The Startup CPG Podcast

Liz Myslik
For one thing is the. The what, right? I mean, we're looking for businesses that have they're solving a real problem for consumers better than anything or anyone else is, and doing so in a way that enhances people's health and planetary well being. So this is saying that this product has and brand has a reason to exist and a reason to win. And that's so easy to explain, but it's the hardest thing in business to do, I think. So it takes a lot.

00:44
Hannah Dittman
Hey everybody. I'm Hannah Dittman, Operations and Finance correspondent at Startup CPG and the founder of Ready Basics. As a former CPG investor, I'm especially excited about today's conversation with Liz Myslik , Managing Partner at Loft Growth Partners. Liz has seen the consumer world from every angle as a marketer, manufacturer, operator, investor and advisor, and has spent her career helping purpose driven brands grow the right way with strong fundamentals, authentic missions and adaptable teams behind them. In this episode we dig into what makes great founders stand out, why sustainable unit economics are non negotiable, and how to evolve your product based on real market feedback. Drawing from two decades in consumer from scaling brands to advising the next generation of emerging founders, Liz shares lessons on building enduring businesses and navigating the realities of fundraising.

01:34
Hannah Dittman
She talks about how early stage brands can creatively solve the chicken and egg money dilemma with angel investors and why even great companies get passed on sometimes. Whether you're refining your business model, preparing to raise capital, or just focused on building something, built to last, Liz brings a rare blend of operator experience and creating investor insight and heart for mission driven entrepreneurship. Enjoy. Hey everybody, welcome back to the Startup CPG podcast. This is Hannah and today I'm here with Liz Myslik, an investor from Loft Growth Partners. Liz, welcome to the show.

02:11
Liz Myslik
Thanks for having me. Hannah.

02:12
Hannah Dittman
Yes, we're so happy to have you here. I'd love to kick off with you introducing yourself. If you could share your title and a brief background of your experience prior to Loft Growth Partners and what led you to investing. I think that'd be a great place to start.

02:25
Liz Myslik
Yeah, sure. Well, again, it's such an honor to be with you here today. I love your podcast and I love Startup CPG and what you're doing, how you're touching and helping literally thousands of founders and entrepreneurs to be even more successful. So super excited to share some insights with you today and some of my lessons learned along the way. So in terms of who I am, Liz Myslik, I'm a Managing Partner at Loft Growth partners. So my why My purpose kind of throughout my career has been to build and enable businesses that make healthy living easy and available choice to everyone. Based on some experiences I had as a young person and seeing that not everyone has access to the same kind of health and wellness products and services, I made it my mission to help democratize that.

03:17
Liz Myslik
And that's a goal that I've really been devoted to throughout my career. I've also always been drawn to founders. My dad was someone who financed founders dreams. So I grew up around founders. I guess you can say helping them is in my blood. So I've really spent my whole 25 years of doing this trying to build businesses and help founders be successful. As an investor, which I am now as a founder, as a marketer and manufacturer, meaning running manufacturing plants, as a distributor, I wanted to learn the business from all angles so that I could be even more helpful to the founders that I serve.

03:57
Liz Myslik
I've had the experience of raising money, acquiring businesses, selling businesses, working with small companies and for many big companies like General Mills, Mondelez, Unilever, Campbell's, J and J, and some of the most iconic consumer brands out there like Gaiam, Larabar, Justin's, Plum Organics, Eco Products. And I've backed companies as a leader, as an investor as well that have failed. And some of these experiences has really given me a 360 view of what it takes to build great companies that help the next generation build and scale as well. So that's really what I'm focused on as an investor with Loft is helping that next generation to achieve their potential and be truly successful and helping more and more people be touched by their products and services.

04:46
Hannah Dittman
Wow. What a powerhouse background. I'm so excited you're here today Liz, and thank you so much for the kind words. I think you're going to be such a wealth of knowledge we probably need a five part series to cover it all. I love how broad your view is. I think in consumer there's some people that have kind of a little bit broader perspective and bring a different lens and there's other people that go really deep and have only been an investor and I think have a lot of different insights and approaches to things because of that. So I'm really excited to dive into all that today. Before we get into some juicy conversation, could you also provide an overview of Loft Growth Partners and walk us through your investment criteria, kind of your fund dynamics, stage focus, any key themes.

05:30
Hannah Dittman
I know you mentioned wellness, your average check size, all the kind of baseball card information, first I just want to.

05:36
Liz Myslik
Say how I came to be here, which is I met my partner Andy for the first time about 20 years ago when I was running a brand. He sought me out and helped me. He was not an investor in my business, he wasn't able to invest. I was funded by a different investor. But he made connections for me, gave me advice, cheered me on and was just such a great person and great supporter and he was in it for the right reasons. And so when I decided that I wanted to shift from being angel to a full time fund investor, his was my first call.

06:10
Liz Myslik
So you know, I just think it's helpful to give that context in terms of the kind of person that our founder is and that we all aspire to be, which is someone who genuinely is motivated to help people and help the entire industry. So in terms of some of the specifics, we've been around since 2001 providing growth capital and expertise to brands for now almost 25 years. And you know, since then many things have changed and then some things have not changed. What's still true is that we help brands at a critical phase when they're between proof of concept and proof of scale. That usually means somewhere between 5 and 20 million in revenue. That really is a wide range, but it really depends on sort of where they are in their more of their stage of life than necessarily revenue.

06:58
Liz Myslik
We have about a hundred million in assets under management across two funds. We are minority investors in brands that are ready to scale, that figured out product market fit, have proven traction with consumers, have established supply chains and we are the engine or the fuel to help them scale. Our check size, typically 3 to 5 million for the first check, usually up to 10 as a fund investment. We do also have a lot of co invest from our LPs, many of our LPs or our limited partners and our investors are folks who are themselves former entrepreneurs that had a lot of success or others from the industry.

07:37
Liz Myslik
So we have a lot of industry expertise in our LP base who love to co invest with us and you know, we always expect to have follow on investment because it always takes more time and more money than anyone thinks to grow and scale a brand.

07:51
Hannah Dittman
That's great context and super helpful to understand where you're playing in the world. Kind of just picking off of one of the things you mentioned was brands that are kind of ready to scale. Can we break that down a little bit more and explain what that means and what that typically looks like in practical terms? Is that like a brand that maybe had some online success that has now gotten a retail PO and is kind of going into a retail distribution or what are the big uses of funds that you typically are working alongside founders with?

08:23
Liz Myslik
So we get engaged usually when. And this is a topic that I love to double click on because it's something I really have a lot of passion for in terms of how founders should think about what kind of investors they work with and at what stage they should engage investors, particularly fund investors. As a lifelong operator, I want to sort of pull the curtain back on how this industry really works and what really drives investors and what makes them successful so that founders can make more informed decisions for us. To answer your question directly, we are engaging with founders when they have really figured out that product market fit. They've done a lot of tinkering. It takes a lot of tinkering to figure it out. I don't care if you're, you know, a mom and pop small brand or if you're J and J.

09:11
Liz Myslik
Every new product that a business launches takes tinkering. And the first iteration of it is never the last iteration of it. So whether it's the formulation or the price pack architecture, the margin structure, the positioning, the packaging, something always needs to change. So we like to help people after they've really had that opportunity to tinker and figure it out and have that product market fit, have some provenness that consumers love and are repurchasing the product. That proveness can be determined by repeat, if it's online, by velocity, if it's in store. We generally like to see brands that have some combination of online and brick and mortar retail distribution and also have a margin structure and supply chain that they figured out. Again, that takes tinkering too. And as a former co man, I know those relationships can be challenging.

10:05
Liz Myslik
So having some stability in that supply chain is really important. And then again, we put fuel on the fire to really help them go from what we call the adolescent phase up to scale. And there's a lot of growing pains that happen during that time and we focus and dedicate a lot of our own time experience, our network to helping those brands be successful.

10:26
Hannah Dittman
If you had to list out, obviously there's going to be so many different variables and dependent on the category and the company and all these different things. But if you had to list out maybe five key pillars that you're looking for that founders could focus a North Star on in their business, what do you think those would be for you?

10:43
Liz Myslik
Yeah, I mean, for one thing is the what Right. I mean, we're looking for businesses that have, they're solving a real problem for consumers better than anything or anyone else is, and doing so in a way that enhances people's health and planetary well being. So this is saying that this product has, and brand has a reason to exist and a reason to win. And that's so easy to explain, but it's the hardest thing in business to do, I think. So it takes a lot. You know, the next thing that's really important to us is the economics. We want to be able to support businesses that can make money on their core product. And unfortunately there's been, I would say, a pattern or a reward system that's been in place for some time for businesses that don't necessarily make money.

11:32
Liz Myslik
And that's to the detriment of founders most often because ultimately if a business can't make money on its core product, that valuation kind of gets eked away and the founder's ownership in their business ekes away. So we like businesses that have strong margins out of the gate. And I can tell you from experience that's, you can't go from 5% gross margin to 40% gross margin. It really has to start strong. And yes, there's some efficienc as brands grow, but it's gotta be a great margin structure out of the gate.

12:04
Liz Myslik
So we look for that, we look for founders that really are exceptional in terms of, you know, having a vision, a worldview that, you know, millions of people really want to follow and get behind, including us and that have a clarity, a focus to what they're doing, a curiosity, a resilience and leadership and self awareness to know what they know and what they don't know. Also a concept that's bigger than just the product that they're making and that's really the brand that it stands for. Something that again, consumers want to come back to because of the transparency, the authenticity and the purpose behind why it exists that consumers fall in love with.

12:47
Hannah Dittman
Great points and very eloquently said, thank you so much for sharing that. I think those are all huge achievements for anyone to accomplish. And so often some of those might not be as forefront in people's minds, like making sure that you're focusing on repeats and that showcasing demand for your product in a longevity way and the founder kind of profile that you're describing and how to demonstrate that clearly. Could you maybe give us example of a portfolio company or a founder in your portfolio that you felt did a amazing job? I'm sure, all of them. But one that you particularly is top of mind that did an amazing job kind of communicating and conveying these things to you and what they were highlighting or demonstrating that helped you buy in to these attributes or visions that they had.

13:37
Liz Myslik
Yeah, I'd love to share. There's so many examples and again there's. I meet so many founders and entrepreneurs that even outside of our own portfolio that I feel do this so well. But I'd love to showcase one that we have the privilege to work with and that's a brand called Back to the Roots. And Back to the Roots is founded by Nikhil Arora and Alex Velez. This is a brand that I think exemplified all of those attributes that I mentioned, especially around the founders who have an incredible worldview and also the curiosity, resilience and self awareness that make them great leaders of their business. And by that I mean when they started, their story was they had a passion for gardening and growing things. And so their first iteration of their business was growing mushrooms out of recycled coffee grounds.

14:32
Liz Myslik
And needless to say, that's a great idea, but it's not necessarily scalable. And they had the, you know, again, the vision, the worldview that they wanted to make gardening more regenerative, more sustainable and more organic. And so they wanted to be able to give foods to people that were more true from the earth than maybe we're seeing today. And so much conventional farming and highly processed foods. And so how they manifested that evolved over time, today being the largest organic gardening company in the US and so now today their business is all about soils. So seeds, seed starting and plant food that help people become home gardeners.

15:17
Liz Myslik
And how they got from where they started to where they are today, again is a masterclass in resilience, in curiosity and humility and self awareness to understand and listen to the market, be willing to change, be willing to let go of some of the things that they held dear and adapt. And they've done a beautiful job of that and they've been rewarded for it because they really hit a trajectory now that has been like a hockey stick.

15:44
Hannah Dittman
That's a really great example. And I think, you know, something that sometimes founders don't get enough credit for is how adaptable you have to be, but also how stubborn within reason you have to be. It's like a very tight rope to walk to see and defend your vision when you might be one of the few to see the world that way. And that's why you're founding your company and doing the things you're doing, but at the same time being nimble and open minded enough to adapt and massage and make sure that it's going to work in a practical sense, I feel like it's an important skill to have the confidence, but also the humility and that's a hard balance to achieve. So I love that you highlighted that example. Kind of going into maybe some more business fundamentals.

16:28
Hannah Dittman
I know you're kind of touching on some of them with margin profile. You're touching on repeat purchase rates and things, velocities, things like that. Do you have any kind of general benchmarks and obviously so dependent on channel or things you got going on, but when you're thinking through the math of why those metrics matter to you, could you maybe shed a little insight on either benchmarks that you're looking for or kind of the rationale behind why those particular metrics are so important for you?

16:56
Liz Myslik
Yeah, you know, I think at a fundamental level businesses should be able to make money. And I know that hasn't always been something that people have felt was, you know, important in consumer, but it is. And we're seeing that reverberate now throughout the industry. There was, I think, a little window of time where there was some euphoria, some, you know, there were examples of businesses that maybe weren't making money, that were having success, getting acquired by strategics, but that was a window that's closed. And unfortunately some of the behaviors of investors changed so abruptly that founders were left struggling. But the reason is why margin's important is businesses should make money.

17:37
Liz Myslik
And so when you think about when you're starting your business, how do you build your product and your or your service in a way that you can see the economics, you can see your way to making money while also building your business along the way. Now there's no question that it takes money to start a company and to build a business. But if by year two, year three, your business isn't profitable in terms of thinking about your projections, ask yourself why and what are the fundamental barriers to that and other ways you can overcome them.

18:11
Liz Myslik
Because the more ability you have to make money in your business, early in the life of your business as a founder, first of all, the more options you're going to have, the more success you're going to have, the more control you're going to have over your destiny and your outcomes. So that is something that I want to sing from the rooftops is so important. And so what that means and how that breaks down into specifics it really does depend on category and channel as you so well articulated, Hannah. Businesses that are, let's say a yogurt business selling in Whole Foods is going to have a very different margin structure than let's say a beauty business selling through their own website.

18:53
Liz Myslik
And so just for a founder, understanding what the common margins are for the type of business that they're in and the channels in which they're selling and how those might change over time is really important. I'll give you a specific example. A lot of brands, and we love this, seeing brands that start out on their own website or through Amazon, through E Commerce, because E Commerce gives you the opportunity first of all, have a direct relationship with a consumer to really test and learn quickly and have a lot more control over how you're presenting your products and your brand and getting that feedback loop also from consumers in terms of reviews and repeat purchase.

19:35
Liz Myslik
But if you're a brand that ultimately wants to go into retail, it's important to understand how the cost of doing business changes between even D2C to Amazon to natural and organic, channel to grocery to club and work backwards. When you're thinking about your initial business plan to say if we ultimately want to be a business that's sold through Costco, let's understand we're starting an Amazon. Let's understand how that margin structure changes and structure our price pack architecture and our ultimate margin structure in a way that we can be profitable not just on Amazon, but also in Costco down the road.

20:14
Hannah Dittman
That's really great insight and thank you for breaking it down. So clearly I feel like, you know, a lot of founders who maybe don't have as much of a finance background or are as familiar with these things might not know some easy tips and tricks to be thinking about, but I'm sure in a diligence process your company will get broken down P and L by channel. And looking at your business that way and understanding the profitability not just as you've of your overall business, but the same way you would look at the profitability by the mix of SKUs you offer and individual SKU unit economics, you should really be thinking about your business by channel that way as well.

20:52
Hannah Dittman
And yeah, I've definitely seen businesses before where all rolled up it look fine or you know, by their main channel looks fine but their D2C is actually losing money or something like that, you know. So it's really important to understand the nuts and bolts of how your business is built. The same way that it's important to understand the ingredients that are going into your product kind of pivoting a little bit to maybe some lessons learned. I'm sure you've had many winners and maybe some that haven't panned out as exactly as planned. Looking back on your career, have you any kind of big picture lessons or takeaways or anecdotes that you can share that might be helpful, you know, if you were to do it all over again or that you've carried forward once you've kind of post mortem thought about things?

21:36
Liz Myslik
Yeah, so many. Maybe I'll speak to my experience, maybe just knowing that a lot of your audience are operators, founders, people building businesses. I'll speak from my experience as a business builder and mistakes I've made or lessons I've learned. So one is thinking too early about marketing and not enough about sales. So what I mean by that is, you know, I came out of marketing, that's how I grew up. So I love to think about brand and positioning and messaging and all that is packaging. All that is so important. There's no question about it. But none of that matters if you haven't figured out how you're solving a consumer's problem on it in terms of the product that you're delivering and your ability to sell that product over and over.

22:21
Liz Myslik
So getting that product market fit right, really through understanding who you're trying to serve, what you're offering them and how you're doing it better and proving that through the ability to sell it over and over again before you're thinking about, well, our brand and you know, how we, what our logo looks like and things like that is so important. So I want to say just like the blocking and tackling of getting your product into people's hands or mouths or on their body, whatever it is, over and over again and learning from that and being again curious enough and resilient enough to take that feedback and learn and improve and iterate again.

23:03
Liz Myslik
No product starts perfect, so you've got to figure out what needs to improve to do a better job of solving that problem, such that people ultimately want to make that part of their daily lives. So lesson number one is focus less on marketing, more on selling and getting. Making sure that consumers are making your product a habit. The next thing is wanting to flank too quickly or grow too quickly into new categories or new products. This is such a common thing that I see that I did as an operator and that I see as an investor, and that is make sure that, you know, focus on your core product or service longer than you think you might want to before you move into the next.

23:49
Liz Myslik
So often I see brands that have five product lines and none of them are that strong, but they may have $100 million in sales, but they don't have very good velocities. And that's a business that's going to really struggle versus one that's $20 million. But they have three SKUs and consumers are buying it over and over. So really the discipline and the focus to stick with that core product and make it, you know, continue to tweak and iterate and really invest behind it for a very long time. When you look at some of the most successful iconic brands, very few of them are in five, 10 categories. Oftentimes it's one or two. And even the brands that we grew up with, the mega brand, the billion dollar brands, often they're in one category.

24:36
Liz Myslik
So as a early stage founder, trying to take on incumbents across five categories is very difficult. So just focus on the first thing, the first product for and make sure that you've really got that right and scale that up before you move on to the next.

24:54
Hannah Dittman
Yeah, no, that's so helpful and I, I feel like great advice from the operating side as well. I think kind of dovetailing off of one of your points or just a general observation. A lot of investors, I feel like have a really, really great understanding of a board level knowledge of a business, but not so much of an understanding sometimes of what it's like to be in the executive chair actually getting the execution done. I think so often it seems like, oh yeah, just build a great product and then, you know, you just market it a little bit and then it gets sold and you're good. It's like there's so much nuance and things that have to happen to get any of these things right.

25:34
Hannah Dittman
So I think having an appreciation and understanding for that probably makes you a very empathetic and well informed investor.

25:43
Liz Myslik
Kind of, you know, you touched on something that I really want to highlight, which is execution. I have a saying that a good idea executed well is far better than a great idea executed poorly. So that is to say, you know, just the execution, the showing up day in, day out, delivering your product on time in full, answering consumer emails and calls, and just being, you know, being a great partner to your retailers, to your brokers, to your manufacturers, all of those things, all the little things add up and that execution ultimately is the difference maker, more so even than the product itself initially. So because the product, the service will keep getting better if you execute really well.

26:28
Hannah Dittman
Great advice and help with perspective. You know, it's really interesting. Every investor, like every operator will have different opinions and approaches to things. You know, some people feel like you have to knock it out with your product and or have your margin right at the very beginning. Other people think that's something you'll kind of massage and work through as you grow as a company. I think in my personal experience and just what I've observed as well, the one thing I will add too is I think knowing yourself as an operator and a founder and knowing your own personal strengths and weaknesses very well is truly the key to your success. I think there's a million different ways to skin a cat. And I think we've all seen successful exits of big companies happen from many different ways and many different kind of startup stories.

27:12
Hannah Dittman
But I think something if you know how you work and how you think really well, like at the beginning, especially when you're a solo founder, the competency in your business is only going to be the competency of you as a human.

27:24
Liz Myslik
I love that perspective. I couldn't agree more, Hannah. And the fact is that none of us have, has everything figured out right. We all have weaknesses, we all have things that we don't know or haven't done. And so I think that having that humility and that self awareness is so important. And then, you know, surrounding yourself with people that have the strengths that are your weaknesses. I'm not a person who believes that, you know, you know, you should invest a lot of your time trying to make your weaknesses into strengths. I say lean into your strengths and then surround yourself with people that have complementary strengths that will collectively help you be successful and support each other. So I love that perspective that you shared and I couldn't agree more with it.

28:06
Hannah Dittman
Great add on as well. I think. Yeah, team building. I think that goes back to why investors focused a lot on your ability to build a team early on. Because I'm sure you don't expect the world out of a founder, but you expect a founder to understand the world that they need to operate in. I would also like to kind of pick your brain a little bit on your perspective on the industry more broadly and a little bit of thought leadership. You know, you've been in many different facets of the space for a long time.

28:34
Hannah Dittman
Do you think there's anywhere that people are kind of other investors or even operators may be missing the mark or on changes you would like to See in the industry or maybe things that you think you're doing a little differently or contrary in view, maybe to other people in the space.

28:50
Liz Myslik
Yeah. So one thing I want to say is I don't think it's ever been harder to build a consumer brand, but I also don't think it's ever been more exciting time to do it. And I've seen so much incredible creativity and innovation. So I'm very hopeful and I don't think we ever run out of ideas or innovation that are can turn into incredible brands. What I would say is one of my greatest sources of frustration is seeing the cognitive dissonance that exists in the relationship between brands and investors. And what I mean by that is that I think that fundamentally the dynamic of an investment fund and the dynamic of building a brand are out of sync. And I don't think enough people are talking about that or doing anything about it.

29:43
Liz Myslik
And so I want to speak truth to that, which is to say that first of all, I have been so blessed to be able to move into this investor space and meet so many incredible investors. And it's something that we talk amongst ourselves a lot about. But I'm just not sure how many people are talking to founders. And so the fundamental truth is that investment funds like ours, they have a time limit. They're generally 10 years with maybe a couple of years of extension. So 10 years from start to finish, 10 years from the time they raise the money until they have to return that money to their investors. And an investor's job is to, you know, maximize returns for their investors. Just like many of us are in our 401ks or our IRAs are invested in mutual funds.

30:35
Liz Myslik
And we want to see the highest return on that possible over a period of time. The thing is that building a great consumer brand takes much longer than the time horizon of a fund. Because even if a fund is 10 year, has a 10 year life, the reality is that from the time that an investor meets a founder, they make an investment and they need to provide that return is less than that. Right. Let's say it's five to seven years because you don't always meet all the brands in year one. So what that means is that there's a very specific timestamp and there's also a very specific return expectation depending on the type of investor, the size of the fund, the investment thesis. And again, I'm talking specifically about investment funds, not angels or family offices.

31:28
Liz Myslik
But is it could be 3.5x cash on cash return, maybe more, but typically in that range. And that is a significant scale up from especially considering whatever valuation was set at the time they made the investment to the time they exit. So what that means is that many times investors and founders interests are not totally aligned. And I think that is a problem. And I think you have very well intentioned people, well intentioned investors, well intentioned founders that go into a relationship that is doomed to not succeed for either party or both.

32:11
Liz Myslik
And I bring this up because I think that's something that founders need to be aware of and think about how they're founding their business, how they're financing their business, what ultimate goals they have for their company, and how that determines where they go or the types of partners that they have. It's something that is on my mind a lot and I want to be opening up more conversations about this, especially to founders.

32:35
Hannah Dittman
Yeah, no, I love hearing you speak about this. I think it's. It's definitely something that I feel like is so important to dig into and something I tried touch on before a little bit. But I'm glad we're getting into it, which is kind of this concept of fund math. I think it's really important, you know, the same way you would understand how your real estate agent makes money on the sale of your house or anything like that, it's really important to understand every constituent in an equation's incentive and how they work and what works for them. The same way that you would understand how your co man is making money or how your distributor is making money, you need to understand how your investor is making money too.

33:09
Hannah Dittman
So to make sure that you're all on the same team, you're all aligned, and that it's kind of like a fair shake and a common goal for everyone. So, you know, you started kind of talking a little bit about that in a way of explaining why the dynamic might be kind of two ships passing in the night. I'd love to kind of double click on it a little bit more and just maybe bring it a little bit into more tangible terms of, you know, either through an example of a, a deal that maybe you've done or that can help explain the story a little bit.

33:37
Liz Myslik
I'll bring it to what you said in terms of thinking about how fund math and how funds make money. So. And something that I heard you say on another podcast, which is that when you're asking someone about what questions that they should ask investors when they're talking to them, and you had brought up the point of, you know, asking the investor how they make money, what their return expectations are, how big your business needs to be and in what time frame and does that really match up with what you think can happen or what you want to happen?

34:11
Liz Myslik
Because the reality is again, from the time that a fund makes an investment, there's a five to seven year, sometimes maybe a little bit more, but generally not a lot more time that brand has to 3x, 4x 5x or you know, hit significant growth and profitability for that flow fund to achieve its goal. And the chances of that, I don't care how great the brand is, the chances of that are very small. And it's not to say that brands aren't great. There are so many amazing businesses out there, but that's such a very specific outcome that it's like hitting a home run, right? It really is literally like hitting a home run. Hitting a home run is great. But even the best baseball players in the history of the world strike out two out of three times.

35:02
Liz Myslik
So, you know, not every brand can do that. And in fact a small number of brands can. So what about all the rest of them? It doesn't mean they're not great ideas that they shouldn't. They don't have a reason to exist or reason to win. It's more about the specific financial structure that exists when you take on, you know, an investment from a fundamental. So the alternatives are many. And it's why I love to get in front of founders early in their life and why I love having conversations like this. Because it's all about understanding what you want from your business, how you intend to get there, and what kind of risk you want to take on when you're doing it. Every idea has a chance to be a billion dollar idea, but very few will.

35:46
Liz Myslik
So think about, do you want to take a, you know, a bet like that or do you want to sort of take a more of a approach of incremental growth or even faster growth that, you know, testing the waters over time and really having a chance to make money, to see this thing grow and maintain, preserve as much control and optionality as you want while you're building the business? I think that's just the kind of question that I love to explore with founders again before they make the big decision of working with a fund like ours or you know, the many other funds out there. So it's something that I hope more founders ask more questions because again, this is a two way street. Founders, the Reality is investors, we work for founders, right? We are here to help you be successful.

36:37
Liz Myslik
So it's important to take ownership of that relationship and the questions and making sure that as a founder, you're lined up with the right partner, the right type of partner that's going to meet your needs and your expectations for growth.

36:53
Hannah Dittman
So well put and very well explained. And I definitely won't put any words in your or your fund's mouth, but I do think for the founder experience, a lot of times when you get an investment, maybe you don't realize there's kind of like this ticking clock going now in the background and you're really kind of hustling ideally for a strategic exit. And I think that's a lot of pressure if your business isn't well positioned already to be on that trajectory, which is I think why diligence processes are so in depth and exist, especially the later you are as a company. Because that's really what's kind of being evaluated when the money goes in is, are all the things going to work out for you to get where you need to go in a certain timeframe? Essentially, yes.

37:35
Liz Myslik
And again, this is why for us, why those criteria that I mentioned earlier on are so important, why we're looking to help brands that have gone through that proof of concept and are now ready to scale. So they've tinkered and tried and explored and tested and learned on things like their product market fit, their price pack architecture, their margin structure, their supply chain partners, their team, all of those things that they feel, listen, every business, those will continue to evolve, but that there's been a lot of trial and error and really, ultimately they're in a place of more stability with each, in each of those areas with some provenness behind them. And I think that's really where funds in general have a better chance of success and operating with brands.

38:24
Liz Myslik
But again, when it comes to, as you're sitting there as a founder thinking about, well, you know, I do need money to start my business, to grow my business. If I have to have all this figured out to work with a fund, what does that mean for me, what are the options? And there are so many, and I think the most valuable resource in terms of financing partners for a young brand, well beyond bootstrapping, which like I said, let's hope you can kind of find a way to make money early in the business's life is through angel investors. There are so many incredible people out there who love to support founders.

39:02
Liz Myslik
There's entire networks of them so you don't have to go one to many different people that in business to be able to help founders at a point in time that they're still figuring it out. There's still very high risk that there's, you know, a lot of things to learn and figure out. There are going to be mistakes along the way. So I encourage founders to really pursue angel investing as they're early in figuring things out, which that can last for years and years and the structures of those and are often in notes and things like convertible notes and safe notes and with terms that are favorable to the founder, also favorable to the investor. So that again their interests and their time horizons are more aligned.

39:46
Hannah Dittman
Such great tangible advice. I want to not take us too far off track by digging into this, but would you have any advice? You know, I think a lot of people have heard angel investors or maybe have found one or two themselves. But you know, if you don't even know where to start, what would be your advice to kind of get in touch with some of these people or some of these groups?

40:06
Liz Myslik
Yeah, so there's so many networks and I recommend going through angel networks because as an early stage founder because then it's a one to many relationship. An angel network or syndicate is a group of angels that have come together where they share diligence, processes, pitches, et cetera, deal flow. So that for them it's more efficient to be looking at, you know, a select group of brands or companies together. And it's also more efficient for the founder because you're dealing with multiple and multiple angels all at once. And a simple Google search will help you identify angel networks or syndicates that could be right for you. Oftentimes there are syndicates in different cities. I live in Denver. There's something called Denver Angels. There's also industry specific angel networks like you know, the angel group which services cpg.

41:06
Liz Myslik
There are syndicates that are associated with universities, so check out your alma mater and see if they have angel network. So there's so many different ways in which to find them and connect with them. And yes, it's work but honestly the alignment with again for an early stage founder that's still very much in the trial and error phase of their business, which is a very important phase. The angel networks I think can be often much more aligned and receptive to that stage.

41:38
Hannah Dittman
Great pieces of advice and very helpful. I think this is kind of a nice time to segue into a case study question that came up as you know, startup CPG has the largest Slack community in the industry with now over 30,000 members. I'd love to pull a question directly from our channel and have you answer it as a case study for any founders with a similar question. The recent question is what are reasons you would pass on a deal that you thought was still a good concept?

42:05
Liz Myslik
That's a great question and it also prompts me to invite people listening to check out the resources page of our website@loftgrowthpartners.com because we actually have a great resource there called why Investors Pass. And that is something that you can actually see the inverse of that to explore how you might increase your success with investors by ensuring that you have the opposite. So things like knowing your numbers, having good economic, you know, unit economics, et cetera. So I definitely encourage people listening to check that out. I also want to mention there is also angel list on our resources page.

42:53
Liz Myslik
So what we've tried to do is provide a lot of resources and tools and insights for people to use that we hope are helpful that we've gathered over the years through our own experiences or those of the brands that we've worked with to help many founders and many brands out there. So check out the resources page on loftgrowthpartners.com but in terms of a reason why we pass, as I mentioned in the beginning, you know, one of the things that distinguishes what we're trying to do as investors is support businesses that we think can reach scale touch millions and millions of consumers lives and become habitual daily products for them in a way that enhances their health or the well being of the planet. That's a big lofty goal. And not every business has that type of ability to scale.

43:46
Liz Myslik
There are so many great businesses that I see and fall in love with every single day that might again solve a real consumer problem, but do so in a way that maybe it's a smaller market or a smaller segment of the market. So I think that those ideas are no less amazing or great. I also want to point out that we have a very small portfolio of companies that we work with and that's by design from a diversification strategy. It's nutso. But for us it means that our interests are very aligned with our founders. We're not in a situation where if one of them fails, that's okay. No, for us, every founder, every brand's success is important to our success as a fund. And so that means that we make very few investments, maybe one a year.

44:37
Liz Myslik
And so as a result of that we See hundreds, some, you know, we see over a thousand deals a year, honestly, that we seriously take a look at. That means that we'll pass on so many great businesses that we would love to work with that we just don't have the bandwidth or the resources or the ability we have to pick one. So I would say that, you know, having the. Having great. Having great unit economics, great margins, solving a real consumer need, being super focused in who you're serving and how you're doing it better than others, those are universal. We see a lot of businesses that do that and we still can't invest for a variety of reasons that have nothing to do with the brand or the founder, but just have to do with us.

45:18
Liz Myslik
And that's why again, we try to have a reach and a support that goes far beyond our direct portfolio by having conversations like this, providing the resources, putting on events to provide input and insights to founders that we love, being able to be part of this community and help even if we can't make direct investments in every brand that we love.

45:40
Hannah Dittman
Such a great answer and I think a vote of confidence for founders to feel like, be tenacious. One rejection or there will be many rejections for many reasons and it doesn't mean what you're doing isn't important or great. Before we wrap up today, I just wanted to take a second to make sure our audience can have an actionable next step to apply all of this amazing knowledge to. For founders that want to get in touch with you, where can they find you or what is the best way for them to get in contact? And for anyone looking to transition or interested investing or working directly with you, what advice would you have for them?

46:14
Liz Myslik
Yeah, so in terms of how to get in touch with us, please go to our website. We have a contact form there. We look at that weekly. We also have LinkedIn page for our fund and I'm on LinkedIn. I'm less good at responding to all of LinkedIn requests, but if you go through our website or infoftgrowthpartners.com again, we have actually a process to go through all those inputs. We also, you know, love meeting people at events, so we're at every kind of logical trade show that we can be at. Expo West, Neutopia, Global Zoo, Nosh. Let me see what else? Fancy food. We're at a lot of these events, so please check us out there as well as, you know, just warm intros are always great. So, you knowing connected through a mutual friend or contact, which is easy to find on LinkedIn.

47:07
Liz Myslik
That's, that's always helpful and we do a lot of outreach. So anyway, so that's how to get in touch with us again. I encourage you to check out our resources page because we have a lot of great stuff there.

47:17
Hannah Dittman
Anyone interested working directly with you or trying to break into investing, I think.

47:22
Liz Myslik
The best thing you can do is work in brands. I think the best investors are those that have walked a mile in the shoes of the people they invest in. So go to work for a business that's in the industry that you want to invest in and learn as much as you can. When you're in that business, if it has investors, ask questions, get to know them, learn how they work, learn as much as you can there. That's, I would say the best advice of all is to do it directly because then as an investor yourself, you'll be so much more valuable and let your intentions be known. I think a couple of the other guests you've had on had mentioned venture and growth equity investing. They're small teams. We're a very small team. We haven't changed much in size in 20 years.

48:07
Liz Myslik
We've been somewhere between four and seven people. So that's a very small group of people. But if you start to build relationships within that, I love it. We have people that are interested in working with us. They send us deals, they say, hey, here's a company you should look at. I like it for these reasons. We can sort of see how they think about brands. We love that we want to work with people that we know. So building relationships with funds that you like and want to work with is another great thing to do.

48:35
Hannah Dittman
Well, Liz, thank you so much for all of the thoughtful responses and your insights today. Such a pleasure to speak with and the mentorship you provided today was so amazing. I'm sure everyone's going to really enjoy learning from this. So thanks again for hopping on the podcast today, Hannah.

48:52
Liz Myslik
Thank you. I really appreciate your questions. I love listening to you and you are in it and doing it yourself. So I really admire you as a founder, as a former investor, as someone who really understands this space. So thank you for taking the time to have this conversation and so many conversations that I know are helpful to all of us. Thank you. Aww.

49:14
Hannah Dittman
So kind. Thanks again, Liz. Thanks so much for tuning in everyone. If you like this episode, show us some love with a five star review at ratethispodcast.com startupcpg I'm Hannah Dittman, podcast host and correspondent here at Startup cpg. I hope you'll join me again as we dig into more juicy topics like ops, finance, and all the real talk founders actually need. Come say hi on LinkedIn or ping me on Slack. I'm always eager to hear your questions or brainstorm future episode ideas. If you're a potential sponsor and want to get in on the fun and appear on the podcast, shoot us an email@partnershipstartupcpg.com and last but not least, if you haven't already, don't miss out on our free Slack community. For emerging brands and CPG lovers alike, join us@startupcpg.com we'd love to have you. See you next time.