Cloud Water Filters - Clean Water Isn't a Given Anymore

Rose (00:01.15)
Welcome back to the story of a brand. I'm Rose Hamilton, CEO of Compass Rose Ventures and your host for today. Thank you for taking time to spend with us. You're in for a real treat. You know, there are some categories that consumers think about all the time, like food, supplements, skincare, fitness, beauty. And then there are some categories that shape our lives just as profoundly, but remain almost invisible until someone forces us to take a closer look.

Water happens to be one of those categories. Not bottled water as branding, not wellness as aesthetics, but the actual water moving through our homes, into our kitchens, our offices, into our children's bottles, and into our bodies every single day. And what makes this conversation super fascinating is that it sits at the very powerful intersection of wellness, trust, infrastructure, design, and consumer behavior.

because today's consumer is different. They read labels, they ask questions about ingredients, they think about toxins in their home, and they actually care about what's in their air, what's in their food, what's in their routines, and increasingly they're asking a new question, what's in my water? So my guest today, and I'm super excited, is Ben Zaeffler, pronounced, hopefully correctly, Ben. Okay.

Ben (01:04.667)
Thank

Ben (01:22.425)
You did great.

Rose (01:24.152)
Co-founder of Cloud Water Filters, a company reimagining residential water filtration for the modern consumer. Cloud, what interests me here, has built a very premium, connected reverse osmosis system. And we'll talk more about that. But it gives households something this category has largely failed to offer for decades. Not just better filtration, but better visibility, design, confidence, and something that most people have historically been told, don't think too hard about it. It's just water.

But what makes the story especially compelling is that Ben is not building from a place of theory. He and his co-founders have done this before. And previously, they built Pupbox, which was acquired by Petco. And that founder journey eventually led to a partnership with Nick Braun, who also built and sold a company to Petco. So this is not just a startup story.

It's a second act founder story. And in many ways, to me, those are the most interesting ones because they reveal what experienced entrepreneurs chose to build when they've already proven they can win. What did they see in this category that others missed? Why enter a harder, more operational complex business after they have already had success? And why and what does it say about the future of consumer wellness when one of the most important next frontiers may be sitting quietly under the kitchen thing?

Pause, Ramon, I'm gonna count myself back in. Three, two, one. And what does it say about the future of consumer wellness when one of the most important next frontiers may be sitting quietly just under the kitchen sink? And that's what we're getting into today. Ben, welcome to the story of a brand. I am so excited to have you here.

Ben (03:06.831)
Thanks, Rose. I'm excited to be here. That was a great open. I feel like I don't even have to say anything. You kind of covered it all.

Rose (03:11.95)
no, I know we've got lots more to talk about. So Ben, I want to begin with something that I think is often more interesting than the company itself, which is the founder decision behind the company. You'd already built something meaningful. You had already gone through startup intensity, growth and exit. And in many cases after a successful outcome, founders have more freedom than ever, which means they can become more selective than ever. So I'd love to start here. Why was water the next problem we're solving for you?

Ben (03:43.183)
Yeah, you know, I think I tell people, I think it's more of a personality flaw than anything. Entrepreneurs are kind of like sick and crazy. We are always looking at like the next thing, the next problem to solve. And that's kind of how I was, you know, when we were at Petco, after we had sold our last business, we worked through an earn out over a several year period and working in corporate America and working for someone else, you know, I kind of always wanted to get back to entrepreneurship. I like building things. I like solving problems.

And water just kept coming up as this major problem that just didn't have a good solution. know, we going back in time, my wife, who is also my business partner and I, we've always been like massive water snobs. We were in our early twenties, we were installing reverse osmosis systems, you know, in our house and for our friends and family and telling people of all the toxins lurking in their tap. And it was a big market then, but like fast forward a decade after that, after we had sold another company.

We kept taking a look at this industry and saying, you know what, nothing is innovated here. The products are the same. There are these old school canister filters sitting under your sink that look like a science experiment gone wrong. You have no idea if they're working. You have no idea how they're working. You have no idea when to change the filters. There were just all these inherent flaws. And we had just come out of this successful.

exit, which kind of gave us the confidence to go tackle a larger problem in a bigger market. Something that, as you mentioned, was a lot more operationally complex, a lot more capital intensive with a lot, I wouldn't say a more, a lot bigger players, but there are a lot of players who have dominated this market for a really long time. And I guess the exit really gave us the confidence we needed to say, okay, let's go get it.

Rose (05:30.551)
That makes all the sense in the world. one thing, hearing your story, one thing I've observed the strong second act founders is that they rarely choose their next category casually. They're often looking for a problem where consumers pain is so real and the category has been so under imagined. And oftentimes the economics, unit economics can support a bigger strategic play. Was that true for you?

Ben (05:56.909)
Yeah, absolutely. think it starts small and it kind of it's snowballs and it gets you in this rabbit hole of research. that's kind of how we were where we knew the problem existed. knew the larger problem was that consumers were losing trust in their tap water. Even I'm 40 years old, but when I was growing up, we were still drinking out of the hose and drinking tap water. And now if I try to give my

kids a glass of tap water, look at me like I'm absolutely insane. I might have all have scooped it as a toilet. I think the I think the consumer sentiment around tap water has really changed and probably rightfully so. I mean, the water system infrastructure in this country is super old in terms of like the best quality tap water. We're like 25th or 30th in the world. Like we're really just not that far up there. There's all these emerging contaminants like PFAs and microplastics that

Rose (06:29.325)
You

Ben (06:53.659)
The EPA and the water systems, they just don't know how to deal with them yet. They haven't even put the regulations in place. And so, there's this rising tide about consumer knowledge around drinking water toxins. And also, more largely about just toxins in the home more generally. Like their new moms or new homeowners are just trying to detox their homes as much as they can, because we're realizing there's just so much stuff that can...

be carcinogenic or can cause health issues down the road. And we just simply don't want that for ourselves or for our kids. And so like the problem was real. And it just seemed like there was a huge disconnect between that and the right solution, right? Like there is these under sink RO systems that did a really good job purifying water, but they were just super hard to use and didn't give anybody any sense of.

what was going on or how it was working or any trust in the product. And then on the other side of the spectrum, there were, you know, the Brita filters or the fridge filters that were probably doing very little other than making your water taste better, not removing the PFAs or the heavy metals or whatever it might be. And they were very easy to use and seeing some innovation in that category. But like from a filtration standpoint, it just wasn't doing the job.

And so we just got down this, you know, this rabbit hole just kept doing more and more research. And finally we've got to the point where we said, okay, let's like take a really hard look at this. and we started doing, some consumer studies and we got together some focus groups and we talked to people who had filters. talked to people who had no filters and we started just checking off all the problems that they saw with the market and the things that, you know, we had hypothesized were all kind of come into fruition. was these, know, we, we decided early, we wanted to focus on.

under sink RO as our first product and reverse osmosis specifically as like our category because it was the largest and fastest growing segment within the residential treatment space and because it simply was the best way to filter water. It's you know what the bottled water companies use. It's just really tried and true filtration technology. And so we just try to poke as many holes in as we could and people kept saying the same things. They said these things are way too hard to install. So I'm paying

Ben (09:13.645)
exorbitant prices to get a dealer or a local plumber to install this thing. It's really hard to change the filters every year or every 24 months. So I'm just not doing it. And at that point, it's doing more harm than good. The knocks on RO were that it strips the water of all of its minerals. And so there's, you're drinking dead water, just pure, acidic, low, low pH water. And then the big one also was that

reverse osmosis wastes too much water. In order for the process to work, reverse osmosis separates the water into two streams, a pure stream and a waste stream. You kind of need that to happen for the purification process to work. But most traditional ROs waste like four gallons of water for every one gallon purified, which was a major problem. And so we started just designing a system that checked off all of these boxes, made it easier to install so that a DIYer could do it.

You didn't have to pay and even if a deer and if someone didn't feel comfortable with it, it would be a lot cheaper to get a handyman in there to do it because it was so easy. We made it super easy for someone to change their filters without ever touching any of their plumbing. We integrated a mineral filter so it actually elevates the pH and adds some trace minerals like calcium magnesium. So you actually have alkaline water and not like this concept of dead water. And then we made it a lot more efficient. We got it to a one to one waste ratio.

Which is pretty much best in class for a traditional RO system sitting under your sink And the big, you know light bulb moment was you know at the time several years ago call it four or five years ago when we were really digging in researching this stuff We saw all of these connected home smart Appliances coming, you know coming in and dominating their respective markets. So Yeah nested already, you know taken over the thermostat market

Rose (11:00.949)
Thank you.

Ben (11:05.947)
Everybody wanted a Nest. Builders were installing Nest almost exclusively in new builds. Ring had just had a really successful story where they pretty much just transformed what the security industry looks like. We were seeing all these air filters pop up. They were all connected air filters. The Sonos of the world were dominating audio. And these were all consumer first brands that started direct consumer on.

built brands that consumers trust and just totally transformed their industry. And we were like, you know what? We can probably apply that same concept to water filtration. We continuously heard people say, I just don't know if this system I have under my sink is working and I don't know how it's working and I don't know when I'm supposed to change the filters. And so we installed a bunch of sensors throughout the system as well as Bluetooth connectivity.

so that you can actually track and monitor your water quality and your household consumption in real time via the app. And then based on all of your data that we're seeing, we have an algorithm that intelligently projects when you need a filter replacement. So you're not, if you have a family of two, you're changing the filters a lot less frequently than, Nick has four kids, Ariel and I have three kids, we have larger households and so we're gonna need to change our filters a little more often. It's all individual.

Rose (12:27.917)
Well, and it sounds like you really applied consumer research throughout all of it to help you understand what are the biggest pain points and what to spend money on and what not to spend money on as you're building out the brand. And I think that's an area where some people get tripped up on that when they're building products and they'll just move straight into building the products and then get into the market and see what sticks. But it feels to me like this was a very customer experience, not just a

product, a lifestyle experience that you were building with the app involved in it and not just a product, but a service and a product combined together.

Ben (13:06.297)
Yeah, when we started looking at the space, the one thing that was really attractive was the fact that a consumer would install this thing into their plumbing, under their sink, and they wouldn't necessarily wake up one day and say, you know what, I'm not going to drink filtered water anymore. I'm going to switch back to tap water. And so we saw this as an absolute like lifetime value annuity play. We had just gotten off building a straight subscription business. Our last business put box that we sold to Petco was a subscription box for dogs.

Nick had sold a pet insurance business, which is all annuity based. And so we are pretty much hard coded to like the value of recurring revenue. And so when you're building a recurring revenue business, the trust with the customer and the customer experience and the services you called it is super, super important because if you can nail that stuff, the customer is not just going to trust you when they purchase the product, but they're going to trust you for the lifetime of the product. And that drives a ton of downstream value.

At the same time, on the, you know, the last business was also, you know, direct consumer online. Everything unit economic related comes to this ratio of how much you paying to acquire a customer versus how much are you getting from them in the lifetime of that customer, you know, the lifetime value. And so with my last company, honestly, I don't think we spent nearly enough time building out the brand. Like we had a good thing going, but like we didn't.

We didn't spend enough time on design and branding and just getting that cohesive story in place. And I think it really hurt us from a customer acquisition standpoint too, because it makes it harder to get that flywheel going where you're getting all those customer referrals. You're just getting everything rises to the top of all the marketing channels because you have that brand in place. And so it is something that we intentionally invested in early was design and brand and customer experience because

At the end of the day, just makes your customer acquisition cost a lot less, which just further improves your unit economics unless you grow more rapidly.

Rose (15:08.813)
You know, and on the surface, puppy subscription boxes and connected water filtration systems sound like completely different businesses. But I love what you just talked about because I suspect that deeper founder logic is actually very, it's very connected because you understand the retention aspect, which is such an important point. And in both cases, you're dealing with emotional consumer behavior, daily rituals, trust, education, reoccurring purchase patterns. And from the pre-interview when we talked,

it's clear that filtration also stood out because of the revenue potential in a way. So when you looked at the market size, you probably had a more strategic eye that gave you the confidence to say, can be a subscription model and it needs to in a way that many might not. So I guess my follow-on question would be, what did building the subscription box business teach you unexpectedly or prepared you for?

to build cloud, above and beyond trust and building the brand, was there anything else that surfaced for you?

Ben (16:10.875)
Yeah, I mean, I think you kind of hit the nail on the head. we were, you with the last business, everything was driven, like the entire business strategy was driven off those retention metrics, right? Like how long can you keep a customer? How much value are they going to drive? Like you almost take a step after the product is launched and you're further into market, you almost take a step away from the product and you focus so much on, you know, the unit economics. But when I say unit economics, I mean like the retention metrics, the lifetime value, how much value you're

extracting from that customer because that's how you can make the business profitable in the long term. so absolutely, we were so entrenched in that with our last business that it very much carried over. And whenever I tell people like, yeah, I had another company previously and they're like, what industry? I say, the pet industry. they're just like, how did you get from pet to water? But for me, it's not that big of a leap because it's the same type of thing. It's build a brand.

Learn how to market online really well to consumers, to speak to those consumers on the internet through digital channels, and then retain that customer on the backend. And there's a lot of strategies that get put in place if you remove the product that are the same across both of those businesses and any businesses that are really selling online and have this recurring revenue stream.

Rose (17:29.133)
Well, this is such an important lesson for founders listening, I think. Sometimes your next company is not in the same category, but it's in the same behavioral architecture. And the best operators know how to spot the architectures early based on their previous experience. So, you know, when I think about the thesis, your founding thesis, it's incredibly clear. Water filtration had not meaningfully innovated in decades. Legacy systems were inefficient.

super poor design, has definitely heard that, and often invisible to the consumer. So no one had really built a connected, design-forward, premium solution for the modern household. So I want to ask this in a bigger way. What did you see in water filtration that increments were missing?

Ben (18:17.135)
I think that, you know, I think they were missing the customer, the customer component. think that this industry, because it requires this installation, this, this industry specifically was really driven by this dealer model where you'd have, you know, the collagen man going door to door and trying to sell you a water filter typically for way more than it should cost. And they, you know, or somebody going into a Home Depot and picking up a GE reverse osmosis system and installing it themselves.

In both of those scenarios, you're cutting the tie between the brand and the customer. And so I think that's what was missing is this customer connection. And that's why we're seeing so much success is because when you work through those distribution channels, when you disconnect the customer from the brand, that customer forgets what that product is. It doesn't become part of their lifestyle. It doesn't become part of anything that's

emotionally driven for them. And so they have no loyalty to it. And so that was the big thing for us too, is like, let's build this connection to the customer so that we can keep it forever. One of our early sayings is like, we're building lifetime relationships with these customers, not one time relationships. And the app and the connectivity really do that. really, we've seen it more and more as we've gotten deeper into the business. Like, we've been in market for about two and a half years now.

We're starting to see systems that are two years old. Sometimes issues will come up or issues will come up when there's, you know, first installing the system. And one thing that was, you know, kind of an unintended consequence of the app and the connectivity piece is it actually gives us direct real time view into a customer system in their home. So we can also provide a much better support experience, which was a big thing that was lacking with those other distribution channels, because, know, someone to install it and they'd leave. You wouldn't have this guy's phone number, have him come back and do anything.

And so we can actually get on the phone with a customer. We can have them open up their app. We can see all their system data. We can actually push changes. Like we can push pressure changes or system upgrades directly through the app. And we have them on the phone and the customer like really feels that customization and that, that customer service experience, you know, with our last business, you know, when we were at Petco, Chewy.

Ben (20:36.985)
was is a massive pet company that was acquired by PetSmart. And it was this like really big deal. And Chewy built this massive multi-billion dollar business on customer service alone. Like their whole thing, they had the Zappos model. They're like, we're to do everything to make this customer feel special. So I think that was also sitting in the back of our mind is like, if we can create a relationship with a customer and do everything in our power to make that customer feel good and make sure their system is working as well as it possibly can, there's no reason we can't just keep that customer forever.

And I think that was the big difference for us.

Rose (21:10.571)
what you said there, I'm going to double click on it. You were building lifetime relationships, not one time relationships. And that's a theme. I think that connects very well to the subscription model and how you built the brand. And I think that there's something super important and one of the most valuable pattern recognition skills in brand building. It's almost like a category becomes vulnerable when the consumer expectations evolve faster than the category's operating model.

And when I look at cloud, that's what I see. The consumer moved, the category didn't, and the people within it serving it, the brands within it didn't see that movement and that new consumer expectation. Would you agree with that?

Ben (21:49.785)
Yeah, I think that's spot on.

Rose (21:51.768)
Yeah. So what makes this especially relevant right now is that water no longer is just a utility conversation is what we're talking about here. It's increasingly a wellness conversation. So the same consumer who's reading ingredients labels, optimizing to their supplements, it's incredible how the wellness space is changing. And they're thinking more carefully about toxins in the home, and it's beginning to ask about their water too. they're...

as well, like you're layering right on top of a change in consumer behavior and wellness that one might not connect directly to water when there's millions of beverage brands that sit on the aisles now, but you've really gone about it very differently. And it seems like the reality that many people simply just don't realize the old infrastructure and how many contaminants can even be present or how do even think about their assumptions on tap water and what they might be.

So what's the biggest misconception through all the consumer research you did that people have about their water? I'm really curious to know about that.

Ben (22:56.303)
Yeah, think it's two things. One, think that when you're talking about health and wellness, that really comes into play because I think 20 years ago, maybe even 10 years ago, people looked at water and they said, is it okay to drink? Is this water okay to drink? And the answers across the board if you're drinking tap water is probably yes. You're not gonna get immediately sick if you're drinking tap water. But then the...

the follow-up question is, okay, but is this water healthy? Like, are there things in this water that I shouldn't be drinking? And that's kind of the same as, you know, the other health conversations. And so I'm really surprised actually that water has kind of taken a backseat to some of these other health things. You know, people will go out and buy a cold plunge or a sauna before they get a water filter. you know, when you talk about like, is my water healthy? Is it as good as it can be? I think that's where like the conversation really gets interesting because

Rose (23:42.839)
Thank

Ben (23:53.871)
The EPA guidelines for tap water are, this good enough? Right? They set these benchmarks, not based on like what your optimal health is. And they actually have separate health guidelines that are way lower. They set the guideline based on what they know they can achieve. And so, you know, for many things that are in your water, like, you know, whether it's nitrates and nitrates, which come from pesticides or whether it's, you know, trace amounts of heavy metals, they'll set.

Guidelines based on what they know they can achieve and not necessarily what is ideal and much of the time ideal is zero Like you really don't want any of this stuff in your drinking water and so, you know, that's where reverse osmosis really comes into play because it does a really good job of just Giving you a clean slate. It creates pure water. It's what you know, they use in dialysis. It's what they use in Bottled water it creates extremely pure water. So for someone who's saying like, you know

I don't want trace amounts of arsenic in my water. Reverse osmosis becomes a really good solution. In terms of like misconceptions, the other big thing is that the water leaving the water treatment plant isn't necessarily the water that you're getting in your home. And this is where the infrastructure really comes into play. think that there's, I don't remember the number off the top of my head, but there's like millions of miles of lead pipes sitting under all of our

our cities. we, you know, it's been on the, on the government's radar to like remove all these lead pipes from circulation. but they just don't have the funds to do it. And so while the, the water that you're getting from the city is tested when it comes out of the plant, it's not tested at your home. And so much of the time we see lead being picked up or copper or other heavy metals being picked up in these lead pipes between the plant and your home.

And we see a lot of customers come to us with water tests and they're like, I have lead in my water. This is like, it's supposed to be zero. And there's nothing that the government can do about it other than tearing up all these lead pipes and replacing them, which they just don't have the budget or, you know, infrastructure to do. And so that's why it's really important to treat your water at the point of use versus just relying on them to treat it, the plant. The third thing I'll mention is the emerging contaminants. And this is another big one.

Rose (25:54.253)
Okay.

Ben (26:19.833)
We hear about PFAS. They're these, you know, the layman's term or forever chemicals. Basically, it's a chemical that was created by the Dow Chemical Company when they invented, I think it was like Teflon, like some, you know, magic material back 20 or 30 years ago. And it started getting used for all these applications. And the runoff from these factories got into the groundwater and started

infecting our water, it started infecting our air, and basically it's everywhere at this point. so, you know, recent studies by like the environmental working group have said that likely about 50 % of US water supplies have elevated levels of these forever chemicals, which the EPA is already classifying as carcinogenic. They're already putting super strict guidelines in place, but those guidelines aren't in effect yet because the water systems don't know how to treat for it.

And so the EPA is saying, yeah, you definitely can't drink these things. You shouldn't have it in your water, but the water system's not necessarily treating for it yet. And this is something like, you know, to the government's defense, they didn't know existed 10, 15 years ago. So you don't know it's a problem. You can't treat for it. But that's why I think it's super important, like to have a water filter in the home. So you just are always protected. Another one that kind of falls in that category is microplastics. People ask about microplastics all the time.

There's microplastics everywhere, including in our water, and they can get picked up, again, on the way to your house. They can get picked up basically anywhere, and a good under-sink water filter can remove them. And I'm not saying reverse osmosis isn't the only way to filter water. There's a lot of other water filters out there that work in various different ways. We just think it's the best.

Rose (28:08.855)
Do you think this category is entering mainstream awareness because of wellness itself and that it's becoming more expansive and there's such a macro trend going on around wellness that's impacting things?

Ben (28:22.583)
Yeah, I think it's, if you just look at the industry data, the market is growing. And I think it was like, you know, 10 to 15 % year over year, just as an industry water filtration, which is really massive for a big industry. But I think that it will actually pick up pace because I do think the consumer awareness around water has just really grown. And I think because there's just been some stagnation in the technology, the technology is just starting to catch up. I think that creates a lot more buying activity.

from consumers who potentially had a legacy system or are just looking for something new and better.

Rose (28:58.293)
I think I actually want to pause here because this feels like one of the key ideas in this episode where there's a fascinating cultural intersection happening right now where clean eating, toxin awareness, home wellness, infrastructure distrust, and digital visibility are all colliding in one spot in the kitchen sink. And I think that's such a powerful idea. So for everyone listening, if this conversation is already changing the way you think about the invisible systems in your home,

Ben (29:19.173)
Right.

Rose (29:28.065)
This is a great moment to share the episode with a founder, a parent, a partner, anyone building a modern wellness brand or anyone who is concerned about health and wellness, because this conversation is really about much more than water filtration. So, you know, jumping back into it, reverse osmosis is not new and you've referenced it several times, but what is new is the way that cloud has rethought that experience. So from efficiency and flow to

installation and app-based monitoring, I find that so fascinating. The product is positioned not just as effective filtration, but as a dramatically better consumer experience. So here's what I think the deeper strategic question is. What did you have to reinvent around reverse osmosis, if at all, to make it relevant for today's consumer?

Ben (30:18.315)
you know, I think that it was, I don't think it was necessarily around the reverse osmosis technology itself. A lot of the things that we implemented already existed, just not all packaged together. And, know, when I talk to people about, why do people choose cloud over another system? I always say, I just think we check more boxes. I don't think that a consumer is looking for a water filter and saying, I need something that has an app. Like I just don't think that's how people shop.

And so I think, you know, when you're comparing it on a digital shelf, you're comparing price, but you're also comparing features, right? And so somebody who is buying a reverse osmosis system, they've likely gotten to that place already. Like it's a long rabbit hole. Once you get into this, you know, researching water quality, the stuff that's in our water, the types of filtration there are the differences between, you know, a carbon based filter versus an RO system, versus a whole house system.

Usually by the time they've gotten to us, they've made the decision in their head, okay, I'm going to go with RO. Seems like the best way for my drinking water specifically. So I'm going to go with that technology. And then they're putting us against, you know, the legacy players in the market. What is, you know, how do I get this thing installed? What's the filter change process like? How often am I going to need to change filters? This one has a remineralizing post filter where this one doesn't.

This one's waste ratio is X. This one's ratio waste ratio is Y. This one is NSF certified. This one isn't and so they have this checklist and We've just done a really good job when we were you know building the system to check as many of those boxes as possible for people to make it an easy decision And then that you know, the next big thing is price So we also built it in a way where we made it very price competitive

we aren't the most expensive system by a long shot, and we're not by any means the cheapest system. Online shoppers are so price sensitive that price is the single most important factor when looking at conversion rate and customer acquisition costs and everything else. So we intentionally priced this product in kind of a mid-tier threshold that would be able to drive

Ben (32:34.499)
volume when the customer sees, this is obviously a better system. I think I can afford this. It's cheaper than some of these other ones that don't seem to do as much. And it becomes an easier decision.

Rose (32:44.459)
That's amazing. So how important then was design in signaling that this belonged in a modern, call it health conscious home?

Ben (32:51.513)
I think the design, mean, the decision for the design was kind of made parallely, but I think the design was twofold. Like one, it was utility, right? Like when we were designing the system, most of the systems on the market were these legacy canister filters that were just super hard to deal with. And so we put it to our designers, like, let's make something that's just easier for the consumer. that just make that the number one.

number one decision point. then secondarily, we're like, we get that it lives under the sink in this dark cabinet, but it doesn't have to be this hideous device. You know, we can we can make it look beautiful. Even if it's hiding, like every time you open your sink, you shouldn't have to stare at this, you know, rat's nest of tubes and hoses. And so that was really important for us. Just from like a customer experience standpoint, but also from a comparative shopping standpoint.

Right? Like when you're, when you're looking at a digital shelf and you see this beautiful product that looks like it came from Apple versus this, you know, old school, you know, I, I'm kind of thinking of those like old Apple ads where it was like the cool Apple dude. And then like the PC guy with the glasses. It's, kind of like that, you know,

Rose (34:10.335)
Yeah, yeah. And I think this is just such an important reminder for founders. Innovation, it's not always about invention. And I think people get lost along the way. Sometimes innovation is taking something proven, stripping away the friction, as you just described, and rebuilding the interface, then aligning it with today's consumer expectations. And that's often where the real value is. I just find it fascinating, your perfect example of that. You know, one thing that stuck out

to me from our earlier discussion is that you traditional systems felt like a black box under the sink. So people didn't know what was happening, whether the system was working, when maintenance was needed, or how to interpret performance. So that feels like such a powerful insight, because trust today is increasingly tied to visibility. So what I'd love to hear you talk about is how much of cloud was built around solving the black box problem and not just the filtration problem.

Ben (35:10.479)
Yeah, I think we thought about it, as I mentioned, I don't think people buy a water filter because it has an app. And so I think we realized that upfront is like, we need to make a better water filter because people will buy a better water filter. And then the trust element was something that we always put front and center because we knew that once the customer purchased the product, they're in our ecosystem, right? That's when you need to build the trust.

And so we built the app and the connectivity piece and all the customer interaction around this concept of let's give them, you they don't have to be opening their app every day or even every week, but if they're, they know that they can trust the system, that they have it in the palm of their hand, they can see the performance, they can see the filter change cadence, they can see how much water they're consuming. It just gives them this, this sense of calm that, that really lends to, you know, the customer just.

sticking with the brand long term and trusting the brand and potentially other things we sell, right? Like there's also this halo effect that you get when you bring a customer into your ecosystem. So that's big part of it too.

Rose (36:22.208)
Well, it just sounds like connected data in your mind deepens trust in a way that a traditional system just simply can't. And it's that extra touch point. So to me, this is one of the most defining characteristics of modern premium products. They don't just perform better. They don't, they don't. It's about how they reduce uncertainty. And that's an enormously valuable brand promise. I certainly think. So the system is connected. Cloud gets something most companies in this category never had.

which is the behavioral visibility. You can see how water is used, how households are different, even support customers remotely using the live system data. That creates both product intelligence and service advantage. So tell us, what has your data taught you about how people actually use water at home? And what has surprised you the most? I'm so curious.

Ben (37:13.487)
Yeah, I mean, it's really cool because we do, get a ton of data from these systems and we can see, you know, usage trends, which has been really interesting to just map, you know, when some customers setting up their app, they tell us how many, how many people they have in their household, how many, you know, adults, how many kids. And we kind of map that against how much water people are consuming. And it gives us a really good sense of like consumption habits for different household sizes, which is, which is really interesting. And we see like across the board, we see that.

you know, consumers are drinking somewhere around a gallon of water a day for their household. And so that stuff is interesting. And then, you know, we do get water quality data as well. So we track what's called total dissolved solids, which is a measurement of basically all the stuff that's in your water. And this is the metric that reverse osmosis uses because it, purifies the water. So basically it removes all of this stuff. And so we track total dissolved solids, TDS coming in. So basically your tap water.

We track it after the reverse osmosis membrane, which removes between 90 and 99 % of the dissolved solids. So it brings it down to pure water, know, call it a TDS of from 100 to five. And then we measure it again after the remineralizer. So we can see those minerals are being added back in those, the calcium, magnesium, potassium, zinc. So we see that number as well.

It's been interesting on a macro scale to see the fluctuations in TDS on the incoming water. So we can see based on regions, you know, like I live in San Diego, Southern California has very hard water. So we have, you know, TDS that's in the, the 500s and we see, you know, in New York, it's typically lower dissolved solid rate. And then in the Midwest, we'll see, you know, a big snow melt and we'll see a big drop in the dissolved solids. So we can kind of see these macro trends.

To be totally honest, like we haven't figured out what to do with all this data, but it is really cool to see it on the macro scale. I think the unintended consequence that we've seen is like the customer service. We thought that the data would give us these macro trends. We kind of knew that. We thought maybe it would be valuable, but we didn't really know how. But the most value we've seen is using the data on the individual level so that if a customer is on a well,

Ben (39:31.323)
and their water pressure coming into the home is really low, it's going to affect performance and performance is going to drop. So we can get, the app notify the customer like you need to service your system, please call us or please schedule a meeting. You know, we get on the phone, we talk to them, we pull up a service mode in their app and we say, okay, we're going to adjust the pressure on the system down so that the system works more effectively. I mean, the customers, when we have these service calls,

And I mean, transparently, Ariel, our business partner, she runs all of our customer service and customer experience, and she's taking most of these technical calls even to this day. And the customer is like, they think it's magic. You know, we flip their app into a service mode and it changes how it looks and they see a lot more data and they're like, my goodness, like, this is crazy. This is amazing. So it's not something that we really market heavily, but it comes back to that, like that trust, that customer experience. And we feel like that is a huge value.

long-term as you look at us differentiating against some of these legacy players where it's kind of like this set and forget it. think, I always use Colligan as an example because they're the big player in the market, but like the Colligans of the world or even the Moans and Collers of the world as they get into water filtration, they're going to want that look, that peek into the customer's home. These are like commodity-based big

businesses that don't have any relationship with the customer. And this inside view is extremely valuable to them. They've told us that much.

Rose (41:05.436)
This is a moat. It's your moat. And I think it's a really important strategic point for founders, often overlooked. Data is most valuable when it improves not just targeting, but service, retention, trust. That's a very different view and a lens in terms of thinking about a performance-based ad and how you use data. That's what a

Ben (41:07.994)
Right.

Ben (41:28.571)
I'd almost take it a step further. I think the macro data is so much less important now than it was a year ago because of how AI has transformed everything. When I was building Pupbox, everything in meta ad world was like, find your perfect audience, test all of these different audiences to find that one that works and then go heavy there. And now it's like the macro data doesn't even matter. Everything is just like, throw all the data at it.

let the algorithm figure it out. It matters a lot less, I think, for consumer businesses than it did a few years ago, although it's kind of fun to talk

Rose (42:10.892)
Well, and I think it's the sign of when a product becomes a relationship. Like that's what I'm hearing out of this. You know, a perfect lead into one of the most interesting parts of your story that we haven't talked about yet is that demand has not been the central problem. Most founders we talk to are concerned with how do we acquire new customers? But supply and operational complexity have been more difficult, especially given the realities of hardware, chips, the broader supply chain disruption.

You also talked earlier with me about tariffs and the challenges of scaling a very capital intensive hardware business that might not be visible at the surface when somebody is looking at cloud. So I wanted to really talk to you about how do you think about demand creation early? Because I think there's some insights that leaders, operators, people building brands should know. And what did you understand about the economics of this business that gave you conviction to invest ahead of the curve?

Ben (43:06.746)
Yeah, think really when we talk about demand creation, it really comes down to that concept of product market fit. think that the more product market fit you have, the easier the demand creation will be. It's always hard in early days. It was hard for us. know, like our first few months, we're requiring like 10. I look back at some of you know, our models and it's like, you know, we're requiring like 10, 15, you know, 30, 50 customers a month.

and you know, now it's, you know, thousands. so you, you always have to start small and build the demand no matter what. But if you have the product market fit in place and you're seeing those signals early, that should give you some, some confidence to lean in. To continue to drive that demand. and that's what we did. We know we saw the product market fit. just, we, we knew that there was an opportunity, but then we also were just getting.

really good feedback from customers, our early group of customers, and you kind of have to rely on those early advocates. And that gave us the wherewithal to kind of lean into the demand creation. I mean, know, transparently over the first couple of years, like we spent a lot of money building the customer base, acquiring customers, finding channels that worked, doing things that were inherently not scalable and not efficient. And, you know, I think that's also a big lesson for founders like

You shouldn't be doing things that are scalable day one. You should be doing things that get you new customers in the door, get you more product feedback, allow you to improve that product experience and that marketing funnel. And for us, because it was a nudity-based business, that was really important, right? Like we need to get this flywheel started or we're just going to be spending obscene amounts of money forever. And so we spent a lot of money on customer acquisition through the first couple of years. We spent a lot of money on brand building.

And we're really seeing it pay off, especially in 26.

Rose (45:09.13)
That's amazing. And because I spend a lot of time with brands at the DTC to Omnichannel inflection point, I have to ask, how are you thinking about the role of retail and distribution over time, especially for product that feels very premium. It feels like it's naturally suited for physical environments. How are you thinking about that?

Ben (45:28.859)
Yeah, I mean, I what I think is also nice that we kind of have the hindsight of the Petco experience. You know, we were acquired by a large, old school brick and mortar retailer and we were a digital first, 100 % direct consumer online business. They acquired us because they wanted more digital businesses in their portfolio. And we got some insight into how these retailers think.

and how that retail relationship works. And I think a lot of brands, they try to force the retail relationship really early because it can be really fruitful from like a unit economic standpoint because you're getting these large orders and you're able to scale your revenue quickly. But the retailers take a lot. They ask a lot from businesses, both big and small. And it's really hard for small brands to

to fund those POs, it's hard for them to scale up at the demands of the retailer and it can really cripple a company. And so we've always kind of thought, yes, this would be a great product for retail, but let's build the demand and build the brand first online and let's go as far as we can. Because at some point the retailers are going to come and knock on our door. And that's when you have the leverage to actually make some deals that are better suited to the company's needs.

And yeah, I mean, as you mentioned, demand has not been our problem. think it's because there's such product market fit and because, you know, a rising tide kind of floats all ships type of thing. It's a rapidly expanding market. And so we're able to capture that demand. But, but I think, you know, somebody told me the stupidest saying really early in this journey is like hardware is hard and it really is. It's, know, it's hard to create physical goods. It's harder to create electronics and appliances. And this is why we don't see a lot of.

US-based manufacturers making the appliances or even standing behind the appliances in their kitchen. At this point, there are a lot of overseas companies and there are just some inherent risks with hardware that we have felt and seen. And it's been really challenging. mean, the business is extremely capital intensive because you have to, know, foot the bill for inventory before it lands to your customer's door. You you can't...

Ben (47:50.299)
borrow when you're a startup and you're not profitable. And so you kind of have to fund that those inventory purchases with equity and, um, butting up against the tech, you know, we launched this product, you know, we built this product and launched it like during COVID. built it during COVID launched it shortly after. so the chip shortage was just a nightmare. had to buy like, I think we had, you know, a million dollars in pre-purchased inventory, just in microchips to get like the product launched and just sat on that for years.

then the tariff thing happened last year, which was, you know, a big hit for us. You know, we do manufacture the product overseas, but we were able to, onshore a lot of our key components to gain us origin. So the, you know, that, that gave us a, an outlet, and as a, as a brand, you know, based in San Diego, California, like I'm grateful we were able to accomplish that because I do think, you know, products are

Rose (48:33.876)
So.

Ben (48:47.205)
Products are global these days. Products aren't just made, you know, maybe a sneaker is made in China, but a product like cloud, we have 150 sub components that are made all over the world. And they're, you know, our product is assembled in China, but the products that are living in the system, they come from the best manufacturers from all over the globe. And oftentimes those best manufacturers are in China or are in Vietnam or are in Europe or in the U.S.

They're not always in the US, and that's especially true with electronics. And so it was a real challenge, the supply change stuff, that we're still working through. Our demand continues to increase. The supply has always been slow to catch up. And so we deal with constant rolling back orders and periods of sold out. We're in back order right now. We try to communicate that on our site as best we can, that you might not get the system for two weeks, but it's worth the wait.

And that has really been the major challenge for our business. And personally, for me as an entrepreneur, it's something that has been new for me, this type of business. I saw the market opportunity and the marketing opportunity, which is very clear to me, but the supply chain and capitalizing the business correctly, that was very new from what I was doing in the patent industry. has been, transparently, it's been a real challenge.

Rose (50:09.836)
what just a wonderful, thoughtful conversation. feel like I could talk to you for hours, Ben. I just I think what I appreciate the most about your story is that it's not just about launching a better product. It's about recognizing that consumers have changed. Trust has changed. The entire category has become newly relevant when looked at through a more modern lens. And you put a very fresh take on what it actually requires to build something like this behind the scenes and the challenges along the

So before we close, I want to leave our audience with a few takeaways because there are some very real lessons here for operators, founders, and brand builders. It's really, for me, the big takeaways are, first, some of the best brand opportunities are not in glamorous categories. They're in overlooked categories where consumer expectations quietly outgrow the increments. And second, if you want to build a very durable brand,

Don't just solve a functional problem, solve an emotional one. And in this case, cloud has not only filtering water better, it is reducing uncertainty, building trust, increasing visibility and building confidence inside the home where many others just can't touch that. Third, we heard a lot about how founder maturity matters. So to have a multi-time founder is pretty exciting for us. And one of the reasons second act founders are so interesting is because they tend to see deeper architecture of a business. We heard a lot about

retention, recurring revenue, category timing, trust, where the consumer's actually headed next. And I think that that really shows the maturity of understanding you need a retention-ready first acquisition strategy. And fourth, a lot of brands think they need to invent something from scratch, but often the real opportunity is to take a proven behavior, listen to the consumer, a proven need, a proven technology, rebuild the experience around it for the modern customer. And really finally,

For founders listening, especially those building in the wellness home, CPG adjacent categories, or even premium consumer products, the real strategic question is not, do people want this? It has the consumer changed enough that the old version of this category no longer feels acceptable. That is where some very big businesses get built. So this is exactly the kind of inflection point I spent a lot of time thinking about where consumers are shifting first.

Rose (52:30.166)
Brands have to decide whether or not they're going to respond with sharper positioning, smarter channel strategy, stronger recurring economics, and more modern relationship with the consumer. So if you're a founder or an operator navigating one or any of those growth moments, that's the work that we love to do. And if this episode gave you a new lens on brand building, consumer behavior, or category expansion, please share it with others. And I'd love to hear from you too. You can find me on LinkedIn at Rose Hamilton or even more about our work on Compass Rose Ventures.

And one last thing, please, please do share this because any person who drinks water, any human being really should hear about the opportunities that exist in this category. So it is a wrap. Ben, it has been an absolute pleasure. I want to thank you for your time and your thoughtfulness on the show. And I hope to see you back here again very soon.

Ben (53:18.907)
Thank you, Rose. I appreciate it. It was good. It was a good time.