The Barrel Holdings Origin Story: Building a Portfolio of Agencies

Peter Kang (00:03.138) Welcome to the Agency Habits Podcast presented by Barrel Holdings. Each episode, we share lessons and takeaways from running our portfolio of specialized agency businesses. Your co-hosts are Peter Kang and Sei-Wook Kim, co-founders of Barrel Holdings. Visit agencyhabits.com for more details and be sure to subscribe on your favorite podcast app or YouTube. Sei-Wook Kim (00:23.609) On today's episode, we'll be sharing the story of how Barrel Holdings came to be, how we got our start as agency operators, and how we ended up with the idea for a holding company of agencies. Peter Kang (00:35.246) All right, Wook, so this is our origin story, I suppose. Let's take the listeners and video watchers back to 2003. We were at Columbia University. What do you remember from then? Sei-Wook Kim (00:51.417) Yeah, so we met in 2003. My freshman year of college, Peter, you were a couple years older, so junior year. We had met in a student organization. And through that, we started making websites together and started a little freelance business. Peter Kang (01:14.338) Yeah, so I was more of the designer project manager and you knew some HTML CSS, right? Sei-Wook Kim (01:21.237) Yeah, self-taught coder at this point. This is back in the early days of coding. But yeah, we were making all-tables-based websites back then, pretty much for anyone that would pay us money. Student organizations, nonprofits, small businesses around the city. Doing work for little to no money. Peter Kang (01:47.042) Yeah, but it was fun. It was nice to at least be learning how to build websites. I graduated earlier, went to work at Lehman Brothers Investment Banking. And I remember we'd still meet up — you were in school, we'd go to my apartment, which was around Times Square. Every Friday you'd come down and we'd pump out some websites, right? Sei-Wook Kim (02:11.031) Yeah, those are some crazy nights — gave up essentially every weekend through my senior year of college, just working. But it was a lot of fun. We had built up enough clients to keep us busy. One of our earliest clients: we had both interned at the NFL, the National Football League — Peter first, and then I took over the internship — and they ended up being one of our first clients out of that experience. Peter Kang (02:40.898) Yeah, so I quit almost immediately after my bonus hit at Lehman Brothers. That was 2006 and we decided to incorporate Barrel. By then we had a little roster of clients going. I think there was a diabetes-related magazine that we did some website work for, a sound equipment company that we did some branding and web work for. We were growing the business and felt confident enough to do it. So 2006 we incorporated as Barrel LLC. Obviously you still had a year of school left, so I moved out to Astoria to save on rent. I remember just being by myself in a room, trying to learn UX, branding, some web design. And you'd still come over on weekends — I think that's when you'd stuff a week's worth of coding into a couple of days, right? Sei-Wook Kim (03:40.663) Yeah, definitely. Fast forward one year after I graduated, we set up our full-time shop in your apartment. But then soon after, we got our first office in Manhattan — a small sublet out of the back of someone's office on 36th Street. From there we started getting more clients, brought on some interns to help support us in various business endeavors we had at that point. And we slowly started to grow the business from there. Peter Kang (04:18.21) Yeah, and it took us about five years to break a million dollars a year in revenue. It was a slow burn, but we started gaining some traction. The inflection point was when the iPad actually came out. Sei-Wook Kim (04:35.573) Yeah, I forget what year that was, but around that time we were going deep into building HTML5 experiences that worked well on iPad. Previously, when you would have all these animations, everything was done in Flash, but with the iPad we had to reinvent how those interactions were coded. We connected with another agency, a communications agency that was doing large annual reports and different websites for big Fortune 500 companies. We became almost like a production arm of that agency doing tons of this work. I remember in a period of time our team grew from two, four, eight, 16, 30 — year over year — with a lot of that driven by the engineering and software development. Peter Kang (05:29.166) Yeah, there was — going from $5,000 websites, which at the time we thought was a good amount, to $50,000 websites overnight — that really changed the math for us and allowed us to grow quickly. And those were the days when we would find most of our talent through Craigslist. Sei-Wook Kim (05:48.377) Yeah, the current CTO of Barrel we found on Craigslist, yeah, over a dozen years ago. A lot of our talent actually came that way. Peter Kang (06:03.532) Yeah. From there on, we didn't just stick to doing annual reports. We branched out to a few other areas. Part of it was we were involved in the startup scene in New York City at the time — the burgeoning startup scene. So we ended up doing a lot of web apps, UX, UI design. And then we also got into doing a lot of WordPress websites, if you remember, right, with cultural arts organizations. Sei-Wook Kim (06:30.793) Yeah, that was a pretty big focus — arts, nonprofits, education institutions. A lot of those are very content-rich, dense websites that we had built out on WordPress. Before that we did a lot of work on a CMS called Textpattern. But around that time we were getting deeper into building these information sites, building out a UX team to help with all the architecture and content strategy, and then obviously all the front-end and back-end development that went with that. Peter Kang (07:09.016) Yeah, about 10 years in though, we started noticing a shift. We were beginning to ride this wave that would become the direct-to-consumer wave — websites with e-commerce functionality, selling direct to consumers. Shopify started to take off and we started to realize that was a good place to focus our energies. With that, we ended up starting to turn down some other types of work, namely web apps and even some types of CMS work, and really started focusing on Shopify. Sei-Wook Kim (07:50.413) Yeah, we were really early on in adopting Shopify. When the company was first starting out, we created the website for a men's shoe company. Back then you could figure out the dating — there was a Flash front-end layer with a Shopify back-end layer. Over the years we continued to build more and more on that platform. We dabbled in Magento before that. But once we went deep in Shopify, we started winning more and more work across CPG brands, fashion brands, and we found a lot of success winning that type of work. We went deeper and deeper building out a practice on Shopify. Peter Kang (08:37.378) Yeah, and a couple other things that helped — we sold our own themes as well. We sold hundreds if not thousands of themes on Shopify. That gave us really good exposure to what was possible on the platform. We saw this shifting focus, but we had a challenge because we still kept a lot of our legacy clients that were still requiring support on WordPress. I can remember the resourcing nightmares — sometimes you're working on all these ecom projects, but then these non-ecom requests would come in and our team would have to fulfill those requests. That was the beginning of what set us on this path towards Barrel Holdings. Sei-Wook Kim (09:30.595) Yeah, around that time — about four or five years ago — we came to realize that the direction of Barrel was going towards ecom and Shopify specifically. We had all of these legacy accounts that were built on other technology platforms or didn't quite fit the size profile of Barrel. So we decided to spin out a new business to support all of these accounts, called Vaulted Oak. One of our account managers and long-time team members, Jason Fan, became our business partner in this. We spun out a separate company, separate teams, separate P&L, really running independently from Barrel. Peter Kang (10:22.894) Yeah, and I think the biggest light bulb moment for us — up until this point, 15-plus years into the business, we had only known this agency model where we have to account for every dollar that we make. We have to basically manage every dollar, win that project, find the people to work on it, make sure it gets done, and then invoice and collect on it. We had known very little about business potential beyond that. But with Vaulted Oak, where you have a very capable person in Jason, and we became more shareholders versus operators in the business — seeing basically a dividend, or a profit share, whatever you want to call it, come out every quarter from Vaulted Oak just really shifted our mindset of what was possible. Sei-Wook Kim (11:22.079) And it was around the same time we formalized the holding company — partially from the legal standpoint to manage the ownership, but also to centralize some of the business operations, some of the HR, legal, and financial operations at the holding company level. By and large, the day-to-day of the business was run completely independently by Jason and his team. Peter Kang (11:52.27) Yeah, and he did a phenomenal job. The accounts that went over to Vaulted Oak — under Barrel, you could argue it was inefficient and the clients weren't getting the best service because we had other priorities. But once Jason took over, he was able to really give them the red-carpet treatment. Clients were happier. The margins improved because he was able to streamline operations specifically for this type of work. That went a long way in giving us insight into — if you organize the structures right, you could really build a better business. Sei-Wook Kim (12:25.091) Yeah. And along with that, with the clear focus for Vaulted Oak, he ended up landing business outside of Barrel, building relationships with other clients and other agencies that led to consistent deal flow. It was running — it was growing revenue-wise, but also running very profitably. It was amazing to see it open our eyes to the potential of more and more businesses like this. Peter Kang (12:51.33) Yeah, so the next one came not too long after we started seeing some early success with Vaulted Oak. What had happened was we were early adopters of Webflow internally at Barrel — we had a couple of designers who were really curious about the platform, had done some site work on it, and we tried some client sites on Webflow. We ended up building a relationship early with Webflow; they knew that Barrel was using Webflow on some client projects. And then just by being listed on the Webflow experts directory and having a relationship with them, we were getting organic leads. But going back to — we had just done the Vaulted Oak spinoff, so in many ways it didn't make sense to take on Webflow work. Sei-Wook Kim (13:44.301) Yeah, similar idea. Have Barrel continue to go down this focus on Shopify, and this new Webflow practice — even though we started doing some of the work within the Barrel umbrella — we quickly realized it was better to have a new home for that type of work, a new company, running the same playbook we used with Vaulted Oak. Peter Kang (14:06.732) Yeah. The main difference here was where we had Jason, who was already working at Barrel, taking over Vaulted Oak — we brought someone in from the outside. Sei-Wook Kim (14:17.549) Yeah, the person we brought on is a guy named Jacob, a young guy who had worked at another agency that did some work with Webflow. We got connected with him and took that opportunity to start a new business from the ground up, seeding it with some of the projects we had from Barrel. We were trying to learn from the similar process we had used to grow Barrel and its relationship with Shopify, but with Webflow. The Webflow platform was in its early days in terms of building up a partnership system and community. So we really wanted to be early and be very visible with the Webflow team. Peter Kang (15:11.384) Yeah, and to be really honest with ourselves, we didn't do the best job on the Barrel side of building the Shopify relationship early on. We missed the boat on some of that — although we've recovered some ground since. We didn't want to make the same mistake. So on the Webflow front, we wanted to be way more active and aggressive as a partner, really be an evangelist and advocate for the platform, and build really great relationships early on, which helped Jacob and the BX Studio team get a lot of leads early on. That was what really fueled the growth. And also, the organic deal flow coming through Barrel — all the non-ecom marketing site opportunities that went through Barrel could just be passed along to BX. Sei-Wook Kim (16:05.613) Yeah, it definitely helped having that relationship with Webflow and leads coming through that channel, but also being present, speaking at conferences, sponsoring different events, and just being a clear presence in the Webflow community really helped — both from a talent standpoint and a client standpoint — and just building the credibility that BX Studio is the premier Webflow expert for building out these experiences. Peter Kang (16:41.848) Yeah, so before we knew it — Vaulted Oak was pretty organic, BX was fairly organic — we had this structure now. And around the time after we saw success with BX, we decided to launch a brand design agency called Bolster, focusing primarily on B2B brand design. That's when you and I really started to think about: maybe we should be focusing our energies on building the holding company, because all this time we were still running Barrel. Sei-Wook Kim (17:20.055) Yeah, while Vaulted Oak and BX were getting off the ground, we were still day-to-day running a lot of the Barrel operations. We had put into place a lot of process to slowly get ourselves out of being critical — bringing in different team members and really grooming Lucas, who is now the CEO of Barrel, to take over ownership and leadership of the team. Peter Kang (17:55.714) Yeah, that was definitely a multi-year process. This was maybe year one of BX, and we knew there was this desire to make a transition out of Barrel. We had a conversation with Lucas — we want you to take over as CEO, but we're going to set you up for success and make sure you have the infrastructure and the skills to feel comfortable taking over. So the next 18 to 24 months, we really worked to get him exposed to all aspects of the business. He was a quick study, just absorbed everything. And then, come the 18th birthday of Barrel — the 18th year — we decided to make that the date of the handover. Sei-Wook Kim (18:53.155) Yeah. And Lucas has been with the team for over 10 years. He's obviously known and seen a lot of the growth of the company, and was also very intimately involved with how the team members operate and how we do the work. For us, a lot of it was the business operations, the financials — the areas that we had primarily focused on and managed more closely. A lot of that was education and training, working with him to get familiar with the business. And that was April and June of last year when we finally made the transition out of being day-to-day at Barrel. Peter Kang (19:42.222) Yeah, June 2024 was when we left Barrel. It was a smooth transition in a sense — there were ups and downs on the Barrel side by the time we left — but we knew we had done the right thing because immediately Lucas just showed what an amazing leader he could be. He took firm control of the agency and implemented a lot of wonderful changes in both how he was going to lead the agency and doubling down on some of the strategies we had been working through, but with really great focus. That's the power of it, because the two of us had one eye on building this holding company and one eye on running Barrel at the same time. This speaks to the power of focus — putting someone in who could give 100% to Barrel made a big difference. Sei-Wook Kim (20:46.541) Yeah, and it's awesome to see Lucas immediately navigate, make changes, and overall improve the state of the business — with leads, recruiting team members, and really taking ownership of the direction of the business. Peter Kang (21:06.082) Yeah. So that was our exit. After 18 years of being day-to-day operators in a business — various client relationships, new business calls, thinking about the day-to-day finances of the agency, the personnel challenges — we were out. And that was a huge shift for us. One could argue, hey, take a little breather and give yourselves some time to ramp up to Barrel Holdings, but it didn't quite work out like that. Because immediately at that time, we ended up diving straight into our first acquisition for Barrel Holdings. Maybe give a little background on that. Sei-Wook Kim (21:49.143) Yeah. The backstory there is there's a designer that freelanced for us about 15 years ago, really early days of Barrel. He went off, did some things, and ended up creating an agency that focused in the product design space — company's called Catalog. He had really ridden the wave of a lot of startup funding and VC funding going into early-stage startups around, I'll call it, 2020. He had successfully scaled up a design subscription business where he was supporting startups with everything from their web and mobile product design to graphic design services — if they needed pitch decks or other marketing assets, he would be the design arm for a lot of these companies. He had continued to scale that business up. Peter Kang (22:58.286) Yeah, and the business grew fast. It grew to a pretty sizable team around 2021, 2022. But as the funding dried up in the tech space, the business experienced a bit of a decline. At that point, the founder wanted to get out, and we ended up — we had a relationship with them — getting a call: were we interested in buying the business? We struck a deal with them, and the goal was: can we take over the business, do a quick exit a couple of months post-close, and then run it from there? That was the situation we found ourselves in. Sei-Wook Kim (23:53.795) Yeah. The target was closing the acquisition July 15th. So from June when we were out of Barrel all the way through July — the first six weeks out of Barrel, we were in due diligence and really working to structure this deal so we could close and take over the business. It was a quick learning process because it was our first acquisition. Everything from the legal side to the financing aspect to the due diligence of taking over another company's accounts and team members — we had to learn a lot in a very short amount of time. Peter Kang (24:37.208) Yeah, and the probably the most stressful part was trying to find a good CEO to take over. The two of us had just gotten out of running an agency for 18 years, and the last thing we wanted to do was get right back in the operator seat. We thought it was very important for the Barrel Holdings model to have a good operator minding the day-to-day of Catalog. It took longer than we wanted, but eventually, a couple of months after close — right before the founder was about to roll off — we did bring on a new CEO. That was Fitch, who's done a tremendous job since. Sei-Wook Kim (25:21.773) Yeah, we did a lot of interviews and Fitch has been a great CEO to take over the business. For him as well, he had a very short overlap with the previous owner of the business. He also had to learn very quickly, meet the team and the clients, and really understand the direction of the business. He's done a great job making quick decisions to get the company to be more profitable and setting up all the efforts to drive more leads into the business. Peter Kang (26:00.782) Yeah, with that, our portfolio started to round out a bit. There were a couple of other businesses we added along the way. But this was around the time when we started thinking more long-term about what is the future of Barrel Holdings. Maybe we can share where the portfolio is today and give people the lay of the land of what the agencies are and what the services are. Sei-Wook Kim (26:37.805) Yeah, so we have seven agencies under our portfolio today. Barrel is focused on CPG as the vertical focus, with a lot of work still on Shopify as the anchor technology platform. We have Vaulted Oak, who does support and maintenance for brands — WordPress, some Shopify as well, all in the realm of maintenance. We have Bolster, which is our branding agency, doing visual identity work, a lot of creative work, but also some websites on Framer. We have Catalog, which we just mentioned — product design work, mostly on a subscription basis. We have Prima Mode, which is our Amazon agency, supporting businesses selling on Amazon through full marketing and P&L management. And we have Super Friendly, which is a company we're relaunching in the design systems space — helping companies with a lot of different design channels and platforms, helping consolidate and build understanding from a design system standpoint. Peter Kang (28:13.326) Yeah, forgot BX though. Sei-Wook Kim (28:15.362) Yeah, with BX as well. Peter Kang (28:15.362) Yeah. So with these agencies — and the key point is these agencies are specialized in some way, they're going to focus on certain challenges — one of the questions we get is: are they all complementary? They're actually not all complementary to each other, but there are clusters of complementary agencies. A good example might be Barrel serving CPG clients on the direct-to-consumer ecom side, or supporting some of their omnichannel efforts, sharing clients with Prima Mode who manages the Amazon side of things. They've been good partners. Bolster and BX have some overlap in that they might go after the same client, but Bolster with more of the branding focus can work on the branding side and then pass off larger website builds to BX on the Webflow side. There's definitely going to be some sharing of clients there. And if BX has a client that might need more in-depth product design, they can pass it off to Catalog. We look for that. But I think more and more, just getting to the strategy of Barrel Holdings for the long term — we looked at a lot of different models out there for agency businesses. One thing we know for sure is we want to focus on agencies. Maybe we can share why we want to focus on agencies, because there are obviously things like software and other things we could pursue. Sei-Wook Kim (30:11.457) Yeah, from being in the space for so long, we've developed a lot of experience and perspective on how agencies, businesses in this professional services space, operate — from everything including the marketing, business development, team structure, and how you price your services. That's really where our expertise has grown. That's where we see a lot of potential, even across different verticals like you've seen in our portfolio. We want to go deeper. We do believe there's room for growth in all different areas. These are all independent businesses that run separately, separate teams, but with a lot of the core playbooks we've established over the years. So there are a lot of benefits that each new business gets from the previous businesses we've been operating. We share some common services at the holding company level that benefit all of the separate businesses. The deeper we get, the more standardized the operations get. When we look at our portfolio, we're looking at financials in a very consistent way, and the metrics and reporting — it's not different types of businesses we're trying to compare. We've definitely focused a lot in this agency space. Peter Kang (31:49.09) Yeah, and the other way to look at it is we've found that after 18 years of being in the thick of it, we weren't tired, burnt out, or bored by it. In fact, as you mentioned, we want to go even deeper. Distilling all the mistakes and lessons we learned throughout nearly two decades — there's some value to that, and we want to try to maximize that as an asset in building this holding company. The other piece that excites us is taking this model of long-term hold. In many ways, we thought about several approaches where you buy an agency, grow it really quickly, and then flip it after a few years. But the more we thought about it, that approach was just less attractive to us. We took a lot of inspiration from some other types of holding companies out there, and where we landed was on this concept of long-term hold, compounding cash flows, and being able to grow through both M&A and launching new agencies. Maybe you can share a little bit about how that works mechanically and what that can lead to. Sei-Wook Kim (33:12.727) Yeah, so when we launch or acquire agencies, the way we're modeling out the future is based on — it has to generate cash flows. Consistent cash flows that are generated from the business, if that is the goal, really makes you think about the full P&L of the business structure. Are you efficient at the gross margin level? The way that you're structuring your team and your contractors — is that core solid? And then how you invest in marketing and other G&A in the business. We want businesses that are run efficiently, that will then generate cash flow to the holding company, that we can then use to launch new businesses or acquire businesses, continuing this cycle. That's what we're trying to do with the holding company. Peter Kang (34:23.854) Yeah, and we think there's a really interesting long tail of specialized agencies. Right now we're targeting the $2 to $10 million revenue range with healthy 15% to 20% EBITDA margins. We think with that, these companies don't have to be high growth necessarily, but they do need to be durable. They need to be well run and have a good team in place to really continue that cash flow trajectory. We're also going to be opportunistic — if there are companies that have good positioning but maybe their finances aren't as tight, that could be an opportunity for us to come in and create that value alongside them and make it more durable. There are a lot of possibilities here, but right now that is the strategy we're looking to execute: let's continue to look for these types of specialized agencies to buy. And where we think it's really attractive to start one, we'll also invest in a co-founder to do that as well. Sei-Wook Kim (35:30.777) And in some ways we're investing a lot in the teams, right? Because the focus and service offerings will continue to evolve as industries evolve. But we're investing in having the right people and bringing in our process to run efficient, cash-flowing businesses. Peter Kang (35:49.474) Yeah, absolutely. One of the things we get a lot of questions about is how AI is going to impact the agencies we have in our portfolio and also the types of agencies we look for in our acquisitions. The agencies that have teams that are flexible, that embrace new ways of working and are always looking to deliver value for the clients, are going to be the ones most likely to continue to evolve so that they stay relevant. Sei-Wook Kim (36:23.053) Yeah, so in five years' time, what we do for the clients could vary quite a bit, and potentially some of the industries as well. But it's all about having the right people in place to evolve as the world and technology evolve. Peter Kang (36:37.954) Yeah. That's where we're at today. Just to put a bow on this — because this is the Agency Habits podcast — a shout out to Agency Habits and why we created that platform. It's definitely a function of our belief that sharing our experiences and lessons learned in operating businesses is not only potentially valuable to others out there, but also valuable to us because it forces us to reflect and write about these things. The real hope with Agency Habits is it could be a super valuable resource that other agency founders and owners can come to love and trust. And thereby, Barrel Holdings through its association can become a place where potential sellers will think of us, and also anybody who wants to pursue an opportunity in a role as maybe a CEO at one of our portfolio agencies, or any of the leadership roles we might have, will consider applying as well. Anything to add there? Sei-Wook Kim (37:56.077) Yeah, we're really just trying to build a community of like-minded agency owners, founders, and even people within existing agencies who may want to move into some kind of leadership or ownership position as well. Peter Kang (38:14.286) Great. Well, hope you enjoyed our origin story. We're in the early innings of building Barrel Holdings and we're excited to share more about our journey as we build it. So until next time, we'll see you again. Sei-Wook Kim (38:28.793) Thanks everyone.