- It’s been three months since Sisun Lee accidentally wound up with a hot startup that makes a hangover prevention drink called Morning Recovery.
- Lee says sales have gone crazy and he’s generated $US1 million in revenue in three months.
- Just as his company took off, Lee, a Canadian who was working at Tesla, was almost deported when a new rule for immigrants who start businesses in the US was put on hold by the Trump administration.
Imagine accidentally creating a startup that makes a cure for hangovers. The startup turns out to be so successful, raking in $US1 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.
Welcome to the extraordinary life of Sisun Lee and another crazy chapter of his hangover prevention drink company, Morning Recovery.
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.
“A lot has happened,” Lee told Business Insider when we caught up with him this week.
The story goes: after some failed attempts to import the Korean drinks, Lee discovered the work of Dr. Jing Liang, a USC scientist who had published papers on herbal hangover remedies. She agreed to become his advisor and helped him create his own hangover remedy, using all FDA-compliant ingredients, based on the main ingredient used on the Korean drinks.
Lee tested the resulting potion on his friends at Tesla as well as on friends at his former haunt, Facebook. They loved it so much that Lee contracted a Korean factory, with the idea of producing enough to supply his ecosystem of bibulous buddies. Someone got wind of the project, posted it to Product Hunt and it blew up. Suddenly, thousands of people were contacting Lee trying to get his drink.
He raised some seed money from Slow Ventures and 500 Startups to fund a production run, added a wait list to his nothing-special website about the drink and 30,000 people signed up.
His side project was now taking over his life. So he quit his job and, knowing nothing about the food and beverage industry, went full time at his startup, Morning Recovery.
The Trump administration kicks him out
Quitting his day job to plunge into the startup life had one big wrinkle though: Lee is from Canada, and had been working at Facebook and Tesla under a work Visa.
The seed funding he got was about $US450,000, enough for him to qualify for a visa created by a proposed immigration rule under the Obama administration called the “international entrepreneur rule.”
This rule allowed, “non-US citizens like myself to build businesses in the US. The requirement is you raise $US250,000 minimum from an institutional US venture capital firm. Which makes it very simple. So I did that in June. I had already raised $US450,000 total and [the rule] was supposed to go into effect in July,” Lee recounted.
In the meantime, he launched an Indiegogo crowdfunding campaign to sell the drink he had ordered from the factory and to help raise money for future batches. His Indiegogo goal was $US25,000 and he blew by it. Morning Recovery raised $US100,000 in just 10 days. It finished the month at over $US250,000.
Then the Trump administration did an about-face on the Obama era rule and wouldn’t issue the visas.
“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 specialised 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.
“So now I’m here legally,” he smiles.
Can’t 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, Slow 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.
“I offered them a six-month a 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 $US500,000 that month. All told, from July through September, he sold $US1 million worth, he said. That revenue number was verified to us by one of his angel investors.
At this pace, he’ll bring in $US5 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.
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 $US50 million. They are putting a 10X multiple on our revenue. That’s what you do as a software company,” Lee said. A $US50 million valuation for a $US3 month company seems “absurd,” he said.
How does it work?
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.
Flyby is another one, which offers its remedy in the form of pills.
That’s to be expected.
“We really do think the hangover market is gigantic,” Lee said.
However Liang’s work found that other ingredients matter, too, like Vitamin B and Vitamin C, Lee said, which his Morning Recovery drink incorporates.
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 $US27, instead of the retail price of $US30. A 12-pack runs $US48 and so on, with bigger discounts the more you order.
Here’s a link to a more technical explanation from Morning Recovery of how DHM works.