Imagine accidentally creating a startup that makes a cure for hangovers. The startup turns out to be so successful, raking in $1 million in three months, that you need to quit your high-paying job at Tesla, only to then find yourself nearly kicked out of the country by the Trump administration because of your Canadian nationality.
As we previously reported, back in July, Lee had just quit the job he loved at Tesla to try his hand as a startup founder. He had never intended to be a founder. He was really on a personal quest to get a regular supply of the hangover prevention drinks he discovered while visiting Korea, a country that loves to party.
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"A lot has happened," Lee told Business Insider when we caught up with him this week.
I had quit Tesla because I didn’t have a visa to start a business and I couldn’t get one because I couldn't have both visas," Lee said. When the Trump folks changed their mind, "I was visa-less," he said. He had to leave the country and go back to Canada.
Fortunately, he found a lawyer that specialized in entrepreneur visas. Also fortunately, his Indiegogo campaign was going so well that it could prove his business had revenue.
After an intense interview at the US embassy in Canada where he was questioned about whether he was making an illegal product, Lee got a different visa, one called the E-2 visa (the "e" stands for entrepreneur).
And one week later he, and Morning Recovery, were back in the US.
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"So now I’m here legally," he smiles.
Cant order enough
His first big decision was to move the company from Silicon Valley to Los Angeles, closer to his scientific research team at USC and to the stars that can turn his hangover remedy into a "lifestyle brand," he said.
His LA-based investor, Strong Ventures, has been helping him with office space. It threw him a launch party, too, which helped him immediately recruit employees.
At first, he was weary to out-and-out hire people, as he didn't have job titles, or cash flow.
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"I offered them a one-montha contract with a half of it up front and told them if it works out, we’ll hire you," he said. "Now our team is actually six full-time people."
His team raced to build its own ecommerce website using Shopify. He thought that demand might die down after the hype of Indiegogo died, but it didn't.
It stayed steady through August and in September. Some people were starting to come back to order more, and orders soon doubled. He sold $500,000 that month. All told, from July through September, he sold $1 million worth, he said. That revenue number was verified to us by one of his angel investors.
At this pace, he'll bring in $5 million his first year, he said.
While his company is "absolutely paying for itself," Lee noted that cash "is something that we’re very careful of. Because of the [production] lead time, all profits we make goes to future production. In terms of money in the bank, it's not like we’re rich," he said.
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For December, he's biting his nails and doing a 500,000-bottle production run, more than double the biggest batch he's done so far. He's looking for warehouse space in case he doesn't sell it all instantly. And if demand drops, he'll be hurting.
"We’ll get hit if demand doesn’t grow as externally. We’ll have an excess amount of bottles and have pay for warehousing fees. We’ve been trying to be very lean," he said because he hasn't been doing this long enough to know if it will continue or drop off. "I have no idea what the demand is. It's all so new."
In the meantime, more VCs have gotten wind of Morning Recovery and the offers are rolling in. He's not ready to sell a stake yet, he said, particularly not to a VC. He'd rather bring in a strategic partner that could help him get his drink into retail stores or bars.
But he's still shocked at the terms these VCs are offering him. "We’re getting crazy valuations, like at $50 million. They are putting a 10X multiple on our revenue. That’s what you do as a software company," Lee said. A $50 million valuation for a 3-month-old company seems "absurd," he said.
How does it work?
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So what is it about this drink that has everyone so excited? It turns out the cure to a hangover is never to get one. The secret to that is an herbal ingredient called dihydromyricetin (DHM) found in the Oriental raisin tree and rattan tea, Lee said.
This tree has been used as a hangover remedy in Asia for thousands of years, Lee discovered.
Hangovers are caused when we drink more alcohol than our livers can handle, and a type of toxic acid builds up, he said. Too much of that acid causes inflammation like a headache. Too much too fast can cause vomiting. When you drink DHM right after consuming alcohol, like before you go to bed, it helps the body remove this toxic acid, he said.
Lee is not the only US startup selling a DHM hangover prevention either.
Vitamin B and Vitamin C, Lee said, which his Morning Recovery drink incorporates.
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And while he figures out how to run this company and better estimate orders, he's offering people old-fashioned deals for ordering in advance and sometimes waiting for their order. A six pack, paid in advance, runs $27, instead of the retail price of $30. A 12-pack runs $48 and so on, with bigger discounts the more you order.
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