#16 Qleek

From Gimlet, this is The Pitch. I’m Josh Muccio coming at ya with a cold. 

On this show, we take you into the room where entrepreneurs pitch investors for funding.

Today...a pair of founders think they’ve found a way to reinvent our music experience — by marrying the convenience of digital with the nostalgia of vinyl. 

But first, let’s meet our investors.

Phil Nadel is with Forefront Venture Partners. Look for him to get into the weeds with founders, and explore all paths to revenue. 

Phil: I want to invest in a company where I can pour fuel on the fire. Where you have a scalable way of acquiring customers and I can add money to it that’ll let you explode that.

Jillian Manus is with Structure Capital. She loves to put her might behind a brand and help founders really see the potential in their product. 

Jillian: This has the opportunity to be a superbrand. Put a cape on it and let it soar.

Daniel Gulati is here with Comcast Ventures. He looks for opportunities that can be total game-changers.

Daniel: I'm... Loving the product. And I think that the product you put out is truly disruptive.

And finally on today’s episode, angel investor James Altucher. He’s less interested in a good idea and more into how a company will actually grow. 

James: It's one skill to build a product, it's another skill to get customers, it's another skill completely to extract value for shareholders.

Jillian: No, actually. Wussy wig. That’s something that would be... 

James: What you see is what you get.

Jillian: I know, but...

Phil: Hi.

[hellos]

John: Good to meet you.

Jillian: Nice to meet you.

James: You guys make shorts.

Co-founders, Ismail and Johanna, look like they just stepped off a sailboat - designer shorts, summery tops, with a decidedly laid back air...one might say they have a certain je ne sais quoi about them.

Jillian: What are your names?

Ismail: My name is Ismail.

Jillian: Ismail.

Johanna: And I'm Johanna. And we're the founders of Qleek.

Jillian: And your company is Click?

Johanna: Qleek. 

Yes, the company is called Qleek… but that doesn’t stop our investors from mis-pronouncing it throughout the pitch.

Daniel: Tell us about Qleek.

Ismail: All right. So this entire story started about three years ago. I was moving out of my house, going to my parents' house to get some stuff, and I go to the attic and I find a box sitting there with the writing 'record' on it. And it was my father's handwriting. And I know for sure that my dad doesn't listen to a lot of music, so I was curious. Opened the box and it was filled with these amazing classics. Bob Dylan, Johnny Cash, all the classics, all the best.

But without a record player, Ismail couldn’t actually listen to any of his dad’s old records. So he did the next best thing: he took out his phone and started playing the music on Spotify. 

Ismail: and it was great. And it felt this deep connection to my dad, because he was probably listening to all these songs at my age. And so at some point, I think it was Times are a Changing by Bob Dylan was playing, and I got really sad. Because I thought, okay, I will probably never be able to do this when I have kids, because all our music is in the cloud. And it was at that moment that I started thinking about combining the best of both worlds, the convenience of streaming with the intimacy of the record. And that's how Qleek was born.

So they want to take the best of both worlds… the nostalgia of records with the convenience of digital music, so they came up with a physical product that would be their version of a modern day record - the Qleek. And if they can raise enough money, they’re hoping to get their Qleeks into 25 stores before Christmas.

Johanna: And today we're here to raise 800k.

Johanna: We actually made each one of you a little present, so maybe that will help. That's for you Jillian.

Jillian: Oh, ok, these are so cute.

Johanna hands out personalized Qleeks to all the investors - they look kind of like coasters. They’re hexagon-shaped, with a beautiful wooden top, and fit right in the palm of your hand. In this case, each Qleek is customized with an image of one of the investors. 

Daniel: Oh wow. Oh wow. These are very personal.

James: but let me ask you. This is such a beautiful design, I want to congratulate you on that. That’s your design? So you must be some kind of, I don’t know what you call it, a designer?

Johanna: I’m an industrial designer.

Daniel: That would be a pretty good word.

Phil: Someone who designs.

James: I think I invented that word just now. It's a new word. 

Okay, so the Qleeks are beautiful — but how do they play music? 

Johanna: I'm happy to show you a demo. So basically this is the Qleek player. 

Johanna points to a small, square base made with the same wood as the Qleeks.

Johanna: These are Qleeks. So each one of these hexagons can be a podcast, a radio show or a playlist. And all you got to do is put it on the player, and it will start playing the music immediately.

She places a Qleek on the player. This Qleek is actually decorated with the artwork of The Pitch.

James: It’s a really nice design on the player. So you put it on the player, and it’s like a little box.

Phil: And does it connect with the speaker? A Bluetooth?

[episode of the pitch starts playing]

Johanna: Exactly. It’s plugged to a speaker. So basically you can plug it to any speaker you have at home, and it will start playing the music. Or if you don’t have the Qleek player, if you’re lucky enough to be gifted a Qleek, you just take your phone, use the Qleek app - one second - and you scan the code that is on the back, so I’m going to scan it. 

Johanna takes a Qleek and scans the QR code on the bottom with her phone. 

Johanna: And it will bring me to the same content. And now I press play and it will start playing the same, the podcast or the playlist, whatever is on this Qleek.

Phil: So if people can play it from the app, why do you need that player?

Johanna: It’s either/or.

Ismail: The player is really for the home experience. When you’re at home, usually playing music is a hassle. But in our case,. It’s a one step process. You grab the content you like, you put it on the player, and it starts playing. It’s great for your morning routine. My favorite thing is I’m coming back from home, from work, I remove my jacket, and I put a Qleek on before I’m even done with my jacket. And that’s the kind of friction we’re trying to remove with the player at home.

So maybe you see the Qleek as a return to the physical music you miss — or maybe it seems like another needless item cramping your hip minimalist lifestyle — but, to Johanna and Ismail, they actually see this as less of an item you would buy for yourself - and more of a chance to buy something for someone else.

Ismail: Basically, the whole pitch of the company is to be able to gift the content you love. Today if you want to gift something to someone, any content, a podcast that you like, a playlist that you love, an artist that you really like, there’s no way to do it. You can only buy a CD, or you can buy a gift card.

Daniel: It’s kind of a better iTunes gift card.

Ismail: It’s a mix between iTunes, a gift card and a record.

Phil: But you could do it literally on a piece of paper You could have business cards printed with the QR code on it.

Daniel: Come on. The hexagon.

Phil: And that way, you could just use the app and play it connected to your speaker.

Ismail: Absolutely. You can definitely do that. The only issue would be if you go to, if you put that piece of paper on a Christmas tree, it won’t hold the emotional value that you have with a Qleek.

Daniel: Really the true value here is the physical pieces? It’s the player, and it’s the physical tiles.

Johanna: There’s also another accessory that we make.

Daniel: Because making it easier to stream music or play music through the app is kind of a pretty crowded space. So really the value that you guys are bringing is this next gen vinyl sort of thing.

Ismail: Exactly. 

Jillian: So But you can share content now. You can share music now by sending...

Ismail: Not share a gift. It’s very different. Gifting is very different from sharing.

Phil: This is an elegant way of gifting music. Or content. Versus putting it on a piece of paper. Even if they don’t have the player, If you’re going to someone’s home, as a, you’re bringing a gift, you don’t want to bring them a piece of paper with a QR code. You can bring in this set of Qleeks or whatever with different QR codes and different music to play during the party that you’re going to or whatever.

This distinction Ismail is making between sharing and gifting — this is everything. If I want to share music, maybe I put up a link on social media to a YouTube video I love or I send a link to a Spotify playlist. And that’s fine. But what Qleek is trying to do is fill the void for those who want to gift music. And you’re probably thinking, who is still gifting music these days? Turns out, a lot of people. 

Ismail: In 2016, 50% of Americans have gifted a music gift. Okay. 50.

James: What does that mean? What did they gift?

Ismail: That's a great question. 75% of those gifts were physical. 75%.

Daniel: What is that, like CDs?

Ismail: And 30%, the highest, the most gifted item today, in 2016, wait for it, is still the CD.

Daniel: No way.

Ismail: Yes.

James: Where do they get a CD?

Johanna: Amazon.

Ismail: They buy it on Amazon. They buy vinyl. They buy gift cards.

James: How do they play a CD?

Ismail: They don't. People don't. 

As much as the investors might’ve liked seeing their faces on the front of a Qleek, this is what really gets their attention — the surprising fact that physical music still has a pretty big market. A market that is apparently being sucked up...by CDs.

Phil: You’re saying that 50% of Americans gifted music in 2016, and of that, 75% of it was physical, and most of that 75% was CDs?

Ismail: CDs. Second is gift cards.

Daniel: That’s crazy, right?

Phil: Yes.

Ismail: Well, think of it. There is no alternative. Like if today, if it’s Christmas, and we’re a family and I want to give you the artist, if I love Adele, and I want to give you the record of Adele. What can I do? I can buy the vinyl if you have a turntable. If you don’t have a turntable, I can buy a CD. If you don’t have a CD player, which most people won’t have in ten years, what can I gift you?

Phil: Well, if you’re Jillian, you’ll just have Adele come to the house and perform.

Jillian: Okay, you know what, really? We’re going to so ignore that.

Daniel: Is that a true story?

Jillian: No that is not a true story.

Daniel: If so, I’d love to be invited. And I’d love to get an invite at the next...

Jillian: Okay, all right. Moving right along.

Phil: But you know, it’s interesting, if you think back to when we were kids where, you know, you’d give a mix tape to someone like on a cassette tape. You’re too young for this. But this is, you know, you do a mix tape and you’re curating the list, something special for the person you’re giving it too. Maybe it’s a love interest or whatever. This, you can do a very similar thing with that, right?

Jillian: But you do have the ability to do that, is to create mix gifts, mix... I mean...

Phil: So how would you do that today?

Jillian: There are apps.

Daniel: You create a playlist and share it.

Phil: That’s an inelegant way of gifting it, right. So a physical mix tape says, here, I worked hard to curate this. 

Great so the investors are into sharing playlists. But are Qleeks the way to bring back the mixtape?

Jillian: This is so off the beaten path here. But is it possible to make these clips and to create them in the form of, almost as getting back to your point, a card? So that they're small, the chip is flat 

Ismail: The issue is, if I give you this, and I tell you, here is a gift. This is a tiny business card. You're like, yes, thank you and you put it in your pocket and you forget it. If I give you, we spent a lot of time within the team, deciding the shape of the device and the product because it's a matter of...

Jillian: Yes, I see the design and I appreciate...

James: You’re selling an emotion, cultivated in part by the design.

Ismail: One musician told me, records are not, when people buy records they don’t buy music. They buy the container that has the music.

Jillian: Oh well some, well that’s ridiculous. I’m going to push back on that. It’s both. It’s the both. People buy records because it is the purest form of music. But there is something tangible and lovely, but one of the reasons that this has had, the transformation in the music industry is because people wanted to condense their things. People wanted to be able to… 

Ismail: I don’t necessarily agree with that. I think, that’s one of the biggest misconceptions about why, what happened in music. Because we apply what happens in other sectors of tech to the music space. But in my opinion, what happens in the music space is we shifted to streaming, which allowed you to just access 30 million songs in one click, instead of buying a CD and having 12 songs. And that was the difference. Paying $10 a month to access 30 million songs, that was the killer thing for me to switch to Spotify. Not because it was smaller, or decluttered my house. Actually it made me sad, sort of. And one of the proofs of that is the resurgence of vinyl. In my opinion, it’s very symptomatic of what’s happening in the music space. Millennials are buying vinyls like crazy. Why? Because they never see and touch the content they have and they love.

Jillian: But also if you, one of the mentalities of millennials is that they don't want to have things. They're trying to get rid of their things. So they're investing more in experiences. Everybody knows that. So because one of the reasons is they travel around a lot. They don't want to have records. They don't want to have lots of books. They don't want to have lots of things. So they're actually, I feel that the mentality is counter intuitive to what you seem to be selling.

Ismail: I agree with you. Except for gifting. The study that I can share with you shows that millennials are the heaviest gifters in today's world. Can I give you an example?

Jillian: Yes, please.

Ismail: So we have different pilots. We did a pilot with a, for a wedding, for example.

Jillian: Okay. All right. What did that look like?

Ismail: This looks like this.

Phil: As a wedding gift?

Ismail: It was a, actually, people who...

Phil: People who attended?

Jillian: I see. You give it to guests?

Ismail: We give it to seat the guests. So you have, each, your name on the Qleek written. 

Johanna: That's the whole advantage compared to a CD, that it's not 12 songs and they won't change. But this, you can upload, you can change it over time. So as soon as I, let's say it's a playlist, this is the mixtape I made for you. If I listen to a new song I like I will add it to this and you'll get a notification that I added new songs to it. So it's a present that's alive in a way, which is kind of nice, compared to a record that's static.

James: So in other words, you see gifting as the kind of essence of your business, as opposed to listening to music? 

Ismail and Johanna have really worked to sell their vision of Qleek to investors as the music-gifting company. But in defining such a specific market, have they pigeon-holed themselves? 

Phil: So what is your traction as of now. What are your, the channels that you’re pursuing currently?

Ismail: So we’re doing, we did three main things since we started. The first thing was to prove that people liked the product. And so what we did is to ship the product to people, put it on sale and see what the reception is.

Jillian: So where was it on sale?

Ismail: It was online. At first.

Jillian: It was online. And how many did you ship?

Ismail: 500. Our first round of production.

Jillian: Okay. And you sold all 500?

Ismail: Yes. 

Jillian: And the cost?

Johanna: The cost of, production cost of the player was around $60. We sell it for $100. And the cost of the Qleeks was around $4. We sell for $9 upwards. And that's the whole game, or the whole interest of this round of fundraising, that we scale up and can produce everything overseas to get higher margins. 

Daniel: Talk to us about distribution and what the strategy is at.

Johanna: Last Christmas we had our first retail experience, and it went really well, which was great.

Jillian: Where was it?

Johanna: It was in France, in Paris, at Le Bon Marche. You know it? It’s a bit like Macy’s. It’s a fancy old department store. And they took us in very last minute. It was, I think, ten days before Christmas because they weren't sure about the product. They were afraid people wouldn’t understand it.

Daniel: And that’s a wholesale type relationship? Or what was that?

Johanna: We went through a distributor.

Daniel: You went through a distributor? Okay.

Johanna: And we sold the Qleek packs for 199. And the first time they ordered only twenty because they said, okay, if you will sell one a day we’re going to consider it a success. And the first day we sold all twenty. We were out of stock immediately.

Phil: 199 includes the player and a bunch of Qleeks?

Johanna: It’s the player and six Qleeks, yeah, exactly.

Daniel: It’s a great gift.

Johanna: Exactly. It was the perfect Christmas gift.

James: Do you know how many of those, people who bought, then of course rebought?

Johanna: Yeah. That was the thing. We saw in February a lot of people coming and ordering that we didn't know, because they didn't came through our website. So that was where the retail people, and they reordered Qleeks and the hives to hang them up on the wall.

Phil: So what happened when, you shipped the 500, and then you waited to see if they'd come back and order, and what happened?

Ismail: And they reordered. We were surprised. Because the product was...

Phil: How many? What was the reorder rate?

Ismail: 30% of our customers reordered a first time.

James: Reordered meaning they ordered another click?

Ismail: Yeah, they ordered...

Phil: The discs.

Johanna: They usually ordered a couple of Qleeks and they ordered a hive. 

Jillian: Blank Qleeks? They ordered blank Qleeks to download their own playlists, correct?

Johanna: Yes, exactly. 

Phil: So 30% came back and reordered.

Ismail: And the average cart was on average it was $92.

Phil: Average order was 92?

Daniel: Including the player?

Ismail: No. This is the second order.

Daniel: This is the reorder? Oh wow, that’s high.

30% reorder rate with an average cart value of $92 is a good start for the company. But Ismail’s been holding something else in his back pocket.

James: We did a lot of user research with Bose, who is an investor in the company.

Jillian: Oh are they?

Ismail: Yes.

Jillian: They’re fantastic.

Ismail: And they are leading this round. 

Daniel: And how much do they own? Or how much will they own after this?

Ismail: So they put 350 on a 4 million cap at 20% discount a year ago.

Daniel: Okay. I'm just trying to get to, are they trying to just buy you guys?

Ismail: No, I think if they wanted to buy us they would already do it. They already did that with other companies. 

Jillian: So what keeps you up at night?

Ismail: So, fundraising, of course. [laughter]

Phil: So let's say you raise $800,000 in this round, how much runway will that give you?

Ismail: 18 months.

Phil: You'll have 18 months. And what do you see as the milestones to the next round?

Ismail: That's a great question.

Phil: Thanks. I've been working on that one.

Ismail: Because it's the other thing that keeps me up at night. What is the best strategy in terms of fundraising. And I thought about this a lot and talked to a lot of people. And what we ended up doing instead of going full scale in retail, and try to produce 30,000 units, we're going to produce 5,000 and then work on increasing the numbers of reorders. And the idea for us is to get to 40% reorder rate on the Qleeks. 

Daniel: I’m just curious. What is your, you’ve been talking about the business, and we’ve peppered you with questions. I personally think it’s really interesting. What’s your ambition, what does success look like in this business for you?

Ismail: For us, success means being the new medium for media. For any media that you would like to gift or to keep.

And with that, it’s decision time.

Have investors bought into the idea of a new medium for music. Or has this song already been sung.

Here’s Jillian.

Jillian: I had a great Russian grandfather, and his mantra was, and you have to, in a Russian accent, was - vere there's a vill, there's a vey. So I feel that you guys have the will for this, and you're figuring out the way.

Ismail: We did, so far.

Jillian: Absolutely, and you have so far. I just want to say, first of all, this is the good news, bad news. The good news is I will buy this, okay. And I want to be down for one.

Daniel: The company or the unit?

Jillian: The unit.

Daniel: You were scaring me there for a second. 

Jillian: But I don't know enough about this to really even, I don't want to sound like a cop out, I really don't know about, I know more about vinyls than I do about this medium. And I'm so old fashioned about that. Also, my playlists are thousands and thousands. It's just, I'm not, I don't know how to attack this in a way that would be meaningful to you. And you don't want people like me. You want people like them. Go them.

Jillian’s out, and it’s on to Phil.

Phil: It's a tough one for me. I think that... It's a very interesting product. I'm just not sure, you haven't proven product market fit yet, right. I know that it's early stage. Next round, hopefully you will. I'd like to get in once we see product market fit, or at least some early evidence of that. So I'm a little bit torn on this one, but I think I'm going to pass.

Phil passed, here’s Daniel.

Daniel: So here’s where I’m at which is, I think this is in many ways kind of like a classic consumer product bet. You’re inventing this new format, and no one here in this room or anyone knows what the adoption will be. And so I think if you get adoption, if you get this critical mass of consumer adopters, I think almost everything, at least for me, lines up, in terms of business opportunity. I think that you can easily monetize, and I think you can build a really big business. But I think the germ of this business really starts with consumer adoption. And like so many pure consumer bets, it sort of comes down to a judgment call, a gut feel of how many consumers are going to end up adopting. And so I can’t help, and again I could be totally wrong here, this is one where I feel really exposed. I’m just thinking of that McKinsey study that was done in the 90s that said like, oh, the market size for mobile phones will be a million globally. And they were off by orders and orders of magnitude. And so that’s why I feel really exposed here. Because you could be inventing the next mp3. And so, but I just, if I really sort of think about who will adopt this, I think, I just can’t help but think it’s a niche market. And for that reason, I’m a pass. But I think what you’re doing is really interesting and could be a really, really big thing.

Phil: Just as a follow up to what I said, I think for me, if you hit those milestones that you outlined for the next round, I might be interested in the A round, or whatever’s the next round. Because at that point I think you’ve demonstrated a lot more product market fit and adoption and traction, certainly. So I think at that point it becomes much more appealing, at least to me. I know that there will be obviously a higher valuation. I think the de-risking that would occur between now and then would be worthwhile for me to pay a higher valuation, and to derisk it what I consider a significant amount at that stage.

Three out of four investors have passed. What does James have to say? 

James: Here's what I see here. I see this great, magnificent design. Like it's just so beautiful, and it really appeals to me, and you even have that enthusiast who puts the designs the all over their wall. And so you have artists already thinking how to make use of this. I also see this excellent combination of design with internet of things, technology, [01:11:00] and this essence of gifting. And I wonder what other things these two minds will come up with in terms of internet of things and gifting. My problem is, unfortunately I'm passing also, but my problem is I'm... It's unfortunate for you, really, in that I'm an extreme use case of the opposite side. In that I, about a year and a half ago, I threw out all of my belongings. Like 99.9% of my belongings. Anything that could fit, I only have things that I could fit in my carry-on bag and that's it.

Jillian: He lives in Airbnbs.

James: Yeah so I only live in Airbnbs, I don’t own any furniture. Don’t own anything. This would be, how would I carry this around? I wouldn’t carry it. I can’t philosophically do it. But my advice is, design with internet of things, there’s probably something there. I just don’t feel it with this.

Daniel: I feel like we all could be horribly wrong here.

Jillian: I know that! I know that! You’re right. We could be horribly wrong. And a piece of me feels that.

Jillian: Thank you so very much.

Phil: It was a pleasure meeting you both.

Once Ismail and Joanna leave the room, investors dig deeper into their concerns about Qleek.

Jillian: I just saw this as an extra step. Maybe that's as basic as this.

Daniel: I agree with you.

Phil: I see it as an extra step, but I do think that. 

Jillian: That was a wrong type of pitch.

Phil: Some people are going to like it as a gift. It will have maybe a niche.

James: The whole world for 30 years has been heading towards an access and condensed, an access economy with condensed storage of everything.

Phil: Right.

James: So we can't fight a major trend.

Phil: But to his point, if you look at the vinyl thing as an indicator.

Jillian: But he was wrong, Phil. I can’t say he was wrong, but it is a cool factor.

Daniel: You were pushing back on the vinyl.

Jillian: I was, because...

Phil: Yeah, it’s a cool factor, right. But this would have that same cool factor.

James: No, it wouldn't. Vinyl is for audiophiles.

[cross talk]

Daniel: This isn't retro. This is not retro.

Phil: But his point was that millennials don't buy vinyl for audio quality, they buy it for the cool factor.

Jillian: That's not true, because if you ask millennials, the millennials that are buying the vinyls are actually buying them for the quality. Because millennials are more music-centric than ever, than any generation.

Phil: I don't know enough to say. I'm not an audiophile or a millennial. So I can't say.

James: But you know what, millennials though are what’s fueling the access economy. It’s not going to go backwards to have more things.

Jillian: Yes, I absolutely agree.

Phil: That’s why I said this is a niche business at best.

Daniel: And I think that’s the thing.

Phil: I think it could be a nice niche business.

Jillian: I think it could. Maybe for events.

Phil: I can’t decide. Should I say neesh or nitch?

Daniel: I say neesh.

James: I say neesh.

Phil: You go neesh?

James: I go neesh. But it took me a long time to settle on that.

Daniel: I see neesh, but I also say tomAhto.

After the break, I catch up with Ismail and Joanna and find out just how hard it is to start a mixtape revolution.

[break]

Welcome back! A few months after their pitch, I got Johanna and Ismail on the phone to hear what’s happened with Qleek.

ISMAIL: What happened is we ... I kept fundraising for awhile. I went to a lot of meetings in New York, in Boston, and then we quickly realized that, just like most of the investors at the show said, we were probably too early to fundraise considering the situation of Qleek and all the unknowns around the company. And so we decided to stop fundraising, go out and get more traction and then go fundraise again when we're ready.

JOSH: Okay.

JOSH: Did you raise ... you were raising $800k, correct?

ISMAIL: Yes, yeah.

JOSH: Did you raise some portion of that?

ISMAIL: Not right now, now.

JOSH: Okay, so you decided to cancel the round? 

ISMAIL: Yeah, postpone it.

JOANNA: Yeah, we went back to Paris for now, because we want to do retail here for the holiday season, and we've got five shops in Paris and the UK and in Switzerland that are committed to sell Qleeks, so we're preparing for the holiday season right now and trying to sell as much as we can.

JOSH: What are some of these shops?

JOANNA: Here in Paris it's Bon Marché -- it's a pretty big, famous department store

JOSH: Yeah!

JOANNA: And we've got Harrod's in the UK and Bonne Journée, it's a Swiss store.

JOSH: Wow!

JOANNA: And there's a couple more here in France, BHV and some others.

JOSH: Okay. So you mentioned on The Pitch that your goal was to get into 25 stores by Christmas. It doesn't sound like you'll quite hit that mark.

ISMAIL: No, that was with the $800k. Since we didn't raise that amount of money, we couldn't hire the people that would allow us to be in those stores, and so we did what we could considering we're just the three of us. 

JOSH: How many units are you selling right now per month?

ISMAIL: We can't really disclose that as it's a new product and we're ... we can't really talk about that.

JOSH: Okay.

ISMAIL: All I can say is we've run out of stock for the player, so we can't sell it anymore because we don't have any more units in stock.

JOSH: Oh, you don't have any more of the players?

ISMAIL: Yes.

JOSH: So you're only selling the Qleeks right now?

ISMAIL: Yes.

JOSH: Isn't that a problem that you don't have any players to sell?

ISMAIL: It is somewhat a problem, but it's a problem we have to deal with. We don't have the funds to make a new production run and sell more players, and so we don't do it until we raise more money. 

JOSH: Guys, that is so tough! Like, I'm just trying to imagine being in your shoes, like trying to grow this thing and like having part of your product be unavailable, part of the value prop of what you're selling.

JOANNA: Yes, disappointing, because we have a lot of demand and we would love to sell, but we can't because we don't have the money to run the production. So it's a tricky situation. 

JOSH: So, when you remember back to the pitch, being in that room, what do you remember? What sticks out in your mind?

ISMAIL: I don't know about Joanna, but for me it was the succession of 'No's' that was pretty traumatic.

JOANNA: I kind of felt at some point that the conversation sort of went out of hand, that they were leading the conversation instead of us, which was too bad, because I felt like I wanted to explain more about Qleek or tell them about some awesome features, but they were, like, stuck on some particular point that wasn't super important. So yeah, I felt like we didn't always control the conversation which was too bad.

JOSH: Right. So ... Listening to the conversation, I understand the feeling of, they're focusing on things that we don't think is fundamental to our business, whether it's the conversation about vinyl or something like that. But like, it was really fascinating to listen to, because, like, I've had so many conversations about Qleek with people since I first heard your pitch, because, like, people fall, like, all over in the spectrum and like either they agree with the nostalgia aspect of it, which in that respect, they're focusing on the comparison to vinyl, which is not what you're saying. Or they're, like, excited about the technology of it. But then it feels -- I don't know -- like, it's this really weird conversation that I've never been able to fully resolve in my mind. And that's what the conversation in the room felt like to me, too.

ISMAIL: Mm-hmm. But I think it was, and I think it's okay for us to be polarizing. A lot of products were polarizing when they started. You know this better than I do. Twitter was polarizing because it's a dumb idea when you think about it.

JOSH: (laughs)

ISMAIL: Like, when you really think about the conversations we were having when this started, everybody was saying, 'Why? Why 140 characters when I can use Facebook, and I can use whatever other platform to just say whatever I want.' And it's a limit, and it's a limitation and it constrains a little bit which is like what Qleek does in a sense, too. It constrains you to make a mixtape, really, to someone and prepare it and give it. And that, I think, is polarizing by itself in the age of sharing everything so quickly and so easily. 

JOSH: you mentioned that millennials are the biggest gifters, more than any other generation we've seen. But as Jillian said, we know that millennials are decluttering, they're cord-cutting. And they love the sharing economy, ride-sharing, food-on-demand, why would they be the biggest gifters? It just doesn't make sense.

ISMAIL: Because gifting is a different ... it's not a practical thing. You don't want easy, you want the most relevant and personal way when you're trying to gift, and that's why they're offering very personalized photo albums, they're offering records, they are offering a lot of physical objects.

JOSH: So you're saying when someone's gifting, they don't care as much about the convenience of the thing, they care about the customization and the personalization of it. 

JOANNA: Yeah, it was like the last party I went to, I was so disappointed. Everyone came with a bottle of wine and I was like, 'Oh my God. Be more creative, people.' If you care about a person, if you just bring another bottle of wine nobody will care and nobody will remember what you brought. But if you take the time to make something actually meaningful to you and the other person, where you spent a couple of minutes thinking about them, what they like or don't, that will stick out and they will remember this gift and that's what you ultimately want with a gift I think.

JOSH: True. But what do you have against wine? I love wine.

JOANNA: Yeah, we do too! 

JOSH: Do you have any doubt in your mind that this is gonna work?

ISMAIL: Of course we do. I think doubt is healthy. We had doubts since we started, doubts about 'Is it gonna work?' But not about 'Is it a good product,' because we know that it is. The doubt is about, 'Can we execute so that we can fund this company?'

JOSH: Yeah.

ISMAIL: And that's what we're trying to do.

The last I heard from Ismail and Johanna, they were gearing up for the holiday season and Bose had expressed interest in investing even more money into Qleek. Seems there’s still plenty of fight left in our founders. 

Stick around til after the credits to hear scenes from the next episode.

Our show is produced by me, Josh Muccio, Molly Donahue, and Kareem Maddox. We are edited by Devon Taylor.

Our Theme Music is by Breakmaster Cylinder, with original music composed by The Muse Maker, Bobby Lord and John Kimbrough. We were mixed by Enoch Kim with help from Matt Boll.

Lisa Muccio plans our recording events and thanks to Asthaa Chaturvedi for her reporting on this episode.

We found out about Qleek because they applied to be on the show. Founders can apply on our website at thepitch.show/apply

All right -- you’ve been listening to The Pitch from Gimlet Media. We’ll be back in two weeks, see you then.

On the next episode, the story of how investor Jillian Manus transformed herself after hitting rock bottom — and became the person we know today.

Jillian: When I finally emerged and I the cloud lifted and I said all right I'm I'm ready to get back into society. I went to this little hair salon and if I tell you I look like a mess I look like a monster. My hair was matted and my nails were disgusting and I was disgusting mess.

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