The Startup CPG Podcast

Ryan Williams
I would say exit multiples are helpful, like, or just showing some, like, big exits, you know, with big valuations is a good thing to show in a deck. And then I think, like, a lot of times the deck is the hook to get into a deeper conversation that's more financial in nature. And I think if that kind of financial conversation can show, you know, the kind of shorter term milestones you can hit with that funding, that I think is going to defend your valuation. I see the deck as kind of like pulling someone in, but your model and conversations is getting them to actually write the check.

00:40
Ryan Williams
The one other thing I would say founders should be cautious about is sometimes they include as comps, like companies that have raised a lot or a lot of money at some valuation, and they're sometimes unaware that those have actually been really bad returns to the investors. And if the investor you're showing that knows, like, wait, all the investors lost a ton of money on the company you're showing as a reference point?

01:04
Daniel Scharff
Welcome to the startup CPG podcast. Recently on our Slack channel, we had a super interesting topic come up around what kind of valuation could I defend as an early brand going out to raise. Now, I don't know a ton about the topic, but I do know enough to go ask somebody who does. So I roped in today's guest, Ryan Williams from Fabid, which is the food and beverage investment database. He's been out there collecting data from all the transactions over the last few years, and so he can talk about what are the valuations like right now? Who's getting that money? Who's writing the checks? What are the benchmarks that you can use now and then, also from the previous few years? And he also gives some great advice for early brands that are raising. Hope you enjoyed today's discussion. I sure did. Hello, everyone.

01:49
Daniel Scharff
Welcome today's show. I'm here with Ryan Williams. He's the founder of Fabid, which is a financial services company known as the Go to source for CPG transaction information. Prior to Fabid, Ryan led finance and operations. He was the CFO at Rise Brewing, which is a venture backed coffee brand. Before that, he was an investment banker at Houlhan Loki, which handles a lot of the transactions you've seen in CPG, like true food selling to Mars, a lot of stuff. So, Ryan, welcome to the podcast. Maybe you can just tell us all, how does somebody like you get interested in this CPG transaction space?

02:25
Ryan Williams
Well, first of all, thanks for having me and pleasure to be here. How did I get interested in all of this. You know, I got this advice when I was finishing up college to just pay attention to whatever you're most curious about and go take a job in that, or what the most prestigious job is and go take that. So that's how I ended up, I think, on the finance side. And when I was there in my early days at Hooligan.

02:48
Daniel Scharff
Wait, those can be different things, though. Most prestigious and things that are most interested. I don't know which is better advice, though.

02:54
Ryan Williams
The interesting side was, one of the first transactions that I saw while I was at Houlihan was the sell side for pretzel crisps, which are those flat pretzels that everyone is familiar with. And so I was there as, I think, an intern still. And after the kind of boardroom presentation was done, HR sent out an email to everyone in our, like, nice park Avenue office that all the bags of pretzel crisp that they had decked out the boardroom with as kind of like a yemenite, you know, presentation bonus or whatever, we're up for grabs for all these people in this nice office that were making nice investment banking salaries.

03:32
Ryan Williams
And I thought it was so cool just seeing, like, 200 people stop what they were doing and, like, diving into this boardroom and trying to grab, I think they had, like, the special edition, like, peppermint chocolate bark ones that were available around Christmas time. And I was like, you know, that's cool. And then on top of that, the people that had started, it seemed like they were obviously pretty happy. And I think that just, like, totally drew me even more into the CPG and, you know, and the financing side of it. And it kind of sparked this question, too, of, this is awesome that all these people have made it to this kind of ultimate event for many CPG founders, which is the exit. But how have they gotten here? How they fund themselves before they made it to the boardroom?

04:16
Ryan Williams
And I just kind of been curious about that for, I guess, ever since.

04:20
Daniel Scharff
All right. It reminds me of my own journey where I was in management consulting and just doing this honestly very boring, back office, cost reduction type work. I think some consultants do much cooler work than I was doing, but I was like, what's the opposite of savings that no one cares about or will ever see? Like, oh, the stuff that they sell at 711. That's fun. You can pick it up. It's exciting. And, yeah, definitely. I mean, a lot of the work might be similar, but at least in CPG seemed much more tangible. Like, you can touch the stuff. It's fun. So, yeah, I relate to that and then just the excitement of the new brands.

04:55
Daniel Scharff
So, okay, I wanted to chat with you today because sometimes there is just what I would say, a banger of a thread in the Slack channel that I think is really interesting that everybody gets very excited about. And you were kind enough to weigh in on this one recently, so I wanted to just dig into it and then go deeper. What somebody asked in the slack, very common question, what are the valuation multiples for an early brand? Because I'm preparing a pitch deck for family offices. I think it's a great question. I also love to hear that they're going for family offices, given probably a lot of what we're about to talk about. So first I just threw out my initial kind of amateur answer.

05:35
Daniel Scharff
I was like, well, I kind of remember in like 2019, basically what was going on is that I think brands had maybe like, you could defend a three to 5 million valuation on day one. I don't know. People like CPG and entrepreneurship was still growing a lot then, and there were some exciting exits. And I think if you, like, had a good story and you were confident, you could go out there with that kind of a number and be like, oh, but it's like a safe or something. I don't know. Don't worry about it'll be fine. And the investors might be like, yeah, no, it's not about the valuation. It's, do you believe in this brand or not? But then, you know, maybe like later on we get into the pandemic, things like, really tightened and then expanded again.

06:12
Daniel Scharff
And then I think at that point, people were just, it seemed to me much more consistent on the, like three to five x revenue valuation, which if you don't know what that is for somebody like me, that didn't used to, you basically are just saying, what's the revenue you have for the last twelve months? Multiply that by three to five x and that would be the range. And if you're a very early brand, that's tough. So still, if you're a day one brand at that point, okay, you're not getting the three to five, but it's going to be lower, but you'll have a story. So now I think, man, it's tight. Like the VC's that I used to hear from, I don't hear from anymore. They're like not around writing checks.

06:50
Daniel Scharff
If they do write a check, they're like bragging to me or somebody about what kind of a ridiculously low valuation they got from the person, which honestly makes me very unhappy to hear that from them. I'm like, okay, we're not friends anymore. And then that's if they're writing the check. Right. So because of that, I think a lot of founders have just, they started looking other places. So, okay, first of all, what I really know is enough to tag you into the conversation. Yeah. So what are you seeing? Because you gave a really awesome answer on the slack thread, but what kind of valuations are you seeing for pre revenue companies and low and high side of the range, and what would make you qualify for one of those sides of the range?

07:34
Ryan Williams
Perfect. So I would say the earlier you are really, at any stage, I think evaluation is having two parts. One is this foundational just for a founder and a concept alone to put their time into getting something off the ground. Even if you have zero revenue, a company that has zero revenue isn't worth zero. There's some initial anchor value there. Then I almost think of on top of that, as the company starts to grow, what do you add to the revenue component? Because if you had $50,000 in revenue, the company's not worth 150 or even $200,000. So I think decomposing it, what do we ascribe to this concept and the potential and the IP and the founders and all that, and then what's almost the financial component?

08:20
Ryan Williams
As you grow, there's this crossover that I would say happens as you get a little farther down the road, and you can look at it more purely as just the financial lens than this kind of, I would call it, like, a foundation value.

08:35
Daniel Scharff
Okay, so nobody's explained it to me quite that way, and I like this. So let me ask you a dumb question already, which is, okay, that anchor value, I'm like, okay, wait. So I just, like, have an idea, and all of a sudden that has anchor value that could be worth over 500k. Now, is that because, like, no, it's a good idea. And so, yes, there's value to that. Not that I would like to buy it from you, this idea, at that amount, but, like, that as a business idea, if you're going to go for it, has value, or there just has to be value for this to work as a business, because if you don't have capital, it's not going to happen.

09:07
Daniel Scharff
And so we're going to give you a little bit of rope that there is value there, or how exactly does that work?

09:13
Ryan Williams
I think it's both. I think, as you said, if you watch a shark tank episode where Kevin talks about cash flow valuations for a company that's just started, it's a nonsensical position because that's irrelevant to something that's so early. I think there's a lot of factors and it's holistic into what that number is. So I think some of the major ones that if I was in the investor chair, I would be thinking about, and I think a lot of investors are, first of all, what's kind of the immediate growth potential of this? Who are the people that are starting it? Have they sold a company before? Do we feel like the brand is really well defined and is going to have great traction?

09:51
Ryan Williams
So all of those things, whether you can quantify them as there's some companies, before they even launch, they have maybe a relationship with a major retailer that's going to put them on shelves. So I think if you can quantify what the kind of initial growth curve looks like, what the market opportunity is, and get buy in, that there's long term, ultimately an exit value to this concept and you are the person to make it happen that I think influences this, whatever we want to call it, foundation value. And what I've seen as well. Let's just kind of take like anecdotal median. I think the anecdotal median of the median CPG startup, which of course no founder thinks they're the median, but there is a median in any cohort.

10:33
Ryan Williams
I think three years ago or at the peak of the market that median was probably 5 million. And I would say now it's probably two and a half. Just as like I've got an idea on paper and you know, some good people and a concept here because I think a thesis on the investor side is we can't own so much of this company so early that the founder is no longer incentivized. And that opens a separate conversation of why sometimes, even though they've produced, in some cases, good companies, some of the venture studios have run into issues because they have such an outsized portion of equity from day one that when the company grows, the founder doesn't necessarily have enough to retain the incentives that they would in another case. So that's how I think about it.

11:22
Daniel Scharff
Okay, so then from the investor standpoint, because I've talked to a fair number of early stage investors, at one point were like, oh, maybe we could do a startup CPG fund, something like that. When I talked to a bunch of them, they're like, look, it doesn't make a lot of sense investing at the very early stage because the chance of success is quite low. So you're saying, yeah, before they would want to leave you with enough of the company that you would still be able to raise money later and have an attractive exit for yourself to keep going.

11:51
Daniel Scharff
But now it's almost like they're like, we better have a bigger stake at this company if we're going to invest in it so that it can be worth something and have it kind of make sense, which so if in general that's pretty tough for brands and it's pretty tough for investors, I mean, it tells me that, yeah, I sort of like this person's question about going to family offices and like angel investors who, I mean, a lot of times they're investing because it's fun for them or they're passionate about like a category or a cause or the founder and want to help them.

12:23
Daniel Scharff
And it kind of lets everybody maybe milk their network, I would say a little bit and try to find some of their own personal champions who probably can't be as helpful to an early brand but aren't going to give you as hard of a time and giving you a good valuation is being helpful?

12:37
Ryan Williams
Absolutely. Well, ill say a couple of things because I know its always fun when theres a little bit of a back and forth on a topic because ive seen both sides. I think the downward trend in valuations is probably a long term positive thing because its going to allow those investors to have a good return. And theres a ton of people out there that have stopped investing because theyve had terrible returns. I think they get more capital flowing back into the ecosystem. And as we go through a cycle, it's a really difficult position for all the founders right now. I think it's empathize with every one of them and try to help all of them.

13:18
Ryan Williams
But on the other side of the coin, to get money flowing into the system, there has to be exits again, and there has to be exits that make the early angel backers a return. Unless it's just purely altruistic, the ratio kind of capital invested and the valuations that came in has made it so that almost every angel I know has taken a bath on their angel investing. So it's kind of this catch 22 of like, I think CPG is a nice industry by default and the people are certainly nicer than the average person investment banking. But I think also to re spark investment, there needs to be a reset in the equilibrium which has kind of been, I think, overcorrected and that's unfair. But I think we're kind of getting back to what makes sense.

14:06
Daniel Scharff
Okay. And so again, just to understand the why here, because like there are exits happening. And I think, you know, I don't have the most recent data, but if I think about what's out there on sell through data, like I think in general, overall store is up, categories are up, pricing obviously with inflation and everything is up. I think profits for big CBG companies are up, which probably helps them do more acquisitions if they want to. So people are making money out there, but it doesnt mean that the early stage investments have really paid off. And obviously when the interest rates are so high, its just money is not as readily available out there. So theres just less of that money flowing around.

14:47
Daniel Scharff
So ive read your most recent report and I know one thing that you call out there is it's not just that the valuations are low, it's just that the overall money going out there is pretty low as well, right?

15:01
Ryan Williams
Absolutely. Yeah. So it's fallen by more or less 50% in aggregate. So if you look at the investment into food and beverage across stages, it's down more or less 50%. And this most recent quarter was one of the lowest in the past ten. I think it was a little shy of 300 million. And then the majority of that is kind of disproportionately going to companies that are, let's call it semi established like series A and then established like post series A. So of that 300 million or of whatever we track in each quarter, maybe 15% of it is going to the early stage. Meaning in a given year at kind of the pre seed like seed plus stage, which I would say is companies kind of sub 5 million in revenue, there's probably 150 or maybe 200 million.

15:51
Ryan Williams
And then there's probably some money that isn't public and we can't find or track. So maybe it's a little more than that 250. Right. And I think like the biggest thing for founders to remember, or one of the biggest things is you may have a good brand that's investable and you're a great founder, but just think of yourself in a competitive market where your deck and your data and your is right next to ten other great people with ten other great brands, with ten other great products. And so you are ultimately competing with kind of the marketplace. And I think that obviously sets valuation. And if you need money, I think I would work backwards from let me see who's willing to give me the cash I need.

16:38
Ryan Williams
As a first question, as opposed to starting with this is my valuation and holding to it, which I think can actually harm you in both ways. Because if you're not profitable, your cash balance is dwindling, you've gone to more people, maybe you can't afford the launch that you wanted or the marketing program you needed, and now six months have gone by and you've anchored to whatever valuation you picked and you're in a worse position than when you started. So I think when there's a, let's call it a brand favored market, which there was in 2021, the VC's were kind of price takers and had to pay up to get deals. Now that dynamic is inverted and the brands are price takers. And I just think that's kind of the equilibrium that I find very interesting.

17:27
Daniel Scharff
One interesting thing is starting about, I don't know, a year and a half ago, the hottest thing to say would be focus on profitability. And you would hear every VC talk about that, kind of as if they thought they were the first people to ever say that to anyone. Theyre like, so what you need to do, hey, wait for it, is focus on building a profitable business. Like, okay, I understand why they would love to have that be true and everything that they invest in, but I dont know, for me, having started a brand, having been at tons of early brands, yeah sometimes you dont do that and you flame out and a lot of brands have done that very famously. But I also think like, man, you also do have to grow to be an appealing brand.

18:08
Daniel Scharff
I would almost approach it more if I were an early brand as like, okay, if I can raise money, like this is the amount of money I have to get to go to where I need to be, not like, oh, I need to be unit profitable. Like day one when I sell one unit, because it's just not realistic. You got to do trial runs, you got to build a brand and be able to invest in marketing and all that stuff. I don't know, I feel under equipped to really be like the only person on that side of the argument. But I feel like you might have some insight into it.

18:37
Ryan Williams
Well, I've tried to take the position too of like focusing on just our, you know, our data and analytics for our like marketing of thought leadership. But I agree with you that, and I would say like, I think sometimes there's a lost in translation of focus on profitability with be profitable. I think some companies were blind to profitability for a while and I think certainly that no longer is allowed or going to get you funded. But the question is maybe how unprofitable can you be? Or how much cash can you be burning relative to your growth? And I think one of the clearest cut ways ive heard an investor say they quick ratio, a brand theyre looking at investing in, is how much capital is this brand raised relative to the trailing revenue they've achieved.

19:26
Ryan Williams
And maybe if you've raised recently, you can kind of subtract that. But basically, how much cash have you earned and how big have you gotten with it? And I think if you can keep a ratio of two to one for a while, you're not in like that bad of a position.

19:38
Daniel Scharff
Maybe ideally two to one for how much you raised to what the revenue was.

19:42
Ryan Williams
Other way around, like revenue to your, and maybe you should really be at three to one. Or maybe that standard has gone up. So, meaning, so if you can get.

19:50
Daniel Scharff
To 10 million in revenue only raising 5 million, you're going to look good on that metric.

19:55
Ryan Williams
Correct. And even better if you get to 10 million using two and a half million. So also, like, it makes a lot of sense to founders that, like, I, this is where I think they're absolutely right, is they're like, you're telling me I need to be profitable or you'll come back to me when I'm cash flow positive or break even, and it's like, I wouldn't be talking to you. Yeah.

20:14
Daniel Scharff
What do I need from you at that point, buddy? Right. Well, you're not ready anymore. Yeah.

20:20
Ryan Williams
Right. Listen, I think a greater emphasis on profitability is positive. I think there's also outlier examples of companies that everyone anecdotally knows are wildly unprofitable but have also had wildly crazy growth. And the verdict is out on whether that was a good approach. We'll see. Do they get an exit and does it make their investors get a good return?

20:45
Daniel Scharff
Yeah, I mean, we've seen it go badly. Right. For plenty of them that just had no focus on it and just going for growth. And maybe they were part of a fad that has since subsided. But then we've also seen some companies just get on that raising trajectory, raise, build revenues and then sell to somebody who can then bring their cost down to like a fraction of what it was like if they get bought by a big CPG that has better manufacturing. So pretty interesting. But so at the same time, it's also true that, I mean, there are still transactions and people raising, but at least from my perspective, it's like more of sure thing kind of investments where you look at it. Or maybe the investors feel that way.

21:28
Daniel Scharff
They're like, yeah, once something is really proven, like there are people getting money, but it's ones where they're like, yeah, they feel like they can really see their way to the end, maybe they're not taking as much of a leap of faith. What do you think?

21:40
Ryan Williams
I, I think theres been a pull towards funds moving towards companies that are a little bit more farther along and more likely to exit. I think theres probably a hidden dynamic there as well, which is its really difficult to operate a subscale venture fund, a ten or 20 or $30 million venture fund. If you look at the fee structure for a typical fund, the fees are two and 20. So 2% on a yemenite $20 million fund, you have $400,000 a year to pay all your legal bills, your own salary, your travel expenses, etcetera. I'm not downplaying $400,000, but by the time you pay for all your fun infrastructure and salary and analyst, you're kind of an entrepreneur to running a $20 million fund.

22:26
Ryan Williams
And so what happens is if you run a successful $20 million fund, in order to kind of have more available, kind of ongoing operating cash available, you raise a 50 or $100 million fund. And so what's happened is like the smaller funds that were backing smaller brands, if they haven't had great success, haven't been able to raise the next fund, so they've exited or, you know, kind of aren't actively investing, and the ones that have had success have gone out and raised a fund that's twice as large or three times as large. And when you have a larger fund, you're deploying larger checks into larger companies. And so it creates this kind of gulf at the early stage. And again, it's another kind of reset that's happening. It's going to take a while.

23:12
Daniel Scharff
Yeah, I guess. I wonder then also because of the environment, then even, let's say a small fund makes a good bet on a brand, but still just probably the time to some kind of an exit now is extended. Even so, even if it is a good bet, they still don't have that money, probably, which means they haven't locked in the return, which means they're having trouble raising their next fund. But yeah, I don't know. And it also just makes me remember something like two years ago, it feels like where some of the big funds even that were doing kind of mid sized investments, like, let's say power plant that was investing in a bunch of companies then, like funds like, theirs were actually going much bigger. They're like, investing later stage. Like, oh, no, once it's like a sure thing.

23:56
Daniel Scharff
Like, I remember, you know, oatly, like, you know, had this huge investment, I think, from Blackrock, Blackstone. Sorry, thank you. Right before they went public, like, okay, sure thing, boom, throw all the money in public. Great return. It was sort of like that model, but a little bit earlier of like, yeah, they're definitely gonna make it money. Boom, turn, like, okay. And that was like a good model for a lot of them. But you know that, yeah, they, like, rebranded from PowerPoint to ground force, and I think a bunch of others did kind of a similar game. They're like, yeah, we're just gonna invest in later ones that like, yeah, we just put the money in, flip it, like, good to go. So, yeah, all of that taking money away from a bunch of the early brands.

24:34
Daniel Scharff
So I guess one question that I'd have for you then is what would you be telling an early brand maybe that doesn't have the, like, insta network of, like, dial for dollars? Like, are you, do you like that angel and friends and family route? What do you think about some of these financing options that are out there? What are you telling people?

24:55
Ryan Williams
So I think at the earlier stage and this, you know, I think probably leads in other questions you may have around, like, networks and those kinds of things that some founders have more of and some founders don't. But I think in general, I think, like, CPG Angels are a very difficult and shrunken audience to raise from first, all the excitement that I think everyone that works in CPG has about creating brands and products and how cool that is. I think people in other industries, real estate, media, tech, the list goes on, are maybe not as, like, jaded with some of the last couple of years and have been, generally speaking, much more apt to back new founders.

25:36
Ryan Williams
And so I would say, I joke with people, if I was starting a brand and I needed to raise money for it, I honestly think I would just post myself up at a four seasons bar every night, as opposed to. Which is not to say you shouldn't also go to startup CPG events. You got to do everything. But I think, like, a lot of the people, and, you know, we do the finance and accounting for a growing number of brands, and I look at the cap tables and the early people on the cap tables are like, what did that guy do? Oh, he has like a, you know, or that woman, she has a whatever. Like a business is just totally unrelated.

26:08
Daniel Scharff
So I like that, oh, that's super interesting to me. And even like, I think a lot of brands who are, I mean, serious about it were like, no, lets go after tech investors because theyre not going to give us that hard time. Theyre going to give us tech multiples and well get a much better valuation from them. But at the individual investor level, I like that idea of just like, man, get out there and just talk to a lot of people. And its almost like, I think in my twenties, if I had some extra cash, I would have loved to put it into a bar. If a friend had a bar like, oh, that would be cool. Ill do that. Or a restaurant, ill be cool. And ill have a table there. Or I'll be cool at the bar. Be like, oh, me?

26:44
Daniel Scharff
Like, no, I'm a part investor in the, you know, I feel like CPG is the new investing in your friend's bar. Like, be like, oh, no. Cause CBG is so cool now. Like, when I, I went to business school, I graduated in 2009. In those days, I would say, I don't know, something like 80% of my class went into something very traditional, finance consulting, like, you know, banking or hedge funds. Like, very typical. Some people who were like, I don't know, like, really well prepared and had cool jobs before could go into PE or VC, and then like, yeah, some people went into CPG in general, like brand manager, General Mills. That's what they were doing. And I had like, two friends maybe, who went to a CPG start to, like, start their own thing. They definitely weren't going, like, I don't know.

27:31
Daniel Scharff
I mean, one of them went to bonobos and was an early employee there, and that worked out great for him. But were like, what are you doing, dude? That is weird. And now everyone would be like, how'd you get that? That's like the equivalent of the people our year who got the McKinsey internships. Like, whoa, how'd you get that awesome job at a CPG? And so many of them just go and start their own CPG startup despite the opportunity cost that they have of, like, being able to go and earn a big salary somewhere. So it is just cool now, like, CPG, like, starting these products because of all the, I think, celebrities and public successes. So I love that approach.

28:05
Daniel Scharff
I almost feel like we could start a reality tv show of, like, okay, take all the founders, like, put them at the bar, at different ends of the bar and see who can get a check first.

28:14
Ryan Williams
Well, I'd sign up. That sounds fun.

28:17
Daniel Scharff
All right. If it's a tropical four seasons, maybe then just for all of our benefit. So, okay, on a more serious note, then tell me a little bit about the access to capital, which is already difficult for minority founders, for female founders, because I think what we all have heard is this awful number that like 2% of VC funding goes to women. From what I've seen, it's not getting better. Maybe it's getting worse. Like, it ticked up and then it ticked back down. I think for founders of color, I actually don't know the number. I think it might be even worse. And so, like, do you see any of that on the data side or like, you know, is it something that you're hearing about from any of the players in the industry about, like, are they taking any concrete steps?

29:01
Ryan Williams
Yeah. So first of all, we tracked it a year or two years ago and it is like, relative to the demographics of our country, like, there's totally disproportionate, you know, level of capital, I guess, doesn't go to people of color or women. I haven't tracked it enough to be able to give an update on our kind of initial numbers, but I think no one would question that. I mean, I can say this just with total certainty that it doesn't match our country as kind of holistic.

29:30
Daniel Scharff
It has not jumped to 50% is what you're saying.

29:32
Ryan Williams
It has not 50% or whatever kind of like mapping you apply. And I think there have been like a number of funds that have made that a dedicated kind of focus. And I think it just continues to be area that's challenging for a lot of people. Just, you know, anyone that doesn't have a network, I think it's just extremely difficult. And if you do, just gives you this starting advantage of capital or even talking about like a friends and family around, you know, the hardest dollars are kind of when you just have an idea on paper. And, you know, I'm proud to have personally made some angel investments of people that are, you know, from diverse backgrounds. But I think it's an important conversation and, you know, an area where, you know, it's.

30:18
Daniel Scharff
Yeah, yeah, I know it's tough to get the data in these kind of areas. And that, I mean, I think I, that is one of the most important things is to track it because if you don't, then it just kind of is like a dirty secret in the industry that nobody really acknowledges. I think that, like, that 2% number for me is so powerful, just at least to start the awareness, which I think is a good first step. So anyway, open offer, if you ever really start tracking it and maybe even like, showing which funds are at least making the best, like, movement in the right direction, we will report on that and share it with everybody.

30:50
Ryan Williams
Absolutely. And I've seen, like, crunchbase has made like a pretty concerted effort there. Maybe not with the same quality in food and beverage, but kind of, you know, the headline statistics and so I think those are super relevant. And pitchbook has also, like, I think, done a good job, but I would love to, you know, in a year or so, have the resources to track all that stuff ourselves. And I think it's an important thing for everyone to be trying to address.

31:16
Daniel Scharff
Yeah, awesome. Okay, well, we'll stay in touch on that. By the way, how do you sort, like, you know about all the deals, how do you source most of the info? Is it coming from, like, crunchbase and you're just doing a better job of organizing it or you're getting all the sources out there and putting them together? What's your. Just tell me the secret sauce.

31:32
Ryan Williams
We're the primary source, so we look at or reference any other data aggregator. We're, so we have our own, I'm not one of these people that's like, we've got some AI technology, but we have some basic technology that has some, you know, lines of code that track government databases that basically report or have some portion of funding data. And then on top of that, there's all the different news sources, whether it's the startup CPG newsletter or Bevnet. A lot of times Bevnet or Nash will have an article of something that's non public. So we add that and then people tell me things. So you can always tell me under the radar news. I think it's pretty obvious to me at this point what I would call a open secret and a closed secret.

32:20
Ryan Williams
So if it's an open kind of like, oh, yeah, we know that company raised like $30 million last month. That'll go on our database. And then we just, you know, it's just a ton of tedium over a very long time that we finally have a process around and aggregate, we can report on it.

32:35
Daniel Scharff
All right, I wonder, maybe we could just do a quick, like, roundup of a couple raises that you're psyched about that you've seen a. In the past couple quarters. So any CPG brands that you think are relevant for people out there in the community that we'd love to hear of? Are you able to just kind of rattle off a couple and just whatever you can remember about some of the details.

32:55
Ryan Williams
Yeah, let's see. I mean the biggest one of the last quarter was Voyage Foods, which I'm not commenting on the, I don't know them, I don't know their investors. But I just, it was the biggest headline number of Q two. I think it was interesting because they had kind of this AI angle to their product development and I think that's kind of interesting with how big AI is in every context. Like maybe something to think about for founders of that seems to not hurt from a fundraising perspective.

33:21
Daniel Scharff
The recent, you never know how much of that is horseshit. By the way. I don't know anything about them. I know at least in the whole industry and food tech, bro, that's a recipe. I'm not saying about them, but I know there are some companies where they're like, here's somebody pitched me on something where they're like, look at this amazing weeds, a proprietary technology that was developed with robots from this other planet that, you know, had like you know, born of AI. And I'm like, no, that's a rest. Like I've seen this recipe before. What's going on here?

33:55
Ryan Williams
Yeah, I mean there's like cool stuff I've heard about like I think not co and AI and putting pineapple juice in their milk product to make it taste more like. I mean, I think some of it's. Anyway, I'm not taking a stance one way or another. I think unfortunately, once you become like a banker and a service provider, you're just cast more into this gulf of neutrality. But I think interesting one is athletic brewing and their $50 million recent raise from General Atlantic. I think it's interesting in that when you look at the current market size and the market share of athletic relative to the valuation there, which I think was 800 million or at least that was reported, you have to believe a pretty significant increase in revenue in a short period of time to underwrite that valuation.

34:42
Ryan Williams
So theres an interesting discussion about it on, I think his name is Anson Friedrichs, who has fun called Athletic Capital. Just would I have made this investment or not? So yeah, I thought that was interesting.

34:55
Daniel Scharff
Okay. Any early stage ones, kind of the smaller level like oh good for them. They picked that up.

35:00
Ryan Williams
Yeah, I think this is public ao foods I've seen, which I don't know if they've launched, but I think has a really interesting product coming out and some great investors behind them. Not beer, which I think like caught a lot of attention. You know, I think it's like a super cool looking brand. And I know Dylan, he's a good founder. I think there's, you know, anytime there's, like, anything generates chatter of, like, is this like a follower concept or is it like, is there room for two? I think that's like a fun kind of conversation.

35:28
Daniel Scharff
Do you remember what any of these, like, early sizes or evaluations, if those are public, are getting done at?

35:35
Ryan Williams
Yeah, in general, like, the early ones that I've seen, I can't. I won't ascribe a number to anyone specifically, but I've seen a lot of things. As much as, like, 11 million for something that was in. I would call it more like the not food and beverage, but like, something you'd see in CV's, like, the ointment space with, like, you know, a patent around its ointment and so forth. So I've seen, like, on the very high side, let's call it 10 million pre revenue, and on the low side, like two or maybe one and a half.

36:07
Daniel Scharff
Okay, so, Ryan, maybe from your database, can you just read out some of the interesting early stage raises and valuations, like stuff that's just come across your wire lately to give people some benchmarks?

36:20
Ryan Williams
Absolutely. I won't even read them out. I'll make you think I'm like rain man that just remembers every transaction and every date. I think some that come to mind off the kind of top of my head are sauce, which was pretty recent. I've tried the product. I think they're really good. And obviously, I think is attached to the recent Rao's acquisition by Campbell's. And pasta being a huge category. And I just think they've managed to make something like cool and differentiated and good tasting in a huge category with kind of a brand identity of its own. And so they've been fortunate to secure some funding, like, very early for that. So I thought that was cool paywall, which is in the kind of better for you.

37:04
Ryan Williams
I would call it gender neutral, meaning not monster with fingers ripping the can open branding of energy drinks from Britt and Dardy like they raised in the second quarter. The product, first of all, tastes fantastic. It looks great. And it was, you know, every retailer that I've seen it and I always just kind of do my anecdotal, like, are people buying this? Like, you know, and sounds like it's going very well in the places. I've asked about another one, like, just getting started, that raised, I think, like a $4 million round out of the gate called Key that received some funding from Agfunder and I think a few other venture firms and their focus is going to be on like, ketone beverages. The founders both come from, I think, coke or some like a large, big CPG experience.

37:54
Ryan Williams
Yeah, I think Dylan and notbeer, which I think caught like a lot of the Twitter universe by storm. So I think there's deals that are definitely happening at the very early stage in food as well as in beverage.

38:07
Daniel Scharff
And the not beer one was funny. I don't know him. Ive seen the brand. I think just everybody started talking about it for one or two weeks. It was just like evidence of the trend. And here it is. And its not beer, I think because it was like so on the nose that people really liked it. Yeah, people were definitely excited about that. I see them growing and hiring up and looks like theyre going to go for it, which is great.

38:33
Ryan Williams
It was definitely cheeky. And its one thing to come up with an idea and like kind of be able to joke about it with your friends and then to go for it is, I think it takes another level of conviction. And for the people that are like, oh, this is silly. And this is the following concept of liquid death and are kind of like maybe poking it. I respect anyone that goes for it. And CPG, I haven't done that.

38:59
Daniel Scharff
You know what I like about not beer I think the most is that, okay, so if I have a party, I lived in LA up until a couple weeks ago, and I would have parties a lot of the time. And it was mind blowing to me that half of the people at my parties, like fun social gatherings, could be on a Friday night, what, a Saturday daytime, who knows? Half the people were not drinking. And I would be stocked for this because I know they're going to come in and they're going to like, some might want a mocktail if I have something like that. Some might want a sparkling water. I don't know. So liquid death obviously did extremely well in that space.

39:34
Daniel Scharff
Like, I mean, I don't know exactly what percentage of people drinking it, just drink it because they want some water during the day or what percent are drinking it to like, avoid alcohol. Probably it's a smaller percentage, but it's, you know, still some percentage in there. The thing that I kind of like about not fear is imagining having that at a party. And like, I think not only does it let you then have a nice non ALC option at the party, but it also lets you be a little bit snooty. The people who are drinking, they're like, what's that you're having? Well, it's not beer specifically. Like, what are you having? Beer? Yeah, this is not beer. Just, you can sort of, like, poke at them with it also.

40:10
Daniel Scharff
So it's like, if you identify with that, then maybe that's a choice that you would like to have at a party. A way to, you know, really share your values in a way that's a little bit in the face of the people who don't share them.

40:21
Ryan Williams
Definitely. I would pick up a can myself, and I would say, like, Mike Cesario reached out to me because I had written some medium articles, like, five years ago before he launched liquid death. And I will say this. The things that have been most kind of, like, I don't get that, or that's weird, or that makes no sense or whatever, have been almost exclusively the ones that have become incredibly successful. I mean, I'll give another example of that. I worked on a consulting project in kind of the background for Kali power when it was first starting out. And I just remember thinking like, this is crazy, and who is going to, in their right mind, buy pizza with cauliflower in the crust? Like, that doesn't even sound good. And I think they're at 100 million in sales now.

41:08
Ryan Williams
I've probably contributed a million of it. And I think if an idea strikes you as, like, this is a bad idea, there's this fantastic Venn diagram from the tech world from Chris Dixon, who's, I think, an investor now at Andreessen Horowitz, and he has this kind of, like, Venn diagram crossover. And it's like, good ideas and bad ideas, and the intersection is, like, good ideas that look like bad ideas. And that's like, kind of the business that startups are in is identifying something that everyone else didn't pursue and doesn't think is worth pursuing, but actually should be pursued. And if you're building something for venture, you're taking kind of that bet that you're in that middle overlap, and it just takes time to find out if your thesis is true or not.

41:56
Daniel Scharff
Any brands that come to mind you that could be in that Venn diagram right now, I'll throw out one. I hope they take this as a compliment, because they should. But, like, the brand holy water that, like, I feel like everyone's seen it. You don't know why, but you've seen it. And I think I've heard buyers talk about it. And some are like, I really like this. And others are like, I don't get what this is and I'm like, yeah. And then I think I gave that feedback to the team. Like, oh, I just want to, you know, I like to pass along buyer feedback, like, oh, hey, just like one of them said. And they're like, yeah, we know. Like, it's cool. Yeah, they're like, oh, they really. They probably do have something there.

42:27
Daniel Scharff
If they're getting that kind of reaction from people, that's exciting.

42:30
Ryan Williams
I think, like, mom water also, you know, coincidentally fits into that. I've seen their numbers. They're pretty impressive. I'm friends with Spencer Hoddeson from Gaywater, which I also think is a brilliant idea and kind of, like, has this kind of initial reaction from some people that is like, it's too edgy or something. I think it just makes a ton of fundamental sense. And I think in general, if a portion of people don't react to you with a, like, I don't get this at all, then I don't think you should try to be intentionally controversial or polarizing or whatever. I don't think that's a strategy. But if you don't have an idea that grabs attention, you know, how are you going to get people to pick you off the shelf? So I like a lot of those things.

43:15
Ryan Williams
And if I was starting to fund, that would be one of the questions I would ask is, like, do a lot of people think this is brilliant? And do a lot of people think this is ridiculous? Which is what they said about liquid death as well. And if there's two camps of people I respect that both have, like, extreme reactions, I think that's a good thing, not a bad thing.

43:32
Daniel Scharff
I love it. All right, well, let's all be ridiculous on that note. And so I think that's a good place to end those inspirational words. Ryan, thank you very much for bringing this wealth of knowledge here to the startup CPG podcast. I'll plug Spencer, also from Gaywater, who was on the podcast with us a few months back. Man, he's a pro. I loved that episode. I think, yeah, you can definitely have that kind of an idea, and then if you're also a really strong founder who knows their stuff, look out. So very excited to follow along with that brand and a bunch of the other ones that you mentioned here. So I think for anybody who wants to follow along with Ryan, probably, what do you think? LinkedIn, a good place to do that and keep seeing reports and everything.

44:13
Ryan Williams
LinkedIn, you know, our business is accounting and finance, if anyone ever needs help with that. And my email is Ryan at the fabid.com dot. I try to reply to everyone.

44:22
Daniel Scharff
Back when you were talking about, like, wanting to sound like a savant, I was like, maybe the fabid is just his brain and like, oh, would you like some data? Like blink processing? Here you go. 4.2 million was raised in that. Would just going to start spreading that rumor, if that's okay.

44:39
Ryan Williams
Please do.

44:40
Daniel Scharff
All right, Ryan, thank you very much. Thanks, everybody. I hope you got some good, useful nuggets out of this. And actually, you know what? I have one more question before I end. I just thought of it, and I don't want to end without asking this. Okay. If you are now a brand raising and you're trying to defend your multiple in a deck, let's say, what are you going to do right now? Would you like just be kind of googling similar companies and trying to see how much they actually raised that and put that into your deck or at least have that stuff internally? Like, ideally somebody can just take the numbers that we just used and use those as some good benchmarks. But if they need more benchmarks, how can you actually get them as crunch Bayes?

45:16
Daniel Scharff
Or maybe they don't have access to the fabit or.

45:19
Ryan Williams
Yeah, I would say exit multiples are helpful. Like, or just showing some, like, big exits, you know, with big valuations is a good thing to show in a deck. And then I think, like, a lot of times, the deck is the hook to get into a deeper conversation that's more financial in nature. And I think if that kind of financial conversation can show the kind of shorter term milestones you can hit with that funding, that I think is going to defend your valuation. I see the deck as kind of like pulling someone in, but your model and conversations is getting them to actually write the check.

45:53
Ryan Williams
The one other thing I would say founders should be cautious about is sometimes they include as comps, like, companies that have raised a lot or a lot of money at some valuation, and they're sometimes unaware that those have actually been really bad returns to the investors. And if the investor you're showing that knows, like, wait, all the investors lost a ton of money on the company you're showing as a reference point.

46:16
Daniel Scharff
Don't you want to be like that?

46:19
Ryan Williams
Be conscious of putting other unexited companies as your, like, reference point because you might include someone that is a negative reference point.

46:28
Daniel Scharff
That's like when somebody reaches out to you on LinkedIn, like, hi, I see you're connected with so and so. Wouldn't you like to have a call? You're like, I hate that person. They really screwed me over.

46:37
Ryan Williams
How did you bring them up exactly?

46:40
Daniel Scharff
All right.

46:40
Ryan Williams
Yeah.

46:41
Daniel Scharff
All right. I'm really done this time. Ryan, thank you so much. Hope everybody enjoyed catch you next time. All right, everybody, thank you so much for listening. If you enjoyed the podcast today, it would really help us out if you can leave a five star review on Apple Podcasts or Spotify. I am Daniel Scharff. I'm the host and founder of startup CPG. Please feel free to reach out or add me on LinkedIn. If you're a potential sponsor that would like to appear on the podcast, please email partnershipstartupcpg.com and reminder to all of you out there, we would love to have you join the community. You can sign up at our website, startupcpg.com to learn about our webinars, events and Slack channel. If you enjoyed today's music, you can check out my bandaid it's the super fantastics on Spotify music.

47:25
Daniel Scharff
On behalf of the entire startup CPG team, thank you so much for listening and your support. See you next time.