Ed (00:04):

I am Ed Cowan, and this is Scaling Up.

Tim (00:15):

Most advice about building talent rosters is really bad because it operates mostly under the assumption that you have unlimited capital, I think really that you’re doing a salary cap management roster, and so you’re limited in terms of your resources. You have to allocate those resources to build the best chance of winning a competition that will last five years.

Auto (00:33):

This podcast aims to educate and inspire by telling the stories of great growth companies as told by their CEOs and founders. TDM is an Australian-based investment firm that invests globally in fast growing public and private companies. For more insights, visit our website, tdmgrowthpartners.com.

Ed (intro) (00:56):

My guest today is Tim Doyle, the co-founder and CEO of Eucalyptus, a digital healthcare business that in just a few short years has redefined what Patient First Care can look like in this country and abroad. If you haven’t heard of Eucalyptus, you might know it via its house of Brands, Pilot, Kin, Software, Juniper, each delivering vertically integrated care in everything from men’s health to fertility to weight loss. Before founding Eucalyptus, Tim was part of the founding exec team at Koala, the mattress in a box leader in Australia that scaled rapidly to over a hundred million dollars in revenue and beyond. Here, Tim cut his teeth in the high growth direct to consumer business model and perfected how to build brands that truly resonate. But health, as Tim rightly notes, is a totally different beast. It’s a regulated, deeply personal high trust industry, and that makes the scale up journey all the more fascinating.

(01:53):

In today’s conversation, we cover a huge amount of ground on the evolution of the business, a mini deep dive into the market of GLP-1’s, and most notably the fascinating team building framework that Tim has used up until this point. What stood out to me was Tim’s clarity about how and why Eucalyptus will win as it continues to move through this hyperscale moment of execution across a range of global markets. As always, if you enjoy this episode, leave us a review. Better yet, tell a friend and of course you can find more interviews, insights and resources at tdmgrowthpartners.com.

Ed (02:36)

Tim, welcome to Scaling Up. Six years ago, you finished as the Chief Marketing Officer at Koala, a very fabled D2C mattress and furniture company that you helped scale very quickly to significant revenue. And the success of that business was predicated on a few key performance marketing insights that I’m sure provided many lessons for you. Maybe to start this, what was your core founding thesis when you started Eucalyptus?

Tim (03:02):

Yeah, so I was at Koala, and I think it was the golden age of the D2C era, and I think what were the hallmarks of that golden age was firstly the rise of Shopify meant that you could build an e-commerce offering in a really focused way in a brand around that offering really simply. So, you have all of these high margin categories becoming D2C categories essentially overnight as things shift from the Amazon world to the product focused D2C world and then marketing shifting as well because the Facebook pixel is born in 2015-ish, I think – so you essentially get targeted marketing, visual targeting marketing for the first time. And so those two things put together spawn all of these businesses that are just really fast-growing new categories. But by late 2017, early 2018, you starting to see the cracks in the model.

(03:46):

The history of the venture world is you solve a problem and then you throw dollars on that problem to solve distribution, and then you see enormous scale and returns. And I think what the D2C world was showing is actually throwing tons of dollars on top of these businesses, was producing, I guess marginal CAC and inflated CAC and actually downward pressure on margins. So, you had the inverse SaaS business model and that was starting to really be a problem. And so, although Koala managed to get through it by building into a broader range of furniture categories, and so they kind of ended up being a convenience furniture offering many businesses of their type, and I think Casper in the US being the big one, crashed pretty hard. And so I was starting to think about, well actually VC dollars don’t produce good returns when they’re invested into more marketing dollars, but perhaps if you were to invest them across a portfolio and have a range of D2C brands built on that same infrastructure, then you could manage the CACs a little bit more thoughtfully, manage product expansion a little bit more thoughtfully and produce a much more durable and sustainable business across a portfolio and that was the birth of Eucalyptus.

Ed (04:43):

And I guess there was very much a top-down view and insight that healthcare was a big category to do this in and quality and experience of people’s healthcare could be transformed using technology. But it’s also, I guess purely entrepreneurial seeing a big category top down and saying, I’m going to go after that with no necessarily problem statement.

Tim (05:04):

For sure, you’re looking for friction. I think what I learned at Koala was if you were a renter and moving house often, to get a mattress on the day you moved into a place was near impossible. So, you have this friction and then you solve for that friction and you verticalize to solve that friction. And so, I was looking for other places where the internet could verticalize a category and deliver a seamless high-quality experience and the fragmented nature of general practice and healthcare more generally was an obvious opportunity that everyone was like it was there in plain sight, but it was always going to be more complicated than what e-commerce had traditionally been.

Ed (05:37):

And maybe just digging into this house of brands approach that you took to start with, you touched on this unified tech stack that underpins the house of brands or the consumer experience, keen to understand the insight into both the why and the how.

Tim (05:54):

Yeah, for sure. So, I think we started thinking about a whole range of more classic D2C brands, but the problem is with Shopify existing and at the time big commerce and a few others, your ability to differentiate on technology, which is truly where you can get long-term moats is pretty limited if you’re building on top of commodity technology. Whereas telehealth and kind of digital health more broadly, there was no uniform, let’s call it technology stack for those businesses. And also, you have a lot of regulatory complexity. And so, I felt that once we’d landed on health, that there was actually an opportunity to build something durable and defensible in the core technology, which justified a different shape of venture investment. And I think that is really yielded over time, probably not in the way that I had originally imagined, which was that you could build a whole lot of different brands on top of that stack, but certainly in a way that you can build many markets on top of that same stack. And that’s been a real durable advantage for the business.

Ed (06:43):

What about just going back to those very early days, a first time CEO, it must’ve felt like you’re almost running three startups at once.

Tim (06:51):

Yeah, yeah. I think that was by design right, so I think what we relied very heavily on was a talent model where we believed that essentially the best professional services talent was massively underutilized in Australia. So, if you go to San Francisco and you look at the best kind of generalist graduates from the best schools in 2017, they’re at technology companies. In Australia, they’re at law firms, they’re at banks – and so we thought we could drive that shift and then that would give us enough high-quality generalist talent that it wouldn’t feel like running three startups. It would feel like managing the three best CEOs that we could possibly find.

Ed (07:22):

We’re going to come back to how you’ve built your talent pipeline and the culture, but you’ve raised a really interesting point I want to dig into. So, moving forward in the evolution of the business, to give the listeners some insight, you’ve got a house of brands approach. You create these brands; you allocate capital to these brands and then use data and really tight feedback loops to understand where you’re going to keep investing with the ability to kill those brands and create and spin up new brands as needed.

Tim (07:53):

Yeah, yeah, I mean that’s exactly it. So, this storyline goes pilot first, which is I think the simplest, it’s really a discretion-oriented men’s health brand. So, you solve for the idea that people don’t want to do a face-to-face consultation and want to do it online, then Kin comes next, and Kin is about fertility management and specifically really about contraception management. And the complexity there is finding the right medication for the right patient. So, I think 30% of women are on the wrong contraception or something around that number. Then Software, which is our skincare brand, you get into personalized formulation, so starting to have to work with pharmacists to make the products themselves. And then Juniper comes along as originally a menopause brand, but what has become an obesity brand and the complexity there is obviously you have what I would call much more longitudinal care. You’ve got to do multi-type of practitioner and there’s a lot of complexity – there’s blood tests – and so, I think of the platform evolving in complexity to get to the point where it can solve the big chronic conditions in healthcare.

Ed (08:46):

And in many ways, you were laying the foundations for one of the great tailwinds of any kind of healthcare and you touched on in Juniper and obesity management. And so, my outside in view is Juniper would not be the success it is today without having laid those foundational stones through the other brands, be it the technology and know-how internally as to how to deal with those chronic illnesses.

Tim (09:11):

Yeah, for sure. I think I actually, one of my main reflections on business building generally is the main skill is staying alive long enough to expose yourself to enough luck. And then when you get your moments of luck, I think every business gets a certain number of moments of luck. And then if you can capitalize on those moments and deliver the execution required to be world-class in those moments, then that’s what makes a business. And so, in many ways, we were waiting, staying alive and building to the point where this enormous thing happened, and then you could call that lucky. And then we’ve executed really well through that thing.

Ed (09:43):

You might call it luck. I’d almost say you had a top-down approach to start with in that you saw the healthcare opportunity, but in actual fact, obesity management was bottoms up. You could actually see around the corner to see the emerging consumer behaviour, wrap your arms around it, wrap your technologies around it, and as you say, then benefit from it. And to give people an idea, and we’ll talk about the scale of the business in a second, I think the weight loss market, more broadly in the next 10 years, is going to be a trillion-dollar category growing at maybe close to 10% a year. We’re talking about one of the biggest markets.

Tim (10:19):

We do this very funny thing in times inside Eucalyptus, which is the equities research analyst will always publish every six months an update on the category. And the first time Goldman published about GLP-1’s, it was like, it’s going to be a 250 million, a 250 billion category, and then six months later it was a 400 billion, 600 billion, 800 billion, a trillion. And it’s like, well, I mean where does it actually, I think that the thing that is the truth now is it looks increasingly like the next generation of particularly the GLP-1’s and the associated medications will have broad benefits, particularly in the prevention of inflammatory based diseases like Alzheimer’s. And so, there’s a chance that everybody is on some version of a medication like this at some point in the future. And so, it’s the biggest thing to happen in healthcare in 25 years.

Ed (11:01):

Maybe just to level set with the audience, because I’m sure everyone has heard of GLP-1’s, but maybe to take a step back and give exactly what these drugs do from a market lens and then maybe overlay that with how Eucalyptus are using them.

Tim (11:16):

So, I think the simplest way to think about their impacts on markets is on average, people on a GLP-1 will lose somewhere between 10 and 15% of their body weight in six months. And so, everyone from the overweight BMI of 30 all the way up to the extremely obese and severely disadvantaged by that, there is the opportunity for people to lose so much weight and the impact on that on their long-term health is phenomenal. So, you obviously see the prevention of diabetes and what that does, but you also just see so much impact on people’s mobility on their mental health. You’re even seeing the drugs have impacts on things like addiction. And so basically, I think the simplest way to think about it is what happens if obesity is fundamentally curable and then what does that mean for everything? And I think that’s the question that we’re all still kind of grappling with.

Ed (12:05):

And what about the eucalyptus overlay of a kind of treat as a whole of care platform? The moat you have is not simply to distribute GLP-1’s.

Tim (12:14):

For sure

Ed (12:14):

Because people can access that drug through a variety of means. The moat you are creating is this platform around it.

Tim (12:21):

Yeah, yeah. So, I think we think of ourselves as an outcomes business. So, if we can deliver better long-term health outcomes to patients, they will pay for those outcomes. And so, what does that actually really mean? I think that’s the common phrasing across a lot of healthcare businesses – is the journey is not seamless. There are moments of friction. So, there are access and education moments. So, if we think about how do we get a patient comfortable with the journey they’re about to go on? How do we get them the right advice? How do we get them that advice in a shame-free way? And then how do we get them comfortable with starting? So that’s challenge one. Challenge two is how do we get them to effective weight loss? So right dosage management through side effects, management through plateaus, how do we make sure they succeed and then how do we make that success durable by wrapping the services around them, whether that’s coaching, whether that’s education, whether that’s actually just removing the friction to the right next product. And so, in one year, in three years, in five years, a patient’s metabolic and therefore their whole health is as good as it can be. And ultimately if the category ends up being a category where people come in, shop e-commerce style, lose 10 kilos and then bail and come back in two years, if that’s the way the category ends up, then I think we won’t win. And actually, it’s a net bad outcome for the health sector generally. So, we’re trying to be this care management platform.

Ed (13:28):

And have you started to see clinical results far exceeding those other people who may be accessing these drugs elsewhere?

Tim (13:37):

Yeah, I mean the gold standard here is the clinical trials that the drug companies run. So, Novo has obviously run trials all the way through from Saxenda to Wegovy Lilly with Mounjaro, and what we see consistently in our cohorts is patients outperform the clinical trials from anywhere between 15 and 50%. And I think what that really comes down to is what technology gives you the opportunity to do is provide support to patients when they need it. I think the big achievement of what we do so far is timely advice, and when that works for people, they’re more likely to keep going and when they keep going, they’re more likely to get better outcomes. And so that’s been the real success of the business in reality.

Ed (14:13):

You touched on Nova Nordisk and Eli Lilly there. Maybe give a sense of the relationship, because I’m sure the outside in view is huge drug companies, all the value created falls to them ultimately, but in actual fact, while it may be a commodity drug, there are ways to actually create value inside that value chain from consumer to drug companies.

Tim (14:37):

Oh, for sure. Well, I mean they don’t win if patients are flipping on and off medications, between medications, using suboptimal medications, using generic medications, whatever it ends up being, they need to deliver outcomes as well, and so there is a real interest for them in how do you make sure that patients get the outcomes that they need and get the support that they need because they want to see patients succeed obviously as a moral imperative. But, you know, a big part of what they need to think about is how do they negotiate with governments in the long-term for what subsidies look like in this category for what care models look like in this category? And so, us leading the way in the care model and showing that these drugs can be effective long-term with the right services wrapped around them is both validation for the way they operate, but also really important part of what they need to then take forward and present to the world.

(15:23):

And then I think a really important part of what the relationship between these digital clinic models and the major pharmaceutical companies can be is a partnership to launch new markets. So, let’s take the example of Japan where both the primary medications have launched in the last year. There is a huge market education piece that needs to happen. And I think an example of Japan’s an interesting one because although people don’t typically associate the Japanese population with high rates of obesity, you have high rates of heart disease and very high rates of diabetes. And so, you need to educate the market on their suitability for these medications and actually the need of them. And so there is a shared interest in getting that education out and getting it out in the right way. So, you don’t want to promote the wrong type of weight loss, but you also want to make sure that patients who need these medications are aware of them.

Ed (16:05):

If you look at any successful drug or medical device, the first part of any flywheel is education. The second is access, and you’re obviously providing that to a degree, but there’s also this probably overhang that many people think around reimbursement around regulation. And so, do you have a forward-looking view around reimbursement for these drugs and what impact that would have on your business?

Tim (16:27):

Yeah, it’s going to be really interesting, I think. So, we are working with the NHS in the UK, which in many ways is, I mean it gets a bad rap, but it’s definitely the global leader on digital health and thinking about how digital health plays a role in care generally. And so we likely see what will happen over the next, I think it’s probably going to be three years in reality, is we’ll see governments start to look to subsidize these medications more, but we’ll only do so in situations where the outcomes are going to be clear and for those outcomes to be clear, the wraparound care is going to have to be there. So, I think what we see ourselves doing in the medium term is being a supplier to the government in a care model and in a holistic care model so that patients can succeed on these medications and get access to Them in the right way. Because the thing that we absolutely can’t afford is a yo-yoing populace who lose weight on medications, yo-yo their weight back when they go off and then we have actually a worse problem than what we started with. And I think that’s a real fear from health administrators around the world.

Ed (17:25):

It’s an interesting framing because many people would think in actual fact that would erode the margin of your business, but if you can wrap your platform and standard of care around it, in actual fact it’s creating significant competitive advantage.

Tim (17:38):

Yeah, I wouldn’t think of, this is a question I get asked all the time, which is what happens when prices go down? Drugs become more accessible. I wouldn’t think about the business as margin on top of access. I think ultimately what we are is we get paid for the care that happens around the drug, and we get paid at the moment, we get paid quite a high dollar margin because the cost of the medications is very high, so it’s a relatively low percentage margin, but quite high dollar margin. As the drug cost comes down, you probably see the value of that care remain about the same. And so, you see an increase in the percentage margin and a drop in the AOV and an increase in the TAM. And so, there’s probably more durability around what happens in the category than people expect because the things that people pay for is the wraparound services that actually matter. And so those kind of have a reasonably static value regardless of where the category goes.

Ed (18:24):

Yeah, it’s an interesting insight. You touched on regulation healthcare, by inherent in its very nature is complex and part of that complexity is born out of this regulation that is put on you by governments or regulatory bodies. What are some of the key lessons that have emerged for you? I’m sure there are many things that you didn’t know what you didn’t know. I’m sure it’s a lot easier to sell foam mattresses than GLP-1’s.

Tim (18:50):

Yeah, I think there’s been so many lessons. I think the thing that I think about the most in the context of regulation is there are so many temptations at so many points to move too far in either direction. So, either be like the regulation is grey here, therefore we should operate in the grey and there’s always short-term incentives to do so. And then in reality, in the long run of things that never works. And then the other side of that is also true where it’s like you can set a standard for yourself that is what you perceive to be where the market is going, but you can make yourself uncompetitive while you do so. And so, an example would be is the consult model in Australia is that you have to have synchronous phone consultations for any telehealth consultation basically, or for first time telehealth consultations.

(19:33):

If you were to be like, okay, we’re only going to do video, then patients wouldn’t choose you. And so, you have to meet the regulatory bar where it is but also set all of the standards around that to ensure that’s done safely and at a high quality. And so, I think where we’ve really, where I’ve learned a lot is as a CEO in this space, you don’t really get to make those decisions. You have to rely on the clinicians to make those decisions. And so, we’ve increasingly just built out a really, really strong clinical team and they really set the standards there. And I think we recently released the first version of telehealth standards for clinics, and I think that’s an example of where we’ve built the infrastructure and shown the way that this can be done and now, we’re trying to set that standard across the industry.

Ed (20:11):

So, two follow up questions. One is dealing with this complexity now across markets, so that might be the standard of care in Australia, but now in Germany, Japan, the UK want to open markets regularly. How have you navigated your way through that complexity through regulation?

Tim (20:29):

So, a couple of things there. So firstly, you need really strong legal trust and safety and public policy teams because you’re going to have to assess markets really well. The second is the technology. This is where there’s a huge amount of technology investment that often gets underpriced when you think about businesses and the way that they operate and the way their technology operates is we’re essentially like a compliance platform in many ways. What we do really well is set up in new markets. So, we do asynchronous consults with a pharmacist in the UK. We do synchronous consults with a nurse practitioner or a doctor in Australia. We do synchronous consults with a doctor in Germany. We do synchronous consults with a doctor in Japan. Then sometimes we have a network of partner pharmacies. Sometimes we own a pharmacy, so we own a pharmacy in the UK. Sometimes we work with a single partner pharmacy. So, building a piece of technology infrastructure that can handle all of that compliantly is actually where years of our time has gone and you don’t really get paid for that, but what really happens is it’s the platform by which you can scale quickly, and people really underprice that when they think about what you do.

Ed (21:28):

It’s amazing even having this conversation from where you started in building a house of brands and being a marketer to fast forward six years and really being a specialist in technological know-how to bring healthcare to market.

Tim (21:43):

I actually think of that as that’s been the long lesson about D2C businesses and maybe consumer businesses more broadly is D2C was actually a launch tactic. It was never a business model. It was a way to get to market and to scale fast. Many, many consumer industries, you don’t get the value until you’ve already built a lot of infrastructure. So, it’s not like SaaS where you build a piece of technology, it’s differentiated, you pour distribution dollars on it, and you go. In healthcare, you need all of the compliance infrastructure to scale. So, what D2C actually gives you is a way to get the revenue wheels spinning so that you can then build the compliance infrastructure so that you can then build a differentiated experience. If I came to you six years ago and was like, we’re going to build the comprehensive multi-market obesity platform, you’d be like, good luck. Go raise, go $50 million from somebody and no one’s writing that check. And so, consumer and particularly let’s call it regulated industry consumer I think is very about being able to use the right tactic at the right time and pick the right way of making money at the right time so that you can scale to something that’s actually differentiated in high quality.

Ed (22:49):

Yeah, it’s interesting. Why does this regulation and compliance exist? And it is to allow the consumer or the general population as it relates to healthcare because everyone is your consumer to deeply trust the process and the brand which they are purchasing from. And ultimately as any consumer brand, brand trust is this north star that they’re trying to achieve. And so, you’ve almost reworked it or re-engineered to that point that there is high trust in your brand through the regulation. But there’s also been points in time where you’ve tried to push that boundary as well because it’s almost innate in you as a marketer. And one of the examples I think about is compounding your own GLP-1 essentially when there was short supply. How do you think about that trust trade off?

Tim (23:37):

So, there are kind of two questions here. The first is how do brands evolve? So, I actually don’t think that we built high trust brands in the beginning, and I actually don’t think it’s the right aspiration to build a high trust brand in the beginning. You have to build a differentiated experience in the beginning. So, you have to solve a really narrow problem. Too many companies set out to build broad brands at the beginning and you just don’t have the attention of people. People don’t give a shit about your broad brand at the beginning. You need to be a focus brand.

(24:03):

And then you evolve over time as you earn more attention from your patients. So, we’re trying to take Juniper now from a product differentiated brand to a service differentiated brand. And what I mean by a service differentiated brand is a brand that’s capable of saying, you come to us because you trust us to listen to you, you trust us to help you make good decisions and you trust us to remove the friction to taking action on those good decisions. That’s the pillars of the Juniper brand as it goes from being an obesity brand to a service brand. But if I said that at the beginning, people will be like, shut up, I don’t care. And so, brands evolve. And so, in answer to question one, I think trust is actually downstream of a lot of brand building and so you have to build incrementally into it. And then on the other side in how do you balance trust in a world where there is an inherent need or desire to push the boundaries as a marketer looking for growth, I think in that specific instance we were forced into that position. I think we had 20,000 patients at the time who were about to be told that they couldn’t get their medication.

(24:58):

And so, you get into this situation and the real true version of that story is we’re saying, okay, we have two choices. We give patients no medication or find an alternative. The obvious better alternative path is to find an alternative. So, then you go, what are the alternatives? And one of the alternatives is this medication can be made. And so you go, okay, well if we make it, can it be done safely? Because there’s obviously just a hundred percent stop, go point at “can it be done safely? So, we get it tested at five different universities, they all come back and say, yep, it’s safe. And so then you have a risk-based decision to make and it’s our clinical teams, our legal teams, and me going, that’s probably the right decision and we will worry about the brand ramifications on the other side of this, but history will show that we’re right because we followed this process through and that’s kind of how it played out.

Auto (25:43):

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Ed (26:00):

So maybe just to round out this discussion on the business as it is today, a dominant force in Australia, have grown from nothing to very significant in the UK, taking on Europe and new markets. Maybe you can just give a snapshot, if you will, of what the next couple of years brings.

Tim (26:22):

Yeah, so the way that I think about the next couple of years is we have let’s say 150,000 active obesity patients at the moment and 1% of the total global population that could be benefiting from these medications is currently on them.

(26:38):

And so, if I just hold through the TAM expansion, we’re helping millions if not tens of millions of people in three years. And so, the real question for me is what does that actually look like and how does a platform that’s capable of serving, I think we could do a million people on what we have right now, but what does it mean to do many more than that? I think everything has to get five x better. And I think the interesting thing that’s happening is the cost of high-quality health advice is essentially going to zero. And so how do you build a system that’s capable of delivering that high quality health advice to many more people managing their care journey safely? If we go three years into the future, I’d love to think that we’re doing multiple millions of patients managing multiple conditions for them and ensuring that ultimately, they end each year that they’re with us healthier than they started. And I think that’s a pretty simple but admirable kind of direction for the company.

Ed (27:31):

It’d be crazy not to ask the impact that AI is having on your business because you were very much, you know, Gen 1 2018. It was a thing, but it wasn’t necessarily either going to provide a headwind or a tailwind to your business, but ultimately it will be a defining force.

Tim (27:47):

Yeah, it’s so exciting because I actually think one of the fundamental insights of Eucalyptus is that startups and the mobile internet change the way that companies were built and the cloud changed the way that companies were built and we’re in a way derivative of that. We took those insights and took them to a category where it wasn’t really technology defined, but now AI is such a platform shift that you go, oh my God, all of my assumptions about not only how companies are built, but what companies do and how they operate are being challenged. And so, you just feel so privileged to be a capital allocator with technology resource and scale at a time when the world is changing fundamentally because you get to do first principles problem solving across design, across product, across team. How do you measure culture in a world where insight is capturable in so many new ways?

(28:37):

How do you build product in a way where prototyping happens in minutes? How do you build product in a way that you still have to meet all of the compliance standards? Like how is AI going to impact doctor consults and does it human eventually get removed from that loop? Almost certainly not, but how much assistance actually happens? How much can the patient get when Chat GPT will tell you anything you want about your health? What’s the role of an AI product that’s a bit more constrained? So, it’s just fascinating across every variable, and I am both terrified and also just incredibly excited to be able to build in this time.

Ed (29:12):

Let’s get on to people and culture because you’ve had to build this business from the ground up, and as you said at the top of the episode, you took this generalist approach to hiring. And many people think healthcare is in actual at the other end of the spectrum in that it lends itself to specialist skills given the very nature of the business and the business model. But what you did was try to aggregate the best talent, particularly in Sydney to start with and take them from the Bains, the McKinsey’s, and it was a very successful strategy.

Tim (29:47):

I mean, I just think most advice about building talent rosters is really, really bad because it operates mostly under the assumption that you have unlimited capital and that the only thing that matters is getting the best possible person into each role. And so, I think really that you’re doing a salary cap management roster, and so you’re limited in terms of your resources. You have to allocate those resources to build the best chance of winning a competition, a competition that will last five years. And so, I think most of the best talent managers are actually in the NBA and in the AFL where you’ve got this idea of building a roster that has to last. And so, the thing that I always think about is where do I want to be investing dollars? You need a certain number of people that are world-class, you need a certain number of people that are underpriced and, on the way, to being world class, and then you need a certain number of people that you’ve just drafted that you can turn into great performers in their positions over time.

Ed (30:41):

Role players.

Tim (30:42):

Yeah

Ed (30:42):

You’d call ’em role players in sport.

Tim (30:45):

Yeah, I think NBA basketball has this concept of A 3 and D actually, Australia produces a lot of them weirdly, which is someone who’s good at defending, good at shooting threes and good at passing, but is never going to be the star of the team. You need to build a roster that’s capable of doing that. And so, when you’re early on, you’ve got such little capital that you need to go, which type of talent is underpriced? And so, I was thinking like, okay, where can I get people on high equity, low salary deals that will be able to perform over the next three years across a range of things? And if I can teach them things, I’ll get the yield on teaching them those things. And so, I’m quite good at marketing or growth. And so, I was like, I can teach smart people growth, get them for cheap and have them scale and then that will be the core of the business. It was always obvious to me.

Ed (31:28):

It’s a really fascinating framework. Let’s dig into this because a thousand questions raced to my head. What are some of the common hurdles then for people to outperform at Euc? So, you’re going underpriced, but highly intelligent, room to grow. It also means for those role players, you probably have to manage their performance well, and they’re up or out.

Tim (31:51):

We got in many ways extremely lucky, but also in some ways extremely unlucky in the sense that the first person we ever hired into one of these roles turned out to be one of the greatest people

(32:01):

Ever to probably in the top three people that we ever hired and we’ve hired more than a thousand since then. And so, Nicole, who two-year McKinsey grad, we found her at a startup event. She came in super green; she ran Kin for us. She just grew incredibly quickly, and we didn’t have to put much shape around her. We gave her enough mentorship and enough teaching, and she just crushed. Then we were like, okay, that’s the type. And so, then we flooded another 20 in and there was too much variance in that 20 and we didn’t give enough shape to that 20, and so we probably only had another three or four successes out of that 20. And so, we had to change. We had to go like, okay, well we have to raise the bar firstly, and then secondly, we have to put more structure around them.

(32:39):

And so, I think of the next generation of success is when we brought a couple from Atlassian, a couple from Bain and put a really intense programme around them and they now run markets for us around the world. So, our chief commercial officer, she’s ex Bain, she’s been with us five years, our head of international expansion, he’s ex Bain, he’s been with us five years. And then that type of skillset, we were much more deliberate about developing. And so, I think the flip side of being able to make these high upside, high variance bets is you have to be really good at understanding when they haven’t worked and you have to provide enough shape around them to be in a development organisation and to labour the basketball analogy, I think some teams really struggle. They can draft well, but the development side really falls apart and those franchises never work. And so, you need to be as development oriented as you are scouting oriented.

Ed (33:23):

Whether it’s creating a sporting franchise that has some kind of durability, but in your case it’s scaling – you’re a growing business. And so, do you think this method holds as you scale? At some point do you feel like you need to bring in more specialists or do you actually feel as though this framework is scalable?

Tim (33:43):

So, it worked really well. There are things that can rock it. So, the first thing that can rock it is if you get into the big leagues too quickly, then people haven’t reached the level of maturity where they’re truly world-class operators yet.

(33:56):

And so, I think we had to lay off 20% of our team in 2022. And I think honestly, that was largely the result of me getting too excited and not having the stress tested frameworks to really understand how to operate through different market cycles. And so, I then hadn’t brought any actual world-class operators who’d been there, seen that before. Everyone was 27, and that was a mistake. And so that’s one time when I think it can really fracture. And then the second is when you get on the edges of the technical fields. And so, when you’re looking for product leaders and engineering leaders, I think those are the two big examples. Finance leaders is another one. If you take too much of a development mindset there, you can actually just end up with mediocre leaders and then you’re in this position where you’re like, oh shit, I don’t actually have a leader who’s doing the talent development. I’m not used to hiring at the world-class level and I don’t have a solution. And we’ve been caught in that position a few times.

Ed (34:48):

Yeah, that’s hiring purgatory.

Tim (34:48):

Yeah,

Ed (34:52):

 Have you had to rewire the values, or have you had to add a value, for instance, because it sounds like it’s a very different organisation now, but it’s still rooted in many of the same principles.

Tim (35:01):

We’ve changed our values three times. I actually don’t think we’ve done a good job of bringing our values to life. I think what we do very well is kind of like the shared DNA of the organisation being self-enforcing, but I don’t think we then bring that to life very well in how we talk about things like values in the company. I think those key artefacts have been really poorly done. And instead, what we’ve relied on is the key leaders of the business have been there five years and live things. And so, when I look to the best kind of up-and-coming leaders in the business, I see the direct relationship between them and their kind of role model figure in the business rather than anything that I’ve been able to do from an artefact’s perspective. And that’s obviously a failing because narrative is really important, but that’s just how it’s been and it’s something I probably need to do better over the next generation where it’s not going to be clear who the leaders actually are at 5,000 staff.

Ed (35:51):

I’d call you a contrarian heart. You’d probably call yourself a contrarian at heart. What are some of the contrarian beliefs as it relates to people and culture and scaling teams that you hold aside from this really interesting framework you’ve just put forward?

Tim (36:05):

Yeah, so I mean I try and think about most things from first principles if I can. And I try and think about what is true and what is the norms about things that are just dated and don’t really work. And I think some of the things that I think are really true is like L&D in startups is mostly almost always fake. And actually, it’s about how you expose people to the right shape of role at the right time – that is actually how most L&D happens. And so, what you owe to young staff is you owe essentially the right size box and then the right feedback when they are pushing on the edges of the box,

(36:37):

And that’s how all L&D should happen, but you really owe them structure. And that is something that I think is done really, really badly. One of the things about being in a high growth business is it’s really easy to keep them low politics because ultimately opportunity is not zero sum, it’s positive sum. And so actually I think a lot of people labour over how you create low politics environments in high growth, and I think that’s just a waste of time. I think actually as long as it stays positive sum, it stays low politics unless you somehow make it political by force. And then I think the third one that I sometimes struggle with is I tend to get a bit, particularly in times of stability, I tend to get a bit naval gazey, I get a little bit internally focused. I think a lot of discussion around people and culture can actually be discussion about how you make things good for the people who are working sometimes at the expense of thinking about the customer.

(37:22):

I just think the main driver of a really good successful culture is if you serve the customer really well and then have good principles behind how you treat your team, but not the layer of work in between. I think sometimes that’s a bit of an overcooked concept, and I think we as a startup sector got into a really obsessive place about that for 2022 and 2023, and I think it maybe ended up being net damaging. I also think the inverse of this is true, which I think all the founder mode stuff at the moment is complete bullshit. People obsess over founders too much. There is a job for a founder and it’s a really important directional job and a job of clarity. I just think companies are way more the sum of staff members two through nine in terms of leadership than they are about the founder. If I were to get hit by a bus tomorrow, eucalyptus may get better, and I just think that’s true of many businesses. And then you get a multiplying effect by the founder, but it’s just not what defines successful failure, it’s what defines the two x return to the five x return. I think that’s my responsibility, but one x to two is all the top 10 people in the company, and I think that’s massively underpriced.

Ed (38:21):

Yeah, I agree, and in actual fact, as you get bigger, you’ll probably find its employee two to a hundred, not two to ten, and the multiplier effect is greater at the moment than it will be in the future. Part of your job as a contrarian is to also challenge your own ideas, and you’ve now had six years of experience being able to do that. Is there anything that you believe to be true that simply wasn’t?

Tim (38:41):

Yeah, I hate so many of my early ideas, actually David Walsh from Mona pointed this out to me a couple of weeks ago is that in the core thesis that I had, which was that a portfolio gives you defensibility against variance in the business building process. All of my portfolio bets were exposed to one type of variance as well, which was that if the ad market changes fundamentally, which it did in 2021, all your brands kind of suffer. And so that was, I think a big mistake. Another thing that I think I’ve gotten wrong is, and I’m trying to change this now, but I think I’m actually a relic of a different era in brand building that needs to change. There was a time when it was super easy to build brands like shiny wrappers on good experiences, made brand building really easy, and I think we’ve both seen heaps of those brands and that actually isn’t what modern brands are about.

(39:28):

And then the third one is I think I’m one of the kind of early performance marketers in Australia, and I think I’m responsible for a certain, well, partly responsible for a certain type of thinking about marketing, which is that it’s fundamentally a capital allocation challenge. And I actually think that idea is dead as well. I think the arbitrage era of marketing whereby being better at the channels than anybody else you can build a great business is so over the way that you need to actually differentiate is great storytelling. And so, what shoots me to tears is Australian creatives, they remind me of the last soldier fighting for Japan in the war 20 years after it’s over. They’re fighting for this idea of brand marketing and that’s a dead idea, but so is performance marketing. It just turns out that storytelling is as important as ever and the arbitrage is over. So being a great storyteller should be more valuable than ever, but I feel like I’ve kind of in some ways raised a generation of marketers that are entirely insufferable, which are these performance types. And so, I apologise to people that that’s happened too.

Ed (40:26):

It’s almost like we’re back to where we started before performance marketing existed, which are great brands are built by drips into a bucket, and that takes a lot of time

Tim (40:33):

And good storytelling. I just think so there will never be another Nike, right? Because you can’t control a cultural moment like you could at the Atlanta Olympics or when Michael Jordan wears his first pair of shoes or whatever. There’s moments don’t really exist in the same way, but that doesn’t mean that storytelling is dead. You just do it in an entirely different way. So, it’ll be Hoka and On who control their niches but do great storytelling in their niches or North Face or Salomon or whoever it is. It’ll be niche storytelling done in a really rich way for their community that care about it. And we should embrace and celebrate that instead of mourning the death of the great brand ad who cares.

Ed (41:13):

You talk about your role in arbitraging media over the last couple of years. You’ve certainly found your way into the middle of a story or two over the last six.

Tim (41:24):

You call that an arbitrage.

Ed (41:26):

I’m curious whether that has been an intentional gaming of the system or not.

Tim (41:32):

So, one thing I’ll give out as unsolicited advice is for a long time in your startup, you’re desperate to get attention. The best thing that you can do for your company is get eyeballs on it because whether those are investors or customers or whoever it might be, it’s actually in your interest to say something. And then a day comes when you go from desperately needing to be a story to being a story.

(41:54):

And when you are a story, the variance between good and bad is much bigger than you could ever have imagined. And so, things that you’ve said historically on the way up or the style that you’ve communicated with on the way up becomes an enormous risk to the business. And I said so many dumb things in the space of six months. And then to watch them kind of ripple through and impact the business to a point where I had to be pitching, well, not pitching, but I had to explaining myself to LPs of investors and things like that, it was enormous unintended downside to me not realizing how the returns to saying things shift over time.

Ed (42:32):

Yeah, it’s almost that same narrative arc has almost followed your own personal journey. I’ve been lucky enough to see you grow as a CEO and a leader over the last six years to someone who’s far more mature in there and more comfortable in their role.

Tim (42:48):

Yeah, yeah. I mean, you just get the reps right and you see, honestly, there is nothing like being in the position of being a CEO of a company because the feedback loop on your own actions is so clear and so immediate. And I think you have to be quite self-reflective to not let it either get to you as being like, I’ve cracked this or I’m complete mess. But if you can be reflective about, it’s a real opportunity to grow and improve. And I actually owe so much of my own maturing to just a team around me at Eucalyptus who are extremely no nonsense about how they think about what I say and do. So, I get great feedback constantly from a group of really high performing people who expect that from me.

Ed (43:26):

And how do you, I mean, that’s a really important and interesting thing just to pick on quickly, how do you create that feedback culture? There must’ve been some intentionality to that.

Tim (43:37):

Yeah, I think for the early few years of, I think I’ve been quite bad at giving feedback to my direct reports until our COO challenged me on it a little bit, and I kind of realised that the thing that was implicit in my mind that needed to become explicit was that I don’t know either. We’re all working this out at the same time. I don’t have divine vision on how these things should work. And so, as we problem solve together, let’s reflect on that problem solving, not as a manager report style relationship where I have to provide structured feedback on how you should do better in the future, but as peers trying to navigate a space. And so, I view my executive leadership team as peers because they’re all as experienced in the business as me. And so, when we do feedback, it’s this thing happened, we both lived it, what would we do differently next time? And that has created a much richer environment for me to exist in, and I’ve grown much faster in that environment.

Ed (44:28):

It’s almost as though for founders to scale they actually need to have their ego chipped away at consistently and humbled the point that they no longer view themselves as the founder all-encompassing of what the business should be.

Tim (44:43):

I think that has to be true, and maybe that’s just the Australian in me saying that, but I just feel like I’ve gotten so much better from having a group of people around me who are operating at the same, if not better level, with autonomy and the freedom to say we should have done it this way.

Ed (45:00):

Maybe just to round out this topic and the podcast more broadly, while we’re on people and culture, I’m fascinated by the culture that you have built, and I’ve seen it scale in many different directions, but maybe can you lay out what the culture was and what it was today and maybe what it will be in the future?

Tim (45:19):

Yeah. We’ve talked a lot about the promise to the early employees of autonomy and the opportunity to grow and learn, and I think that’s nice, but that’s a chapter in the business. The path to COO is not clear for someone who joins now, and so you have to evolve and offer something different at scale and be something different. And I think what we are much more trying to be now is a low ego, high agency teaching organisation. So, I think for senior leaders, they come in and we go, your experience is what got you here, but your problem solving is what’s going to get you a seat at the table. And so, there’s a very low ego piece to that that I think really, really matters and I think is the dominant feature of our leaders. And then I think there is a real care to teaching and sharing from that low ego place.

(46:04):

So, we have this leadership acceleration programme internally where leaders in the business run seminars for people coming up as leaders in the business. And I think what’s been, I really enjoy those sessions because it starts with, I don’t know, and I never knew, but here’s how I navigated the situation you’re in right now. And I feel like that really resonates with a group of young leaders that are so used to being told what the growth of business podcasts and business books has done is created an environment where everyone can reflect on their careers as if they were perfect and planned the whole way. So, I think that sets a really hard expectation for young people. So, I think what I see internally at Eucalyptus is our guy who’s currently running Juniper – he started in our risk team, then moved into our clinical team, then moved into our clinical operations team, and now runs one of our brands. And I think him saying, look, I just kind of took it as it came and developed leadership skills along the way has been really, really important to a group of young people coming in. And then also has been an entry point for really senior people to come in and say, I’m here to challenge myself. I want to see my ideas tested and I want the autonomy to do so.

Ed (47:03):

This has been absolutely fascinating, Tim. Thanks for your time. I hope the listeners have gleaned as much experience and insight as have, so thanks.

Tim (47:12):

Thanks Ed, thanks for having me.