#77 Sell Online or Go Door to Door

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But not just because they're delicious. She has an unconventional plan to make her snacks stand out from the competition. But unconventional also means unproven. Let's see if Kate can get the investors on her side. From Gimlet, this is the pitch. I'm Josh Ruchio. Today's investors are? I'm Nimi Katrigata. Nimi is a partner at Box Group where they've invested a hundred million in over 400 startups including one company you've probably heard of, Warby Parker. I'm Al Dome. Al built several e-commerce brands, two of them do over a hundred million in annual sales. And now he's an angel investor. I'm Charles Hudson. Charles started precursor ventures where he's invested 45 million in over a hundred startups to date. I'm Shil Manate. Shil has sold three startups for over 50 million dollars. Now he's an angel investor and he's invested in several companies worth billions today. All right. On with the pitch. Hello. Hi. I'm Kate. I'm Shil. I'm Shil. I'm Shil. Okay. I'm Shil. I'm Shil. I'm Shil. I'm Bridget. Okay. So my name's Kate Flynn. I'm the co-founder and CEO of Sun and Swal Foods. Did you know that three out of four women in the U.S. haven't unhealthy relationship with food? I was one of those women for most of my adult life. About three years ago things changed for me. When I stopped obsessing over numbers like calories in the scale. And I started focusing on the foods I was putting in my body and how they made me feel. Saying away from things like added sugars, added preservatives or things that don't necessarily make your body feel great. And I would go into stores looking for a grab and go snacks that I could eat throughout the day. I'd flip over like the healthy snacks and they would all have ingredient lists like 40 ingredients long with ingredients. I didn't know how to pronounce or I was trying to avoid. So I launched Sun and Swal Foods with a mission of making simple whole food eating more accessible to people living in a really busy on-the-go lifestyle. So I'm here today raising $600,000 so I can make this world a healthier place one bite at a time. Very cool. Yeah. So I'll hand out some snacks. Wonderful. I have little packs for each of you. Kate hands out small packets of her first product, snack bites. She's brought them in cinnamon, chocolate and lemon coconut and I tried them too. They're so good. I was expecting little flavorless cardboard tasting lumps but it turns out these aren't like the day balls my dad used to make. My favorite flavor is the same as shields. Tasty. I like the cinnamon one. Yeah, I think so. How cool. What are these retail for? Three dollars. What are your margins like on this product? Yeah. So our cogs are 90 cents and our average selling prices a dollar or 60. So we have about 45 percent margin right now. And with these four skews are there others. So we launched with this line. It's our snack bites. They're all day and cashew based. We hit the market in 2017. Since then we also have launched some cookies and we have like a tromics and a cracker. Is it like an I mean is your target space? Is it like energy bars? Is that your competition or is it like snack foods like a healthier potato chips? Yeah. So it's we don't like the word energy because we don't add anything to it. But our overall vision is to serve all the snack indications. So I talked about a few of those other products that we launched which are mainly like the crackers. But that's a product like targeted towards litter the clean consumer who would never eat a cheese it or who would never eat a wheat fin. And so it's like they don't have any options there. So this is a pretty competitive category. Tell me more about kind of like what your ultimate vision is and what does it take to build and scale a company in this category from scratch. So I think so two years ago there was no bite or ball category. Sure. Now there is. So we're excited to be part of this fast growing category of bites and balls. But we know that's not completely defensible. So it all comes down to brand. So for us we try to communicate simplicity and like clean and simple brand. So our strategy has always been to sell our snacks and places where our core consumer is spending their day. So that's places like coffee shops, fitness studios, work spaces. We really target those trendier coffee shops where the awareness and the visibility is really good for us. I mean if you go into like various bootcamp it's our product sitting next to our X bar at the bar vital proteins like three of the biggest brands in like the CPG food space. And they found us. They found us in LA and they reached out to us. Until right now it's all retails or any director consumers. So we do so we do sell it has historically been about 20% online. So we totally know the importance of the channel and we like we cherish those relationships with that portion of our customer base. It just hasn't been our core growth strategy. Do you think you ever go for a traditional retail? It's definitely not our strategy in the near term. But this year we've started going after the corporate offices and that's going to be our main focus of growth over like the next 12 months. Are there good examples of companies that I guess I'm more accustomed to building brands directly to the consumers opposed to the employer? Totally. Are there examples of that or can you give me more insight on how you think the office channel helps you achieve your ultimate vision? Yeah totally and and I would say not just office but alternative channels in general. So like a great current example of one is Oatley. If you guys have heard of Oatley like they're a coffee shop brand and that's like 70% of their business and after establishing the brand there then they started to roll it in a grocery. You know our X bar got their start in fitness studios and CrossFit. Personally like I think one of the biggest barriers to people building a food business is it's really hard. So my co-founder is my husband Brian and Brian's background is in sale. He actually did sales and sales operations in the tech space. But we knocked on 400 doors and everybody asks us how we did it. We're like it's no secret sauce. It was just knock on the door. It's like nobody wants to do and obviously as we're looking towards our next scale of growth we can't build it one door at a time and that's where you know the the best thing about the corporate world is the snacks are free and so it's like free trial. Everyone loves a free snack. It's a fair point and a smart way to get the word out about the brand but it's not what these tech investors are used to. They're like have you tried this thing we love called the internet? What would it take to convince you that that was the worst idea ever and you said that? That's coming up after the break. This is advertiser content brought to you by Stonyfield Organic. Our cows them going out to pasture they love it they're so excited to go out every day they weight-rated the door in fact we milk them and we just open up the lane way and let them just go right out to pasture. I'm Rhonda Miller Goodrich and I'm a dairy farmer in Cabot Vermont. Our farm is Molliebrook Farm we're an organic dairy farm and we are a supplier to Stonyfield. Molliebrook Farm has been in my husband's family since 1835. We started our organic transition in 2015. We had 53 acres of corn ground and of course we had to use herbicides and pesticides and the soil was dead really for all intense purposes. 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That's why over thousands of businesses have made the switch so why not you? Try Odo for free at odu.com. That's odo.com Welcome back. Kate Flynn is pitching her plan to turn Sun and Swell into the next big brand in healthy snacks and that plan lives and dies on her ability to sell a coffee shops and corporate offices which is a big change from what these investors are used to and Al with his deep e-commerce background is particularly skeptical. I'm so torn because I hate the corporate growth channel. I love like the D to C. Yeah. Let's go to Amazon. Let's get in whole foods. Let's go that round. It just feels so much slower to go the sort of the hand-to-hand combat of coffee. I mean 400 doors is great but that's like I mean that's one good sale in another space right? Totally. Is there like I mean talk to me a little bit more just about why I mean why we chose that like yeah like why like could I convince you totally so I go back to like who our core consumer is and when are they in that emergency pinch where they need something like this and it's when they're on the go and they're out and about and they're at the office or they're at the coffee shop. Why aren't you ten million dollars in sales tomorrow I mean Brian sounds like he's great and he could you could murder this like well our constraint has been largely our time we do like everything I mean we're not we're not I mean we we have a couple parts we have a kitchen staff we don't make the product anymore ourselves which has really good so we do have some support but exactly what you're saying like building the business wonder at a time to 400 doors to get yes hugely time intensive we've realized that my approach as an entrepreneur was like get validation okay try again like I think personally like my journey just needed to start a little slower and steady and I now I'm just at this point where we like we just need to grow this thing I people want it businesses want it customers want it we just need to grow it so we did 150k last year in revenue and then this year we've started going after the corporate offices and we're playing the 250k and Q4 so 250k and revenue you want me and Q4 and Q4 what's your inspiration for how big this company is so my vision is to have like a brand that reinvents the world of package food and I think it starts with like I firmly believe ten years from now the grocery industry and the staff food industry is gonna look so different because we're just becoming more aware every day about how we can't keep eating these like heavily processed like ingredients if I look at like the big success story over like the past couple years was RX bar who in five years got to 120 million something I feel really solid about is that in three years we could get to 10 to 15 million and like my ultimate vision would be to have the brand like you know well over a hundred million dollar brand and play across categories and why not but I feel like that's super achievable for us Kate's got pretty good answers for the investor's concerns except for one Owl is still hung up on the idea of selling door to door it's two-old school manual archaic even for this internet born millionaire yeah the the the corporate channel is such a difference based and I know I mean what would it what would take to convince you that that was the worst idea ever and you know like what would it take to pull you into other channels and go right away or is it just like human capital constraint it's resource constraint I would love to build our brand more on DTC but like I just don't have the I don't have the strategy behind it right now or the expertise does it hurt the strategy if you show up and cost go tomorrow yes I think so I think well the biggest way would hurt our strategy is I think we lose focus so we start designing products around Costco and it would be a little bit pulling away from focus of whoever I do man I love I love the product like my wife she all my snacks have turned into this kind of stuff and I miss my chewy chips of joy but but no I mean this is a space that like that like it's kind of near and dear and I love the ingredients are like I mean it's it feels like it should exist everywhere yeah the value add that I know how to do is like let's go and be everywhere and that's how we'll succeed and so it's you know there's like this part of me that wants it to be the way that I know how to do it I'm looking at it through the lens that it's familiar but so I'm not gonna say anything yet I'm just gonna hang out for a few more minutes to see still one over here I don't mind the corporate channel actually like for for where you're at today I think direct to consumers actually pretty hard in this category I worry about it from a like venture returns perspective and I think that your projections are totally realistic yeah I just for me it's not the return profile I'm looking for for for a venture investment so I'm gonna pass an investing but would love to be helpful that'd be amazing thank you so much so I really like I really like you I think one thing I really appreciate about you is I think you have a very authentic sense about how you got to where you are and the things that come natural to you on the corporate side versus pretending that you have this deep background and direct to consumer and I think part of being successful as an entrepreneur is understanding kind of your own unique path and I appreciate the fact that you haven't oversold what you think is possible my only reservation right now is I don't I don't know enough about the corporate channel and I definitely get the sense that's that's where your instincts say to go and I think if we can crack some of the distribution stuff this could be really big so I'd like to look at a small investment for our fund of like ten thousand dollars awesome I love I love the whole story here and I love the product and it's delicious and we've invested in quite a few direct consumer brands like Warby and Harry's and I think our expertise in sweet spot is really where companies do go heavy on D to see in the beginning and so I'm passing for now but love to stay in touch and really really enjoyed meeting you. Neemee and Sheel are out. Charles is in for 10k but our holdout is outdone who's been on the fence this whole time. Okay I want to come along for the ride. I'll put in I mean for like 2025 let's talk I think I think man I think that there's a lot of cool stuff we could riff on and come up with I'm excited to see where you go with it just it'll just be fun to be in the same yeah on the same side of the table trying to figure this out. Thank you guys so much. I have to say I'm just the thought of me being a founder like never crossed my mind a couple years ago so even just being here is like I kind of have to take a moment. So thank you so much. Thank you. Yeah. Charles and Al are in like Kate Flynn. Anyway after she left the room with at least 30 grand in commitments I popped in to find out what it was about Kate that convinced Charles and Al to invest in a strategy that clearly they were uncomfortable with. On the show it's often pretty hard for food and beverage companies to get over the line. Yeah. What is different here? Her like I you know I mean I've been in most of the food and bev pitches I think some of the other ones I felt like we're more conventional in terms of their approach and I think Neemian and she'll both hit the nail on the head which is like those channels are really competitive and so if you're an inexperienced person who wants to exploit Facebook and Instagram for DTC I think that's like running into a buzz saw. Yeah. No chance. And there were other teams we've met before I'm like you're going up against way more sophisticated people on the distribution side in the channel that you're going after. Yeah. I feel like this is mostly a distribution game and the thing I thought was interesting is she's picking a distribution channel that maybe don't like and know nothing about but if she's successful I think it's a really unique angle. A more specific question you may have already answered this out but like you said you said you needed more time as you were kind of mulling over her strategy and then you said I want to go along for this ride. What exactly changed your mind? I just had to think through the coffee shop space like I want I want this to exist where once people sample it and they want to go back and get it it shouldn't be as hard as it is but the DTC I didn't think was the right move I think like I want to see this in like whole foods and everywhere else so as soon as you make that customer one of yours that they can go and replenish all day long but I don't know man yeah it's her like she's she's very self-aware she's got a good angle on stuff you know I didn't feel like she was beessing us through any of the work in a market our way to victory here yeah very realistic so her distribution strategy of like selling into gyms and boutique coffee shops was both the reason that gave you pause to not invest and the reason why you ultimately decided to invest yeah I mean like literally I said like I'm just gonna go along for the ride I want to see this I want to see how it goes when we come back Ow comes along for that ride but Charles he's never story support for the show comes from core weave everywhere you look AI is expanding what we thought was possible and at the center of it all is core weave medical research and diagnosis education complex visual effects for movies science and technology breakthroughs core weave powers AI pioneers around the world with purpose built tech building what's never been built before core weave is the essential cloud for AI ready for anything ready for AI to learn more about how core weave powers the world's best AI go to core weave dot com slash ready for anything after decapitation strikes against Iran's leadership what can we expect next in the escalating war the big question is if there is going to be a next strong man in Iran what kind of strong man will that person likely be I don't think that there's going to be another powerful cleric supreme leader I'm John finer and I'm Jake Sullivan and we're the hosts of the long game a weekly national security podcast this week we sit down with cream sagipur to discuss what to expect in this next phase of the war against Iran the episode's out now search for and follow the long game wherever you get your podcasts welcome back we caught up with Kate a few months after her pitch and she surprised us when she said that halfway through her round interest from investors started to wane and her round kind of stalled out I think the reality is we didn't realize how long it was going to take to fundraise I mean like this is our first time really fundraising and everyone tells you it's going to take you know twice as long as you think it is but of course we thought we were going to be different and so we didn't really have a like we we didn't have the money to start putting money in a digital marketing we didn't have the money to start you know hire another person and so we were kind of forced to keep operating really scrappy but Kate said that because their scrappy plan to sell the corporate offices is starting to work they aren't stressing actually they're doing pretty well despite being only partially funded which is why she was like why would I spend any more of my precious time pandering to vcs when I could just keep crushing it on my own so she actually stopped pitching new investors but before she stopped pitching Kate was able to reel in the dough from Al the investor from our show ended up putting in 20k so that's cool but Charles Hudson on the other hand yeah I tried to be sure to him a couple times and I just I never I never heard back you know my perspective is I want them to be excited about working with us and excited about our company and after I've sent several emails I just feel like if you know if he's excited about the company then he'll remember to reach back out but I just didn't want to be pushing someone and forcing someone to do something that you know they're not super excited about Kate got ghosted by Charles Hudson but she had no idea why so we called Charles turns out he was sorry that he left Kate in the dark oh it was awful yeah it was awful why historically you know this is I think in 200 some odd investments probably the first time I can think of where we made a commitment to somebody had every intention of fulfilling it and haven't been able to and it's one of the things we've brought ourselves on it sort of not making commitments that we can't live up to and this is the first time where yeah so circumstances in the portfolio put us in a position where we couldn't do that yeah do you want me to get Kate on the phone right now sure I'm happy to talk to her live so I texted Kate told her that Charles wanted to talk hey Kate okay Kate Charles can you are you both there I'm here I'm here Charles I'll let you take it from here yeah hey look I just wanted to apologize for not being responsive to any of your outreach and every time I heard from you I was like oh we're on the cusp of being able to write a check and I should have just told you what was going on but we we got into a bit of a jam after the show where you know we spend a bunch of time trying to forecast which of our portfolio companies are gonna come back and ask for more money yeah and we had significantly more companies come out of the woodwork than we had modeled and every day I thought we'd sort of reach the steady state that's okay now I know where we are I can give Kate some guidance and another one came out of the woodwork so the dust has finally settled on our no worries Charles and I honestly I'm the same way sometimes and so like I never take it like a fence that like I was like Charles will get back to me when you can get back to me so yeah no worries I know I know how crazy things are and I totally understand yeah and so like I think we're gonna have some proceeds coming back from an acquisition that would allow us to make good on an our commitment to make an investment and work with you and try to get things back on track if it's not too late totally no that that would be amazing I'm around the next next couple weeks so just just touch face and already and we'll go from there sounds great thank you before you guys go yeah like I feel like I'm like the startup whisper here or something like mending founder and investor relationships here like I'm thinking about this from like a customer perspective in a way Charles like Kate is your customer right not not in a way she is not in a way she is so she is your customer but if you were thinking of like any other industry there's a place where the customer can go and like rate and review the service they're getting and so then word gets out that like this you know this company doesn't have good customer service or like whatever but I feel like in this industry in venture capital this happens all the time founders don't hear back from investors and they don't know why and they don't know if they'll get the funding and I think it's a problem I feel like it should be fixed but like I don't know what the solution is so Kate you weren't bothered at all that Charles hadn't responded to three of your emails so yes this is something that I think Kevin's commonly with founders and entrepreneurs like this happened to me before it's better to just have like a yes I'm in or no I'm not but I don't personally get offended or like upset about it because I think it's just like it happens all the time yeah I assume that if I do a bad job in terms of responsiveness and treating people well that when their friends says hey I'm thinking about pitching this person they're gonna go that I had such a bad experience like don't waste your time like I assume that like that will be the consequence of like not doing a good job and the reason I know this happens is we have 300 founders in our portfolio and I know sometimes they'll come to me and say hey I've heard this person like isn't good I've heard that this firm isn't responsive I heard this firm like waste time time huh that's coming from somewhere at the answers it's other founders yeah I think for me like it's so much dependent on like how you connect with an investor and we I mean we've been there's been people who we've investors who people have told us like hey this is like the best person for either me right but like if the connection's not there and like for me it's like you need to see how you feel like how does your gut feel when you talk to the person you need the person and I'm sure the investor feels the same way yeah okay cool thank you for this all right all right all in a day's work just kidding I can't take any credit actually this reminds me I have some emails I need to respond to oops the pitch is hosted by me Josh Mucciau produced by Kareem Mattox and Heather Rogers we are edited by Sarah Sarasan and Blife Torell the music is by the newsmaker original compositions from Brickmaster cylinder Billy Liddy the newsmaker and names are hard we are mixed by Enoch Kim Lisa Mucciau planned the recording of this pitch and here's our quick disclaimer no offer to invest is being made to or solicit from the listening audience on today's show you can follow the pitch on Spotify and listen for free or find new episodes wherever you listen thank you so much for listening we'll see you next week