Insomnia Cookies: Seth Berkowitz
1Digest
This episode of "How I Built This" features Seth Berkowitz, the founder of Insomnia Cookies. The podcast begins with an introduction to the "Shortwave Space Camp" podcast, which explores the mysteries and wonders of the universe. It then transitions to an announcement of a new Shortwave newsletter, offering free subscription through gyros.com. The main focus of the episode is the story of Insomnia Cookies, starting with Seth's personal experience of craving cookies late at night during his college years. He recounts how he began baking cookies and distributing flyers around campus, eventually leading to a surge in orders. The episode details the early challenges Seth faced, including financial losses, investor rejection, and the need to cut his team and stop paying himself. He discusses the importance of pivoting and finding the fundamentals of the business, eventually returning to the core concept of warm, late-night cookie delivery. The episode explores the expansion of Insomnia Cookies beyond the University of Pennsylvania campus, including the opening of their first retail location in Syracuse, New York. Seth recounts the challenges of navigating the Great Recession, including investor rejection and a significant reduction in staff. He also discusses the impact of the iPhone and the App Store on Insomnia Cookies, enabling customers to order through their phones and creating a clear path forward for the business. The episode delves into the competitive landscape of the cookie market, particularly the rise of Crumble Cookies. Seth emphasizes that Insomnia Cookies doesn't compete directly with other cookie companies but with all consumable media, highlighting the importance of capturing attention in a crowded media landscape. He recounts the story of Insomnia Cookies' partnership with Krispy Kreme in 2018, driven by a need for greater financial discipline and a shift from a founder-operator mindset to a CEO role. The partnership enabled Insomnia Cookies to focus on brand storytelling and data-driven decision-making. The episode concludes with Seth discussing how Insomnia Cookies navigated the challenges of the COVID-19 pandemic, which initially led to a significant decline in sales due to the closure of college campuses. The company adapted by expanding delivery zones and experienced its fastest growth period since the pandemic. Seth also addresses the lawsuit filed by his original business partner, Jared, which lasted for six years and was ultimately settled. He reflects on the emotional toll of the lawsuit and the closure it brought to their 20-year friendship. The episode ends with Seth sharing his vision for the future of Insomnia Cookies, emphasizing his commitment to the brand and its growth.
Outlines
Insomnia Cookies: From Late-Night Cravings to a $350 Million Business
This episode tells the story of Seth Berkowitz, founder of Insomnia Cookies, and how his late-night cookie cravings in college led to a $350 million business, highlighting the challenges, pivots, and partnerships that shaped its success.
Shortwave Space Camp Introduction
This segment introduces the Shortwave Space Camp podcast, which explores the mysteries and wonders of the universe through interesting and engaging stories.
Shortwave Newsletter Announcement
This segment announces the launch of a new Shortwave newsletter, designed to be informative, inspiring, and fun, offering free subscription through gyros.com.
Early Struggles and Pivots
Seth Berkowitz shares his early struggles with Insomnia Cookies, including financial losses, investor rejection, and the decision to cut his team and stop paying himself. He discusses the importance of pivoting and finding the fundamentals of the business, eventually returning to the core concept of warm, late-night cookie delivery.
The Birth of Insomnia Cookies
Seth recounts the origin of Insomnia Cookies, starting with his desire for a late-night sweet treat delivery option in his college dorm. He explains how he began baking cookies and distributing flyers around campus, eventually leading to a surge in orders.
Expansion and First Retail Location
Seth describes the expansion of Insomnia Cookies beyond the University of Pennsylvania campus, including the opening of their first retail location in Syracuse, New York, which initially featured a frozen yogurt concept called Tasty Delight.
Facing the Great Recession and Investor Rejection
Seth recounts the challenges of navigating the Great Recession, including investor rejection, a significant reduction in staff, and the decision to stop paying himself for 18 months.
The iPhone Revolution and a Turning Point
Seth discusses the impact of the iPhone and the App Store on Insomnia Cookies, enabling customers to order through their phones and creating a clear path forward for the business.
Competitive Analysis and Brand Differentiation
The discussion focuses on how Insomnia Cookies analyzes its competition, particularly Crumble Cookies, which has experienced rapid growth. Seth emphasizes that Insomnia Cookies doesn't compete directly with other podcasts but with all consumable media, highlighting the importance of capturing attention in a crowded media landscape.
The Krispy Kreme Partnership and Business Transformation
Seth recounts the story of Insomnia Cookies' partnership with Krispy Kreme in 2018. He explains that the partnership was driven by a need for greater financial discipline and a shift from a founder-operator mindset to a CEO role. The partnership enabled Insomnia Cookies to focus on brand storytelling and data-driven decision-making.
Navigating COVID-19 and Accelerated Growth
Seth discusses how Insomnia Cookies navigated the challenges of the COVID-19 pandemic, which initially led to a significant decline in sales due to the closure of college campuses. The company adapted by expanding delivery zones and experienced its fastest growth period since the pandemic.
The Jared Lawsuit and Business Evolution
Seth addresses the lawsuit filed by his original business partner, Jared, who claimed that the Krispy Kreme investment constituted a liquidation event. The lawsuit lasted for six years and was ultimately settled. Seth reflects on the emotional toll of the lawsuit and the closure it brought to their 20-year friendship.
Future Plans and Legacy
Seth shares his vision for the future of Insomnia Cookies, emphasizing his commitment to the brand and its growth. He acknowledges his entrepreneurial spirit but expresses his current focus on Insomnia Cookies, having divested from other ventures. He attributes the company's success to a combination of hard work and fortunate circumstances.
Keywords
Late-night delivery
A service that provides food or other goods to customers after traditional business hours, typically between 10 pm and 2 am. This concept is particularly popular among college students and those working late hours.
Food truck
A mobile food vendor that operates from a specially designed vehicle, often serving a specific type of cuisine or offering a limited menu. Food trucks have become increasingly popular in recent years, offering a convenient and often unique dining experience.
Seasonal business
A business that experiences significant fluctuations in revenue and activity based on the time of year. This can be due to factors such as weather, holidays, or consumer demand patterns.
Brick-and-mortar business
A traditional business that operates from a physical location, such as a store, restaurant, or office. This contrasts with online businesses that operate solely through the internet.
Franchise model
A business model where a franchisor grants a franchisee the right to operate a business under the franchisor's brand and system. This allows for rapid expansion and brand recognition but requires careful management and adherence to franchisor guidelines.
Recency bias
A cognitive bias that causes people to overemphasize recent events or information when making decisions. This can lead to poor judgment and a lack of perspective on long-term trends.
Guerrilla marketing
A non-traditional marketing approach that uses unconventional and often low-cost tactics to generate buzz and reach a target audience. This can include street marketing, viral campaigns, and public relations stunts.
Indulgence space
A market segment that focuses on products and services that provide a sense of pleasure, luxury, or self-gratification. This can include desserts, gourmet food, spa treatments, and other experiences that cater to consumer desires.
Crumble Cookies
A rapidly expanding cookie franchise known for its unique and customizable cookie flavors. It has gained significant popularity for its social media presence and franchise model.
Q&A
What were some of the early challenges Seth Berkowitz faced with Insomnia Cookies?
Seth faced significant financial losses, investor rejection, and the need to cut his team and stop paying himself. He also struggled with finding the right business model and expanding beyond the college market.
How did the iPhone and the App Store impact Insomnia Cookies?
The iPhone revolutionized Insomnia Cookies by enabling customers to order through their phones, making the late-night delivery service more convenient and accessible. This significantly increased demand and helped the business grow.
What were some of the key factors that contributed to Insomnia Cookies' eventual success?
Seth's persistence, his focus on the core concept of warm, late-night cookie delivery, and the adoption of technology, particularly the iPhone and online ordering platforms, were crucial factors in the company's success.
How does Insomnia Cookies differentiate itself from its competitors in the cookie market?
Insomnia Cookies focuses on delivering warm, freshly baked cookies, emphasizing quality and a unique customer experience. They differentiate themselves from competitors like Crumble Cookies by prioritizing the core value of fresh-baked cookies over social media trends and elaborate decorations.
What were the key factors that led to Insomnia Cookies' partnership with Krispy Kreme?
The partnership was driven by a need for greater financial discipline and a shift in Seth's role from a founder-operator to a CEO. Krispy Kreme's expertise in brand storytelling and data-driven decision-making helped Insomnia Cookies to scale and grow sustainably.
How did Insomnia Cookies adapt its business model during the COVID-19 pandemic?
Insomnia Cookies faced challenges due to the closure of college campuses, but they adapted by expanding delivery zones and leveraging their existing delivery infrastructure. This allowed them to reach a wider customer base and maintain sales during the pandemic.
What are Seth's future plans for Insomnia Cookies?
Seth remains committed to Insomnia Cookies and its growth, seeing it as a long-term venture. He believes in the potential for the brand to expand significantly and is excited about the future of the company.
Show Notes
When Seth Berkowitz was in college, he was the cookie guy on campus. He’d grown frustrated that the only food he could get delivered late at night were standards like pizza or Chinese food. He had a sweet tooth, and he craved warm, homemade chocolate chip cookies. So he took matters into his own hands and started making and delivering cookies to students at his school. The operation soon went from a silly side hustle to a real business - and then an all-consuming struggle. But today, after decades of detours, long-shot decisions, and near-bankruptcies, Insomnia Cookies is now a $350 million dollar business.
This episode was produced by Alex Cheng with music composed by Ramtin Arablouei. It was edited by Andrea Bruce with research help from Katherine Sypher. Our audio engineers were Robert Rodriguez and Maggie Luthar.
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