Buying into the ASMR Slime Business with Codie Sanchez

Alex Lieberman: What's up, everyone. This is Alex Lieberman, co-founder and Executive Chairman of Morning Brew. Welcome back to Founder’s Journal, my personal audio diary, where I give you, the business builder, the tools you need to think better in order to build better, whether that's building a business, a team, or a new product. So I have a confession for you. After 340-something episodes of this show, I've been feeling an itch. Let's call it the entrepreneurial itch, basically pushing me to try something different, to make sure that I'm giving you, the audience, the absolute best experience, listening, learning, and growing with the show. So for the next three episodes, we're going to try something new. I sat down with my good friend and fellow entrepreneur, Codie Sanchez, earlier this week and we tried out talking through three different topics that we thought would be exciting to the Founder's Journal audience. We are going to release those as three different episodes: one today, and then two next week. And then we're going to ask you which of these episodes you liked most and why, and that will help inform the content we give you in the future. Today's episode is a convo between me and Codie about a business that she's gotten interested in and let's just say the business is a little bit unusual. Basically, there are a growing group of creators on platforms like YouTube and Instagram and Tech-Talk who create videos that fall into the oddly satisfying or ASMR categories. Now, oddly satisfying is pretty self-explanatory and if you're not familiar with it, after you listen to this episode, go check out the subreddit r/oddlysatisfying and my guess is you'll probably be glad you did, but let's talk about ASMR for a second. ASMR, which I didn't know what it stood for either, it stands for autonomous sensory meridian response. Basically a lot of words to describe a sensation that is often characterized by tingling that starts in your brain and trickles down your spine, usually caused by watching a certain type of video that sounds like this [sound effect]. Now some of you may be feeling that feeling right now. You know, like the tinglies the shiver down the spine. That is ASMR. Now, if you don't have it, don't worry. It's not something that everyone gets different. People have different ASMR triggers. Some people get it more from whispering or soft sounds and other people don't get it at all. So if you enjoyed the clip and you want the full video, we're going to link to it in the show notes. But just for context, this video has 97 million views in just over a year since being published. It is the most viewed video if you search ASMR on YouTube. Now what's interesting about slime ASMR videos in particular is that they contain a product, a physical product that creators can actually sell. They can sell the slime, sometimes with built-in scarcity, where they do it in batches that go really quickly. And so that's basically the deal behind this whole conversation. Codie is thinking about buying one of these ASMR slime businesses. And so she and I sat down together to talk it through. You're going to hear us talk about this thing called PeachyBbies, just for context, that is a specific slime company that makes slime ASMR videos. We'll link to it in the show notes. If you want to check it out, but for our full conversation, here's me and Codie. Tell me how you landed on these accounts. Like how did, how did you get into this ASMR, oddly satisfying, very specific niche?

Codie Sanchez: That's actually funny. One of the women who works for me is awesome. And she used to work for OnlyFans before. And so she said, there's this whole OnlyFans-like account world for ASMR and oddly satisfying things. So she sent it to me and I was like, this is weird. And then 30 minutes later, I'm like, oh anyways, what's happening here. So that's how I got it. 

Alex Lieberman: Oh, oh. I fricking love the oddly satisfying videos. I have not taken it to the extreme of thinking about it as a business as you have. So just take me through what the master plan is with operation slime.

Codie Sanchez: Well, operation slime. So first thing is I DM’ed this one girl, PeachyBbies, here in Austin and she sells out of her slime every Friday. Her thing goes up and she sells out in like 30 seconds to two minutes. I did some rough calculations and ascertain she probably makes about 200K a week. And I was like, this is ridiculous.

Alex Lieberman: What? How big is her audience?

Codie Sanchez: Her audience on Instagram is like a million people. Now, when I first found her, it was like 500 or 600K. So she's just skyrocketed. But the wild part is she's not the only one. There's a bunch of people that make these. And they all basically sell out every single week. And so they make these little TikTok and Instagram videos and that's their only ad spend or whatever marketing. So I reached out to her and was like, “Hey, how's it going? I'm Codie. Cool business. How much money you make?” You know, oddly, she didn't respond to me, but I–

Alex Lieberman: Wonder why…

Codie Sanchez: No idea. It's odd really. But anyway, so she wouldn't let me interview her or she hasn't responded. I mean, she probably gets a lot of DMs. And so I would like to invest in one of these people's businesses, because like how hard could this be to scale and make where you don't sell out of them every single week. And you make millions a week instead of a couple hundred K? 

Alex Lieberman: Oh, it has to be so easy. And, and also on that, is there anything specific about…what's her name? PeachyBbies?

Codie Sanchez: It's like skip some, skip some vowels, like add an extra B or something. 

Alex Lieberman:  Yeah, yeah, yeah. Yes. I know I'm on their website. So PeachyBbies I see they have emo girl jelly, $15. They have cosmic brownie batter, $15. I would definitely be the person to go and eat it. And then slime-mallows cow clay kit, $18. First of all, I'm assuming the margin on this slime is absurd? 

Codie Sanchez: It has to be huge.

Alex Lieberman: Do you think they're just like, they are literally just like logo slapping on this. Like they're not creating this line, this line, I'm assuming like they just order from some manufacturer? 

Codie Sanchez: No. So that's the whole thing. They do it in like a, it's like Martha Stewart slime in her kitchen in like this relatively large, but not nearly large enough batter. And so then it's called “hand slime” and the, the whole point of the videos is like her actually creating the thing. But that's why they can't scale it. She's like, well, I have to get a manufacturing plant, whatever. I'm like, this seems like we could make this a lot easier on you. And you could stick to the IGand TikTok reels. So, yeah, I mean, there are some other guys that are, have their audiences and look like they've scaled up slightly, but even they sell out all the time of the best ones. So I can't figure out. I'm like private equity firms, KKR, what do you feel about slime?

Alex Lieberman:  Slime roll up.

Codie Sanchez: Yeah. Well, and the other thing is like, none of these people have brands to them. So if I was a slime creator, I would create like a little universe. It'd be like My Little Ponies, but with slime or whatever. You'd be like, gotta to catch them all, or Pokemon or whatever that was. And so I'd have, like each slime was like a character or a specific color that you wanted to collect. And so kids get annoying about that and then they want all of them. There's nothing really that is branded with these. And so that I think would be a really easy mix. Not to mention, like you said, what about edible, organic slime? Like there's so many different skews. I think you could go with,

Alex Lieberman:  Wait, are you saying that like, it would be slime that you can eat or?

Codie Sanchez: There is slime. You can, yeah, you can Google it.

Alex Lieberman: There's slime you can eat?

Codie Sanchez: There's slime you can eat. Yeah. You just make it with food as opposed to glue and probably a bunch of toxins. It looks like mom bloggers kind of do this online. I've seen like a lot of, you know, DIY mom blogs, but I can't imagine why you couldn't scale it up. ‘Cause you know, your kids are going to try to eat this stuff like that's going to happen. And so you could get around that.

Alex Lieberman:  I mean, if you're somewhat in the ballpark, $200,000 a week, assuming I don't know how you got to basically how many they would be selling to sell out, but say it's 200,000 a week, 52 weeks, you know, you're talking about $10 million a year and what's the margin on the slime? I mean, they're selling this for what? 15 to $17? To me, this can't cost more than like three bucks.

Codie Sanchez: No, no. There's no way it does. Yeah. And the other thing is I think they have a minimum order sizes. So you can't buy just one, which means like every cart’s  probably like 30 to 40 to 50 bucks per cart. So you've probably got some nice little economies of scale, but with the sand one, so the sand is kind of gross. It's like, but some people love it. They like cut the sand or they squish it down,

Alex Lieberman: Yeah, yeah, yeah. I’ve seen the videos of that. 

Codie Sanchez: But they sell nothing. They don't even have one product.

Alex Lieberman:  Yeah. So that's what I'm even thinking, right. It's like, do you go to like basically in a journey of monetizing themselves is PeachyBbies too far, like PeachyBbies is like inning seven and you need to go to someone who's like inning three? And that's what I was even thinking about to myself, which is like, where do you want to play in this? Right. Do you want to actually hire a college student who is super into ASMR to like build the account from scratch? How much value is incrementally there? Versus just to your point, finding the person who has built a 500,00-to-million follower audience, they have not come out with product yet. You come in and you're basically like the playbook exists and I will run it for you. So you can just do what you want to do and be creative.

Codie Sanchez: Yeah. I think it depends on what type of human you are. I mean, you know, me, I like to build or buy everything and build as little as humanly possible. But I think if you're a young gun and you don't have capital or like leverage to buy the business, then I think starting this is basically a no-brainer, I mean, the only annoying part about it is with physical asset products. Like I wouldn't want to be the one figuring out like, ah, you know, how much do we have to make to put together the thing? And I don't want to be squishing this stuff myself. So at least if you buy it, you start with profits day one. And I bet there's a bunch of these little accounts that almost have the whole thing down but to your point, haven't figured out scale yet on videos. So you could probably, probably buy those. This will be our next empire business, you know, Morning Brew is cool, but I think slime is probably your future.

Alex Lieberman: Well, it's going to be the Morning Goo, obviously, but even for say PeachyBbies is, say the business is doing $10 million a year. Let's just say it's 70% margins on this, right? So they're doing $7 million a year in profit. How do you think about what you'd pay for this business?

Codie Sanchez: Yeah. Well, so a couple things. So the way that I got to the revenue numbers were basically each order size, she said publicly, I have to do a hundred to 300 individual

Alex Lieberman: Batches. 

Codie Sanchez: Batches, or whatever these are called, boxes of these. And so then I did that by the number of slimes she drops each week, which you can also see, that get me to the 200K number. So I think we're probably pretty close on that. I mean, for these types of businesses, I'm cheap. I like to buy businesses at anywhere from two to six X. I really try for the two to three X, but I typically buy boring businesses that don't have a lot of profits. Excuse me. Yeah. But this has a lot of growth trajectory. So I guess it just depends, you know, if this young woman is still loving doing this, then you're probably going to have a hard time getting it for two to three X. But my bet is like, could you imagine she's been doing this since 2016? Could you imagine hand doing slimes every single day for like two weeks? She's gotta be like, a little bit–

Alex Lieberman: I mean, you just have to, you have to just respect how much hustle has gotten into just like hand-batching these things in her kitchen for however long she had been building this audience.

Codie Sanchez: That’s exactly right. So I do think you can probably get in with either owning a minority stake or a large majority stake in the business or buying the business out because nobody really likes to run anything for that long at that lean of how it looks like she's running it today. So that's my guess. What do you think you'd buy it for?

Alex Lieberman: I think, to your point, like what I've thought about with even boring businesses is just taking what you say is like a proxy. But again, these businesses are growing, you know, 5% a year. Why, why are they growing 5% a year? I think at the end of the day, right, they just don't have distribution. They're based on geography and they're local. With something like PeachyBbies, right, what is it limited by? It is limited by the size of the audience they can accumulate and the total market for who would buy slime. So to me this, you know, this could grow a hundred percent year over year, as long as they keep putting out good content and growing on TikTok or on Instagram, right? Like the big risk you run is with algorithm changes. There's just different tastes and trends that change and so the question is, is SMR and oddly satisfying content with slime going to be as popular next year? I think that's a big part of the risk because if the answer is no, growth in distribution is going to be directly correlated with growth in revenue. 

Codie Sanchez: Yeah. I think that makes sense. I mean, I want to know some specific things for a business. Like we would with any business, what are your reoccurring customers? How often do they buy, you know, what's the LTV for an average customer? Because then you can also, you can look at growth trajectory, but you can also just look at what is an average person, you know, how sticky are they? And so I'd be curious about both for sure.

Alex Lieberman: Yeah. I also, you know, just to put a pin in this, I think what interests me about this and kind of any business that has a media component that's being under-monetized, right, is like, is there a way to sell ads against what they're doing on these platforms? And like my guess is that people are doing PeachyBbies from their kitchen also don't want to go out slinging ad slots to companies across the country. So to me that's interesting. And also the question here is I wonder, let me assume that their audience is like kids with their families. It's either parents buying it for their kids or it's kids generally. I could be wrong. Maybe it's the office worker who like me has ADHD and constantly needs to be squeezing or doing something, but let's assume that it's kids then I think it's interesting. Okay. What are other oddly satisfying things that they could make to build out more of a portfolio of products? And could they create adjacent channels for non-slimy things that are oddly satisfying, or tutorials to teach people how to create slime or their own type of things within their homes, but do so in a way that isn't obviously going to be an issue with their business, basically putting themselves out of business. 

Codie Sanchez: Yeah. A hundred percent. I'm just learning about this media world and what you could make on sponsorships and licensing. 

Alex Lieberman: Oh, it’s insane. Okay, guys. So that was part one of my three-part conversation with Codie Sanchez. Now don't forget to tell me what you thought. Would you buy an ASMR company? And more specifically, what is the weirdest business that you would think about starting? Shoot me an email to alex@morningbrew.com and I might just make your weird business plan the topic of a future Founder’s Journal. And if you enjoyed Codie and my conversation, be sure to catch part two on Monday where she weighs in on my plans for mini golf world domination. And finally, we want to send out a survey to get more feedback from you all so that we can continue to evolve the show to make it as good as possible for the Founder's Journal audience. So please subscribe to our show newsletter at foundersjournal.morningbrew.com so you can weigh in on the future of the show. Before we go, I need to give a shout-out to the team that helps make Founder's Journal possible. Our show is produced and engineered by Dan Bouza. Our associate producer is Bella Hutchins. Brian Henry is our executive producer. Alan Haburchak is Morning Brew’s director of audio. Holly Van Leuven is our fact checker. Emily Milliron is our video producer and editor. And I'm your host, Alex Lieberman. Thanks for listening, and I'll catch you next episode.