Pitching a new idea to anyone opens hundreds of opportunities for how it could go. Entrepreneurs dive into these opportunities by pitching a brand. In this episode, Aditi Dash and Chuck Cotter join Elliot Begoun to give their insights on pitching as four founders pitch to them live. Aditi is a partner at CircleUp Growth Partners whose mission is to help entrepreneurs thrive by giving them the capital and resources they need. On the other hand, Chuck Cotter is a partner at Holland & Hart LLP and advises companies at all stages of growth, from startups to ready-to-exit. Listen in as they talk about great insights as well as helpful feedback all about pitching your brand.
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Pitching A Brand With Aditi Dash And Chuck Cotter
We’re doing something a little bit different and hopefully, it’s going to be the first of many. We’re calling this a Pitch Brand. What we’ve done is we’ve invited four founders to come here and pitch to us. They’ll have five minutes to give their pitch and then five minutes for Q&A. What we’ve agreed is on the same three questions so that we can compare at the end. At the end, my two panelists who I’ll introduce here, we’ll talk about what we saw in each of the pitches, what we liked, what we felt was answered well, what we felt was left unanswered all in the hopes of providing everyone reading some learning, insights, feedback as to what happens after you walk out of the room from a pitch. Joining me, I’ve got one stellar panelist and one person that I had to bring in because every once in a while, he shows up and needs to be around, Aditi Dash of CircleUp. I’ll let you introduce yourself and share with everybody a little bit about you and about CircleUp.
Thank you, Elliott. I appreciate it and you’re way too nice to me, probably because you don’t know me that well yet. I’m one of the investors at CircleUp. It is a growth equity fund here in San Francisco. We are investing in food, beverage, beauty, personal care, and anything consumer. Our investments are typically in companies that are a million in sales and we invest somewhere between 1 to 5. I have been at CircleUp for a couple of years. Before CircleUp, I was at a coffee company called La Colombe Coffee, where I was overseeing new products and innovation. Pre-La Colombe, I was at two other funds and another startup called Blue Apron, which is in the meal kit delivery space. I’m happy to be here and I’m excited to know the pitches.
I’m glad to have you. Thanks for doing this. I’m going to let Chuck introduce himself.
I’m Chuck Cotter with Holland & Hart. I run our food bev and CPG practice. We represent over 100 CPG brands, most of which are food and beverage, and a number of funds in the space and close somewhere between 60 and 80 of venture and M&A deals in this space each year. We get a good sampling of investor perspective, brand perspective and see it from both sides of a lot of these deals and as a result, also see a ton of pitches.
You see both sides and your insight is going to be valuable. As always, you’ve strategically positioned your arms to look off and I always admire that in these episodes. I’m going to invite our first brand to pitch. Jared, if you want to come on in and introduce yourself.
The first question I’d like to try to answer is, why Lillabee? Why is this a thing? The short answer is a short story. The world’s going to spend $2 billion on Oreos. While Oreos are delicious, and no shade to anybody from Mondelez, I think the $2 billion would be better spent on Lillabee products instead. Lillabee products are different and they’re better because we figured out tastes with benefits. We’ve nailed healthful indulgence. The functional benefit of an RX Bar with the emotional fulfillment that Oreo cookie, Nilla wafer for Thin Mint. Our brand is grain-free, dairy-free, paleo-friendly snacks, combine organic and superfood ingredients like almonds, sweet potatoes, hemp seeds, avocado oil, and cacao with natural sweeteners to make treats that are delicious and health-conscious.
Around all this, we developed a capital-efficient growth of hypothesis. There’s a long-term opportunity being created in this post-pandemic world. The opportunity results from the lasting changes in how people will discover and purchase their food. There’s white space opening for a new way to take an impulse CPG brand and market. The white space is going to favor companies who grow in eComm and alternative channels with capital efficiency. I personally think that the days could be numbered for emerging brands whose plan is to burn raising and spending vast sums of capital to fund discovery and growth in the retail channel.
One of the reasons I’m excited to be here is that I’m evangelical and sharing my belief of how the retail channel is not and should not be for any small brand or path to growth. Because ours is littered with the wreckage of too many good products, great people, and precious capital that’s been consumed and chasing a false opportunity and a false choice. To avoid falling in the footsteps of those who’ve fallen before, there’s a new path to successfully go to market. For us, it’s about offering that timely tasty product that’s on trend with diets, and now more than ever with health. Having a lean, nimble organization with low overhead, minimize fixed costs and then riding that wave of eCom growth to become ubiquitous online and activating our consumers on their screens.
We have a curated and disciplined approach to retail too. We don’t chase doors and we only sell where we can make money. That means Whole Foods, Thrive and a few other carefully selected retailers. We’ve got an insistent focus on unit economics and great gross margin and we keep that commitment to capital efficiency throughout. The time to execute that strategy is now because prior to all this pandemic happening, eCom sales represented somewhere between 4% to 6% total grocery sales. The estimates I’m seeing have that at almost 40%. The expectation is they’re going to permanently settle somewhere between 15% to 20%. I use a mental exercise in my life that I like to call ‘What Would I Have To Believe?’ As in what would I have to believe in order for something to be true?
That 15% to 20% is probably going to be true and therefore, what I’ve got to believe is the collective experience of living through this is going to permanently alter the purchasing behavior of consumers. That’s going to happen because the in-store grocery experience is being remade from one of joyful discovery to one of joyless function and even one of fear for many people. The opportunity is in digital and eCommerce is our path forward. It’s a strong case backed up with data, great product, and even prior success in our channel. I hope that you all believe in our products are nimble, capital-efficient, eCom focused strategy, are the right path forward in an uncertain world. We’d be very interested in your feedback too and what do you think we should be offering may be beyond the usual convertible note terms. I’m curious if you believe in our growth hypothesis and its focus on capital efficiency in the digital channel. Finally, what would it take for each of you to write a check now? Thanks much for your time. I look forward to your feedback too.
Aditi is going to ask our first question.
The first question is what have you done during this period of uncertainty to your business nimbler, more capital-efficient, and more resilient?
It’s maybe not funny, but apparently, my skillset must be some form of clairvoyance because I’ve already made the choice to do all of those things pre-COVID. I did it because I felt like the writing was on the wall for us as well as for the industry. Specifically, to answer your question, the changes that we made were I got us out of any retail distribution that was unprofitable. No good money after bad pounded down these channels, trying to drive sales in the most expensive channel. We stayed only in Whole Foods, Thrive, and a few other carefully curated retail. We caught all of our SG&A and we moved to a 100% provider model. It gives us a lot of flexibility and minimizes our fixed costs. We shifted all of our innovation to online. There’s no slotting, trade or free fill. Finally, I renegotiated our manufacturing contracts and I brought our gross margin to almost 50%. We are well-positioned to take advantage of the opportunities that are being created because of that capital efficient and resilience changes that we made.
Chuck, what’s your question?
Even pre-COVID, this was a question that existed for brands who wanted to be primarily digital and therefore wouldn’t necessarily be demoing a lot of products that retail, but it’s an even bigger issue in the world of COVID. Where and how do you plan to drive discovery and trial of your product?
We plan to do it on screens and not in a store because our customer is everywhere. We don’t just have to meet them. We focus on product discovery primarily on Amazon and then backing that up with a modest social media budget. It’s in line with our capital-efficient plan. We identified and we engaged with a core group of eCom experts to help us refine and then implement a winning digital strategy that we can execute in its full format if we’re able to raise the growth capital that we need to fund it. Since you can’t taste the product, a lot of that is just placing it where similar products are being purchased, making sure that the social media engagement that we do is resonant with our consumer. That’s driving home this helpful indulgence and nutrient aspect of what we offer and how it’s going to fulfill that emotional need for a great snack, but also that functional need for nutrient-dense foods.
You asked the question to us and to the investors reading, what it’s going to take for them to write you a check. I want to turn that around and ask you, what support are you expecting or wanting from that investor beyond just the money and the capital?
It depends on what kind of investor they are. Are they someone who’s willing and wanting to put sweat and reputation behind Lillabee and not just a wire transfer? If they are looking to be active and additive, I would want to be sure that that expertise was both recent and stage compatible with where we are. Since we already have strong horizontal support in place with the people that we work with, we’re looking for three things besides capital. The first is vertical expertise. That’s the information, relationships, marketplace savvy, and the media networks that will offer Lillabee the chance to move faster with greater accuracy in testing our growth hypothesis and personal support. I’m not looking for a new best friend, but I am looking for someone that I can trust and feel like I can have a real conversation with.
That means someone I can bring a question to and not have that very act of having a question create chaos. That’s somebody interested in the growth of the company, the growth of their investment, and in my growth as well. The third and most important might be venture advocacy. That’s somebody with a seat at the capital table and they’ve got their ears to the market and are going to help with that next fundraise if we can execute successfully where we are. They can be that translator and facilitator between us and the capital markets. I’m not trying to outsource the responsibility of doing that, but what I’m looking for is a partnership with one of them who’s on our side.
Pitching A Brand: Social media is exceptionally broad. We need to be specific about how we plan to utilize social media to drive discovery and trial.
One thing you didn’t mention is how much you’re raising?
We’re raising $250,000. That $250,000 will get us through twelve months. It will bring us to EBITDA positive and cashflow positive and set us up to then reload with those investors for growth capital only.
Jared, thank you. I’m going to bump you down into being along with the masses. I’m going to bring in Hector with Tia Lupita.
My name is Hector Saldivar and I’m the Founder and CEO of Tia Lupita Foods. Before I begin, I have a confession to make. I may not look Mexican, but I am. I even have to convince other Mexicans that I am Mexican. We come in different shapes, color, and sizes. When I moved years ago here to the United States, I noticed that Mexican brands offered here were not. They all had a cookie-cutter approach to offer mild-tasting Mexican food filled with artificial ingredients, binders, and fillers. They we’re not innovating and their authenticity had been completely diluted over the years. Enter Tia Lupita Foods with our list of clean, simple ingredients, innovative products, and authentic family recipes.
Our mission is to build a bridge to better for your healthier Mexican food products. Every story has a beginning. My story begins with a family recipe for a hot sauce that had been passed down to a single-family member from generation to generation. You see a huge percentage of Mexico’s population is middle or lower class. We don’t inherit houses, jewelry or cars. What gets passed down to us is our family recipes. Those are prized family heroines, and it was thanks to my mom’s shipments of her family recipe hot sauce that I realized there was a big wide space that needed to be addressed. There is a need for better healthy, authentic Mexican food products.
The Hispanic food and beverage market size in the US is over $60 billion and over 30% of new generations are Hispanic. We’re paying attention if it’s healthy and sustainable. Our line of hot sauces is made with clean, simple ingredients that you can taste. We source our ingredients locally. We’re non-GMO gluten-free. We have no added sugar and a very little salt. We continue to validate that the hot sauce subcategory is on fire, no pun intended. Hot sauces are the number one condiment in America, even ketchup. Our hot sauce is the second-fastest growing in the natural enhanced channel and top fifteen brands out of over 400 brands.
We developed a line of cactus tortilla and tortilla chips that started to hit stores late in 2019. Whole Foods has been a big supporter for us, but why cactus? Nopales is a food of the future, but don’t take my word for it. There are many articles that have been published to educate us about the nutrient-dense properties of nopales. They have the same superfood properties as kale, moringa, or goji berries. Not only that, they’re the most sustainable plant in the world. Nopales grow in the desert. They need very little water to grow and they have two crop cycles per year. Tia Lupita is the first brand in the United States to introduce nopales as an alternative functional ingredient.
Our line of cactus tortilla chips is 100% plant-based and grain-free. All five offerings have 4 grams of fiber per serving. They are light, crisp, and pack some flavorful heat. They are truly delicious. Our line of cactus tortillas is the number one bestselling hot new product at Amazon flatbread category. We’ve held that position. We’re a low calorie and low carb compared to other corn tortillas out there. We have developed our grain-free cactus tortilla with the help of our friends at Renewal Mill. We are also lowering calories and carbs in a regular grain-free tortilla. We are the first tortilla to use okara.
Okara is a by-waste product of tofu and soymilk. It’s upcycled and processed into an alternative flour that is nutrient-dense packed with fiber and protein. Tia Lupita is a member of the UpCycled Food Association, and we are committed to keep using sustainable food ingredients like nopales and okara to help reduce the overall food supply chain carbon footprint. We need to keep that commitment as we continue to double our growth year over year. We are in trend and the market is coming to us. We are looking for investors to participate in what we’re affectionately calling our apocalypse syndrome.
These funds will allow us to continue fueling our growth and strengthen our position as we strive to become the healthiest flavorful and authentic Mexican food provider in the United States. We are a team of young, diverse, passionate professionals, and combined, we have over 60 years of CPG experience. I know we’re living in crazy difficult times. Aside from a global pandemic, we’re also struggling with divisive rhetoric profiling and building walls. I like to say that my mom built a bridge to me by sending me her hot sauce. Let Tia Lupita build a bridge for better for your healthy Mexican food products.
We’ll do the drill and we’ll start with Aditi and her question.
The same question, Hector. What have you done during this time of uncertainty to make your business nimbler, capital-efficient, and resilient?
When everything started to crumble, we took a dive into our financial spreadsheets, started to review what were our burn rates and what we needed to cut, negotiate in order to survive. We negotiated new terms with suppliers and some of our service providers but also most importantly, it helped us pivot a little bit and focus our attention in what was happening online. We focused our attention in building a website that was eCommerce friendly. Our original website was WordPress, very beautiful, big images, and all that, but it was not very intuitive for selling and didn’t give us the report. We did that and we also hired an agency to help us increase our presence in Amazon. That has been one of the most impactful things that we’ve done as we are seeing that our online sales are going to represent close to 18% of our business.
Chuck, do you have a question to ask?
It’s the same question. For example, cactus tortillas, and I also want to say cactus tortilla chips sounded interesting to me. It would be easy if I were in a grocery store and you were demoing to try them since I have no idea what they taste like. How do you plan to drive discovery and trial in the environment?
I asked that a lot to other people and try to get some answers. Brick and mortar still focusing there. The challenge is sampling and giving it. For us, it’s going to be social media and partnering with other brands to create some giveaways, social or online promotions. Also, partner with bloggers, influencers to help us elevate what cactus does and help educate consumers out there. You are totally right. This is something that needs a little bit of education. Cactus on itself could be a little bit polarizing. We’re introducing it here in the marketing in an approachable way with tortilla and tortilla chips, blending it with other flour so that people can start trying it and start learning about the properties.
I asked this question before, but you’re asking for capital and you need it for growth. What is it that you need beyond capital from those investors? What support are you looking for?
We’re looking for someone that can open doors for us, point us in the right direction but also, mentor us. Someone that has experience in consumer-packaged goods and then help us educate on what’s right and wrong. I’m a first-time entrepreneur and by all means, do not have all the answers. It would be fantastic not only to partner with someone that could provide the funds, but also to be a sounding board for us as well.
Hector, thanks for doing this. Thanks for being one of the bold guinea pigs to come up here and go full kimono. I’m going to bring in Smári.
Pitching A Brand: When pitching a brand, you need to incorporate why you’re the right person to build this brand and take it big.
I’m Smári and I’m the Founder and CEO of Smári Organics and the Creator of Kaffi. I’m thrilled to be here in the company of these other amazing entrepreneurs presenting. I’m excited to tell you more about our company, about Kaffi, our fundraising via Wefunder and about our potential together. You may think this presentation is about investment, but in reality, it’s about bravery. It takes bravery to start a company like ours, the monster product like Kaffi, and that takes bravery for you to invest in our future. We are here to solve a problem. The problem that I identified is that we all need more energy, but the solutions that are out there tastes terrible, to put it bluntly. Also, just as bad within energy drinks and the marketplace, it’s not good for your body and I set out to change that.
Quite frankly, you can’t be brave without having energy. You probably all know that the Red Bull gives you wings. Kaffi restores bravery. We all need more bravery every single day. You need bravery to nail that job interview, to ask somebody out on a date, to be the best parent you can be. You stumped new bravery to get out of bed. Not only does Kaffi restore bravery, but it’s also the best tasting medicinal drink on the market by far. We have three skews. The first one is our Keto Latte. We sweetened it with a touch of monk fruit, but flavor-wise, you took a latte-like on your favorite coffee shop.
There’s only one caramel sugar, two net carbs, both incredible numbers, 2 grams of protein, and 150 milligrams of caffeine with a touch less than two cups of coffee. Our New Orleans coffee, slightly sweetened and flavored the chicory root. Finally, my favorite, Iced Mocha with an amazing chocolate flavor. Both the Iced Mocha and New Orleans coffee is with cane sugar, but still only have eight grams of sugar. All three have 10 grams of protein. My solution was to design an energy drink that tastes amazing, consists of simple ingredients, and gives you sustained energy while also feeding your mind and your body in a positive way. Kaffi’s energy system was designed in such a way that you get an immediate take from caffeine and then the protein sustains you longer and prevents jitters that the caffeine wears off.
The net result is that we enable you to be a great version of yourself. What’s as important as the positioning we’re taking with the branding is summed up in a tagline, “Kaffi Restores Bravery.” It’s a very positive approach on messaging that doesn’t tie us down to an Arab demographic. The product is a vehicle for our platform to do good with our message of bravery. We’re in the crosshairs of a couple of fast-growing categories, mainly regenerative coffee and functional drinks. Seventy-two percent of Americans drink coffee and 43% of them drink it daily. More than half the Millenials drink cold coffee. The ready-to-drink coffee category has been growing at an acre of 18% since 2016 and it shows no signs of slowing down. The functional drink category has shown significant growth as well. We lost Kaffi in the middle of 2019.
Retailers recognize very quickly how integrated coffee is and both Sprouts and Kroger invited us to participate in the innovation programs. We gained quite a bit of distribution in just a few months. With the environment and challenges, we put an increased focus on eCommerce in Amazon. Both of which can be a challenge for a refrigerated product. We were able to identify a path for shipping capital sustainable cost, and I’m incredibly excited that we launched and direct eCommerce a little bit later. We’ll have the ability to catapult our sales. In terms of our overall numbers, we finished in 2019 with net revenue shy of $400,000. We expect to roughly double year over year for years. We feel with our imminent direct-to-consumer knowledge, we can achieve those numbers in spite of what’s happening at retail.
Our aim is to be capital-efficient with our approach. We’re fundraising via Wefunder.com. It’s a crowdfunding platform that enables everyone to invest. The minimum investment starts at only $250 and it takes less than five minutes to invest. This essentially democratized fundraising and we are raising up to $1.5 million convertible note in terms of $4.5 million cap, 20% discount. There’s a bird incentive. We may raise some of the prices depending on where COVID takes us. Why invest? We make a product that’s incredibly delicious and is built around the smart energy system that we can easily apply to plant-based drinks. Categories’ on fire. I’m a seasoned passionate entrepreneur. I’ve done it before and I know what it takes to grow the company. We have a brand that’s a perfect resource to an eCommerce or bottles essentially to sell themselves. The segment is quite frankly one of the best in terms of multiplies that exits.
I’m going to throw a little loophole and I’m going to switch up the order and let Chuck go first with his question this time.
Nice work and congrats on the expanded distribution but getting on-shelf is only half the battle. You then need to get off-shelf. Consumers need to buy your product. How are you planning to support the increase in distribution by driving trial and discovery? Where and how?
Since COVID started, retail sales plummeted. We essentially build a business and we’re going solely online eCommerce and Amazon and we’re going to focus on distribution retail stores in Northern California. I’m in Petaluma, north of San Francisco. We are going as capital-efficient as soon as we possibly can by changing our model and then by building.
I do think you answered both questions, which is fine. I’ll add the one other, which is since you’re raising on Wefunder, which is a different approach, what are you hoping to get beyond the capital on that platform? We’ve asked the other two thus far about what support they’re hoping to get from more traditional investors through traditional investment vehicles, but why Wefunder? What support are you looking for from them and from that type of funding mechanism?
It’s something I’ve thought about a lot and traditionally, you’re raising from accredited investors and you get 2, 3, 4 individuals or groups of people and they can provide a lot of support. Somebody has done it before, or they’re going to be closely working with you. With Wefunder, we have 50 or 60 people that are investors. They’re all much lower amounts, but what I have is a hoard of Vikings. They all have a stake in the company and they are our ambassadors. It’s in their best interest also to help promote us and spread the word. With that group of people is going to grow even more. We’re getting funds but also we are getting a larger community as a part of that. My challenge is how can I be smarter about engaging them and then utilizing them for more than just the money that they bring in.
Smári, thank you. We’ll bring in Emily and Cole from Slice of Sauce.
I’m Emily Williams, I’m CEO and the Cofounder of Slice of Sauce.
I’m Cole Williams, Cofounder of Slice of Sauce and Emily’s husband.
When I was a child, my father owned a restaurant and he was famous for his barbecue sauce. A couple of decades later, he no longer owned the restaurant and I was trying to resurrect the sauce and I was going to sell it at the farmer’s market in my neighborhood. The recipe called for a bunch of veggies. You braise them and then you throw them in the trash. I thought there’s got to be a creative way to repurpose them. I thought I was going to create a spice rub, sell it alongside the bottle. I ground the ingredients up and put them in the dehydrator and what came out instead of the spice rub was a sheet of barbecue sauce. I was about to throw the thing in the trash and Cole walked in the door and he used to be a chef.
I saved the day. I said, “Don’t throw it away just yet. Let’s taste it.” You always have to taste, even if you mess it up and what we realized was that it was amazing. The flavor was incredibly high impact and concentrated. We decided to have a tasting party and we invited a group of friends over for burger night and we put our slices of barbecue sauce on the burgers. Immediately, we started to get these sound bites that were echoing our value proposition, which were it’s the perfect bite every time and it’s this mess-free convenience. It is a big, bold flavor that consumers are looking for when they put a sauce or condiment onto their burger. Right away, we were like, “We’ve got something here.” It’s shelf-stable, vegan, gluten-free. It got the best ingredients. No preservatives, high fructose corn syrups and it’s non-GMO.
From there, we set out to get some consumer validation and some feedback, and we launched on Kickstarter to do that. We doubled our goal on Kickstarter, but also what came out of that campaign was this viral media response. We were written up in Time Magazine, Food Network Magazine. The New York Post did a print, and above and beyond that, we had requests for distribution all over the globe. We knew we had a good idea, but now we knew we had a big idea. We set out for the next phase.
When we’re talking about how to fulfill any of those distribution requests, we start talking about our omnichannel approach to this $22.5 billion condiment category. We know that there are about 300 million sandwiches eaten in the US every day, and all of them use condiments of some sort. To start, we’re focusing heavily on eCommerce, as we’ve seen many people move to eCommerce during this pandemic and post-pandemic world. We’re well-positioned to sell through our website through Amazon, Thrive, even Walmart.com. It’s lightweight, small footprint and shelf-stable.
We’re also going to tackle some regional retail and then alternative channels to find our picnickers, tailgaters, and outdoor gatherings, which are going to spike more than ever in this post-COVID world. In larger volume applications, we see these solving problems at airports, stadiums, hospitals, schools, and generally food service. In this post-COVID world, we’re not going to see bottles or self-serve condiment stations, and this can solve that problem. We’re talking about clean condiments in two ways. One, we have a clean label, but this is sanitary and truly clean.
Emily mentioned things like stadiums. We have the opportunity to put edible logos on our slices. You can have your very favorite team on your sandwich and your jersey, but we also have been approached by very large brands to do licensing deals and partnerships. We can lean into these established brands as we’re a new brand into their equity and tap into their tribes. The endless flavor possibilities, our pesto, Korean barbecue, teriyaki, and much more. It’s not just this slice of ketchup or novel idea, but flavor in a new form.
Pitching A Brand: Giving your investors net revenue numbers will have them walk away with a better grasp of where the company has been and where it’s going.
Our retail price is $5.99 for a pack of eight slices, but we’re working on single server applications for $0.75. We’ll launch with ketchup and sriracha but honey mustard and the Kansas City barbecue will soon follow. Our margins are about 33% fully loaded and burdened with trade and freight, but those are going to climb substantially with some automation and customized equipment. Our store placement focuses on bakery deli where we know impulse purchases and velocities are going to be higher.
We’ve spent years building out the infrastructure of the brand Slice of Sauce, focusing heavily on how our package can educate the consumer as to what this product is. We also had the opportunity to participate in Techstars Austin 2019 Cohort. We were finalists at Naturally Austin’s inaugural Pitch Slam, and we were nominated at the World Food Innovation Awards in 2019. Over the years, we’ve had the chance to sample to about 4,000 people and from that, we’ve learned what the consumer likes and doesn’t like. We’ve been able to refine and pivot the product to perfectly position for launch.
We’re raising $500,000 on a convertible note and that’s going to push us through our launch and give us twelve months runaway. The use of funds includes an emphasis on digital marketing, 3 to 5-second videos on how-to and consumer education, as well as some customized equipment, which will give us some technical installation and proprietary know-how and then the remainder will be spent on operations. That’s Slice. Welcome to the Slice age.
If my wife and I tried to pitch together, that would be ugly. Aditi, I’m going to let you go first this time and ask your question. This is unique because these guys, for all intents and purposes, are prereq. It’s an interesting twist on this question.
Talk to us a little bit about COVID. What have you done to plans for uncertainty and how has the business become nimbler or how do you plan to make it nimbler and more capital-efficient and more resilient?
We’ve looked at this in two ways. One is, what can we do, which is on a financial front? We’re already a lean team, but we cut every last penny that was not necessary. We took advantage of programs like PPP and other grants and trying to be as resourceful as possible in the moment, but then it also gave us an opportunity to look at the product and say, “How does this solve a problem going forward?” Our single-serve solutions and our path to food service may be shorter than we thought it was and our path to profitability. It gave us some time to plan and be more strategic going forward with our go-to market strategy.
Chuck?
You mentioned you’re a brand-new format for delivering flavors that people are more or less accustomed to. How and where do you plan on driving discovery and trial so folks can taste your product because I’ve had it and it’s great?
We’re going to show up at people’s houses and start making them burgers and grilled cheese sandwiches. eCommerce has everything and social media is an incredible tool. Because of the viral nature of our Kickstarter campaign, we have an amazing media list. We can tap into that to help get the word out there, but also things like the licensing and the partnerships, even with local brands that also meet consumers in the same space that we do, whether it’s tailgating or camping RV crowd. Doing little giveaways and then lastly as Emily said, the single-serve slice is great because we can give them away on our website as long as consumers pay for the shipping and include a recipe card. Emily also mentioned through our social media, putting together this video content is everything. Nobody wants to read anything anymore. Our attention spans are too short. These 3 to 5 seconds either GIFs, videos or TikTok to show why the slice age is the best age to live in.
What support do you hope to get from these earlier investors beyond just the capital?
We’re looking for a diverse cap table because our channel strategy is diverse. We’re hoping for people with deep networks within foodservice, and also, working with digitally first brands. Also, someone on the retail side, but we have to come at this from a true omnichannel approach and we’re hoping our cap table looks the same. Above and beyond anything, we’re looking for a mindset and we’re trailblazers. We’re not afraid to be a little irreverent, a little bold, and be the first to do something. We’re looking for investors that also share that mentality more than anything else.
Thank you so much, Emily and Cole. Before we start, I want to call out all four and say, it takes a lot of courage to do what they did. To get up there in front of their peers and pitch and know that what’s coming next is this conversation that we’re going to have about what we saw and forth. Everything that we give here is meant to be not only constructive to the four founders who pitched, but to all the founders who are reading and hopefully use what we’ve discussed here in ways to reshape how you speak to and present to investors. Let’s start with Jared at Lillabee and get some thoughts. I’ll start with you Aditi about the pitch. What did you like? What did you feel maybe was missing and any tips for Jared in general?
I thought that Jared did a great job talking about the market and how big it is. It was clear to me that this is a big opportunity and that he’s going after this healthful indulgence, grain-free, dairy-free world. He asked us that question. There could have been a little bit more there. I also would have loved to know not just about why Lillabee but why you, why him, why is he the right person to build this brand and to grow this brand? The last thing I’ll say is that at times, it sounded like Jared was reading off of a script and I don’t know if he was or wasn’t, but it made feel a little bit less like a conversation. A little bit more robotic and I would have loved to see a little bit more charisma.
One of the challenges, and I’ll give him props too, is his slides malfunctioned right before he came on. He was having to pivot a bit but I agree. Chuck, what are your thoughts on Jared’s pitch and presentation?
I would say if I had to summarize the presentation in the Q&A, and I’d like to get into specifics, I thought his Q&A answers were perhaps among the best, if not the best, giving me specificity and direct answers. The presentation itself, and it may have been because of the slides, I thought it was a little weaker on the end of what we saw and let me tell you why. I think we spent way too much time on the comparison of the digital versus retail channels as a whole and not much with respect to his business solely. I know Lillabee, like it, and eat it, so I’m familiar with the product. If I wasn’t familiar with the product, I don’t think from that presentation, I would have gotten a great idea of what the product is, who the target consumer is, why they’re going to buy it, what the product costs, especially if you’re comparing it to Oreos. Why is someone going to pay a premium? He did hit the ‘better for you’ angle, but I would’ve liked to hear a lot more about the product.
What I loved is how much he focused on being scrappy, because my experience speaking about Angels, not about venture funds, which are different, is that a lot of the Angels we work with are super focused on whether businesses are going to be able to be scrappy and how long can you exist and grow with my money. Knowing they could go to twelve months, cashflow, EBITDA positive, or at least they have a path to what I thought was important to put in there. Lastly, I would have liked a little more data around how they’ve sold and how they plan to be selling. Meaning, net revenue, numbers, velocity numbers, etc. I thought the other presentations for the most part gave us a little bit more data.
I would agree and I’ve had the benefit of seeing Jared pitch a couple of times and I thought he’s artistic. It’s a great pitch and I love the fact that he’s a contrarian, that he saw this before many others and he was out at retail doing the normal grind and then suddenly sat up and said, “What the hell? Why am I doing this? It’s inefficient. I’m not going to win. I’m going to think differently. I’m going to go small, all-in to digital, and build my brand and then use retail to curate.” I thought that was great. I think he did make that case quite as powerfully as unfair to make it before and that was partly because he didn’t lean into the data as much.
Part of it too goes to the slides, but I also liked the way he answered the questions specifically and thoughtfully. A key one in general is that when someone asks you, when an investor says, “What do you need from me beyond just the money?” having a real concrete answer is important because, Aditi can speak to this, most investors want to know that they can play a role in de-risking the investment. That’s the value that they add to their portfolio companies. Their knowledge, their connections, their core competencies. Let’s jump to the next one and talk about Hector, Tia Lupita. I’ll start this time with you, Chuck.
It’s small, but one of the things that left me with the biggest, “I’m not sure I get the goal here,” was the focus on upcycling and okara that was thrown in there. It was a great presentation and he did a great job of being product forward. I very much want to try all these products after seeing it. If we’re talking about upcycling okara and the entire rest of the presentation was around a merge of authenticity and better for your ingredients, I don’t quite understand how okara fits in there. I’m not an expert on okara so maybe it is authentic ingredients Mexican foods. If it’s not, and I think what we’re effectively saying if we’re Tia Lupita is we value better for you ingredients more than we value authenticity, and that was a slight concern I left with.
I loved the focus on nopales and the cactus tortilla chips. Cactus tortillas is awesome because when he started the presentation, I thought, “What platform were you going to build from hot sauce? What’s next?” He hit it without me having to ask it. I love the presentation. When it came to the Q&A section, I thought it was a little bit weaker. I didn’t think we got precise and measurable answers I would have liked and as Jared, for example, gave around how they were going to be more capital efficient, I thought he did give a better answer when it came to driving trial because a lot of people said social media. Social media is exceptionally broad and I need way more specifics about how you plan to utilize social media to drive discovery and trial. I thought at least he was specific around using people to educate around consuming cactus because it’s going to be important.
Pitching A Brand: A pitch is an opportunity to build a connection.
I do agree with a lot of things that Chuck has said. I did write down the same point on upcycling. Does this get consumers to buy more Tia Lupita? I’m not sure what the answer is. The other things that I wanted to mention was that I loved Hector’s story. I thought that he did a great job of incorporating why he’s the right person to build this brand and take it big. I thought that was nice and he’s done that in almost every presentation I’ve seen or any manifestation of the brand. For me, the thing that was missing was a little bit more detail and depth into why they can be different from someone like Siete. They always come to mind. I want to understand why consumers are going to not just try you, but keep coming back to you with something almost like an elephant in the space, I would have wanted to address that and if we continued the conversation, I would ask him head-on, “Tell me why are you different and why will you continue to be different?”
The hot sauce is fantastic. I’m a user. One of the big risks when you start to become a platform is how do you support it. I thought one of the things that was smart in his presentation and smart in that go-to market is that the flavors of the chips are the flavors of the hot sauces. He incorporated the people who love the hot sauces right with the flavors of the chips. I thought that was well done and I think his story is compelling and he does a good job. Moving from adding a grain-free tortilla is the message that happens to use the upcycle ingredient. I get that.
Sometimes you’re winding up messaging now on many things. You’re messaging on upcycled ingredients, on nopales, on heritage, and all of those. In his hierarchy of message, he’s going to need to clean it down. He struggled on the first question. I think he lost his place, but overall, I know all these guys but I thought he did a nice job. Let’s go to Smári. It’s a different approach. He has been raising money the more traditional way. He’s gone to Wefunder where he feels he can activate a tribe. He’s appealing slightly different in his pitch to maybe a sophisticated investor. A more impassioned or a motive investor instead of a more clinical/cynical investor. Aditi, what are your thoughts on Smári’s presentation?
I thought that you did a nice job. I thought the presentation was beautifully done and simple, easy to understand. I liked that you were building the brand around the whole concept of bravery. I think that’s smart. It ties into the heritage of Icelandic products nicely. This one from a traditional investor’s point of view is left of center for us. When I see companies like this, I always wonder to myself, “How are they going to do this in a competitive market that needs a lot of capital?” I left wondering whether Wefunder is the right way to do this and if so, where is that capital going to go? How are you going to execute because beverage is tough? Coffee is tough and I left wanting to hear more on those topics.
She nailed it. I should proxy my time to her. I wrote down bottled beverages take a lot of capital, and there are lots of coffees with functional or better few ingredients and protein. That didn’t leave with a, “Why you?” In a time where capital efficiency is key, I didn’t think we got a great answer there. This is going to be a far more capital-intensive business than the others. I did love that he gave us net revenue numbers. I felt like I walked away with a better grasp of where the company’s been, where it’s going. While I am not personally a huge fan of crowdfunding, he gave the perfect answer when it came to what’s the value of crowdfunding, with respect to what those investors can bring and because it’s the only good answer. “I’ve got a hoard of Vikings out there proselytizing my product.” It’s a great answer, at least thought about it. I didn’t get any margin or profitability information, which for a category like this, I’d like to know where he’s going to land because I think it’s going to take a lot of money.
Some of the stuff we coach them not to disclose things that they’d be uncomfortable being widely public. Once it got out that Chuck was on this, we knew this thing was going to go viral. We wanted to keep it close. The thing that he needs to continue to focus on is the why. What is the reason for being? Why would this get picked up over anybody else’s? He did talk about his pivot and strategy in recognition. I thought that this is a very capital consuming category and he believes he’s figured out a pathway to leverage into this eCommerce growth in beverage using network design. That’s going to be an interesting experiment that I would love to have him put some milestones out in terms of what that success looks like with the launch on Amazon and the D2C.
I get the Wefunder. It does build a tribe. Also, we have to recognize that in this post-COVID world, that funding gap between seed and funds have grown. There are a lot of brands that are in the middle and there aren’t necessarily when you’re sub $1 million in revenue and you’re needing to raise money. There aren’t as many funding mechanisms out there. There’s been some progress made around equity crowdfunding in terms of cap table cleanliness and all that stuff. He, to me, represents an experiment. That’s going to be very interesting to watch, witness, and see if he can leverage Wefunder and leverage this eCommerce D2C on beverage and grow. Certainly, I’m rooting for him and the product is great.
Contextually for everyone reading, but also for the people who pitched, they only had five minutes plus a little bit of Q&A. I don’t know that I’ve ever seen a pitch that short where I didn’t have a whole lot of questions and concerns afterwards. I want to make sure that everyone knows that. It’s impossible to cover all this stuff.
Truthfully, I’m going to say and use that as a follow on, in any good pitch you want that. If you leave an investor with no questions, there’s no reason for another conversation. The whole goal in a pitch is like writing a good song. You want to hook and you want them to come out, going, “There are things interesting that I want to find out. I want to sit down and have another conversation.” We’ll end with Emily and Cole with Slice of Sauce. I’ll go with you first, Chuck.
Aditi led with this point. I’m talking about it here with them, but I’ve written it down as a meta point for everyone, which is a pitch is not just about delivering data. A pitch is an opportunity to build a connection. It’s not because we’re in a ‘better for you’ industry and I live in Boulder and therefore I’m a hippie. There is value to understanding that there are a lot of soft factors involved. Even professional investors that they feel like they have built a connection with you because you’ve been able to be personable, friendly, relaxed, warm and open. They are going to be more likely to look at everything else you say favorably.
I would say among the four pitches, I thought they did the best at creating that connection to the pitch. I like the succinct origin story. I’m personally concerned around the combination of delivering a new format and then also the pricing. I look at it and it’s $5.99 for eight slices. If you compare that to sauces, I think it’s significantly more expensive per serving. I’d like to see that data from them and also less flexible in use. For example, a bottle of ketchup. I can use it for a hamburger, but I can also use it for tater tots. I’d love for them to address that too. They said they’re going to raise $500,000 in their pre-revenue. I would love to hear what’s it going to be used for and how long is it going to last because scrappiness is key in the market.
Aditi, anything to add there?
I agree with a lot of what Chuck has said. I think that the only other thing that I want to hear is more on the foodservice side and the opportunity to get this on every sandwich in America. There’s an opportunity there that they could have expanded on and I don’t know if that’s a big part of the plan, but more specifics on exactly what they’re going to be doing to get from tailgaters and outdoor enthusiasts over to all the sandwiches that exist.
My feeling is, first of all, great energy on the pitch. I saw that come through on one of the Jets and Alex as well and I thought that they’re dynamic. It was super smart to pitch together and I thought that was great. Their method of pitching is compelling. The biggest challenge for them is going to be that they are going to have to figure out how to drive trial because they’re introducing a completely new form factor and that is hard to do. People are going to be skeptical. People are going to be wondering, “Why should I do this?” They’re going to have to figure out where the best waypoint is to drive that discovery.
Elliot, something I also try to figure out is whether they’re going to be the right people to do that. That’s the hardest question for me to answer sometimes. I agree with that, how to drive trial, but I got the vibe that they were going to figure it out.
The one thing we typically do here is use a little bit of time for Q&A from the group. If the panelists can stay and if anyone has any questions, we’ll do our best. Here’s one from Joshua, “Do the panelists have any suggestions about tasting and sampling in the new world?”
There are a lot of ideas floating around and new brands are doing different things, but that you have to meet customers where they’re at. Single-serve samples are important, making sure that COVID doesn’t get in the way of people getting just one single thing. Brands that I’ve seen that do a single sachet of their product or a mini size have had more luck sampling than big sizes. Also going to meet customers where they’re at doing it guerrilla-style. There’s nothing stopping you from going to more people are lining up and handing out single-serve samples of your product to everybody in line. I think that there’s some creative thinking that could help what you’re doing. It’s about trial and error. Try fifteen different things to get one that works.
Nothing to add to that, giving your product to people for free. It was the way people did it in demos and you can’t do it in demo. How can you do it, where everyone’s still figuring it out? I was a little concerned about the idea of sending a $0.75 slice because how much it’s going to cost to ship each one of them and what’s the efficiency? I don’t have any better ideas.
We don’t have any other questions in the Q&A. I want to thank our founders, Jared from Lillabee, Hector from Tia Lupita, Smári from Kaffi, and Cole and Emily from Slice of Sauce. Thank you, Aditi and Chuck, for doing this and hope it was enjoyable and helpful for everyone. Take care.
Thanks for inviting us.
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