From: myfirstmillionpod
The Zuru empire, founded by brothers Nick and Mat, began with humble and often naive beginnings, evolving from a small toy company into a multi-billion dollar enterprise that leverages its core strengths to expand into diverse new markets and industries. Their journey highlights the power of persistence, a “first principles” approach, and a strong emphasis on automation and speed of innovation [00:00:00].
Origin Story and Early Challenges
The company’s roots trace back to a dairy farm in New Zealand [01:08:08], where Nick and his brother Matt started by selling model hot air balloons door-to-door at festivals [02:00:00]. This early experience in door-to-door sales taught Nick the valuable life lesson of persistence and how to handle rejection [02:27:00].
A pivotal, albeit naive, decision was to move to China with no money, no plan, no relationships, and no language skills to build their own factory [01:17:00]. They even slept in a bush at Hong Kong airport due to high hotel costs [06:37:00]. Their initial factory was a small shed by a river where they invested all their money in an injection molding machine [07:01:00].
Learning from Failures and Lawsuits
Their early products, such as a Night Frisbee and a Money Gobbler, were direct copies of existing products [08:19:00]. This led to multiple lawsuits because they were unaware of intellectual property (IP) rights [09:25:00]. Nick recalls being sued for the Night Frisbee and having no money to defend themselves, eventually hiring a lawyer who let them write the defense themselves for a minimal fee [10:31:00]. These experiences forced them to start innovating and creating their own ideas [10:27:00].
During these challenging times, they lived on less than a dollar a day [12:47:00]. Nick’s brother even lived in a tiny room within their factory for 10 years [13:23:00]. This period instilled a deep-seated commitment to profitability:
“From this day on we will never have a day, a month, a week, a year will we lose money. Like if we’re losing money in a month we will sit down, we will like eat nothing or we will like live on nothing just to ensure that we’re like profitable” [33:20:00]
Breakthroughs and Business Philosophy
The company’s first significant break came from a large order for a David Beckham Tamaguchi from Walmart, an order worth nearly $30 million USD, far exceeding their previous sales [22:53:00]. Despite the order being significantly reduced and eventually leading to a five-year blackball from Walmart, it provided enough capital to survive and grow [24:41:00].
They developed a unique business model, realizing they were bad at designing products initially, so they partnered with US companies like Zing and Zard to sell their products internationally [27:05:00]. This strategy of taking others’ products and leveraging their distribution channels proved successful [27:31:00].
Key tenets of their operational philosophy include:
- Persistence and Grit: Continuously fighting and pushing forward, as exemplified by Nick’s relentless emailing of buyers and “buying” his own products in retail tests [31:36:00].
- “Win or Learn”: They view failures as learning opportunities, not losses [16:24:00].
- “Firing Bullets and Failing Fast”: This involves making minimal viable investments to test an idea. If it works, it becomes a “cannonball” for larger investment; if not, they fail fast and learn [00:17:00].
- “First Principles” Thinking: They deconstructed traditional toy manufacturing and business models, rebuilding from the ground up, leading to highly efficient and profitable operations [34:16:00].
- Automation: Zuru focuses heavily on automating production, even for complex products, minimizing human intervention from raw material to finished product [59:03:00].
- Continuous Improvement: They aim for a “2% improvement a week,” believing in the power of compounding small gains over time [01:05:59].
- Hiring for Grit: Beyond talent, they prioritize hiring individuals with immense grit, competitive drive, and a bias for action [01:06:30].
Diversification into Fast-Moving Consumer Goods (FMCG)
A personal health crisis forced Nick to return to New Zealand, prompting him to rethink the toy industry’s market ceiling [42:28:00]. He observed that FMCG (Fast-Moving Consumer Goods) or CPG (Consumer Packaged Goods) industries were dominated by a few large, slow-moving companies with duopolies [44:01:00]. Nick’s thesis was that Zuru could disrupt these markets by:
- Delivering more margin to retail partners [44:47:00].
- Innovating faster [44:48:00].
- Reaching customers more efficiently through targeted digital advertising [44:56:00].
- Moving at the speed of culture and platforms (e.g., TikTok) [46:46:00].
This led to the establishment of Zuru Edge, focusing on a “Five Vertical Strategy” [52:07:00]:
- Diapers: Zuru launched a diaper brand in New Zealand, quickly gaining 40% market share and causing a local competitor to go out of business [45:47:00]. They then replicated this success in Australia and the US (Walmart, Target), producing 2 billion diapers last year within 5.5 years [48:24:00]. Their success was attributed to bringing high-quality Chinese diaper technology to the global market at competitive prices, a price and performance-driven category [49:37:00].
- Beauty: Partnering with Jamie, who had a background in luxury PR and beauty, they launched Monday Haircare, which became known as “the most famous shampoo and conditioner bottle in the world” by Forbes [49:09:00]. This success was driven by innovative design, creative marketing, and strong TikTok presence [50:20:00].
- Pet Food: With a young entrepreneur, they launched into pet food, with their brand Bonkers driving 30% of all cat treat growth in America last year [51:31:00].
- Home Care: They are actively building several brands in this vertical [52:02:00].
- Supplements: This was one of their failures; their brand Dose & Co, despite working well internationally, failed in the US and was eventually sold [51:43:00].
Nick states that successful categories for them are either price and performance-driven, innovation-driven, or design and creative-driven [49:57:00]. Once a product or category shows promise, Zuru goes “super deep,” automating production and optimizing every part of the process [51:13:00].
Moonshot: Zuru Tech
The latest and most ambitious undertaking is Zuru Tech, a project focused on disrupting the construction industry [53:15:00]. The core idea is to create the world’s first factory with a customized input (building design) and a fully automated output (finished building), significantly reducing costs [53:45:00].
Key components of Zuru Tech include:
- Dreamcatcher Software: Built on Unreal Engine, this software has a simple user interface but a complex logic layer [54:05:00]. It catalogs every global building code, maps terrain, and allows users (even a 10-year-old) to design houses with automated structural, mechanical, electrical, and plumbing calculations [54:18:00].
- Quira AI Assistant: An AI assistant trained on the works of great architects allows users to interact with their building designs [54:30:00].
- Automated Factories: Starting with a 1/10 scale factory to test software-hardware integration, they have progressed to a three-hectare test production line building a house every two weeks [55:25:00]. The ultimate goal is a 25-acre commercial factory and eventually one of the world’s largest factories, aiming to build houses for $500 per square meter with high quality [55:56:00].
- Self-Funding: This massive undertaking, involving about 700 software and hardware engineers across offices in India, Italy (through acquisition of architectural software company), and China, is entirely self-funded [56:34:00].
This project embodies their “first principles” thinking, akin to Elon Musk’s approach of breaking down problems to their fundamental components [01:03:52].
Current Scale and Future Vision
Today, Zuru’s empire generates over $2 billion USD in annual revenue, growing at 25-30% year-on-year, and is remarkably profitable, running at 40% net profits [41:06:00]. This profitability has allowed them to organically fund their growth and diverse ventures without outside capital [34:40:00].
Nick and his brother remain highly motivated, driven by the love of competition and the desire to solve bigger problems [01:00:20]. Each of their five new verticals (diapers, beauty, pet food, home care, and supplements/others) is envisioned to become larger than their original toy company within the next two to three years [52:13:00]. Their consistent commitment to their core DNA of persistence, speed, and automation allows them to enter and disrupt new industries effectively [01:04:14].