[00:00:00] Jay: Hi everyone. Welcome to The First Customer podcast. My name is Jay Aigner today. I am lucky enough to be joined by Eric McHugh. He is the chief nothing officer, which is the first of their kind at SHOPX. super chill dude. We only talked for a couple of minutes before the episode, but I do think we're going to be best friends, Eric.
How are you, buddy? Nice to meet you.
Eric: Dude, I'm doing amazing. And honestly, Jay, thank you so much for having me on this podcast. I'm super grateful.
Jay: I appreciate you, brother. so, where did you grow up and did that have any impact on you being an entrepreneur or business owner later in life?
Eric: Yeah. So honestly, dude, I've been very [00:01:00] fortunate. I'm very blessed. I currently live in Southern California, which is where I grew up. So right now it's probably like 70 degrees and sunny and it had a loose impact on where I'm being an entrepreneur in real life, just because I was surrounded by a bunch, like if I wanted access to entrepreneurs, I could get access to this and it was actually a great learning experience.
When my first startup, we were in a VC incubator, which is essentially just like a building. Got lots of desks, bunch of startup founders working together side by side. So that was my first VC experience. And then being around by so many founders, I just got to ask all of them. What do they do? What do they best?
What works for them? So it was a great, just like absorption of knowledge or just like, okay, this worked for them. This is how they do things. This is how they do things. And of course, like in that environment, everyone's down to share, share tips. So that wouldn't have happened if it weren't for the area I lived in.
Jay: Very cool. yeah. A lot of people do not obviously have access to that level of, you know, entrepreneurship right next to them. so what was the business you were, or you had founded that was in the incubator here? Can you talk about it?
Eric: Yeah, sure. So the incubator is [00:02:00] called science, Inc. And it's founded by like the former CEO of my space. And that particular business was a company called "Polnareff", whatever you want to call it. it was a SaaS platform that replaced affiliate links for e commerce brands. So if you're on Shopify, you could upload your products to a database and then any of your customers could sell any product.
From a singular link. So for example, I, if I like this Nike shoe, this Adidas shirt, this Reebok hat, I could add all three products to my Eric Mckew link. And then you, Jay, being a follower friend or whomever, you could buy all three of those products within four clicks without leaving Instagram. Thus, you get a discount from the website.
I get commission and the brand's off to get sales. So everyone's happy. They share customers. Like, for example, if like you like coffee, you like cookies, both brands on there. It's like, why don't you sell coffee? Like if you're in a normal ambassador program, you just like get one link to the coffee store, but Hey, maybe your followers want to try some cookies with the coffee.
So you can sell both those do some marketing stuff with them.
Very cool. and what happened with [00:03:00] that? How did that go? Like, how did the, what was kind of the start and end of that journey in kind of a condensed form? form, very minor, except the biggest issue. And the biggest learning experience is we took money from the wrong type of investor, which isn't like, they're not bad people or anything. It's just like, when such a large. Portion of your equity is locked up in someone who doesn't, they want to go a different direction than the company founders.
That's creates tension. and then the situation's like, okay, do X, Y, Z. We'll introduce you to our network. And we're like, no, that X, Y, Z is not what we want to do. It's not how we want to build it, but then you just kind of have to do it that way and you kind of waste time resources. But it was overall positive thing.
Cause all that experience talking about two brands, learning how to sign Shopify brands, learning how just to get in front of all of them was invaluable for SHOPX. So it was a W. And then.
Jay: how does somebody avoid that if they're being approached by VCs or they're trying to get funding or whatever? How do they not get in that same situation?
Eric: Yeah. No. And honestly do it. I think it's a pretty common situation just because like, imagine this, you're a new startup founder, you're [00:04:00] early, you haven't been paid in a while. You've been trying to fundraise for a while, which honestly do, it can be an annoying process. So someone finally offers you money and you're just like, yes, I'll take it.
I'll take it. But the thing is you have to just look at it like some partnership, think of them as part of their team. Like you have to actually vibe well with them versus like, okay, I just kind of want money because if you vibe well with them, it'll go well. So I think the ideal VC partnership or like as more of an advisor where it's like.
They're there to be a neutral soundboard where you can run ideas off them. It's like, Hey dude, I'm thinking of trying this, I'm trying this. And then they can give their feedback because they have experience. But in the end they should trust that it's your sword to fall on type of thing versus like, no, you have to do it this way where the BC, we know everything.
Do it this way. But yeah, and then it's, I think it should be the founder's decision.
Jay: Does that come down to how much? equity, you grant them during that, that, whatever rate, whatever round is they're giving you money in. is that why they have so much say,
Eric: yeah. So I would say that equity portion is a [00:05:00] lot. Obviously if they have a ton of equity, like, A quarter or something like that, they do have a lot of say, it's also more so just the position you may be in as a startup, for example, it's like, like, let's say you're an early start. If you're struggling to get off the ground, they could dangle and not that they did this, but they could dangle their network in front of you type of thing where it's like, okay, well, we assigned you as a VC because we wanted to be connected with investors and brands and they're like, okay, well, we'll connect with our brands.
If you do this and we're just like, okay, we'll try this. And then you burn a bunch of resources that way. Okay. And in an unpaid startup situation, like your time is the most valuable thing. It's like if you're wasting time in one direction, it increases the burnout rate.
Jay: right? That makes sense. so tell me about SHOPX, what is it and who are you guys kind of going after these days as clients?
Eric: sure. So SHOPX is a really interesting use case. So I want you to think of the Google or Apple web three. So longterm, we're going to be a suite of products on Shopify and WooCommerce for an e commerce brand to download an app and then interact with them web three and gain different benefits.
[00:06:00] depending on which product they use and whatever the brand wants. Right now we have two products live. The first is, and they both tie together. The first is ReserveX, which is an NFT powered loyalty program. So if you're a brand on Shopify or WooCommerce, you can download our app. And then within the e commerce app, like within Shopify, You can launch a NFT collection and then you can program an e commerce benefits to that collection.
So for example, if Nike were to launch a gold, silver, bronze style pass system, the gold pass holders could get a product for like product A for free. Silver could get the product for 50 percent off. The bronze pass holders could get the product for just before everyone else. So you as a brand get to program e commerce benefits to the pass.
From there. It's like, okay, I'm a customer of Nike. I want this pass. Okay. I want it because of the e commerce benefit that it gets like, okay, I want this specific autograph shoe that gold passers gets all by the pass. Then you as the customer, you have the option to buy with credit card just to make it [00:07:00] easier for you.
And this ties into the second product, which is squad X. So squad X is the first ever blockchain based ambassador program. Just like Twitter pays its creators from their ad revenue. We pay our community for helping our ecosystem grow from reserve X revenue. So when a brand uses reserve X to launch a pass, they have control over 95 percent of the funds.
So if you're working like an agency or an influencer, you can program in their wallets so they get paid, they're properly incentivized SHOPX earns our revenue from that additional 5%. And 2. So half of our revenue, so 2. 5 percent we give to our community for helping our ecosystem grow. The logic behind this is, A, it's just better to give than receive, and B, I believe in like energies, I think positive energy is sticky, I think negative energy is sticky, so this creates like a positive upward spiral for everyone in the community, making sure everyone wins, so as SHOPX gets more and more brands get more and more mints, the customers, their customers are happy, SHOPX gets paid more, then Our community is getting paid more and more Ethereum.
[00:08:00] So they're happy. They're posting about it. They're being really annoying on brand pages saying, Hey, you guys need to check this out. That's creating more and more brands joining. That's creating more men. So. The logic behind that ecosystem is, I believe in power versus force or forces where one party loses, one party wins.
It's unsustainable, but in a powerful relationship, which is honestly just like these podcasts, like we're both getting something. So we're both going to be here. that's more sustainable. So in the SHOPX ecosystem, the brand wins because they get increased customer lifetime value. word of mouth marketing, customer retention, which is honestly the major factor.
That's why most brands will use us shopping their customers win because they get e commerce benefits with NFT. Like. They wouldn't buy if they weren't winning, so that's easy. ShopX wins because we get paid. I also, me, ShopX wins because we're also onboarding people into CryptoWeb3 at scale, which is something I'm all about, because like, it's like a zero to one for a bunch of people.
Like if we onboard like Nike, that's like, that's great for the ecosystem. Cryptocurrency ecosystem wins for that reason. That's why [00:09:00] we have a bunch of support in the space, like a bunch of people rooting for us. And then the ShopX community specifically win because they're getting paid Ethereum. So all of the players in that present ecosystem, I think they're all taking W's, which is why it kind of works well.
Jay: Hmm.what? IW3 and crypto, I think especially W3 has almost become a dirty word in
some circles, right? So, what does Web3 mean today? I mean, I know what it meant a year ago, but it kind of came and then went and then didn't really go, but it kind. So what does Web3 mean to you? And I, you know, I'm saying that as a complete outsider who has no skin in the game either way.
you know, I haven't really engaged into, we've had some clients that are Web3, but as far as like engaging in the ecosystem, I'm kind of just a bystander. So I can tell you what I've. Heard on the one side about being positive and the other side being negative. But like, what is it today? And like, what is the benefit of being, you know, in web three, if you're, you know, a tech company,[00:10:00]
Eric: Yeah. So in terms of web 1, web 2, web 3, and just to be completely honest with you, the negative connotation. Is real, it's justified in shop, has a deal with it because we're a B two, B2C cus company, like we could send all the brands in the world, but if their customers can't pitch the NFT to their, if the brands can't pitch the NFT to their customers, honestly no one wins.
And we've had cases where the brand was excited. They launched their PR release, they did everything up until sell the past, they did their Instagram posts, their customers would ratio them and then their brand's like, okay, we'll just wait for this. So in terms of and there's a great learning experience because in terms of web one web two and web three I would think of web one is read only.
So in web one we can go online. We can just kind of read content That's it, which is great. Web two is read and write So think of like Instagram YouTube Facebook or any social media platform So we could read content like I could or I could write content like I could do an Instagram post You can read that content, you can view the post, you can interact.
The only issue is we don't own the content. So [00:11:00] Instagram, in that example, owns the content. They sell your data for various purposes. They can retroactively cancel you for whatever reason. Like I could say something on this podcast, which doesn't apply 10 years from now. They could come back to the podcast and they could cancel both of us for that reason.
And we both know how, we both know how arbitrary their processes can be. In Web 3, I would say that's read, write, and own. So in Web 3, you can read content, you can write content, but more importantly, you can own the content. So hypothetically, let's say I create an NFT collection, I add value to that collection, you want the NFT, you want the NFT for the value that's added.
You purchase NFT, I can't take it from you. Amazon can't take it from you. Instagram can't take it from you. It's your NFT. So in that case, you own the NFT. But of course there are some, it's a double edged sword. Meaning if you own the NFT, you also have the responsibility as a user. But yeah, In terms of where we're at web three, it's obviously not adopted right now.
And the two major reasons it's not adopted are incentives and just user interface. So incentives, like, honestly, if you're not in the space, [00:12:00] there's no real reason to enter the space. And even if you do enter the space, you just see a bunch of honestly, crypto people can be super cringe. So you just enter, you're just like, Jesus Christ, I'm out.
Sothat's. That's one big reason and ShopX is helping with that because like in our first, with our first customer, this is about the first customer, the, their first launch as a hat store in LA, they had a big issue with botting, meaning like they would drop a collection of 500, 500 hats. The bots would buy those hats within less than like a second and then flip those hats on the second remark for like 10 times the profit.
So they use our NFT collection to create like a gold silver bond style pass collection for their core fans. So now, and that a hundred percent solved their bonding issue. Now the core fans get early access to hats, exclusive access, and he even created a discord community for those specific people. He gets their input on hat design.
So it's really just charging up to super fans. So that's, so that solves the incentive structure. And the second reason web design adopted is [00:13:00] because the interface is just honestly, dude, it sucks. Like I can never send my mom or my grandma to like a web three thing. But the plus side about that is the bigger brands are getting in.
Like for example, Nike. They can't send their millions of customers to like, a terrible UI experience. So they have the capital, the resources and the incentive to make it good. And on top of that, the game theory takes over from there. I mean, once Nike gets in, Reebok has to get in, Adidas has to get in.
Otherwise they lose. And the beautiful thing about web three is it's composable. So just like in software, everything is solved once. I would say 90 percent of all code is probably copy and pasted. So in web three, like, once something is solved, It's all once and other people build off that solution, which is what SHOPX does too.
So I think I would say we're five to 10 years out away from mass adoption. And for that to be successful, my mom has to take your phone,tap web. Three steps happens in the background. She has no idea. And then that's how it eventually wins.
Jay: Got it. Wow.definitely one of the, probably the best [00:14:00] explanations of 1, 2, and 3 as far as read and write and, all really great, kind of, Layman's terms there. cause even I could understand that. So, tell me a little bit more about the first customer, right? So the there you're in a space that's like you pointed out.
I think sometimes could feel like. You know, 4chan or something like it's just very like, very, aggressive. I think that's, would be kind of the word. I think when people feel scared of the space, they think it's maybe a little too much, a little too,
Eric: It's like Reddit.
Jay: it's like, yeah, I mean, I would even put it past Reddit, you know, it's like a little, like it just feels very fast, it's almost like, I feel like for somebody who's not familiar with that world. To step into it and see the content. It's almost like watching a YouTube video and like trying to like partake in a chat. That's full of like, you know, a million different, it's just like stuff pop up. And you're like, I don't even know what's going on. I feel like that is like the real, especially when I'm 38, you know, I'm getting older.
Like I am jumping into some new technologies, like [00:15:00] weirdly, like not as enticing as it was when I was in my twenties. You know, you look at your grandparents, you're like, you guys can't use a, you know, smartphone, but like, we're starting to get into that point. But I, you know, I, I think it's a really great. explanation of why people haven't gotten into it. So tell me about the first customer. it's a weird space. You know, it's a new space. It's an exciting space. How do you get somebody to pay you physical money to build them something in that? Like, what was the first customer like pitch to get them in?
Right,
Eric: So in terms of product design, we actually tailored our first product around what our first customer wanted, because we knew as a brand, it's like, okay, cool technology. That's great. And I'll, Oh, there's so much height, whatever. But if you can't, and again, I like that to use a phrasing, get someone to pay you money to provide a product and services, because that's the biggest deal.
It's like, how do you get someone to pay us money? You have to solve an issue. So initially we, our first solution was like, it was something different. It was SourceX. It's attached to ENFTE to each individual product SKU, and then you can do some tracking and supply chain and all that stuff. But then we were talking within our local space.
Okay. It's like, okay, [00:16:00] if we wanted to implement that, we would need a major client. We would need them to uplift their whole supply chain. They'd have to go on the manufacturing level to attach ENFT to each individual product SKU that relies on the metaverse. That doesn't work. So we needed something that worked right now that solved a very specific issue.
And our research led us to, So what happens in body is there are certain brands when they release a product bottle by the inventory immediately and then resell them the secondary market, which is a shame because the core customers don't actually get that don't get the product. The business owner misses out on a bunch of money.
It's just a lose for everyone. So our core customer, we built reserve X around this issue to solve his bonding issue. So again, like it was a brand called the mag park and he's from LA is like a hometown hero type of vibe where it's like, he's like Mickey. he's a really chill dude. He has a basketball hoop in like his shoe store.
It's called the mag park and like the kid, like, and his customer base are like teens, like young 20 year olds, like who want the coolest like hat, you and all that stuff. And they'll shoot in the store. It's like, it's a friendly [00:17:00] vibe where it's like, his customers would also like wait outside for his new drop.
Yeah. And spend like all their money, because again, it's like they're young and they don't have much money, they'll spend all their money on the new hat. And then it's a shame when a specific bot, when they, when no one, like not even one customer can get it, because like someone's waiting online to scalp all the product and just flip it.
So what we do with our NFT technology is that solve the botting issue a hundred percent. So right now with Shopify, we just NFT gate the checkout process for specific users. So if you, let's say he releases his ad, NFT holder, you're not. You go to the brand, you try to buy the hat, it says, okay, you need this pass or NFT to get through, we scan for that NFT, if you have the NFT, it goes to their checkout as usual, so all retention emails, all that stuff, nothing changes on that end, but if you don't have the NFT, you get rejected, you can't purchase it, so this 100 percent solved his bonding issue.
And for funsies, we hired a team of like, I [00:18:00] call them cyber shadow botters where they're just like, honestly, they're just DJs. We do, we just got to do bonding for a living. And there's like, Oh, can you try to break this? And then they couldn't. And then, which is so important about the first customer is.
Honestly, this is probably one of the best use cases in crypto right now because a, his launch was super successful. He sold 93. 75. He sold a hundred passes, 125 passes for 93. 75 or 0. 75 B. So he made like 93 ETH. Over 50 percent of his customers are 100 percent brand new to crypto and 0. 75 ETH is no small number like don't get me wrong It's like a thousand bucks and for someone in his clientele to actually spend money to learn a new system like this one like a thousand Bucks, like imagine like a 23 year old who's like into hats and I was just like, okay I'll spend a thousand bucks for this.
So that was actually a pretty cool pretty big proof of concept moment. And the cool thing about this project is he still uses the technology to his day. Like this past Friday, he had a drop. If you check out his Instagram, he's like pink mocha holders. They get this hat [00:19:00] early. So now they can relax because it has deserved.
So it's successful because it's still getting daily uses, which is extremely rare. Even like SAS, fostering crypto, especially in the crypto space. Like there's very few products that actually get used by customers. And, and on top of that, we got that, so we got that case and essentially it's a case study for us.
So we've got content, we could have a fancy case study. And now from that, we taught, we were targeting other brands, like. It's a, it's like, we target other brands in the bonding space. That case study led us to Fox studios as a new show. Kapapa. So anyway, it's like, okay, they're legit. They are down to use this.
Now we have two brands. And then other brands like, okay, people are actually using them. So getting that first customers, obviously. Katie.
Jay: Yeah, no. And I like that you built something different at 1st and then saw the real problem and solve that. And then that's what kind of spun out the
entire new business. I think that's like, people talk about pivots a lot. And I think. They, I think people were so like, like stuck in their ways for [00:20:00] all of humanity when it comes to business and like pivots were like this hot thing in the, you know, 2000s or in the nineties or whatever, whenever it kind of became a thing and then like, everybody was talking about pivots that people change and change and change, but like, it's really about changing into the. It's changing into something you believe in is the right way forward and kind of moving towards it and you guys pivoted in the right direction and didn't just like pivot all over the place and keep trying to find something that was hotter or better.
and you found the right thing. So it's very, it's a good pivot and it's a great. Kind of story about, you know. Finding a customer that trusts you trying to build something, you know, maybe that's not the right thing. And if they stick with you and you kind of got that relationship, because it's all about relationships, then you're going to get a shot at pivoting and trying to really solve their problem, which you guys did.
So that's very cool, man. I love that story. Um,how are you guys, two more questions. How are you guys marketing today? Like, do you spend ad dollars? Do, is it all word of mouth? Like, how are you guys getting those brand names out today?
Eric: so I love our marketing strategy right now, specifically squad X so that the paying our [00:21:00] communities for helping our system grow and this strategy has worked really well for me because it, so what will happen is like, like I mentioned earlier, they'll comment on brands posts. Like you need to SHOPX for this reason X, Y, Z, here's a case study.
They do it. They do it authentically. And then I can go on LinkedIn and this worked for some major brands. It's like, I just add everyone on that company. It's like, Hey, I can help you out with this problem. Do you want to solve this? And it works because it's authentic. And it's like, Oh, should I kind of do what I talk to you?
So that's been very effective. Most of us have most of our outreach has also been referral based. Like we were an app on the Shopify and WooCommerce app store. So we get organic downloads. But I would say referral based has been the best way to do it. I mean, you can replace honestly, dude, the classic cold email, the cold scraping, like you can't like that has to be going on in the background.
we were doing ad dollars in the past, like just classic, yeah, just normal Facebook ad spend and all that stuff. But we found that during the bear market, which crypto has been a bear market, it's like, you're just throwing money into the void because like you said, there's a negative connotation.
It's [00:22:00] like, why would I pay money for someone to see something they don't really want to do? So, that. And I'll say, I would say that I'm going back to the first customer. Like they referred us to brands. Those brands are for us, other brands. So it's all about kind of one who's like, okay. Cause and then that kind of sells itself.
Cause like the first, like the Mickey, he referred his homie. So we referred his homie. So there's like, okay, again, like you mentioned, trust is key.
Jay: Yeah. No, you guys built it the right way. and it's, it is all about getting that first trusting, partner that will kind of refer you to other people. So that's a new, right. I mean, I think the side note there about the cold scraping, the cold email going on, like, I
think people like to like pretend that's like, Not happening, but I
think,
Eric: it has to happen.
Jay: everybody's doing it.
And like, we all kind of have to like find out who's out there and get their
contact, like do all this stuff that like, you know, you just have to do to the side. So I love that a very honest answer. So one more question, non business related, if you could do anything on earth and you knew you couldn't fail, what would it be?[00:23:00]
Eric: That's a good question. If I could do anything on Earth and I knew it was going to fail, eh, I'dto die and see what happens. I'm curious about that.
Jay: that I will tell you, is the first time I've heard that, that's a
great answer. It's a great, I mean, it is like the ultimate question, right? Like everybody wants to know. I mean, I guess theory. You could do that pretty easily and not fail, but I guess is it to die and come back? Is that what you want to do?
Or is it just like,
just go on the other side?
Eric: die with the optionality come back.
Jay: Okay. The option.
Yeah. All right. You have a lever. You can just pull to like rip you back into,
Eric: It's like, let's go back. Let's go back for now.
Jay: Just kidding. Like
there's nothing just kidding. I'm going to go back. all right, man. Well, it's awesome to meet you. I love your story. I thank you for coming on and being transparent and open and honest and talking about like some different things that we don't normally talk about as far as like web three and just how that works.
It's like living in that space. So it's very cool. You, if people want to reach out to [00:24:00] you, find out more about SHOPX, how do they do that?
Eric: Yeah. So the best place would be our website, shopx. co and our Instagram and Twitter are shopxlabs. So we have a pretty active community. Just join the discord and ask them what's up. They'll give you honest answers.
Jay: Cool, man. Awesome. Well, Eric, you're fantastic, man. I'm jealous of your SoCal, weather and vibe. So, keep it going, brother. And, we'll talk to you again soon. All right.
Eric: Yes, sir.
Jay: Thanks, Eric. See you, man.
Eric: Thanks, Jay.