango.

Russell Breuer (38:42)
Yeah. Yeah.

Yeah, amazing. It's spotandtango.com for the core business. And then we recently launched a brand called Pup Gum. It is gum for dogs. It's a new novel dental care product we launched about five months ago. So if your dogs have periodontal disease or bad breath in particular, that's the solution. Always deliver direct to consumer.

Adam Callinan (39:10)
Awesome, we'll make sure those links end up in the show notes. And yeah, this has been amazing, Russell. Congrats on the adventure. I deeply appreciate the being honest and all of the horror stories and lows that we did not talk about that surely you have got to experience. Yeah, exactly.

Russell Breuer (39:23)
Yeah. Episode two. Cool.

Thank you, Adam. That was really fun. Enjoyed the conversation.

Adam Callinan (39:31)
Yeah, likewise. Thanks.