Hello, and thank you for joining.
I am Melissa Travers, Director of Community here at BevNET & NOSH, and I am excited to welcome you to The Nombase Podcast, a podcast built to help CPG owners and operators navigate growth challenges and build more profitable businesses.
Be sure to check out nombase.com, BevNET's platform built for the CPG community, where you can find this episode and so much more.
As we move into 2026, food and beverage founders are navigating a market where capital is still available, but it's deserting.
Deal structures are more complex, expectations are clearer, and the gap between brands that raise on strong terms and those that struggle has become harder to ignore.
Today we are taking a close look at what recent investment and acquisition activity reveals about how value is being built in CPG.
We're going to break down the patterns behind some successful outcomes, explore why certain brands continue to attract premium interest, and examine where founders are losing leverage.
Our guest today is Ryan Williams, founder of Northall and the creator of Fabid, two platforms that sit at the center of CPG finance, fundraising, and deal execution.
Ryan works closely with founders, investors, and acquirers, giving him a front row view into how terms are set, how capital is really deployed, and what decision makers are underwriting right now.
Ryan, it's so great to have you here again on the Nombase Podcast. Thanks for joining us.
I'm happy to be here and invited back. That's a big compliment.
We always want to have you back. So we're going to break down some lessons from recent transactions. But before we do that, let's get an update on what you've been up to.
Since our last recording, you started Northall. Tell us all about Northall.
So Northall is a finance and accounting firm for emerging CPG brands. We worked with everyone from pre-revenue companies up through one that I think will do borderline nine figures this year.
And we kind of just serve as an end-to-end bookkeeping controller, financial statements, FP&A service provider for the brands we work with.
And then in addition to that, I've maintained this database, which is kind of how we originally got started tracking deal activity.
And it hopefully makes us a little sharper when we give some advice or chat with our clients that are often going through the fundraising process themselves.
And how do those two businesses speak to each other day to day? How does that let you see into food and beverage CPG that many, maybe other folks would miss?
I think you just have an awareness of how many transactions there are and how many investors there are. And so you can help with some of the connectivity and point people in the right direction.
I also think it gives you just more data points of what the right expectations are for different brands, kind of with different traction levels and stages in their life cycle.
So I think just anytime you can add a little bit of data to opinion, I think that most people really appreciate that.
Well, on that note, let's get into some data. And let's start with kind of an overarching theme of what we've seen and what we're thinking we're going to see for 2026.
Can you give us the broad strokes on what the trends in CPG deal volume, dollars, valuations over the past few years have looked like and how you think that's going to set us up in 2026?
3:42
Absolutely.
So yeah, we just finished and we'll soon be publishing our exclusive report with BevNET on the investment activity.
Unfortunately, it was another year of decline, not a huge drop, but another consecutive year of down dollars, which ended at like $1.45 billion invested into.
We have a more complex definition on our website, but essentially I phrase it as like the types of businesses you would maybe see at Expo West.
So, you know, brands where you can consume their product that sell that product in the US., that volume has continued to drop in terms of dollars from the 2021 peak, which was like $2.8 billion.
So, you know, four years later, there's roughly half the amount of capital flowing into food, beverage, consumable supplements than there was, you know, at kind of the peak.
And a similar trend on the number of brands that are receiving investment as well.
So, a slightly lower drop in the dollars than the count, which just kind of indicates a slight rise in the average size of each deal, which, you know, follows a shift we've been seeing for a while of just a little bit more of a pull towards, like,
And actually, I really should point out, of course, that your report, Fabid's report, is on nombase.com for our insiders.
Everyone should definitely go over to nombase.com and check that out. It's been great partnering with you on those.
5:34
Let's get into some of the deals themselves. You know, one of my favorites is the Good Culture Deal. And, you know, I'm just like everybody else.
I'm such a huge fan of the product.
And I was just really encouraged to see that they are coming up under the private equity firm, El Catterton, in order to ramp up production and distribution so that hopefully when people go to the grocery store, they'll actually see the product on
the shelves. So they're coming under the PE firm, El Catterton. They also had an investment from mandatory of $50 million in 2022. They also re-upped as well.
They're pulling in nearly 200 million in sales, but they're at less than 50% of their potential retail distribution. What's interesting to you here? What do we need to know?
I feel like every founder's dream is to get acquired by a huge public company, like Coke or Mondelez or whoever.
But I increasingly see these PE stepping stones as, one, I think, a really big compliment to the founders and the operators, because it's just like you only attract the Mandatory or El Catterton investment if you've just really executed on value
creation along the way. Even if you've done it in a category, which I think a lot of people would have like given a second glance of how big can you make a cottage cheese brand, five or six years ago.
And so I think it should open people's eyes to like, when you start a business, the only, I think almost the default thing you should be thinking is like, how do we create value along the way that even a financial buyer can realize and continue to
grow as opposed to what I think is like an even harder and at times more just like moonshot pathway of let's just make like a massive product market fit, but we can lose like a ton along the way. And one of the few strategics that makes sense for
that type of plague comes along. And you can do that obviously, Poppy is I think the case study in that this year, and they knocked it out of the park.
But I think for most founders, especially in the food category, thinking about like, how can this brand grow and generate value for all of the kind of capital partners that are needed as it gets to a couple hundred million dollars in revenue.
Like I think that's maybe a little bit more where, if I was starting a business today, I would think about what makes it attractive to El Catterton eventually, then, you know, maybe Kraft.
Steve Young, the managing partner at El Catterton, said that he thinks of good culture like Kodiak cakes, which was also sold to El Catterton, and that there's a much broader opportunity in the marketplace.
Are you seeing PE buyers much more active in today's market?
There's like pluses and minuses on the PE consumer side. You know, I know there's a very high profile, large private equity firm that like shut down their consumer investing, you know, vertical within the last year or two.
But then on the other side of it, there's very active and very quality ones like, you know, El Catterton and others, and that are acquiring brands not quite to the stage that good culture has found itself.
So I think there's probably a mix just in all kind of flows of capital of like, if the last number of deals were really good, you know, you're gonna see that fun continue and continue to believe in consumer.
And I think like there's plenty of larger investors like Monogram and many others that have made really, really good bets. I think some of them kind of straddle the like venture into PE stage.
I think some of them have broadened their mandate, VMG being a good example of just kind of purely consumer, to maybe more broadly like consumer and consumer enablement, because it's just super hard to get, you know, to be every single fund to be
perfect, or like top dot decile in returns. But I think, broadly speaking, there's a pathway there. And I think, yeah, I think we'll continue to see some PE exits.
You know, when we think about how a brand like Good Culture will operate now that they're partnered with El Caterton, how is that different or the same, you know, versus if they were to be working with a strategic or, you know, some other sort of
organization? How does the brand live differently with a PE firm than they would somewhere else?
You know, I left my banking at Houlihan Loki, which helped put some of those deals together after a couple of years. But I can't say I've been part of one of those private equity firms. So I, you know, this is just a hunch.
But I think they're like very, very meticulous on like value generation, you know, and in particular in a financial context, because even if that brand doesn't turn around and IPO or exit to, you know, a large global company, I think there still
needs to be an underwriting to like what the IRR and the investment is and its performance. So I think probably that last step is like the final professionalizing of the company. And I think it's like makes it even more kind of ready to transition.
And I'm sure that's part of their work together is like, how do we make this just, you know, refine all the edges to make it an attractive asset and maybe something that's easy to integrate with, you know, whoever the kind of final step is, whether
that's an IPO or Coke or Kraft or whoever. So I would imagine that's a lot of the focus. I play a little more in the like series B and below stage.
So, you know, a little less, a little less guardrails, but like I think a lot of a lot of fun and excitement and just kind of finding product market fit. So I think they're all fun stages.
And, yeah, you know, just different different points along the journey.
Yeah, for sure. I'm really excited to see the product everywhere and hopefully in stock as as things move along.
12:05
Evergreen Waffles Funding
All right. How about Evergreen Waffles? They took on a fifteen point two million dollar investment.
It was equity funding with Terpsi Capital and Meletus Ventures. Meletus had previously led their twenty twenty four five point four million dollar round. What do you think about this one?
I'm excited about it.
I mean, first of all, I'm excited about Frozen in general. Like I know a lot of people are probably averse to it for a while because it's such a fixed shelf space. There's high distribution costs.
There's a lot of things. But I think because of that, there were maybe less disruptive brands wanting to say like, let's get started in what feels like a really difficult category.
So the people that have looked at it and been like, you know, it may be difficult in operationally, but we also don't have, we have maybe higher barriers to entry and lower existing new entrance and associated competition.
So I think they've done that really well.
I think the branding and messaging behind that brand, I think is just really strong of, they've managed to appeal to the parents, but also if I was five years old, I think I'd see that in the shelf and think it was cute and cool and not feel like my
mom was sneaking veggies into my meal. So I don't know all of their numbers, but it's a somewhat early stage company. It's not a $200 million brand yet, and yet $50 million is a pretty significant amount of capital.
And so I think the size of that deal relative to where I would guess their revenue is, is decently large, which I think is indicative of when you have a company that's working, and whether that's brand product, whatever facets that make it an
attractive investment. I think a lot of the founders are rightly realizing, while we have this moment of traction, let's raise plenty of capital to be able to keep executing against it, versus what I think can be maybe a little bit of a dangerous
path of we have a ton of traction, our valuation is due to increase if we keep this level of traction, let's raise a little bit less. Maybe I think two years ago, I think a brand like that might have raised $8 million and then been like, we'll raise
another $8 million or $10 million a year later. You may be incur a little bit of incremental dilution by not bifurcating the raise, but I think you also just remove so much risk and you give yourself time to grow into the capital you just raised and
focus on making sure that you achieve what you set out to achieve with it. For a frozen brand expanding into more stores and all of that stuff, it's just a lot for any founder to manage and so I feel like they probably are like, okay, I've got a year
before I even need to look at my bank balance too much, let's make sure our velocity is working. I think that's the right approach.
There are so many opinions on what the right way to raise money is, how often you should raise it, how much you should raise.
What's your opinion right now taking into consideration what we started with, that there are fewer deals happening at slightly higher numbers?
I think the finance people are always more negative than the founders and more like risk averse.
And feel like even when it's working, that like they're, you know, they're just, you know, I've met, we've yet to work with a company where like my view of the traction was like beyond what the founder believed, which is why like they're the ones
that start the brands and we're the ones that like support them. But my view is almost more from like a personal standpoint of, if you end your business successfully, whether it's L.Catterton buying it or Kraft, so long as your capital strategy is
not so dilutive that you end up owning 1 percent of your $100 million company, I think there's very few scenarios where incurring a little bit of incremental dilution but an exchange being able to focus on operating. When you get to the quote unquote
end of the road, which is some sort of like significant exit, where you're like sitting there and you're really upset that you only own 30 percent as opposed to 37 percent of your $200 million business. It has zero impact on your life-changing
personal outcome, which let's be honest, I think is at least part of the motivation for a lot of people that start these. And so I think on the other hand of that, there's a high risk that if something goes just a little bit off the rails of your
business, which can happen with even the highest traction, brightest kind of companies in this like Series A stage, that all of a sudden now you're recapping your business or unable to find capital or whatever. And I think there's a very high
likelihood that if you don't thread the needle, you're like, wait, now I've gone from feeling like I'm a rising star to like, you know, old news. And so I personally like when there's some momentum, I think like you should buy a little bit of safety
with the momentum and safety to me is like a little bit more cash than you think you need, especially when the terms are like really good. Because if you have like people fawning over your brand and are able to get terms that reflect that like crazy
competition, and then like a year later, you've done good, you might get like the same terms as when like people were begging you to get some shares. So I just think, I think there's like a waiting between those two.
And I think you're CFOs, and FDNA, whatever person, if they're not a little bit trying to like push you to not be too risky. You know, that's the, you don't want like a risk on CFO, I don't think.
No, that's what the entrepreneur is for.
Yeah, that's funny about it with the founders themselves. So that's my opinion.
18:33
When you were talking about going off the rails, I immediately thought of Daily Harvest.
And this was earlier in 2025. This was in April of 2025. So Chobani, of course, acquired Daily Harvest.
They, Daily Harvest evolved from D to C to retail. They had raised over 133 million. But, but this was after their plant-based meat crumbles were causing, I think, gallbladder issues.
I know they were causing, you know, healthy issues in their consumers. So I have to admit, I was a little bit surprised to see the acquisition by Chobani. I don't know, what do you think this is about coming back from disaster?
That was a tough one.
I have a ton of respect for that brand as well. I feel like they, well, frozen, they managed to do like frozen in D to C, which is not easy.
And I think like, you know, really, if not pioneered, like, nailed that kind of like, ultra chic aesthetic that I think is like really kind of, you know, appealing to, you know, certain markets.
And I just, whatever, I have a ton of respect for all the people, even if they had some road bump along the way. But I think it's an interesting Chobani acquisition.
Like, I think sometimes it's easier to feel like if something has kind of hit a hurdle, and there's like an associated demand, you know, issue that results from it, that it's like unsalvageable.
I think when you find an option to salvage it to some degree, if your brand is like, you should take that. And I think like VMG and Daily Harvest and Chobani are obviously like three super-statisticated people.
I think they're, you know, gonna find something to like, try to still create some value out of that asset. And I mean, I think Chobani is probably the right people to do it.
But again, you never really know what like thing lies around the quarter that can cause some longer term bumps. So yeah, that would be my thoughts on that one.
I like your point about the frozen food category. It is notoriously and actually such a difficult category.
But I wonder if we'll see more M&A activity in that area, especially because processed foods and ultra processed foods are becoming something, a talking point of, you know, in our country and for consumers in general.
Spindrift just took on a non-UPF, non-ultra processed food certification. So I'm waiting to see if other brands are going to take that on.
But certainly it seems like there's plenty of opportunity in the frozen category for that, while still being able to maintain really strong shelf lives, of course.
Yeah, I mean, even like there's brands I don't know the founders of, but I just see them on, I don't know, Twitter and wherever else. And I'm like, oh, that's cool.
And I haven't seen something super unique in a bit there like Chara and I think Frozen Yogurt and Rippy and Ravioli.
And I think like, I just always find it so fascinating that like of the, whatever it is, a thousand brands that start a year, like one of them that you see or maybe a few of them will be like good culture in six or seven years.
But it's fascinating to just see like what kind of clicks and what doesn't.
22:11
All right.
Another one of my favorite deals was the Simple Mills acquisition by Flowers Foods. And I think part of the reason this was such an enjoyable one for me, is that I remember actually hearing a Taste Radio interview with Caitlin Smith.
22:25
Apple Podcasts
https://podcasts.apple.com/us/podcast/taste-radio/id1109466665
And she was talking about how she was building the brand way back in the early days. And she was talking about how she would set up demos at the Whole Foods markets across the weekend after she had finished her day job.
So she would do one on Friday, three on Saturdays, three on Sundays. And it really took her a long time to build the brand and get it to where it is now and where it went. So Flowers Foods acquired Simple Mills for 795 million.
Flowers Foods also owns Dave's Killer Bread, Canyon Bakehouse. They are a maker and producer of baked goods. But Simple Mills gives them an opportunity to expand into a new and growing category.
Any thoughts?
I think they had an investment to prior to the Flowers acquisition by Vestar, which is a PE like late stage firm.
And is like an example of like, you know, just like anything, everybody's heard of a handful of like the big PE names that are, you know, deserve their reputation like Alcatterton and VMG.
But there's plenty of great firms that are, you know, maybe less marketing driven, but still have created a ton of value.
So I think it's honestly another great example of like, that business started, gained a lot of kind of product market fit, found like a very sophisticated partner that I'm sure was not purely focused on like, let's build the brand.
Like I think they probably were very focused on let's build a business. And like, that I think set them up for the Flowers Foods acquisition.
And I know that founder is also just, from anecdotal evidence, like a very humble and nice person, because I have a family member, I'll leave it, I'll leave it as core as that, that reached out to them when I think they were well past $100 billion in
revenue with a sophisticated TE firm involved and asked if they were looking for any angel investors. And she took the time to write a very nice note back, which I think some people might have not responded with such humility.
And I think that's whatever. I'm from Chicago. I think Caitlin's from Chicago as well.
So maybe it's a Midwest quality, which I think is a good one, and shows you can be nice and still eventually sell your company for $800 million. So good for her.
It always makes you feel good when the good people win. And call it karma, call it. I'm sure that that's the way she operates across all of her business practices.
So it really was so nice to see that. And one of the notes that I thought was interesting when I was reading about that deal in NOSH was that Simple Mills had only, they only have 17% of their demographic are gluten free shoppers.
So while they've certainly been able to appeal to that demographic, they've been able to widen their audience so much and been able to expand their audience so much. That's hugely attractive to an acquirer like Flowers Foods.
And I'm sure Flowers Foods sees a ton of opportunity to grow that brand.
Totally. I mean, you know, that's the thing. I think you like a lot of people are so excited to you, even if the brand is working.
And I think like the founders kind of feeling of is it is it working is usually a little bit lower of a bar than like the external universes. Like is this super working?
And I think that excitement to feel like it is and then launch into a bunch of new categories or channels is sometimes comes a little bit too early.
And like one of the ways that it manifests is too early is like if you go into new categories or try to pursue like a new demographic or a new channel or whatever and it doesn't work, I think that probably makes your potential acquire nervous.
And so I think you want to like have a believable, but like no data yet upside for your company if you go to sell it.
I think Siete is probably a good example of that or maybe even better as Rayos, where like they had obviously dominated the pasta sauce category.
But I would, you know, I wasn't in any of those rooms, but I would imagine when Sovos and Campbell's and whichever bankers sat in between were talking, like there was probably a lot of confidence that not only could it be a huge pasta sauce brand,
but it could be really big in frozen with all of those like frozen pasta meals, which I think are very good, by the way. I think you want that like, you know, it exists more in tech than it does in food, but like a little bit of like, we're
pre-revenue on this like upside, but we're, we have like a lot of revenue and like EBITDA and whatever on what we've already done. Because once you like break the seal on some new channel or category, better, better work.
Otherwise you're kind of like, I just think you, you take a big step backward in believing that it can be a platform, which is often I think what the acquirer is like seeking.
It'll be really interesting to see what happens there.
27:45
We have to talk about Lemon Perfect. They were two-thirds of the way into raising $15 million in 2022. They closed a $31 million Series A.
They've had issues with production after moving to a higher capacity coman. They had to pull a bunch of product off the shelves. They're certainly having some issues with dollar sales and velocity.
What do you see happening here?
Listen, I think RTD beverage is incredibly difficult and requires often a ton of capital and some risk. Because if you sit in this mid-lane stage as far as sales, it's really hard to be profitable.
And I think maybe we'll touch on this advice on be profitable. I think it's also, they exist, but there are very few EBITDA generating $20 million beverage businesses.
And it just takes so much scale and distribution and velocity to hit the positive side of your economics. And so I think as the founder, you're left with two options.
One is to just go really slow and try to somehow make this incredibly tight margin business less capital intensive along the way. And the other is we're going to go for a home run and hopefully it works out.
And I think it's very easy when it's like, transparently, it's had some bumps just like Daily Harvest. Maybe you could say it's not working as well as I think people would have hoped when they wrote their check.
I think it's easy to second guess the decisions along the way that cause it to stumble a little bit. But I always respect the people that are there trying to build a business.
That said, they've raised a lot of money and they're kind of in a difficult position.
And I think it's fortunate that when you're in a position of sales decline to find an investor that effectively keeps the business going, and there is a chance to turn the ship around.
I've been part of a business that had its rise and then had its stumblings. While I was working for that one, it's easy to be critical, but it's also maybe fairly. But also, I don't know, you step into the CEO seat and see what you're just telling.
I'll leave it at that.
Yeah. I mean, there's a reason that we're not all running CPG businesses. I remember hearing that Joel, one of the founders of Kodiak Cakes, I think he quit the business outright twice.
And I think it took them 15 years to get to scale and to get to a point of success. So, you never know what's going to happen next. And it's certainly not an easy job, not one that I would want.
Like, there's different personalities needed at different moments of any given company.
And the personality that has the energy to attract $90 million of investment and bring on a big team and get all of the retailers super excited. Like, it is a huge order to be like that.
Same person needs to be super intense about financial stewardship and return on invested capital and all that stuff.
So, I just think, I think sometimes the person that got a business from zero to one or zero to 0.3 is like, maybe just, that just needs to evolve as businesses, as the business needs and kind of traction changes.
And it sounds like there's some of those changes happening at Lemon Perfect. And maybe that's what gets them to the kind of the next level.
So, you just referenced profitability and you and I were talking before the show. And I was really refreshed to hear your thoughts on profitability and how profitability relates to raising money and acquisition.
I feel like I hear from everybody over and over and over again that the most important thing to be able to demonstrate as a brand today is profitability. But you have a more nuanced opinion there.
I just think like, you know, back to that first part of our discussion of PE and good culture and like value creation. I just think that's like ultimately what it comes down to like, is your business creating economic value or is it not?
And you like, there's many levers that feed into like, did we create value here or did we not?
You know, some of the businesses we work with that have like created a ton of value because they have like obvious consumer interest in super high growth, have like not been profitable along the way.
But like, and in some cases are like losing more absolute dollars each year, even though their like percentages are improving. I think like it is a dangerous kind of like mindset to start with like, I need to be profitable.
I think if that is your like first order goal, I think that's a recipe to be like still slightly unprofitable and to grow really slowly.
And if you're like a little bit unprofitable and you're growing slowly, you're in this like no man's land of like, how are we creating value here? Because the time is going to be so long to get to profitability.
And then even when you hit there, you don't really have a particularly large business. And so like, you know, your return on capital is a function of the size of your eventual profits, but also the time that it takes to get there.
And I think if you over focus on just like, let's minimize the loss along the way. I think that's like a, you know, univariate analysis that is probably the wrong approach.
I think the better approach is like our capital efficiency needs to be strong.
And if we like, if we cannot take a dollar in and generate, at least on the top line, like $3 of revenue out, and then some reasonable improving margins along the way, then we have like a broken business.
And I think that's like the toughest place for founders to be because their advisors, investors and CFO can kind of like tell them like, hey, it's not really working in terms of product market fit.
But the answer to like changing that, I think is like the most elusive, impossible thing to figure out. It's like, okay, well, I don't know, like the product is a good product, like our brand is what it is. Like, what do we do to kind of change that?
And so that's one area where, you know, I almost feel some degree of guilt of like coming and being like, you know, when you see it's not totally working, but you don't have the answer to make it work, like that just feels not great.
But I also think like doubling down on it, I think like fundamentally flawed business that doesn't have true product market fit is like also just a recipe to burn a lot of money and not really get to where you want to be.
So I think like, at least if you are like super self-critical and realize that early the cost as you're like not profitable in terms of absolute dollars is relatively low to tinker.
But like if you get to 100 employees and 30 million dollars in revenue, but it's still not working, now each month to like keep the not working machine going, instead of it being $30,000 a month to try to figure it out, it's like 300 or a million
dollars a month to like spend your time tinkering. And the number of people that are willing to like sit by your side, even if you're an awesome person and founder and someone they believe in, like there's a short list of people that are like, let's
keep giving you checks while we figure it out. So I just think, I think more brands early should be more similar to tech, where like a lot of the tech founders launch their product.
And like in four or five months, like if they're not, if they don't have like a really great user adoption and what in tech would be like users coming back and keep on opening their Instagram.
Like if those aren't happening, you can force it for a while. But I think the gravity of economics eventually always takes over. And I think just like, there's no shame in just trying to like really make some big turns when you're small.
We had no product market fit with trying to sell a database of investors. Like people find it incredibly interesting. And I think it's been useful to maintain.
But I mean, even as a service provider, like to be totally candid, there were people that I think got a lot of value out of it and found it interesting. But it was like, it was frankly like not a great business.
And I just think like, you know, just paying attention to what works as a business is very important.
Yeah. Yeah. And your point about minimizing loss early on is a great one.
You talked a little bit about capital efficiency. How do you evaluate capital efficiency?
I know some investors just look at it here like as just like a quick take of like where is your trailing revenue or your like run rate revenue relative to how much you've raised.
So if you've raised $5 million and you're a $15 million business, like you're three to one, I think that's like kind of a pretty good indicator.
You know, there's a little nuance to that calculation because if you've raised $5 million, but you've spent zero of it, like your ratio is actually, you know, infinite on your capital efficiency.
So it's like how much have you burned relative to how far you've, how much you've scaled. So I think that's probably like a pretty, pretty quick, you know, quick math way of assessing it.
And it's obvious when it's like, you know, again, I mean, daily harvest and lemon perfect, like this is just, you know, semi-public.
Like if you've raised approaching $100 million and you're not selling well beyond $100 million of annual sales, like there's something happened along the way where the dollars and the dollars sold, there's something that needs to be kind of reset.
So yeah, that I think is like a good metric. I mean, for us too, like I know there's a lot of focus on profitability.
I think at least in RTB beverage, like there was an era where I think like a lot of companies were like comfortable having a loss that was almost as large as their revenue. I think that era is like very far gone.
In my opinion, like if we see a brand that has like really good velocity as the product is like working and like they're growing really quickly, which I would say is like a million and a half to like five or six million to like 12 or 15.
And they're losing, I would say like 10 to 20 percent, like maybe 15 or so. Like I think that's an investible business. And so far we've seen like investors excited about those kinds of companies.
I think when it's like we grew from like one to two, and we lost, you know, a million dollars as we grew from one to two, as much as you want to say we doubled, like you need to, especially in those earlier, you know, seed series A stage, like you
need to be more than doubling. And it needs to be believable that post-investment you're going to more than double to like justify, you know, the loss.
You sit at the intersection of financial operations and deal making, and you shared a really interesting tidbit with me when we were getting ready to do this show.
And that was around how entrepreneurs are talking to potential investors when they're fundraising and the kinds of information that they're sharing. You changed your tune along the way in that regard. Can you tell us about that?
I used to believe like, you know, I put all the data rooms and diligence materials together when I was part of Rise.
And I used to think like, if I just assemble all the raw data, have like a, you know, financial model, it has like every input and now, you know, just like basically more, more is better because it will allow the investor to answer all the questions
themselves. And that will like reduce the amount of back and forth. And that will therefore like accelerate the deal and momentum and lack of like what's going on here.
And as we've now worked with like the better part of a dozen brands, I would say like the ones that seem to be really successful with the fundraising side are not like, they're certainly not coy or shady or like, you know, you know, unwilling to
provide information to investors. But I do think they like really well control the narrative and like what needs to be shared and make sure that like as information is being shared, that there's like, you know, a palpable sense of momentum to a deal
coming together. And I would say at this like, series A and below stage, even the sophisticated funds, I think are often, whether they would say this or not, more backing like the obvious commercial traction and like their belief in the category and
their belief in the founder, than like sell G1003 on the like depreciation tab. And like, I just think financial information is a good way to kind of sometimes get a deal off the rails or like lead into like a whole side quest of like assumptions.
And like, ultimately, like, El Catterton is rightly investing based on like a beautiful LBO model, like Melitas and whoever.
I'm sure they have a great financial diligence process, but like, if you're writing your check on the basis of your confidence in like the historicals and the actuals and the, you know, like, I don't think you can do that because it's a small, it's a
small company that still has just like so many things to figure out. To put it like comically, like a little more on vibes and relationships, I think that's where you want to be.
And I think that's certainly a strong suit of so many entrepreneurs. So hopefully that's good news to so many of the folks in our audience.
Last thing I would love for you to talk about, I asked you what's one tidbit that you would share with the CPG brands out there after you've worked with so many brands and really been in the middle of their financial operations.
You talked a little bit about systems and I thought you had an interesting perspective on this. I will.
I'll say one other thing, by the way, on the data side that I forgot to mention in the beginning because I feel like I started with this like, you know, sad note of yet another year of decline of investment.
There was more M&A this year, including M&A of venture-backed brands.
I'll like, you know, I'll save the actual numbers for the report that will be on the BevNET website, but really positive thing is like, yes, there was less money that went in, but there's more money and more M&A occurring and more, you know,
ultimately capital getting returned to the people that put it in. So that actually is a very positive thing that I think if people listen to this entire episode, they should feel happy about.
As far as systems and stuff I see, I think like consumer brands, especially with like the kind of service provider model that's kind of, you know, become pretty standard for a lot of them today, should really like have essentially two steps.
And one is like your QuickBooks spreadsheet era, that you can actually operate really well for a lot farther than you think. And then into like your full ERP and full-time team era, and then, you know, your exit.
And I think where I've seen some businesses get into trouble is like thinking that at that earlier stage, before they have the full-time team or their processes, you know, all ironed out, that they like get a bunch of pieces of software that like,
they don't have the knowledge or the team to be, you know, kind of manically focused on making sure they're perfect. And so, particularly with anything like inventory, tracking and all of the, you know, things like that, there's really great
software, SIM7, DOS, others in, you know, kind of ERP world. But I think you just have to be so careful to not do that before you're ready to like have your whole company bought in and managing it well, because otherwise you end up with like, not
only data that's not totally right, but is like incredibly complicated to unwind and make sense of. And like, I've seen a lot of companies where like, a disaster only in QuickBooks on cash basis is actually like way easier to clean up and make sense
of than like a million transactions. So I would just be really, really cautious of software before you're like, we are more than ready and know what we're getting into.
It's, I think it speaks to a lot of pain points, but it doesn't on its own solve them. So I just be cautious of that.
You made the point that if you don't have an internal person who can implement and run the system, then it's probably not going to go that well.
Is there an inflection point that you can point to that would help a brand understand when they would be ready? Is it points of distribution? Is it dollar sales?
Is there some metric that brands can use to have an understanding of when a transition like that would make sense?
I don't know if there's one number that makes sense. Look again, we work with a company that's doing... Their sales numbers are unbelievable.
But the supply chain is relatively stable. The cost of goods are relatively discernible. We don't need that yet.
So I don't know if it's a dollar number. I think it's just like... When the complexity to get kind of granular reporting is so great that you really can't do that well with spreadsheets.
I would say a couple of things that influence that. Like one, international. Two, when you're doing all your own procurement.
Three, when you're in multiple product categories for multiple suppliers. So if you're doing puffs and sour strips and applesauce and 10 different things, and you want to be able to understand your margin on all of those, I think you need that.
And then when you take all of those things together and you're like, we need a team that's managing that system, which I would say is like a minimally a team of, I don't know, four or five people and the associated cost is probably a million bucks.
So when you're at a stage where you're like, it is worth $1 million a year to have like this amazing software and full-time team, making sure that all of the like hypothetical things that it can tell me are actually happening quickly each month, then
I'd say like, it's time to press go on that. In the interim, you can be very confident that you would have a sensible margin structure just by like calculating good bombs in Excel and making sure you're paying attention to any changing supplier
inputs. And while you can't maybe log in to your ERP and pull the exact margin by retailer by month, which I think understandably every founder wants to do, you can make really good informed decisions without it.
And I think it just comes down to, like, am I not able to make the right decision? And until you feel like I can't make a good decision without this, then I think it's unneeded.
And then I think like the next question is like, what's the incremental value creation I will get from making an incrementally better decision?
And when it's like, when the value creation exceeds the cost to get there, then I think you have arrived at that inflection point.
And our goal at Northall is to basically be like, we can take you all the way to that point, help you with that system set up and transition.
And maybe, I don't know, maybe keep a couple of our accounting or some service still with you as you make your way to, I don't know, Alcatar. So, that's my opinion.
Ryan Williams of Northall, thank you so much for joining us. Everyone out there should definitely check out northall.com and absolutely go to nombase.com to look at the latest Fabid report, which will be out by the time this podcast comes out.
Ryan, thanks again so much for joining us and for sharing such great advice and wisdom with our audience and for everybody out there listening. Thank you for listening to The Nombase Podcast and we will see you next time.
