The Startup CPG Podcast

Gabrielle McGonagale
Yeah, I think a lot of clients are nervous that lawyers are the ones who get in the way of signing documents. They're like, you're going to tell me all of these things I can't do. You're telling me I can't sign this agreement. You're telling me it's going to take another couple of days to be able to have the manufacturer start work. I think kind of reframing that in to sort of like making sure that you're partnering with somebody that's going to be protective of you.

00:34
Daniel Scharff
Hello, everyone. Welcome to the startup CPG podcast in our Slack channel. By far the most frequent questions are all around legal topics like how do I set up my company? What are the watch outs when I scale? What do I need to do? Today we have got the pros from Gianuzi Luwinden. They are a top tier CPG law firm that works with over 3,000 CPG brands and they have seen it all and they are about to answer all of the most frequent questions that we see. So buckle up, get ready. There is so much knowledge that's about to be dropped in this episode. If you want to reach out to their team again, this is what they do for a living. They help brands from inception to scale to hopefully an eventual transaction.

01:13
Daniel Scharff
You can reach out to either one of our presenters today, Adam and Gabrielle. It's adam@gllaw.us or gabrielle@gllaw.us. It's in show notes. All right, here we go. All right, everybody, here we go with a legal Ask me anything. Got a question? Just ask in a pickle. Let us know if you're stuck. We're here. Don't you know you can ask us anything? And I'm going to ask you guys a lot of things today. So thank you for coming to the podcast. Thank you for sitting through my jingle. Also, do you guys just doing a quick intro to get us started here. Adam, I'll start with you.

01:58
Adam Marsh
Cool. Yeah, thanks for having us. And we're pumped to be on again. Yeah. So I'm Adam Marsh, one of the partners at Genui blueinden. Excited to be here to answer any questions that have come up. Over on the Slack channel, we've been doing the CPG game for about 15 years now. I've been doing it for 12. So we've seen a lot of trials and tribulations so hopefully we can give assistance to them.

02:19
Daniel Scharff
And do you want to sing anything?

02:21
Adam Marsh
I do not.

02:21
Daniel Scharff
You know. Okay. Objection. Sustained. Or Whatever you say. All right, Gabby, over to you.

02:28
Gabrielle McGonagale
Yeah, hi, Gabrielle McGonagalee. I started a couple years after Adam, so have been doing this for 10 years. And it's actually kind of a perfect set of topics for today, given that probably half of our job is advising clients and answering these very questions. So probably half of our day is spent doing that in addition to all the actual legal work. So excited to jump in?

02:51
Daniel Scharff
All right. And I'm really excited to do this, kind of ask me anything on this legal topic. We've done it on ops, we've done it on marketing, but really it's like the same questions over and over that we see in the Slack. And it's just great that now, I think after we do this episode, we'll be able to point people towards this as a great resource to just help them get, like, that, those level one questions out of the way from people who just do this for a living, who do this all day. And, you know, I think it would be probably hard to come up with a question you guys haven't heard before or even heard this week. So I'm excited to jump into this one.

03:26
Daniel Scharff
So what we've got here, these are questions that are mainly sourced from our Slack channel, which hopefully everybody who's listening to this has already joined. And that's what it's for, is for brands to ask questions and get help. And the legal foundations is just one of the most important things that I think can really trip you up at the beginning. You get it wrong, you got to go back and undo stuff. It can be really complicated. And then you have to hire lawyers to undo the stuff that you didn't do because you were trying to avoid paying a lawyer. But we're just going to get all that good stuff out here today. So the first one, a recent question in the Slack was, I'm considering doing a family and friends round. What are the watch outs here?

04:02
Daniel Scharff
Because, like, if you're doing a proper institutional round, probably you do have a lawyer involved in that. Friends and family, you're thinking about it, you're like, that's kind of a gentle way to get into this. But I know that can be complicated. Cause I've heard debrief afterwards when people have done it. So, Adam, hit me. What's the stuff that people need to know?

04:18
Adam Marsh
Yeah, I got you. So friends and family rounds are supposed to be easy, right? It's supposed to be a quick, dirty, easy way to bring in some capital. But I'd always recommend a few things. One is to Start with a term sheet or at least like an email where you kind of summarize what the terms are, right? So if you're doing a safe or a convertible note or even a price round, you kind of have the terms laid out for. For your friends, your family, your neighbor. So everyone's kind of aligned from the get go. And then the other thing I would say is to limit, like, the side deals, right? You're supposed to give everyone kind of the same treatment. What I really see hurting folks down the road is they really need the extra 25 grand, right?

04:58
Adam Marsh
And Uncle Vinnie is going to do it, but it's going to come with a lot of strings attached to that. And that could just be hugely problematic because down the road, when you do your institutional round, Uncle Vinnie might not be so. So helpful. So I can, as an example, like, I just, in December closed a series A financing. The client came to us for that. They had done two rounds of friends and family and had these two side letters. One was with their dad and the investor was saying, we're not doing the deal until this. These side letters are terminated, dad. Terminated. No big deal. Then they just had a family friend who refused to terminate the side letter.

05:32
Adam Marsh
And it literally held up the process because he was asking for additional rights that he shouldn't really have been entitled to had he been treated the same as everybody else. So I'd say limit those side letters, treat everyone the same. Because, yeah, I know that extra 10, 15, $20,000 could really help, but down the road, it could really hurt things. That deal almost done.

05:53
Daniel Scharff
And so on that first point that you made about, like, have some kind of terms at least out there, what would be an example of someone not having terms? Terms like is just like, hey, yeah, I'll give you 1% of my company for this amount. Write the check. And like, that's all. That's kind of a handshake or what are some ways to not do that.

06:09
Adam Marsh
Yeah. So like, I'm thinking about if you're doing a friends and family run, you're doing like a safer convertible note. So have what the discount is, right? Say it's a 20% discount. You know, have what the cap is. Just those minor things will make sure that everyone is aligned for the future so that again, you're not cutting side deals with everyone. Everyone's kind of aligned, so they know what they're getting themselves into. They know how much the company intends to raise and that everyone's treated the same way.

06:36
Daniel Scharff
Okay. And in the instances where that can Go bad because we know it can't. Like friends and family. Great. I would say, in my experience, it seems like they don't give you as hard of a time on things like valuation, due diligence. They believe in you or they like your story or the product. Something like that can be a great way to get going. But I also have heard people express regret because they're like, I might not do that again. I've got like 100 family and friends on my calf table. It's kind of messy. And now I'm not friends with Uncle Vinnie anymore. So, like, later on you can have these sticky things that can happen, right?

07:09
Daniel Scharff
Because, like, maybe the terms weren't clear or people can sour on it or maybe just feel like they, I don't know, like, maybe they turned out to not all be accredited investor or stuff like that. Like, are these some of the kind of things that can go wrong after family and friends?

07:23
Adam Marsh
Around 100%. You know, sometimes you hear stories of family members not speaking to each other afterwards, but sometimes that's just what is required to keep your company alive and thriving. Right. So sometimes you can't be picky about who you take your money from. You're going to take 50 grand for whoever is going from. Whoever's going to give you 50 grand. So, yeah, I mean, hopefully if you have the right legal support, you don't run into these hiccups and everything goes smoothly and everyone. Everyone's expectations are aligned. Right. They know what they're getting into. But we've seen it all and we've definitely seen friends no longer speaking, family members no longer speaking, but hopefully it doesn't come to that.

08:00
Gabrielle McGonagale
Also a reason to not promise all of those things inside letters, because those are the promises that you typically can't keep down the line when you do have institutional investors come in who want that stuff removed. So, to Adam's point, so circulating, sort of a short list of this is what I'm raising under. If you want in, great. If you don't, all good. But not giving away extra things to extra people, because that's when things typically get a little bit messier, when you can't deliver on some of those early promises that you hoped would pan out but didn't quite.

08:31
Daniel Scharff
It's a tough one. Me, I've written angel investment checks and had them not go well. And at least for me, I would say some of the relationships that I had with people have been damaged, but mainly it's actually is because they just didn't give updates like, when I write a check, I'm like, probably this will be worth zero, but I believe in this person. I'm excited to be part of this journey. Let me do it. But then you just don't hear from them for like a couple years. You're like, what did you even do with that money? Like, did you work on this business actually? Like, did you really go for it? I'm like, wrote you a big check. What happened with that? I honestly feel like I wouldn't mind if it's a friend. And they're like, look, I tried it.

09:08
Daniel Scharff
We both knew the risk. It didn't work. Here are the reasons it didn't work. Okay. I feel like I could take that and sustain the relationship. It's just the communication part I feel like people might take for granted when it's their family and friends and not just get into that habit of, you know, quarterly updates, whatever it is. What do you think? Do you think that's one of the potential solves?

09:25
Adam Marsh
I mean, flat inhalations is just a whole nother spectrum of things you got to think about when you're raising capital, right? You bring in the money, you bring in the half a million dollars, and you're so excited and you get to work. But then, yeah, to your point, Daniel, like, you gotta keep people updated. You gotta keep people in the loop so they know what their money's going to. And you're right, they don't all succeed. But to your point, it's imperative that you keep people. Even if it's just an email once a quarter being, you know, here are our sales, here's the stores we got into. Your investors appreciate that so, so much.

09:58
Daniel Scharff
Yes, I really appreciate that. Especially the brands where they just did it. And they always said, here's what we did, here's what we're going to do. And then they did it. Like, that's an ideal scenario. They just keep hitting their projections. But I understand it. It won't always, but, yes, I really like that. Good communication. I wish that for all of the brands out there, even though it's a hard thing to do. But yeah, okay, so I have another question for you. Let's say you actually get down that journey. Yeah, it can be hard to raise money. Maybe you do a couple friends and family rounds and then later, okay, you're going in to actually get maybe a more institutional type vc.

10:36
Adam Marsh
What.

10:36
Daniel Scharff
What's going to be the difference there? So I've, like, I've gotten friends and family where they didn't really ask Me a lot of questions probably in that instance, maybe just revenue, I don't know, a couple things that they knew to ask, I think often also, if you're just saying like, oh, we use a safe, then you're like, okay, that's fine. Then, you know, you may not ask a ton of questions, but an institutional VC will. So what do you think they're going to really ask for that I might not be prepared for? What's the process going to be like?

11:01
Adam Marsh
Yeah, I guess I'll kind of piggyback on my last one. Sorry, Gavin. But there's a few things that will make it a lot less painful, I would say. So the first one is I'll say start building your data room early, right. So for every employee, have a folder with their offer letter and if you viewed them, Incentive Equity and their NDA or have all of your broker agreements in a separate folder in your Dropbox. Right. Every manufacturing contract, every consulting agreement might seem tedious to build that out kind of as they're going. What's a lot more tedious is when you have the Series A investor on the hook. You know they're going to ask you hundreds of diligence questions and then you're going to have to go back to your files for the past three years and try to dig all this up.

11:41
Adam Marsh
So if you are kind of doing it purposely from the beginning, it'll make the diligence process go a lot better. And I can't tell you like our clients hate the diligence process the most. The back and forth on the purchase agreement is way less painful than answering hundreds of diligence questions over the course of a month. And then I think the other big thing is you're going to hear me. I guess I'm just kind of repeating this, but have a term sheet, right? Sometimes you get that LOI from the investor and you agree on the amount of the raise and the valuation, then you're right. All right, let's go right into those long form documents. And those are two great things to agree on.

12:17
Adam Marsh
But there's so much more that goes into these like NVCA forms that the long term, if you make that LOI go from two pages to seven pages because you're negotiating the size of the board, what blocking rights they have, downground protections, information rights, Right. If you negotiate all those stuff at the onset and that lose from two to seven pages, it's so much more efficient and cost effective than negotiating those in the long form agreements because those are 530 page documents. Right. So getting, doing the work at the beginning will save you so much hassle at the end.

12:53
Daniel Scharff
Okay, and real quick, because I know you do work with both brands and investors in this big CPG space of ours, but just give us the insider tricks real quick. I'm sure if you're a brand, if you Adam our brand, what are you fighting for in that seven page doc? What are a couple of the things that you're like, these are the killer terms. If you can get them, fight for it.

13:11
Adam Marsh
Size of the board and frankly the control rights that investor has. That is 90% of the game in my mind. Right.

13:18
Daniel Scharff
And what should you want? You want a big board, a small.

13:20
Adam Marsh
Board, what kind of control board? A small board, you want to control the board and you want them a limited set of blocking rights. Right. Because you're used to being in control. You've been the founder, you've run day to day, you've done all the blocking attacks when you haven't had to listen to anybody. And now all of a sudden we've got one or two people sitting on your board, we're going to tell you no. Right. So that's like a tough pill of pill for a founder to swallow. So to understand that the board's going to be small, it's a five person board, maybe you control three of those five votes and they have a block on seven things you can't do as opposed to 20, because that's what they're going to put in their first draft of the shareholders. Right.

13:57
Adam Marsh
So no, to be able to still control your next round of financings, when you can sell the company, how much debt you can take on all these things, when you're the founder all alone, you don't even think about it. Right. But then once you have someone's check for $5 million and you have someone else to answer to, those are the types of things that you really want to negotiate hard.

14:17
Daniel Scharff
Yeah, that makes sense. Gabby, anything you want to add on that?

14:20
Gabrielle McGonagale
Yeah, I think it's just this is one of the reasons it's so important not to give stuff away to friends and family round, because the protective provisions that you lose grow and grow and grow. So if you've given Uncle Vinny a bunch of blocking rights and maybe you've said, hey, when we do our next round, you'll get a board seat, then when you actually are raising the institutional money, they're going to say, well, if you've already given this guy a board seat, I want two and you've given this guy five blocking rights, so I want 10. And so if you're not able to do those early rounds really without giving much away, it just makes it all that more sort of punitive when you are taking in that institutional money.

15:00
Daniel Scharff
And my guess is that it's probably some combination for early stage brands of just doing what they have to do when people ask for things and securing that capital, but also just being excited and feeling grateful that people took a bet on them of like, yeah, Uncle Vinny, for sure. By the way, I really, I want to thank you for this trust that you're placing in me and I want to give you a board seat.

15:18
Daniel Scharff
That's the part where I really encourage everybody to just be measured about it and think about it and talk to advisors because, oh, it can handcuff you later when just this very generous, beautiful sentiment that you had early on it, oh, I can come back and you know, when you watch like the social network and stuff like that's what a lot of these very harsh things that they're doing are probably trying to undo. Some of these things that were just done kind of naively in the early stages of the business. So hopefully when you have that instinct, you will talk to somebody like Adam or Gabby, like, hey, is this a terrible idea? It is. Okay. Okay. So Gabby, I wanted to ask you.

16:00
Daniel Scharff
A lot of people in the slack ask this question like, hey, I have an advisor for the business or I want to bring on this advisor and I am thinking about giving them equity instead of cash, maybe because I'm being really scrappy or maybe they asked for it or maybe they just have been helping me out and I really want to show some gratitude. How could I do that in an early stage where it will make sense and not get me into one of these messes?

16:23
Gabrielle McGonagale
Yeah, I think there, luckily there are a lot of great ways to do it. For a corp, we mostly see stock options or restricted stock for LLCs, profit interest grants. I think one of the most important things is to decide what success looks like for that advisor. So if you are bringing in somebody who you want to help out with sales, maybe you have the vesting of equity happen based on hitting those certain sales targets as opposed to just you're going to vest over two years or if you're bringing in a cfo, maybe it's certain revenue targets or something like that. So I think really making sure that the parties are aligned on what the role is, what success looks like and what the commitment is, because the Beauty of that sort of incentive equity is it is very flexible.

17:12
Gabrielle McGonagale
You can really tailor it around whatever role it is. Where we see things kind of get a little bit hairy is when, you know, you sign somebody up to do consulting for you and they're going to vest over two years and there's not really a fleshed out set of services. And so you look back 18 months in, they haven't really done anything for you, but you're not really in a position to terminate either because you haven't defined what it is they haven't done. So really aligning on those expectations, I think the other thing is depending on the life of the company and you know, if it's really early stage, maybe hiring a big time CFO isn't going to be in the budget, right?

17:51
Gabrielle McGonagale
And so then if you really need that person to take off, maybe you give them a little bit of equity, maybe you're giving them a little bit more than you would in a later stage because they're going to be diluted by a lot, right? Like if you are bringing someone on to help you with the fundraise that then they're going to get diluted by 10% of new money coming in. Those are sort of considerations you have to have. So I think the big things are again, aligning on what success looks like and also being honest about sort of where you are in the life of your company and what you really need to grow in that moment.

18:22
Daniel Scharff
I've never done this. I never had advisors who were just on equity, but I could feel myself being in that position of, okay, I brought this person on because they have a nice skill set and I just gave them some equity to save money because I didn't know in the early days what was going to happen exactly with his business. And that felt like a free way to get their help instead of an expensive retainer. But then, yeah, we didn't totally define it and they're like a little bit helpful, but they aren't really out there doing a job for me. But it also, it feels like almost free because I'm just giving up this little invisible share of my company consistently. And oh, it's.

19:00
Daniel Scharff
But it's also hard to cut off because maybe there's something right around the corner they're helping me with a little bit. So it seems like similar advice or just like have those terms like what if you're gonna do it right, write it out.

19:14
Gabrielle McGonagale
The other big thing is depending on when they're coming in. Like if this is an early Stage company before you're doing a big fundraise, you have a little bit more flexibility because they're really diluting you. As you get sort of further in, when you have a bunch of people who have been writing checks, they may want to limit what the incentive equity pool is. So usually we see an incentive equity pool of somewhere between 10 and 15%. If you're giving away a bunch of equity and all of a sudden you have 20% of your company going to sort of consultants and advisors, the people who wrote checks may be a little displeased by being diluted by a bunch of sweat equity.

19:53
Gabrielle McGonagale
So you do also need to be a little bit mindful of not giving away too much and thinking it's sort of free services because that equity equates to real dollars. If you have check writers involved.

20:06
Daniel Scharff
Yeah, I would love to know some of the reactions you've seen when you've done due diligence and shown investors, businesses with all of these random line items on for sweat equity. They're like, what is this bullshit?

20:17
Gabrielle McGonagale
Well, it's one of the big blocking rights that Adam was sort of referring to earlier. When you get strategic investors that come in, they will make sure that they are limiting what your incentive pool looks like. Particular they're coming in and they've seen you've already given quite a bit away. So definitely something to be mindful of.

20:33
Daniel Scharff
All right, that makes sense. And it's a world that I don't know a lot about, but seems like they have learned that lesson the hard way. Okay, so here's a question that we get a lot in the slack people are always asking for lawyers actually, like, hey, I need somebody to do my business entity registration or help me restructure from whatever LLC and do a C Corp, stuff like that, or you know, do basic stuff. And a lot of times they're asking like, hey, I'm not looking for like a big firm. I'm looking for, you know, an individual lawyer or something like that. And you know, like, for me, actually I had like a business once upon a time. I just set it up on legalzoom. Com. So my question is the following.

21:17
Daniel Scharff
For these brands that are just starting out, is that an okay route to go? You guys, obviously you're a top tier law firm and all you do is CPG and you're going to get it right. You have all the expertise in the world, but also you're a firm. And there you guys are smart, educated people with great degrees. They got to pay you there's overhead at the firm. It's probably going to be more expensive than picking off a small independent freelancer, lawyer or whatever. I know you must get asked this or think about it all the time from brands who are just trying to figure out figured this out. Do I go with somebody small and scrappy? Do I just go with the blue chip? How do you think brands should think about that when they're in the early stages?

21:58
Adam Marsh
Probably a little biased here, but I would always recommend hiring a law firm. You know, it doesn't have to be the crevasse with the white shoe law firms of New York city. We're a 25 person boutique law firm. But you can also, if it's simple corporate formation, you know, you can do use the general practitioner down the street. What I would kind of avoid, I mean Danny, you could tell me how your legal zoom experience went, but maybe avoid the legal zoom just because it doesn't cost a lot firm very much to do this. Reach out to them, ask them for a quote and they'll tell you, right? They're going to tell you it's going to cost you two grand, sometimes more, sometimes less. Right.

22:35
Adam Marsh
But just ask the firm because when you go the legal resume route, sometimes the mistakes that are made are going to cost you a lot more to unwind and to fix. So unless you're feeling very confident, legal zoom maybe don't go that route. Definitely don't need to hire a big time law firm for basic stuff. You can again hire a general practitioner, but more often than not, definitely recommend hiring a lawyer who's experienced enough that does this on a day to day basis. Jenny mentioned like converting from a Delaware LLC to a Delaware C Corp. But that gets even more involved and the process there has to be right. So definitely want a legal professional to help with that. But also like when you're starting your company, oftentimes you don't just start stop the formation. Right.

23:18
Adam Marsh
You need the other documents, right, the governing documents or a stock option plan or incentive plan like Gabby talked about. So when you start thinking about that, right. You definitely want someone with industry experience that knows how to set you up for success in the long run. And even that cost you know, an extra two or $3,000. I think they'll put your company in a better position for long term success.

23:41
Daniel Scharff
Thank you. I know, of course, yeah, you guys are a blue chip CPG law firm and probably everybody wishes they had the luxury of getting to work with you from day one. And sometimes they need the initial traction to get to the point where they can get the funding also to then have all of the service that they want. So I appreciate being able to have that kind of a discussion. You know, it's the thing that's on brands minds when they're figuring out who they can and should work with. And like, are we going to go for this can? Is it a luxury we can't afford right now or is it essential?

24:11
Adam Marsh
I would definitely recommend people literally go to a lawyer and ask them for a quote. Like the way our firm works, like we think about this as a long term partnership. We're not in it to make a quick buck. So I'll give you a quote and if I charge you two laps, what I quoted you and this partnership wasn't meant to be. Right. So whether it's me or another lawyer, ask them for a quote and make sure they stay within that budget. And then maybe you have someone who could be a long term partner for you.

24:36
Daniel Scharff
I like it. You make it sound very approachable. So ask for quotes, people. All right, next question that I have, Gabby. What are some of the top things that I might get sued for as I'm growing my brand? I really like this question because it's not fun to get sued or to get a threat from some lawyer out there somewhere. There are a lot of different things that could make that happen to you. So what are just some of the basics that brands should know and maybe get ahead of?

25:06
Gabrielle McGonagale
I think first is if you ever get that letter, relax, reach out to your lawyer, don't sit on it, don't ignore it. We've seen that too, where clients are like, well, I didn't really take it seriously. And then an action's pursued. But there, I mean, Adam can tell you we get tons of clients who get forwarded some class action letter and there are firms that really just churn those letters out. So take a breath, talk to your lawyer, make sure that it's even something legitimate or something that's really going to sort of manifest into something. But I think the big things that we see one is somebody claims that they were promised equity three years ago and never got it papered. And I created this logo for you. You said I owned 5% of the company.

25:53
Gabrielle McGonagale
So anything where you're sort of generally talking to somebody who might be providing a service and you're throwing out a percentage, that's one of those things that you want to sort of stay away from kind of touched on this. But with branding, like if you have anybody, especially we See this all the time. Someone early stage, or maybe it was even almost like a co founder, like two kids in their dorm come up with an idea, one drew out the logo, one was doing all this sort of testing and kind of tinkering with the formulas and then they part ways. And five years later or right before an exit, you hear from this former person that says, wait a minute, I actually own some of this ip. You can't sell this company without me. So I think those are two of the big ones.

26:32
Gabrielle McGonagale
The other thing I would just advise every client to do, and this is not sort of self promoting because we don't actually do sort of labeling review or that sort of regulatory work, but get your labels reviewed by people who really know what they're doing in this industry. We can give you recommendations if you need them. But if you're going out and selling product and you have things that haven't been vetted, those are the things that are not only sort of very easy to get called out on, but almost always losers for the brand. Because there is a very particular way that you do need to advertise your brand and that you do need to disclose for what's in the product and where it's made and those sorts of things.

27:11
Gabrielle McGonagale
So I think the one to take sort of the most seriously from the jump is getting all of that label work done.

27:17
Daniel Scharff
I like that answer a lot though. And definitely people should be cautious at the early stage of the kind of things that they're throwing out. And even if you just start working with a co founder, it can be very complicated, especially if you don't formalize anything very quickly about what happens if that person who drew the logo is like, no, I'm still involved, but I'm taking this other job, but I'm still involved. Well, it's not 5050 then. Are they going to keep working on it? You're going to keep working on it. What's going to happen? Those discussions probably only get more complicated the longer you wait to have them. So I would say that's my advice is for somebody who's an early stage brand is just really try to do things properly from the beginning. Write things down, try to have it clear.

28:01
Daniel Scharff
In some instances you may not need a lawyer for that. Even of just like, great, let's just write down on a piece of paper, here's what I'm going to do, here's what you're going to do, here's how we think about this. If one of us leaves, here's what Happens. What do you think?

28:12
Gabrielle McGonagale
Yeah, definitely. I will say this is one of the reasons sort of not to use Legal Zoom. You know what Adam was touching on, like, what about governance? There are lawyers who think about these. When we see things go wrong, Obviously when you're first starting a brand, it's a love fest, right? Everything's great. You have this great new idea, it's exciting. Cpg, entrepreneurship, it's tough, it's a grind. And when you're working day in and day out and maybe things aren't materializing as quickly as you want to, you see those sort of fun relationships fracture a little bit.

28:45
Gabrielle McGonagale
So making sure again, whether it's from a lawyer or not, but even just having a written document, even if you are putting it together yourself with you and the person you're starting this out with, of what it looks like when it's great, what's going to happen if you guys decide to part ways. Those sort of things are really important to sort of get on the same page with early in the stage of your company.

29:06
Daniel Scharff
I like it and I've seen this go so bad. Just in this CPG world of ours where people didn't understand really what would happen. Co founders, it's really good to be clear about it. I also think when I say Legal Zoom to a lawyer, typically lawyers recoil the same way. If you were like talking to your doctor about WebMD, like, well, it says this then I'm an expert now also. But I, yeah, I don't think it went great when I use Legal Zoom, but four digit revenue kind of company and that's what you got to do in that kind of an instance. So you know now. And now I would always go the lawyer route. Okay, so here is another question that we get all the time in the slack.

29:45
Daniel Scharff
Which brands are asking, hey, I just got sent this agreement from a distributor and there is some wild stuff in here. It looks very scary. And I think when they send it to you, usually it has every single thing in the world in their favor. And like, if you ever leave me, by the way, you owe me. Not just your firstborn, but their firstborn and everything else forever into infinity. So when you're just starting to scale your distribution, Adam, what do you think are just some of the key things you should be looking at? What kind of things can you ask for as a brand versus you should be just so scared to ask because you're so desperate to get into the distributor you're worried about?

30:25
Adam Marsh
Yeah, well, I'd say it kind of depends, right? So if you're looking at a broad line or like US Foods or Cisco or someone like Kahi or Unify, like to be honest with you're not going to get many changes or maybe any changes, right? They're not going to allow much pushback. But with the DSD network, if you go that route, you'll be surprised about how open to negotiation they really are. And it's always a function of leverage, right? If you're a bigger company, you're going to have more leverage than a brand new company who has no distribution, right? But even those brand new companies still get comments accepted all the time. So there's a few things. I built the Body Armor distribution network. Gabby built the essential distribution network. We've done a lot of distribution agreements in our day.

31:08
Adam Marsh
So yeah, like to your point, like looking at the termination fee, if someone tells you that a 5x termination fee is market, I'm going to be able to pull up that same agreement that we've negotiated three times. Be like, well, you agreed to 2x last year, right? So to be able to go to someone who has experience, doesn't have to necessarily be a lawyer, but industry experience that can point to distribution agreements in the same area or with the same distributor, it really arms you for success. And I think the other big thing, other determination fees are just the concept of exclusivity, right? These distributors want you to be their exclusive distributor in the territory. But there are some accounts that they can't service, right? There's a common accounts that you already have somebody with you go direct to, right?

31:52
Adam Marsh
So you're going to want to carve them out from their exclusivity of the contract. They understand that. They understand that they can't service everyone in the territory. But if you don't ask for it, they're not going to give it to you. So I really try to find carve outs to exclusivity. Are they asking for invasion fees? Are you going to ask for trans shipping fees? What kind of marketing expenses are you responsible for? Are they responsible for like what services are they actually providing? Sometimes they just say we'll deliver to accounts in the territory. How often do they have to visit those accounts? If they don't visit account, can I go direct to them? So like putting actual objectives and deliverables into the contract for the distributor I think is pretty important.

32:32
Adam Marsh
And then lastly, like the assignability provision and it doesn't just go for a DSD contract, but really any contract, it should say that you can't assign this agreement, except in the change of control or company sale, then I can assign it to my acquirer. Right. So those are like kind of the big ticket items I would think about, but they often do throw the kitchen sink at you. But don't be afraid to push back, especially with like more regional, smaller distributors.

32:57
Daniel Scharff
Yeah, I think you hit on all the points that I went through negotiating with DSDS in my life. And yeah, I think unfi KE those people, like, not much. I think that we managed to get done there, especially as an early brand that does not have much leverage with them at that point. I think with smaller distributors, yeah, those were the main points of contention and they might throw something on there, like, you owe us three years of revenue if you ever leave us. I really appreciate what you're saying. There are people out there who know what you could negotiate them down to, but that information is not available anywhere centrally. There's no database of agreements that they've done with everybody. Lawyers who are very active in the space, like, you guys probably know some of it.

33:42
Daniel Scharff
You can ask in our Slack channel, for example, and see if anybody has a history there. There are people in this CPG game who just know they're told things by everybody. It's good if you can figure out how to get them on your speed dial list. I've definitely used that help. Or even maybe you figure out another brand that works with them and see if you have a backdoor reference there.

34:03
Adam Marsh
Yeah, go to the stores in the area and maybe you can find out, you know, oh, there's top pee on the shelf. All right, well, maybe buy some bags. But there is XYZ Beverage brand on the shelf. Let's get in touch with their Ops guy to see who they used and how much they paid.

34:18
Daniel Scharff
I like that a lot. I think LinkedIn you could also probably use because most brands like me like to celebrate their success and gains. And when you get a cool new distributor, you probably post on LinkedIn about it. So there's probably some hashtag sleuthing that you could do there to figure out your way into it. And if a brand asked me that, I would say give me a call. And I would say to them on the phone, don't you ever tell anybody that I shared any of this with you. But yeah, here are some things that I managed to negotiate with them because I appreciate your position. But again, we never had this conversation and hopefully there's nothing in the contract that is like a NBA type thing that says you can't do that. Of course but.

35:01
Daniel Scharff
And maybe sometimes people will give you a non attributed type background, but. And it can make all the difference. Right. Because who knows, later on maybe you're hoping to get acquired as so many companies are in our space someday and they might look at some contract that you've signed. Like you said, five years of revenue. What are you crazy?

35:19
Adam Marsh
Yeah. I mean if you get on the blue truck or the red truck, right. They're going to make you terminate all those DSD agreements. Right? Or not all of them, but most of them. And there's going to be a termination fee associated with all of those. Right. And that's just money that's not going in the founder of the shareholder's pocket. So of course you want to keep those terminations fees as small as you can with a understanding of what's customary and what's not.

35:42
Daniel Scharff
Yeah. And you mentioned a couple terms like exclusivity. Okay. You work with a DSD in one area, they might say we want every single account there. And it can get complicated because there might be a national retailer that you're working with or a regional one that just has two little stores in their area and you're like, yeah, I can't have you service those. The buyer is going to throw a fit if I'm like, hey, we're going to work with unifi. Except for these two stores. Can you set up this one distributor? You don't really know for this. It's going to be tough. And so that's when you would ask for things like can we have carve out for certain retailers that I know I need these broad liners to service? And that's where, hey, maybe there is that invasion fee that you mentioned. Where.

36:19
Daniel Scharff
Okay, yeah, but every time somebody who's not me delivers a case in my region, you owe me a dollar or something like that. But I think if you don't ask for it, you're not going to get it. I think you don't always know what they really care about because probably in the contract they send you, they ask for everything and then only when you start having the back and forth they're like, yeah, oh no, totally, we can do two years instead of three years. That's no problem. Like, okay, but they really seem to.

36:44
Adam Marsh
Care about this other thing.

36:46
Daniel Scharff
I don't know. My school of negotiations for me was always about trying to figure out how to get to the best mutually beneficial outcome, which a lot of that is just figuring out what do both people care the most about and having more of a cards Face up type approach to it. But some other people have gotten better success than me.

37:06
Adam Marsh
No, you're totally right. And frankly, you don't get what you don't ask for. Right? So stick a schedule on the back and say, you know, I need to go direct to GNC and all these gyms and every sports stadium. Right? And more often than not, they're going to agree to some version of that because they're right. Right. We can't service that. And if you are in those accounts, it's helping build the brand's awareness. Right? So in the long term, it might actually beneficial for them. They're not going to give it to you.

37:32
Daniel Scharff
And if you're at that stage where you're negotiating with them, they like your brand or there's something in it that they feel like will be a good business opportunity for them. So even though you might feel like it's your lucky day that a distributor would consider you, they are considering you, they're talking to you. And their time is valuable and their time pouring over contracts is valuable. So at that stage they want to make it work. So that's a good thing to keep in mind. So, Gabby, let me ask you same question, but more about comands, because I think very similarly early on you're like, hooray, I found a co man who will take me to the dance. Like, they can make this product that I love and we're going to get out there. It can go so badly when things go wrong.

38:12
Daniel Scharff
So what are the things that are going to be most likely to burn a brand?

38:16
Gabrielle McGonagale
The biggest thing is obviously owning the ip. So whatever the formula is, whatever the recipes are, all of that, you need to make sure that you own that brand. We've seen sort of you get to an exit. There's some really vague language in the IP section and maybe it's not even the manufacturer who's saying like, hey, by the way, I own the formula, I did the R and D, that's all mine. But you'll have a buyer who says, we don't feel really confident about this language and we need you to go back to that manufacturer and make them clean up that language. And now you've given the manufacturer leverage and you've sort of planted this seed that they never had on their own.

38:54
Gabrielle McGonagale
So I think really making sure from the beginning that it's very clear that you own the ip, including any modifications made after that, any enhancements. Because with most good co packing relationships, you're going to have tweaks to the Products, you're going to have changes over the years and you'll have manufacturers sometimes who will say like, hey, by the way, if we add this, it'll have a creamier consistency or it'll be a little bit more shelf, stable or whatever it is. And you want to make sure that you own every part of that. So I think IP for sure is the most important thing to be buttoned up from an operational standpoint. Kind of like with distribution agreements. A lot of manufacturers, if not most manufacturers, are going to want an exclusive relationship.

39:35
Gabrielle McGonagale
Really important to have certain carve outs for if we need certain changes made to the specifications that you can't make, we need to be able to go elsewhere. If you can't handle our demand, if we're sending you forecasts and you say we can probably get you 3/4 of this, you need to be able to go somewhere else to get whatever that additional product is. So making sure that, sure, maybe it's going to be an exclusive relationship for so long as they can provide you with everything that you need provided. But if they can't, for whatever reason that you're able to go elsewhere and make sure that your product can get made.

40:11
Gabrielle McGonagale
And I think the last thing is being really buttoned up with compliance, making sure that they're repping to compliance with law, not only in the way that they're manufacturing the product, but in the way they're storing it and handling it and the shape that their facilities are in. So those I think are the three big buckets.

40:27
Daniel Scharff
I like those a lot. And some of that I actually have not heard before, especially the provision around, by the way, if you can't make this product. Because I would never think about it that way instinctively, like, here's a product that I need you to make. You can make it, yes or no, but things can change. Almost every product does change over time. Whether you realize, oh, I need beverage, I need it to be more carbonated, or it's a food product. And it turns out that actually the way that we're making it like we could save a lot more money if we had this different process involved. Or the buyer is telling me that there's a problem with the consistency now on the long run and I need to change to some other process.

41:08
Daniel Scharff
But I've never had an agreement stipulation that was like if you can no longer make the product that we need to be sellable, then I can go somewhere else. I could see them. Especially once you're building the business up and the CO man Has taken a chance on you. And they want that business. And they're like, no, no. Like, we can do that. And we just need three months to get this new equipment. And by the way, then learn how to do it. And there'll be a lot of spoilage when we do that. So you don't have that flexibility because they want the business at that point.

41:34
Gabrielle McGonagale
We had a client recently who they went to the facility, they had all the product tested. They were tasting it live. Everything was great. Turns out when it sat on the shelf for a month, the consistency separated. And they had all of these customer returns, and there was nothing in their contract that gave them an out if they couldn't make the necessary changes. And this production facility could not add the additional ingredients that were necessary to stop that from happening. And there was no out of the contract. And they had a huge buyout. And it was a nightmare for the brand because in addition to having a huge buyout to be able to terminate the contract, went months with a bunch of customer returns and no way to make the product that they actually needed made.

42:14
Gabrielle McGonagale
So it can be a big issue if you run into that.

42:17
Daniel Scharff
What a horror story that is. Can you imagine?

42:20
Gabrielle McGonagale
Yeah, a bit of one. It was.

42:21
Daniel Scharff
Yeah, like, you can't make it, and now I have to pay you to not make it. And I can't even get it made. That's the opposite of what everybody dreams of doing in this business. Oh, my gosh. And so, yeah, how would you avoid something like that? Because probably from the com perspective, they're like, this is your fault. Cause you didn't figure out that you shouldn't be making a product that way and that it's not going to work. That's not our responsibility. We made the thing you told us to make to say the way that you told us to make it. And so they don't have the same culpability probably that you do. Because, yeah, probably they did do the thing that you asked them to do. It just turns out that doesn't work.

42:55
Gabrielle McGonagale
Yeah. It's another reason to be really specific about your specifications. You'll see there are certain clients that will give you a set of specifications, and it might have a list of ingredients. Others will say, this is exactly what we want the consistency to be. This is what we expect the shelf life to be. This is so more is more always when you're talking about specifications. Because almost every manufacturing agreement will say, we're going to make it in accordance with the specifications. But if your specifications are very Bare bones. There's not a lot to point to when something goes wrong, as opposed to if they're really in depth and really detailed, then you have a lot more to say. Look, this is what we agreed the product would taste like, the consistency would be shelf it, all of these things and it's not measuring up.

43:39
Gabrielle McGonagale
So there's only a breach of contract if there's something that they're supposed to be doing. So the more specific you can be with that stuff, the better.

43:47
Daniel Scharff
I like it. And I really encourage people not to shy away from specifications because you probably feel like, oh, no, I don't want to be a pain in the butt and tell them all these things. They're going to be so annoyed. I actually have never seen a CO man mind any of that. They're equipped to do it right.

44:03
Gabrielle McGonagale
Or the client just assumes that it's obvious, you know, like, well, of course we wanted it not to separate after a month. Which I'm not saying in the specifications you'd say make sure it doesn't separate, but you know, specifying those, the different elements and what you expect it to look like. And also I think it's great when you can go to the facility and try the product, but also having it shipped, doing the different tests over a course of time is really valuable.

44:29
Daniel Scharff
I wonder who is the person that could have told them that was going to happen. Maybe it's just an operations consultant who's worked on those kind of products before that could say, like, you know, if you make it this way, it's going to separate just because they happen to have seen that. I've had problems in the past. I felt like just being too cheap to pony up for a proper consultant at the beginning, you know, because the formulator isn't necessarily going to know that stuff either. Because if they are not someone who does a lot of that commercialization scale up, they may not have seen it through what happens with their formula. They make a great bench formula. I don't know. That is a tough one.

45:00
Daniel Scharff
Okay, so now let's just imagine a world for a little while where it goes really well and you just skate through all of these issues and your brand is really successful. And I mean, I know every time we talk to brands and like, why are you doing this? Like, no, I'm doing it because of this problem that I had when I was a kid and I'm trying to solve that for the world. And like, I have no plans to ever sell this business. But like, the reality is most people are actually trying to build towards some kind of an eventual exit. We've seen a lot of them happen lately that we all applaud. As you know, we love when they're good outcomes because it's very promising for early stage brands. When strategics are buying brands, that means that there's a market out there.

45:41
Daniel Scharff
That means earlier stage VCs sees that there is a good return out there and they're more likely to invest. So like good, we get all the juices flowing in the industry. We love it. Let's say you're in that wonderful situation where that happens and all of a sudden like maybe you're even running out of money and all of a sudden, oh, there's an out, there's somebody that wants to buy you. What are the. I've seen this happen. What are the things that might actually throw a complete wrench in the wheel of that transaction and how could you avoid that?

46:10
Gabrielle McGonagale
Yeah, I mean, I think the biggest one that comes to mind for me, we had a great exit. The company did phenomenally and did not have a buttoned up manufacturing agreement. So kind of getting to that, a different issue, but kind of one I touched on earlier, which was the manufacturers said I own the formula and it was a week before we closed the transaction and it was effectively a six figure ransom of I'll give you the rights, I'll sign whatever you want if I get this six figure check. And the buyer wasn't going to close around it rightfully so because for the acquirer, they're buying the brand, they're buying the recipe. I mean, sure, they're usually getting inventory and things like that, but what they're really buying is the formula and the branding.

46:53
Gabrielle McGonagale
So if you don't have that really cleanly buttoned up, it can be a very expensive sort of holdup at the end.

47:00
Daniel Scharff
Okay, let me ask you a question on that because I feel like the way it typically happens, you're going to a co man with your formula like, great, make this okay, cool. But I know things can change, right? Because there can be a lot of IP around the process. You talked a little bit about some of that stuff before, but I'm just making this up. But let's just say you're, you know, beyond meat, somebody like that. Maybe the formula, like the ingredients is just a portion of that story. There's so much in the actual processing of the ingredients, the treatment of the product, so many things that are so key in there. So like, is it that kind of a situation where it Might not be clear who actually owns the IP around a formula.

47:40
Daniel Scharff
Or could it be so basic as like, oh, no, I went to the CO man, they said they would make this for me. I didn't realize that meant they owned it.

47:46
Gabrielle McGonagale
Yeah. So I would say the vast majority of our clients, their products are unique in formula, but not necessarily proprietary in process. So you don't run into that a lot. If you have something that's particularly proprietary, then that's something. If you don't own the formula or that the process of itself, you need to at least have an exclusive right to it. So we had one client who had a very proprietary ingredient in one of their sauces, and there was only one manufacturer in the US who could even make it. It was just a very unique process. There was very unique machinery that was required to actually do it. And we didn't own the process, but we did have sort of like a perpetual exclusive right to use it. It obviously for a fee, but was so proprietary.

48:36
Gabrielle McGonagale
That was something that was negotiated and that worked. And that client was super buttoned up. They knew this was a. This was a client who had an exit previously and so made sure when he was going into it that all the T's were crossed and all the D I's were dotted. So luckily for them, that was something that they had. But more times than not, the process itself isn't typically the thing that needs to be protected. It's the formula or the specification.

48:59
Daniel Scharff
I really like this topic because I feel like it's somewhat like having a prenup. I don't know, I feel like.

49:03
Adam Marsh
Feel like when.

49:04
Daniel Scharff
I mean, I'm not married, but growing up, I always felt like, oh, that's like. Like you would never have that. That would be just like such a crazy thing to have to actually need with somebody. And you just like, plan on it going great. And I feel like a lot of CPG founders are just like, no, it's going to go great. And they don't spend the time really worrying about these kind of things. But, like, if you actually don't take the time and document some of this stuff, like later on when things need to be unraveled, it can be so complicated. And I've just seen this with people in my life that it can really have a huge impact on your every day forever after that.

49:38
Daniel Scharff
Because it was not clear in the beginning, like, what would happen if things unraveled in business, in life, so many different ways. And so I really like, Gabby, you giving some of these specific Examples, because this is real. Like this can happen to you if it goes well, all of a sudden there's a lot of money on the table. People start going back to, well, was it in writing?

49:58
Gabrielle McGonagale
Right, right. And that's why we always say, hopefully you'll never have to look at this again. But if there is some sort of dispute, when you do have to look back at it, you want to make sure that somebody has looked at these very particular issues. I think Adam and I have talked about this before, but because we do so much M and A as a firm, it's actually really changed the way we look at commercial contracts because usually when you get to that stage, that's when these issues start to really rear their heads. And so we've been able to, as a firm really look at our commercial agreements and make sure that they're set up for that big moment when it's the exciting exit, not wanting anything to be a footfall there.

50:38
Daniel Scharff
It's the best thing, I think, just to hopefully then have good relationships with everyone at the end of just like whatever it is, we all understand what happens. It's been laid out, it's clear everyone can make decisions based off that. And then hopefully it avoids a lot of nastiness that can happen when everybody realizes what's on the table at the end. Adam, you must have some stuff to add on this topic.

50:58
Adam Marsh
Well, I was going to say, whether it's sale process or a Series A or a Series B, just be honest, right? Because you're. This is your partner, right. So during the diligence process, I would just encourage everyone just to be honest and get ahead of the any issues that might arise. Literally, like two weeks ago, I just sold a company for a substantial amount of money and we're supposed to close on Friday morning at 9am and Thursday at 8pm we find out about this related party relationship, right, With a contract and the buyer is insisting. Right.

51:33
Adam Marsh
We just found that out 12 hours before closing, you know, and the buyer is insisting that contract be terminated because they don't want to deal with Uncle Joey this time, but don't want to deal with Uncle Joey in his, you know, understanding and agreement with the company. So we're up till four in the morning trying to close this deal, but also trying to satisfy everyone with getting out of this agreement with an uncle. Right. So if we could have gone ahead of this weeks, months before, right? So I think just being open, being honest, you know, if you're doing a Series A, these are going to be our partners for next five years. So don't try to sweep anything under the rug. Be open and honest. It's going to save you from getting sued down the road.

52:14
Adam Marsh
But also it just builds trust and you want that in a long term partner.

52:20
Daniel Scharff
Yeah, I don't have enough experience in this area to know from a brand perspective of, okay, let's say like in general when a brand is showing projections to investors, I feel like if you go back a number of years, especially with all of the hype that was happening in the CPG world and crazy valuations, people were just going to show an inflated number and it was going to be crazy. And you just kind of had to know that and then they might change, just change it over time and people aren't seeing the same deck a bunch of times. So they can just kind of do that. Gets very tricky because in some instances it's like, well, they would never look at this if we didn't show those kind of numbers.

52:55
Daniel Scharff
Even though, like, hey, maybe we all know that it's going to come in lower than that. I don't know. It's a tough one to know. But I mean, I personally, someone gave me this advice once upon a time. They're like, you know, it's way easier to remember the truth than a lie. Like once you start a line, then you have to remember the lie that you told and like, it's just much easier to just tell the truth. So I like that. But also you have to remember sometimes you do have to kind of have this fake it till you make it kind of mentality in this life.

53:24
Adam Marsh
Yeah, I completely agree. And you know, when you're doing your decks, I think you want to be truthful yet aggressive. Right. You don't want to present anything that you can't live up to. But people understand that sometimes that's aspirational. But it's like, you know, in the diligence process when you're hiding something from the buyer or waiting to the last second to sprig it on them in hopes that they're not going to care, that's not the way to build trust, that's not the way to build a relationship. So that's what I would try to shy away from.

53:52
Daniel Scharff
I like that because yeah, it's just hard for me to bridge those two things as well. But I think you've done it nicely and I mean, you do have to lobby for yourself and tell your story in a well presented way, in a strategic way. That is what everybody does. You know, you don't just show up and like, look, let me just tell you all the worst stuff about my business. You know, that's not how it works. But you know, you can do it without trying to stretch the truth or hide things and hopefully that works out for everybody. Although I know there are some people who just have lied through their teeth in this life and it's worked out well for them too, so. But we don't know them. We don't like that, we don't support them.

54:27
Daniel Scharff
All right, let me ask you, I think kind of on this topic then, one last question here, which is I think probably the tendency is for early stage brands to look at working with lawyers as, okay, how much is this going to cost me? Right? Like, oh God, this could escalate. And also they're like, you guys are partners to these brands, right? All of the advice that you've just given shows like there's a lot of stuff that you know and can be good strategic partners to them over time. So can you just talk a little bit more about like how can people best work with you in that way and get the most out of you and your best thinking to really have a great, huge impact for them over the long run.

55:07
Adam Marsh
Yeah, I mean, I think kind of hit on earlier. But like, as I mentioned again, we view our clients as long term partners. We're not in it to make a quick buck. We are in it to watch you succeed because that's what's exciting to us. Redlining contract, fine, that's great. But watching the ultimate success, that's what makes this job worthwhile and rewarding for us. So I mean, yes, use us for the red lines for the markups and all that stuff, lean on our experience. But to that end, like, you know, Gabby's probably represented 500. CPG brands are probably represented 6 or 700, our firm, 3,000. Right. So like we have just ingrained experience and knowledge in the industry. So maybe you don't have the money for us to mark up your manufacturing agreement. We can just give you some bullet point advice.

55:53
Adam Marsh
But also like we can just be advised, like a good lawyer is more than just someone marking up a contract. They're an advisor, they're someone you go to with your questions or concerns and your successes. Right? Something to be shared. So I think oftentimes our clients think of us as like almost their consigliere. Right? They give us a call, you know, standing meeting, 30 minutes once a month just to pick our brain because we've seen what works and we've seen what fails. So I think once you find that right partner to lean on them, not just for the red lines or whatever, but really their industry knowledge, what can I expect from this distributor? Or I'm going to go nationwide next month. What do I need to plan for? Or we have Expo west in two months, like, what the hell should I do?

56:39
Adam Marsh
Right. We've gone to expos for the past 10 years, so we give you some advice. Even if it's just like not legal at all. Right. So I think, you know, once you find the right partners, whether it's legal or otherwise, like lean on them, have that call with them once a month. Because people in this industry especially want to watch other people succeed, so they're happy to have those 30 minute calls.

56:59
Daniel Scharff
I like that. So making sure you're using your peacetime consigliere as well as your wartime consigliere. Okay. So, Gabby.

57:07
Gabrielle McGonagale
Yeah. I think a lot of clients are nervous that lawyers are the ones who get in the way of signing documents. They're like, you're going to tell me all of these things I can't do. You're telling me I can't sign this agreement. You're telling me it's going to take another couple of days to be able to have the manufacturer start work. I think kind of reframing that into sort of like making sure that you're partnering with somebody that's going to be protective of you. I think most founders in this space, but I think everybody sort of realizes, like we all have our different strengths. There are people who are crushing branding. Could not be me. That is not my strong suit. So really leaning on people who have a different skill set, who have a different way of looking at things.

57:48
Gabrielle McGonagale
And I think it's just a lawyer is just sort of part of your broader team. Just like a CFO is not going to be doing the regional sales work.

57:57
Adam Marsh
Right.

57:57
Gabrielle McGonagale
Like, you need a lot of different people rowing these boats. And I think a lawyer whether. And not just us, but there are a lot of great lawyers in the CPG space who really have an industry knowledge and want to see the companies grow. And like Adam said, it's sort of, it's the reason we're in it and the reason we do it is to see those exciting moments, to see the product on shelf, to see the billboard with the new face of. So, yeah, just sort of thinking of it as more of a team sport all around.

58:24
Adam Marsh
Okay.

58:25
Daniel Scharff
And so one to end on with you, Gabby. I bet that, like me you guys love your jobs. We, The CPG industry is very fun and probably gabby. When you are doing your best work, you get this very warm, fun feeling, and you're excited that you're just crushing it for one of your clients. What can your clients do to get that out of you? Where you are just like, I am just crushing it for them. They have set me up very well to do that for them because of the way that they engage me or interact with me or the kind of info that they give me or help me understand certain things about the business. What would you say to brands out there, like, make sure that you do this with your legal team?

59:03
Gabrielle McGonagale
Yeah, I totally understand. It can be expensive, it can be daunting. And so you want to sort of, like, get the quickest result with the shortest amount of interaction. But I think being really honest, and this is why, I mean, at the beginning, Adam talked about, ask us for a quote, ask us how much it's going to cost, really align on expectations.

59:21
Adam Marsh
And.

59:22
Gabrielle McGonagale
And I think the more time you spend sort of at the beginning of a project, I know there's this, like, rush to get things done, but the more time you spend at the beginning just to get aligned and on the same page. And what. What do you really want to get out of this? What are you looking to achieve? What are the things you're nervous about? What are the things that you know aren't going to be a problem? It actually cuts down on a lot of cost, and it cuts down on a lot of time. The more we know at the beginning, maybe we only have to do one or two drafts of this. We revise the draft, we send it to the other side. We make a couple of cleanups, we change.

59:53
Gabrielle McGonagale
Can't tell you the number of times where it's like we're four revisions in. Because it's like, well, I. I don't know if I really feel good about this. I've thought more about this, and I'm not sure that this really works for us. So not being shy with really what the expectation is and what you're looking to see out of it, I think is the most important piece.

01:00:12
Daniel Scharff
That is a great answer. Adam, let me come back around to you. Cause I'm sure you have some thoughts on that as well, as many clients as you have worked with.

01:00:19
Adam Marsh
No, I think. I think that's. That was the right answer. Like, get alignment early. Right. We're used to demanding clients. We can take the late nights and the long hours, but getting alignment early helps an occasional thank you. Also goes a long way. It kind of goes back to like the term sheet stuff. Right. Like getting everything kind of an understanding early. Ask us for a quote and if you tell us, I want one markup and I'll take it from here. Great. And if you want us to hand hold your hand all the way through it, we're going to do that too. But like, let's just make sure that we're all thinking the same thing because nothing makes a client more angry than getting a bill that they weren't expecting. Right.

01:00:57
Adam Marsh
So I just want to be sure that me and you are aligned from the get go such that there's no surprise bills, there's no unexpected costs because again, I got harp on this. But we're all about partnership and you getting a bill that's twice as much as you thought isn't really what a good partner does.

01:01:14
Daniel Scharff
I love it. That's really good advice. I hope that all clients you on board get that kind of a tip. So they should all listen to this episode clearly. All right. And then just to end, I also really want to thank the whole team at Genuzi Luindon for being one of the sponsors for our recent founders and funders event, which was a magical experience. It was the culmination of six months of work from my team where we had the top 70 early stage VCs really actively writing checks for brands. We had 160 brands there. We facilitated 600 one one meetings and the content was incredible.

01:01:52
Daniel Scharff
I think the biggest complaint we heard is like I was so Busy taking my one one meetings, I had like 15 in a row that I missed some of the panels that I really wanted to get to as well, which will work on that feedback as well. But that's a good problem to have. Adam, I'm wondering just because I know you got to be there for the full day. Any reflections on what it was like? What would you tell someone who wasn't there about what was like to be there for the event?

01:02:12
Adam Marsh
I mean, definitely apply. It was great. It already had speakers from across the spectrum dropping so much knowledge. Right. You had founders who have succeeded, you have lawyers, you had investors, but they provided really beneficial guidance. And then frankly, just going out and being able to meet and touch all these new brands was super rewarding. And if you were there and I didn't see you and I didn't get to try your product, I'm sorry, but send me some and. Okay, yeah, happy to help on a zoom discuss, but no, it was just a great process and it's only going to get better. I love it.

01:02:48
Daniel Scharff
Well, thank you guys again for your support. It was a really high impact event and we have already heard about a lot of checks actually getting written from it. And that was our goal, was just to help the early stage brands. Yeah. Really figure out who is really writing the checks and hopefully get some of those checks then probably have the kind of traction they need to go and hire you guys to get them properly set up to receive those checks. All right, so thank you guys again everybody. Please feel free to reach out to the Genuzi Linden team. We'll have their contact information here in the show notes. So thank you everybody. I hope you learned as much as I did.

01:03:21
Gabrielle McGonagale
Thank you.

01:03:23
Adam Marsh
Thank you.

01:03:26
Daniel Scharff
Well, my friends, we've now arrived together at the end of another episode of the start of Startup CPG Podcast, the top globally ranked podcast in cpg. As you may know, we're not just a podcast. We're a community of brands and experts and you should join. You can sign up@startupcpg.com you'll then get an invite to our online Slack community. You're going to hear about amazing events near you, all of our special opportunities to get you in front of buyers, investors, brands and more. It's a free community. So what are you waiting for? I will see you there or on our next episode. Bye Bye.