I must admit I do like my wine and I have the good fortune of living in close proximity to some great wineries. I not only enjoy the taste, but I also appreciate the aesthetic of the bottle, label and cork. So, the fact I was paying attention to the writing in the side of the cork is not surprising, but finding the cork to be a source of wisdom was unexpected.Read More
Finding early money for an emerging natural product brand is hard. It is sure to occupy a disproportionate amount of your time as a founder. So, get used to it and good at it if you want to succeed.
There is a funding gap that exists between friends and family and venture capital. It is a gap, in my opinion, that is growing. It is often referred to as the “valley of death,” and it spells the demise of many a brand. The size of the average VC fund in the natural products space has been increasing. The economics of that increase require that bigger checks be written. Those checks are far more likely to go to brands that have revenue over $2MM to $3MM trailing twelve, proven velocity and a strong tribe of followers. This only makes raising capital harder for early-stage brands.
In most cases, this means that the capital you’ll raise will be from angels. So, how do you find them? There are some high-profile angels in the industry, but they see hundreds of opportunities each year and invest in very few. You will need to unearth your angels who are called to your mission, share your vision, and believe in you. Here are three hacks you can use to find your angels:
This is a powerful tool for angel discovery. I would encourage you to invest in LinkedIn Sales Navigator. Use the advanced search features to build a specific query based on industry, geography, keywords, and more. There are some other add on tools like “Meet Leonard” that help to automate connection requests, follow-ups, and notifications. I’ve worked with many entrepreneurs on just this, and they’ve been successful in identifying hundreds of potential angels.
2. Future funds
You’re always raising capital, even when you’re not. What I mean by this is that the best time to look for money is when you don’t need it. One thing I always suggest is to start your outreach to the funds that you are too early for now but are the ones you hope will be interested in you in the future. Making them aware of your brand is essential as it helps to have an established relationship when the time comes. But, another benefit is they typically have a pretty good list of angels. So, when they tell you that you’re too early, thank them for their time and then ask them if they’d be willing to introduce you to some investors.
3. Be different
When you do start your outreach to investors, stand apart. Don’t just send an email with your deck or executive summary. Try recording a video message to include in the email. Send them samples, with a handwritten note. Here is a totally radical idea, call them first. Whatever it is, do something that creates a point of difference. You need a hook to get them engaged and willing to move the process forward.
Nothing above is rocket science. However, it could make all the difference in getting the capital needed to get your brand through the valley of death.
After 30 years, I am still a student of the Natural Products Industry. One with many questions that remain unanswered. Questions such as, what drives some people to take on the inherent risks of entrepreneurship?
Most of us see needs unmet or problems unsolved in the market. Some of us even come up with ideas to fill those needs or solve those problems. But, the gulf between idea and action is enormous. The majority stop at an idea. So why then, do some take action while others just think?
For the longest time, I thought it had to do with risk tolerance. I was sure that entrepreneurs, in general, had a much higher tolerance than those who remained on the sideline with their excellent ideas.
I believe now that I was wrong. I’ve met many entrepreneurs whom I would not describe as risk takers. In fact, I’ve worked with quite a few who are abundantly, if not overly, cautious. These weren’t gamblers, adventure seekers, or adrenaline junkies. They were no different from anyone else. They too worried about providing for themselves and their families. So, why do this crazy thing? Why not take the well-worn path?
The answer? They simply see risk differently. While those who stop at an idea believe taking action and moving off the well-worn path is risky, those who actually take it see inaction as a far greater one. They feel compelled to do something, to fill the gap in the market or solve the problem. Not doing so would be a considerable risk. They are confident that someone else will swoop in and do it, leaving them wondering “what if?”
To them, that is unacceptable. They find inaction far more frightening than action. The consequence of the former is regret while the latter is merely failure. A failure you can recover from while regret stays with your forever.
One of the odd things for me is that it took me a while to bestow upon myself the title of entrepreneur. Yet, by all definitions, that is precisely what I am and have been. I struggled with that moniker because part of my self-identity is being risk-averse, cautious, even prudent. How could I be an entrepreneur if I don’t like risk? The same answer applies to me personally. The risk of staying the course, or inaction, was far greater than that of action.
The more I thought about this, the more sense it made. Entrepreneurs aren’t daredevils. They are worriers and thinkers. They calculate the risks and trade-offs and weigh all the options before moving forward. Where they depart from those who stop at the idea, is the conclusion they draw from their evaluation. Doing nothing, staying the course is scarier and riskier than taking action. That small difference in view, that thought process that inaction is more dangerous than action is the very definition of entrepreneurship. It is not that they are any more risk-tolerant or are inherently risk-takers, they merely see the risk on the other side of the ledger. It is inaction that they find frightening. So, where do you see the danger - in action or inaction?
This article was originally featured by New Hope
A question asked all the time is “What’s the right channel for my brand?” Founders wonder if they should go to brick and mortar retail or focus on direct-to-consumer. My answer is as clear as mud, it depends. For some brands, it makes perfect sense to launch into retail. For instance, if it is a better-for-you analog with a low educational threshold.
An example of this would be one of our portfolio brands, The Good Crisp Company. As a canister chip with an understandable brand promise built right into its name, putting it on the grocery shelf and offering consumers a much-needed alternative was a no brainer.
Other brands are better suited to build traction D2C. Dr. Cowan’s Garden is another of our brands. As a producer of high-quality biodynamically grown vegetable powders, it leverages the direct relationship it establishes with the consumer to educate them on how best to increase the biodiversity of their diets.
For most brands, especially those that are solving lifestyle problems or are filling unmet needs, I like a channel strategy that builds concentric circles around the targeted consumer. First, I will explain what I mean by a concentric circle strategy. Then I will offer the reason why, for most brands, I feel it is the best approach to building lasting consumer traction.
The strategy is straightforward and is narrow and deep. I recommend focusing on 1-3 core markets. It is an omnichannel approach to meeting the consumer where they live, work and shop. It starts with empathy requiring an understanding of where the problem is most acute or need most defined. A good illustration would be Native State Foods who recently pivoted their offering to ancient superfood breakfast bites. Their consumers live in yoga studios, gyms, running shops, airports and more. They recognized that having the product available at corporate campuses and micro-markets places it where their shoppers work. Finally, ensuring that it is available on the shelf at their neighborhood stores and on the e-commerce platforms they visit, completes the last of the concentric circles. Thus, the brand becomes somewhat ubiquitous within the consumers’ field of view.
As mentioned above, I do believe this is very powerful and here are a few reasons why:
Brick and mortar retail outlets are tough and expensive places to drive trial. You are competing for attention with 35,000 + other products and for a consumer who is very habitual in the way they shop. D2C is also tough. First of all, it’s hard to stand out amongst the sea of products. Plus, many first purchases made are done so on impulse, and most consumers don’t want to make too large a commitment without trying an item.
Since a concentric circle strategy is narrow and deep, it slows the burn rate. You’re not paying for a lot of slotting, or promotions. You are not managing a sophisticated logistics network and don’t have national brokerage commissions or retainers. You can learn a lot about your product and its consumers in a less expensive manner.
Social media impact
Geo-fencing or geo-targeting makes your digital efforts more effective. You become a louder voice to a smaller audience. It brings forward the opportunity to leverage micro-influencers costing you less and allows you to be bolder and more creative in your approach.
When your brand is available where people live, work and shop you help your consumers tell your story. Social proof is one of the most potent purchasing motivators. When friends see friends using a product frequently, they want to try it too.
Let’s talk about investors for a moment. Two critical variables that most investors consider are validated assumptions and proof of consumer traction. A concentric circle strategy allows you to do both faster.
In my experience, this approach is highly-effective, makes good sense but, is admittedly hard to execute. As founders, you already know that what is right is rarely easy. If I can be of any assistance or provide any greater depth of information, please don’t hesitate to reach out.
There is no shortage of things to do or issues to resolve as a founder. Choosing which to attend to is often the difference between progress and stagnation.
The question is, how? How do we choose the right things to focus on and let the others fall to the wayside? One way is to make sure that you are clear on the difference between what is interesting and what is important.
Back in the early ’80s, two young engineers figured out how to compress both audio and video data and transmit it via a phone line. Think early Zoom or Google Meet. The two were able to secure a meeting with a Sand Hill Road VC to share their invention. Their contraption wasn’t pretty. A well-intended staff member of the VC firm suggested placing a table cloth over the nuts and bolts of the machine. “It would help with the aesthetics.”, he suggested. There was one significant problem with that suggestion. That early Codec prototype put out as many BTUs as a backyard BBQ. The meeting started, they turned on the contraption, dialed up a colleague on the east coast and started a video conversation. Unfortunately, moments after the call began, smoke started billowing out of the back as the table cloth caught fire. It was quickly doused but, needless to say, it marked the end of the meeting. As the two founders left, one was dejected, “I can’t believe we started a fire. We will never get any money from these guys.”, he said to his partner.
“Who cares.”, the partner replied. “We just conducted the first coast-to-coast video conference call!”
That is the difference between what is interesting and what is important. Sure, the fire was interesting and fodder for a great story, but what was important was the first ever coast-to-coast video call. This is a real story told to me by one of the founders of PictureTel.
There is no simple way to discern what is interesting from what is important. It requires slowing down and the asking of questions. It should be investigatory. Items such as; is this what will move the business forward or constrain its growth? Is this a strategic issue or a tactical one? What happens if we do nothing?
You’re not always going to be right. Sometimes you will get swept away by something interesting. However, if you can have that happen with less frequency than your competitors, you’re likely to outperform them over time. One tool that I’ve felt helpful is the use of OKRs. If you are not familiar with them, check out the TED talk by John Doerr or read his book “Measure What Matters,” which, I will warn you, is a little dry.
As an entrepreneur, more things need to be done than there is available time. Therefore, things will slip through the cracks. It is an inevitability. The better you are at focusing on what is important, the more likely that what slips through is just some interesting stuff, not something that is going to drive the business forward or hold it back.
I spent last week as a panelist at the Hirshberg Entrepreneurship Institute, which was great fun and a huge honor.. Being around so many amazing brands and their founders energized me and made me think of this article that I wrote last year. I’d love to hear your thoughts.
The other day I was sharing an Uber with friends who also happen to be managing partners of a food and beverage VC fund. Being nerds of the business, we quickly moved the conversation away from the Trump-Putin press conference to noodling the question, “What traits do we want to see in investment-ready founders?” The ride ended soon after, but the question lingered. Although not exhaustive, the following are what I believe to be the key traits.
A deep visceral passion for the brand, product, and mission is vital. I am looking for founders whose passion is like that of a street corner preacher. It is so deep-seated that they feel compelled to climb up on a soapbox with fire and brimstone and tell all what it is that makes their brand, product, and mission special. Passion will also see founders through those dark and stormy nights. This is so hard, I could not imagine doing it without passion as my constant companion.
Wrong and right
I don’t know how best to describe this trait. There is a balance between a willingness to be wrong and the need to be right. I think of it as a continuum. Founders need to be willing to accept criticism, be shown a better way or a different approach. But, at the same time, they can’t be so malleable that they are like Gumby. They must, at times, display the moxie to lean into what they believe and not back down. Advisors, consultants, and stakeholders don’t know everything, even though we talk as if we do.
This is closely related to the above. When it comes to a food and beverage startup, healthy conflict is important. We tend to tether our ideas to self. Founders need to be able to cut that tether and allow ideas to be debated, torn apart, and rebuilt. That’s how good ideas become great and how you stop bad ideas from becoming expensive mistakes.
Know what you don’t know
A form of humility, this is so critical to success. The food and beverage business is so damn complex. No founding team has all the knowledge and skills needed to scale a business. Smart founders see the gaps and leverage other team members, outside service providers, and advisors to round out the available skills to make sure the needed wisdom and knowledge is accessible.
Although in my opinion, this is obvious, it is surprisingly not as common as it should be. As mentioned above, this business is hard. Founders are going to make mistakes, numbers aren’t always going to look good and not everyone is on that hockey stick growth trajectory. Strong leaders own their mistakes and don’t obfuscate them. They see them as lessons, teachable moments. Mistakes and challenges are what build a better strategy. Investors will see right through the charade if an attempt is made to sugarcoat results.
Founders must be able to laugh at the absurdity of this journey. They have the ability to laugh at themselves and with each other. They’re off-roading it while most take the safe paved route. So, they make sure to enjoy all the bumps, twists, and turns and try not to take it so seriously.
The above represents what I believe to be the most critical traits and are the ones I look for in the founding teams I work to support. Certainly, there are others, but I’d argue that those listed above are the most vital. I’d welcome your thoughts.
Do you remember those posters where you are asked to find Waldo hidden amongst thousands of other cartoon characters? That is your product in a retail grocery store.
Last week I had the chance to walk a few stores with an industry friend who is trying to expand the distribution of his brand. We stood in the middle of an aisle that had cliff-like shelves running down both sides of an expansive span of polished concrete. It felt like the grocery version of the Grand Canyon. It was overwhelming.
I paused and asked him, “Tell me, if I was unfamiliar with your brand or its products, how would I discover them here in this aisle?” I’ve written about the fact that getting on the shelf is the battle, but getting off it the war. Distribution without discovery is deadly. It remains the most repeated mistake made by young Natural Product brands.
As a founder, you need to prioritize discovery over distribution. Assess the fit of every new opportunity for retail expansion by asking these simple questions:
1. How are my products going to be discovered?
2. What can be done to drive trial?
Discovery is both an investment and a partnership. When you launch into new retail outlets, you must be prepared to invest in driving awareness and trial. This investment can be in many forms; social media, trade spend, events, demos, and more. It is also a partnership, and this is something often overlooked. The retailers hold some responsibility for discovery, and you should only work with those who understand that it is a shared objective.
Most retailers have tools that aid in discovery. These include merchandising opportunities such as end caps, secondary placements, and impulse fixtures. They also include digital and physical ads and other promotional vehicles. None of these are free, but having access to them is crucial. Part of any negotiation on the rollout of product into stores should include a conversation around these tools and an agreement of which will be used and at what cost. The hope being that the retailer discounts some of these weapons to help stack the deck in favor of a successful launch.
Here is where discipline comes into the equation. If you are confronted with the opportunity to expand into a retailer that either does not offer you access to these tools or prices you out of them, say no thank you. I understand that might not be easy. It may be a retailer that you want, one that follows a review schedule that will require you to wait another year to try again. However, until the brand is ubiquitous, you don’t want to go into any new distribution without having every possible arrow in your quiver to help create discovery and drive trial. It is just not a risk worth taking.
Retail expansion is alluring. It is hard not to get caught in its tractor beam. However, again, distribution without discovery is deadly. It is all but sure to increase your burn rate, decrease your average velocity, and put your brand at risk. Don’t bet your brand’s future on the consumers’ ability to find Waldo.
Suggesting that you collect people sounds a bit “serial killer creepy”, but I promise that both in intent and practice it’s not for dark or sinister purposes. A few weeks ago, I met Lew Jaffe, a clinical professor and entrepreneur in residence at LMU and formerly an early pioneer in video conferencing. During our conversation, I asked what I could be doing to further help the entrepreneurs I support. He casually said, “Collect people.” He went on to explain that there is no better way to serve them then to be able to connect them with the person or persons who can best help them at that moment.
His thinking aligns strongly with my belief in the power of the ecosystem, something that I write and talk about often. No founder succeeds in this industry without being hoisted on the shoulders of others. Your tribe, the people you collect, are force multipliers. To expand your reach and your impact, you must have others in your corner who willingly open doors and pave paths.
On the surface, the practice of collecting people sounds self-absorbed and self-serving. It certainly can be if you go about it the wrong way. That is why I want to offer you a radical approach, one that has created a lot of richness and joy in my life. The secret? Give freely and fully.
Networking, the most common and overt version of collecting people was something I deeply hated. I had an admittedly cynical view of the process. It included people slipping on some false veneer and seeking out others from which to extract value. Dark, I know.
I am not sure when or how it switched, but it did. It morphed from a process of taking to one of giving. I recognized that each time we enter a room or situation, we do so with our own unique set of experiences and acquired knowledge. Wouldn’t it be cool to spend time at industry events focused on what we can offer and give versus on what we want and can take?
Guess what I learned? I found out that this radical approach becomes a real superpower. Call it karma if you’re cool with being a bit “woo-woo”. If not, just recognize the human need for reciprocity and homeostasis (balance). Regardless of the label, the simple truth is the more you give, the more you get. I offer with no expectation of a return, but return it does and from many different sources and I am indeed the richer for it.
I hope by sharing this approach, it unlocks you from the shackles that have held you back from getting out there and collecting people. You can do everything else right as a founder, but if you fail to build your tribe of force multipliers, you may never achieve goals that you’ve set. This is a people business in an industry with a robust, vibrant ecosystem that can really help. So, go build your collection and do so by giving freely and fully.