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In this episode of the Startup CPG Podcast, Daniel Scharff sits down with Paul Voge, Co-Founder and CEO at Aura Bora, a craft sparkling water company that has experienced remarkable growth from just 2 stores in 2019 to an impressive 10,000 stores in 2024. Paul shares his entrepreneurial journey, highlighting the challenges and realities of running a consumer packaged goods (CPG) startup in a fiercely competitive beverage industry.
They explore the intricacies of distribution, retailer relationships, and the high stakes of navigating a market dominated by giants like Coca-Cola. Paul opens up about the operational hurdles of maintaining supply chains, forecasting demand, and the significant demands of fundraising, all while managing the emotional toll of entrepreneurship.
They emphasize the importance of resilience, setting realistic expectations, and finding fulfillment in the entrepreneurial journey, despite the sacrifices and stresses involved. Paul offers valuable insights on maintaining a healthy mindset and the continuous learning required to build a sustainable business.
Tune in to gain practical advice and inspiration for aspiring founders navigating the complexities of entrepreneurship.
Listen in as they share about:
- Profitability and Challenges of the Beverage Industry
- Differences Between Big Brands and Small Startups
- Acquisition Pathway
- Distributor and Retailer Relationships
- Consumer Competition
- Entrepreneurial Mindset
- Excitement vs. Stress in Growing a Business
- Challenges in Operations and Logistics
- Constant Learning and Adapting
- Balancing Personal and Business Life
- Corporate Careers vs. Entrepreneurship
- Setting Goals and Expectations
Episode Links:
Website: https://aurabora.com/
LinkedIn: https://www.linkedin.com/in/paulvoge/
Don't forget to leave a five-star review on Apple Podcasts or Spotify if you enjoyed this episode. For potential sponsorship opportunities or to join the Startup CPG community, visit http://www.startupcpg.com.
Show Links:
- Transcripts of each episode are available on the Transistor platform that hosts our podcast here (click on the episode and toggle to “Transcript” at the top)
- Join the Startup CPG Slack community (20K+ members and growing!)
- Follow @startupcpg
- Visit host Daniel's Linkedin
- Questions or comments about the episode? Email Daniel at podcast@startupcpg.com
- Episode music by Super Fantastics
Creators & Guests
What is The Startup CPG Podcast?
The top CPG podcast in the world, highlighting stories from founders, buyer spotlights, highly practical industry insights - all to give you a better chance at success.
Paul Voge
If you want to be a founder and CEO of a beverage company, snack company, sunscreen company, whatever it is, you probably won't enjoy it that much. If you like the idea of course, creating something and seeing it exist in the world and you're attracted to the creative part of this process and that sounds fulfilling to you? Absolutely. There will be, of course, a lot of difficult days and a lot of difficult dynamics. Whether it's fundraising or selling or operations or trucks going missing. It will not always be a fulfilling thing, but the fulfilling piece of creating something from nothing. If that's what's attracted to you, then great. This is an amazing place to channel that creativity. I think that's pretty clear. If instead you think, oh, it's amazing.
00:47
Paul Voge
I've got this 80% gross margin product, it's going to be really easy to build it very fast and make it very big and very profitable. I think you're just in for a really rude awakening.
00:56
Daniel Scharff
Welcome. Welcome everybody to the Startup CPG Podcast. Today's episode is a doozy. I think this is just one of the most interesting episodes for me that I think we've done. It's with Paul Vogue from Ouroboro, who's back on the podcast because he's just such a candid, transparent guy and he's here to talk to us about what is the CPG founder journey like? What is your stress level going to be like, your excitement level, what are the tasks at different stages of the business that you're going to have to get good at, and just what's your life going to be like if you go down this path? So thank you so much, Paul, for bringing us all of these nuggets of wisdom. It really put into perspective for me why I decided to pursue cpg.
01:37
Daniel Scharff
I hope you get as much out of it as I did. Enjoy. Hello friends. As you know, the startup CPG podcast recently became a top 0.5% world podcast thanks largely to your reviews. I wanted to read some here. Jake from Philamanilla says we take all sorts of topics that could be complex and make them into understandable nuggets through casual and fun discussion. Thank you. We heard from Ham Don that this podcast helps him avoid paying the dummy tax. Being new to cbg, that's awesome. And then lastly, we heard from another brand that's called Dirty Virgin. It's a virgin cocktail company that this podcast has been really helpful for them and they'd recommend to anyone starting in the industry. Please pass it along. And if you can leave a review, please shout out your brand and I will try to read it here. Thank you.
02:21
Daniel Scharff
All right, Paul, so I recently went on a walk with a very early stage founder and the conversation kept coming back to her saying like, hey, what I want for my life is to be running this brand. Here are the reasons I think people should buy it. I care about it a lot in the mission. I want to fundraise and make it work well. I want to be able to earn a good living and have this just be what I do. I want to make a good living. My salary used to be 200k at my last job and I want a good lifestyle. And we know it's possible, right? People have done that and much more. And like I actually personally believe, even if you can only make a fraction of that, but get to do this, get to do a startup that's yours.
02:57
Daniel Scharff
And it's so amazing and fun, but at the same time, like, I want her and all founders to kind of know at the beginning what they're signing up for and what is actually going to come next. Almost like a what to expect when you're expecting for CPG founders. So like, when you go all in and if you do this thing, what is your life about to be like for the next few years? What does it take? Because if you can make that happen, it's probably going to be a long time before that actually does come to be and it's going to take everything to get there right. And just tons of work and stress.
03:31
Daniel Scharff
So I wanted to invite you, Paul, because, you know, I think you're a founder that a lot of us would point to as one of the success stories in the industries for sure of the last few years as like, great, let's talk about that journey. Let's dig into it. So, like, what has your life been like since launching it? What are the highs and the lows and the sacrifices? What's the day to day actually like for you? What do you end up doing most of the time? Is it glamorous? Is it not glamorous? All of that. So let's just jump into it. So Paul, where are we finding you today, first off? And hello, how are you?
04:04
Paul Voge
I'm well, I'm at home in San Francisco, California.
04:07
Daniel Scharff
All right, Paul, can you give everybody the Ourobora 101 as I also crack my lovely Ourobora here, I'm drinking a lavender cucumber.
04:18
Paul Voge
Thank you. Yes, Ourobora 101. Five and a half years ago, I was working in a kind of classic office building with A fully stocked pantry area. And we had a lot of distinctive, disruptive brands to snack on or to consume throughout the day. We had Kettle potato chips and Jenny's ice cream and Justin's peanut butter and Sir Kensington's mustard. And I found it was kind of odd that our office had Lacroix sparkling water, and it was the item that was most consumed, but also the item that was least enjoyed. So it felt like, gosh, why doesn't someone make. Why doesn't someone make a crap?
04:50
Daniel Scharff
That's. I was one of those consumers drinking and not really enjoying it.
04:53
Paul Voge
So that resonates. Yeah. And I think there's not a lot of things you naturally consume more than one of in a day. You know, the average sparkling water consumer is actually having more than one can per day. That's not the extreme user. The extreme user like me is having like eight cans a day, but the average is having two or three. So it felt like, okay, this could be great if we could just create a craft version of this. Could we draft off of a lot of the success of, you know, other categories where they did a similar thing, different ingredients, different flavors, more modern brand, and give consumers, you know, a lot more for more money, of course, but hopefully a lot more for the consumer that's willing to pay for it.
05:29
Paul Voge
So that was the idea on our boards of craft sparkling water. We say made with herbs, fruits, and flowers. So think what Sarah Nevada or Sam Adams did to beer many years ago. We are trying to do to sparkling water. And of course, we have some nice trends we're drafting off of. People are drinking less soda, less diet soda, less alcohol, and a lot of that volume is going to sparkling water. So that is the Quick 101 on Ouroboro.
05:50
Daniel Scharff
Thank you. And I think you do have to credit some of that probably to Lacroix and like, others like it, who in those earlier stages, I feel like me, I worked at a food tech company. We had Lacroix in the office, and people were choosing it over soda and other, you know, kinds of like maybe quote unquote, unhealthier options. So bringing people into that space where they're interested in delicious sparkling water. So. And what do you tell people about the difference, let's say, in just taste like consumer experience drinking a LaCroix versus an Ourobora. And I can tell you, like, right now, I mean, I have not had a Lacroix in a long time, but when I'm drinking this Ourobora, for me, it's the aftertaste. I Think probably is going to be the main difference where I just don't get it, really.
06:28
Daniel Scharff
With yours, it's like a fresh floral taste and it's floaty, and then at the end, it just lovely, you know, in a nice way. Dissipates and not like a little, I would say, aftertaste bite that I might get with a Lacroix. What do you think?
06:42
Paul Voge
Yeah, well said. No, the word bite is a word I use often. So most sparkling waters, Lacroix included, use citric acid to make the product more acidic. And they're able to not list this on the label because citric acid is one of those ingredients that is in a lot of things. We can consume your toothpaste, some of the snacks you eat, and it is listed often as a preservative of taste or sometimes a processing aid in either of those things by us, you know, FDA law, you don't have to list it in the ingredient panel if it's actually not intended as something that a consumer will experience. Now, the truth is you do experience it.
07:18
Paul Voge
You experience it the way you just said, where it gives you a very acidic bite at the end of drinking sparkling water, usually at the back of the throat. The negative that we've all experienced is, hey, if you leave a can of conventional sparkling water in your car and come back a couple hours later, like, you would never touch that can because, you know, hey, that's now not plain water. That's not just flavored still water. That's now a different substance. It's kind of a science experiment. What you're tasting there is citric acid. It gets a little bit muddied by the carbonation, which is also an acidic thing. Your carbonic acid is what's created when you add CO2 to H2O. The best part of Ourobora for some folks is what you just described, that, hey, this is not upsetting my gut.
07:57
Paul Voge
I don't get this soda ish. You know, bite. When I drink it doesn't burn the back of my throat because it's not as acidic. And then, of course, hey, if I'm drinking it slower, it's not like it goes from a sparkling water to a disgusting science experiment. It goes from a sparkling water to a less sparkling water to a flavored plain water.
08:14
Daniel Scharff
So anyway, that is super interesting, Paul. I've never actually had anyone explain that to me, but it kind of makes sense because I would, like, drink it and then I. I don't know, I would feel a little queasy if I had A bunch of them. But I didn't really know why. And I always. People are always like, oh, it's like natural flavors, like, you don't know. But actually, it makes a lot more sense that it would be citric acid. It would be. It would be a stomach feeling where I was like, I don't. I don't know what's going on. I feel like maybe I just shouldn't be drinking a lot of this, but that just my experience, maybe not everybody would feel it that way. But that is super interesting to hear.
08:45
Paul Voge
It's a tough thing to market because citric acid is a normal thing. It's in lemons and oranges, as the name suggests. You know, in any piece of citrus, that's a citric acid. And it's a hard thing to talk to consumers about because we are the least acidic sparkling water. But we are still acidic because we're a sparkling water, and we're the least acidic because we're not adding acid. We're just creating acid by adding carbon dioxide.
09:07
Daniel Scharff
Right. And citric acid is the ingredient that caused a lot of lawsuits and all of that for the beverage companies that said they aren't using preservatives on the label, but had citric acid in it. So then basically there was that big Celsius lawsuit a year or two ago around that topic specifically. Okay, so Paul, again, like me, most of the people I know, they would look at Paul and be like, wow, Paul's killing it. Ouroboros. Killing it. Like, he must be living the good life, you know? Can you first just tell me the timeline? Just a quick summary, like, when did you start? Where are you at now? What was the March on door count?
09:41
Paul Voge
Sure. We started in the spring of 2019 and sold our first can in the fall of 2019, actually, five years ago, in a month in the middle of November of 2019. So we ended the year 2019 in two stores. We ended the year 2020 in 700 stores. We ended the year 2021 in 2,500 stores. We ended the year 2022 in about 5,000 stores, ended 2023 in 7,000 stores, and we'll end 2024 in about 10,000 stores, so hooray.
10:17
Daniel Scharff
That's awesome. All right.
10:19
Paul Voge
Yeah. So your earlier comment of, hey, we'd say Ouroboros a huge success and living the good life. No, we are not a profitable company, nor are a lot of beverages at this size. Certainly not living the good life. You know, it's. I still make, you know, a lot less at ourobora than I would make elsewhere just in terms of salary and we have not returned a dollar to investors. So I think to your comment about the friend you're on the walk with, it is really good to define goals. You know, I think people say, hey, I gotta get into cpg. And for some people that is, hey, I'm trying to build a billion dollar company that one day Pepsi will buy the way Siet Day just exited.
10:52
Paul Voge
For other people it might be, hey, I make this product and I want to sell it to 10 or 20 grocery stores in my town. And generally the latter you can do profitably almost immediately and the former you probably can't do profitably for many years. But it is kind of good to have a goal if your goal is to. It sounds like your friend. The good news for her is she immediately said, hey, I want to make $200,000 a year. That's a good goal. I'll say There are some founder CEOs I know that make more than $200,000 a year, but generally they have, you know, raised at least $20 million and as a result that means they've probably sold at least 50 million units. They probably have at least a 40% fully loaded gross margin.
11:30
Paul Voge
They're probably very close to profitability as a percent of net revenue. So there's a lot of things that have to be true for that to be the case. But definitively no would not say I'm quote living the good life nor quote a big success. Certainly I would, I hope on the pathway to both of those things. But it's a long, long pathway that is for sure.
11:46
Daniel Scharff
I love. Well thank you and I really appreciate you just being so transparent about all of that because yeah, that's huge store growth, right? To like during the pandemic have just be absolutely exploding in categories like beverage that are so hard. And before we kind of jump more into just the day to day of this stuff, like what are the main challenges of getting profitable in beverage? Right? Because like okay, someone would look at this and be like it's water and like you have a nice price point. But what would you say are like maybe the top couple areas that are really making it hard for you to get to profitability.
12:18
Paul Voge
Sure. I would say for most beverages and I'm specifically saying beverages, if you're listening to this podcast and you don't have a beverage, you can translate to what I'm saying for most low price, high weight categories that even if they are fast moving consumer categories, if There is a infrastructure that conglomerates have created to get to the shelf. It will, by definition, make it hard for you to compete with them. And I'll give an example. When I say beverage, you probably think Coke, Pepsi, Dr. Pepper, Keurig, Nestle. Those four large conglomerates distribute on trucks that they own. They manufacture in facilities that they own. As a result, they are running wildly profitable beverage companies. And you can just listen to all four of those companies, you know, quarterly earnings reports, if you want to hear just how profitable they are.
13:07
Paul Voge
It's amazing what you can do when you're effectively vertically integrated. So if you are not vertically integrated, like me and like a lot of other beverage companies, and by that I mean, hey, I'm using someone else's manufacturing facility to make the product. I'm using somebody else's truck to get the product to shelf. I'm using somebody else's retailer to sell the product. Not that Coke has its own retailers, but given the deals that they have with the major retailers, in a way, it's as if they have. They own a chunk of those retailers. So think Coke, Pepsi, et cetera. They're effectively vertically integrated from the raw ingredients all the way to you paying, you know, a couple dollars for your half liter. And Ourobora is so the opposite of that you can see where all of the dollars, you know, fall out of line of.
13:49
Paul Voge
Yes, of course. You know, you can buy a six pack of our board right now at a Wegmans for $8.99. It does cost me less than $8.99 to make that six pack. So great. From the gross margin line of our business, it looks like, whoa, this. This Paul guy's got something going. He's going to have a profitable business. Great. It's on the shelf at 899. I make it for a lot less than that. But the retailer is taking at least 38 points, sometimes as much as 42 points in Grocery Channel, as much as 55 points in the convenience channel. If you're a beverage company selling to convenience, which is generally the largest beverage category. So who's getting the most value out of this product being sold? Not me. The retailer. Who's getting the next most value out of this product being sold?
14:35
Paul Voge
The truck that it's coming on, the distributor that's getting to that retailer. Again, not me. I'm paid. After those two people are paid and there's a lot of other dollars involved, like, of course, we have A, you know, 15 employees on our team. We are expected. And the Only reason we get items on the shelf is because we promise to run a lot of marketing dollars. Not just marketing dollars in the form of trade spend where the price comes down on the shelf, you know, 16 weeks a year, but in the form of advertising in those grocery stores, doing sampling events, having shelf talkers, whatever it is, there's a million ways you need to market because it's a very competitive category. And like I said, you are competing against some of the largest corporations on earth.
15:15
Paul Voge
So there's a lot of reasons why beverages aren't profitable, but there's a few of them.
15:19
Daniel Scharff
Yeah. And even if, I mean, if you look at like liquid death, a lot of people would talk about them. I don't know their financials. I'm guessing they're probably not profitable either, even as much as they're fundraising now because it's a very low price point category. But I feel like for them, and I don't know if Poppy is either, and they're obviously getting like all the hype these days. And I drink it, I enjoy it. But like my assumption is those things are will just be so valuable because at some point they will get bought by one of those companies that can then manufacture it for pennies on the dollar of what they're getting now and distribute it. And then it's an incredibly valuable brand. So you're kind of building towards that event. What do you think?
15:57
Paul Voge
It's a mix of both. So both of the ones you just named. Correct. Are not profitable today, October 2024. That said, they're both a lot closer. You know, I always say EBITDA as a percent of net revenue is a great metric to look at. If you're running one of these fast moving consumer companies that can't be profitable. You want to show like, hey, we're getting closer to profitable. And even if the burn, even if the dollars we are losing every year is getting greater, is the percent getting lower, I'll pick a fictitious number. Hey, if you're losing $1 million off of $3 million of sales, that's a lot worse than losing $10 million off of $500 million of sales. Even though 10 is a larger number than 1, you're still losing a much smaller number relative to the net revenue.
16:36
Paul Voge
And the reason investors or potential acquirers are looking at that is, hey, eventually these things do flip. And in the past they used to flip where they start making money after that acquisition. And an acquirer would say, hey, great, you know, we can do an add back as we're Buying your business because, hey, we're not going to need a lot of your employees, we're not going to need your manufacturers. We're going to manufacture it for a lot less. We're not going to have to use these very expensive distributors. We're going to use our own trucks and distribute it for a lot less. And all of a sudden this, I'll just use that same number.
17:04
Paul Voge
This $500 million revenue business that was losing $10 million turns into a $500 million business that's making $100 million, which 15 to 20% EBITDA, like that is best in class. End of the yellow brick road. EBITDA for a beverage company. And I'm saying that a vertically integrated Coke owned beverage company, that's what they can expect. 20% EBITDA. And if you don't believe me, you can listen to any of Coke's last quarterly earnings calls. The good news for those beverage companies is, hey, even though we lost 10 million last year, maybe 15 the year before or maybe 20 the year before that, at the very end of this rainbow, we just got bought for a couple billion dollars. Again, I'm using a very big acquisition just to prove a point.
17:40
Paul Voge
And they are saying our business is worth that because to Coke, hey, they're going to meet with, turn to $100 million profitable machine and then they can run it out and probably make it more profitable and much larger very fast using their system. What has changed is of course those acquirers now don't want to buy that company even though it's very large. They want to buy the profitable version of that company. So that's of course if you're liquid death or Poppy or me to a much smaller extent. That's what you're trying to do is prove, hey, I can be a profitable company on my own. Even with these bad dynamics, even without owning the trucks or the retailers or the manufacturer. I can create a profitable business and it will just become more profitable in your system. But it's a long road.
18:17
Paul Voge
You have to raise a lot of dollars to do that. You have to be willing to do this for, you know, at least a decade and learn a lot very fast and compete against those big guys as you go.
18:26
Daniel Scharff
Paul, you should be a professor. I very much am enjoying this class personally. I'm like, man, I worked in beverage for a long time. How come I don't know or understand any of this stuff? So I'm very impressed by all of this knowledge that you have. Okay, so going back then to the beginning, sure. When you started this business, you know, what were you doing before? And talk me through, like, okay, here's why then I wanted to do this. And here's what my life was like in the early days. Starting this back in 2019.
18:55
Paul Voge
Sure. My life in the early days. Yeah, I was, you know, delivering the product out of my Subaru, driving around the city, dropping off invoices. And it was really fun. I mean, it remains to be fun. That was just fun. And it was just me. And it was like a very clear objective. Hey, we want to add one store per day. Let's see if we can get one more store per day. And I'd say in 2020, that was like roughly our rate. You know, we started the year with two stores. By the end of January, were in about 32 stores, and the end of February in about 64 stores. And it was just like a kind of intoxicating thing. And we ended up working with a couple of small distributors locally. One of them was a.
19:28
Paul Voge
An egg distributor here in the Bay Area was our first, like, major distributor. I was so thrilled to be on this truck next to, like thousands of eggs. And getting to know their sales team, obviously beverage was not their main thing. It was like their third tier thing, after eggs and after milk to most of these grocery stores. Then you get into these distributors and you probably leave your car and you start working behind a desk the way I am right now. And you're trying to make sure, Okay, I was joke in food and beverage, and I guess this is true in other categories too. But uniquely in food and beverage, like, you kind of have four customers, only one of them pays you, and they generally don't pay on time or in full.
20:01
Paul Voge
But your four customers are the obvious one is, hey, you're a distributor, great. I'm selling this product to a distributor, and I'm trying to get to know their sales team to increase the sales to, of course, get the orders in on time to existing retailers to make sure their sales team is motivated to get into new stores. When they're presenting other items, they present my new items. That's the first customer. They're the one that actually pays. Next one, the retailers. I actually have to meet with the retailers. The distributor meets with some retailers, but for the most part, I am meeting with the retailers. And it means you have to figure out, okay, at the beginning, who are the regional.
20:31
Paul Voge
In the Bay Area where I live, like, how do I move Linardis, how do I meet with Oliver's, how do I Meet with Buy. Right. And I have to have those meetings at the retailers and hopefully get as many yeses as possible. And like fundraising, it's kind of a numbers game. Not all retailers are going to say yes to you. You need to talk to a lot of them and then of course, make sure that when you get to those retailers, velocity is so good that you have great data to show the next set of retailers. That's your second customer, third customer, the consumers. Again, the retailer is not paying me, the distributor pays me. The consumer is not paying me. They pay the retailer. I need to make sure consumers know about my product. It ends up on a set.
21:02
Paul Voge
You know, the average number of sparkling water brands on a set that we are on is 23. There are 22 other sparkling water brands in the category. For us, it's a very large category, which is why there are so many brands. But it does mean we're not just competing against Lacroix, which I've already referenced. You know, there's an interesting dynamic in sparkling water where of course there's, there are brands owned by Coke, Pepsi, Nestle, Dr. Pepper, Keurig, which are the four big conglomerates. There are also independent brands. Lacroix is an independent brand, publicly traded as national beverage company. Sparkling Ice is an independent brand and they actually sell more sparkling water than any of those companies I just named owned by Nestle, San Pellegrino and Perrier. They're these big century, multi century old imports.
21:39
Paul Voge
So there's just a lot of big sharks in this sea and you're trying to get consumers to notice you over their buying habits for maybe 50 years and to give you a try.
21:49
Daniel Scharff
All right, so Paul, when you decided to do this at the beginning, like, were you thinking about your opportunity cost when you're creating this business and starting to do it? And how are you funding the business at this point? Like you deciding to go with this entrepreneurial venture, not having a job, not, you know, getting paid much by those distributors. I mean, you know, when you're in just a couple stores, there's not much to. To in revenue at that point.
22:11
Paul Voge
I didn't know any of this. So I read two books. One was Mark Rampola's book about starting Zico Coconut Water, and one was Seth Goldman's book about starting Honest Tea. And if you want to pick between One of those two, the Honest T1 is a comic book so you can knock it out in an afternoon. No, I didn't think about opportunity cost. I was dumb. You know, I was 24 years old, I liked the sparkling waters. I was making it home in my soda stream, as did some friends and I thought this would be interesting. I wish I had if I had thought a lot more. It sounds like if you're a listener of this podcast, you're already thinking more than I was thinking. You're probably way well more prepared than I was. So I made no money.
22:46
Paul Voge
I'm like grateful that I'm married to an amazing woman that was making money which allowed me to do this. She was also working on our arabora on the weekends and after work and packing boxes in designing our labels and doing a lot of other things for free. So there's a couple different ways Maddie helped. But no, I made no money. Huge opportunity costs. I was making good money before then to the fundraise question. You know, that's maybe the first thing I'd say is what to expect. And you're expecting to your opening of this podcast is you're going to have to spend a lot of time fundraising. That's probably the first thing I was surprised by. I would have guessed. And some of this is unique to beverage, but it's true in all consumer categories.
23:22
Paul Voge
Even if you have a very high margin item, let's pretend you're in personal care, you have 80 points of gross margin. You still have a cash flow problem where you have to manufacture a product in advance and sell it and get paid by a distributor not in advance. So you know, a good cash flow hole would be like 90 days. Most people are closer to 180 days. So you need to be fundraising. And for me, I spent way more than half of my time fundraising for this business. And if you had asked me in 2019 what I anticipated, I would have said 10%, maybe 8%.
23:54
Daniel Scharff
You said spend or spent?
23:56
Paul Voge
Spent. No, spend.
23:57
Daniel Scharff
Currently 50% of your time fundraising.
24:00
Paul Voge
I am almost always. Even if we are not actively in a fundraise, I am working on the metrics for the next fundraise for sure. Yes.
24:07
Daniel Scharff
Wow. All right. Respect, Respect. So probably my least favorite part of any business would be the fundraising side.
24:15
Paul Voge
Yeah.
24:16
Daniel Scharff
And they don't make it easy for you. I don't know why, but I feel like VCs have this tendency where they just want to like summon you places if you want to talk to them. You need to like go show up to the coffee house near their kids school and between 1 and 1:12pm or something. They've got a lot of the power. So okay. If you were looking back at it like, okay, I was I had this job, I was making good living. Would you have done it exactly the same way at that point of like, okay, let me just go all in on this right at the beginning.
24:45
Daniel Scharff
Do you what would have been the pros and cons of maybe even like keeping your job for a while and trying to hire somebody to do some of that work or it just wouldn't have worked that way?
24:53
Paul Voge
I don't think that part. I don't think that's possible. I've had a lot of people ask me that of like, hey, I've got this awesome product, we're selling it to some stores, maybe I'm going to hire a salesperson and I'll stay working at my job. I don't think that's possible. And I'd also say this is going to sound like a bold, maybe even annoying statement, but I'll say it anyway. If you don't like the idea of meeting independent store owners and selling them your product, don't do this. If you are doing this to make money, don't do this. And those two should eliminate a lot of people trying to do this. Because if instead you're saying, hey, I want to make money, great. There is an SBA 7 loan that you can get from the United States government.
25:27
Paul Voge
There are cash flowing businesses all around you. The laundromat that you go to is a cash flowing business. Go buy one of those businesses and you can make money and spend the same amount of time and energy I have put into this CPG business and a lot of other people put into their CPG businesses. And almost certainly you will have real tangible cash flow that yourself can pay yourself with and you can pay off that loan and you will own 100% of a cash flowing laundromat rather than 10% of a money losing CPG venture for a very long time. Now obviously that works.
25:59
Daniel Scharff
Okay, so what's the right reason to do it then? Because I would say, like I talked to a lot of founders who say, oh, I always wanted to revolutionize the way that people would, you know, drink water. You're like, okay, like, I mean, you know, maybe it's not just to make money, but there's gotta be more to it than that. And you probably didn't start out exactly that way. Like, for me it was fun and I do love the sales process and it's like competitive and high energy and I could sell or demo all day and never get tired of that. But like, yeah, what do you think are the right reasons?
26:28
Paul Voge
Yeah, I always Say in life. And this is not just a cpg, like, if you think less about what will be on the business card and more about what the tasks involved in that title are, that's probably a good indicator. So, like, I'll say ouroboro, whenever we are hiring anybody, if someone mentions the word title more than once, no job, we're done. And that might be a mean thing to say. But if you are more worried about what the job seems like than what the job entails, just, there's not. There's a mismatch here. We're misaligned. Whereas if you just love marketing and you love the tasks involved in marketing, absolutely, you can come be our head of marketing.
27:04
Paul Voge
If you like the idea of being our head of marketing and you haven't actually mentioned the tasks involved, but you just like the idea of it, well, then we have a mismatch. So I'm saying the same thing. Hey, if you want to be a founder and CEO of a, you know, beverage company, snack company, sunscreen company, whatever it is, you probably won't enjoy it that much. If you like the idea of course, creating something and seeing it exist in the world and you're attracted to the creative part of this process, and that sounds fulfilling to you? Absolutely. There will be, of course, a lot of difficult days and a lot of difficult dynamics, whether it's fundraising or selling or operations or trucks going missing. It will not always be a fulfilling thing, but the fulfilling piece of creating something from nothing.
27:45
Paul Voge
If that's what's attractive to you, then great. This is an amazing place to channel that creativity. But I think that's pretty clear. If instead you think, oh, it's amazing. I've got this 80% gross margin product, it's going to be really easy to build it very fast and make it very big and very profitable, I think you're just in for a really rude awakening.
28:02
Daniel Scharff
Okay, that's very helpful. And I think that's exactly why I wanted to have you here to talk through that so everybody could understand that part of it. So if we just. Let's consider two different personal metrics, excitement and stress. What was your excitement and stress that first year? And then how did that change, let's say, the second full year when you were kind of, let's say, you know, from going from like, two stores to 720, 500 stores? Like.
28:28
Paul Voge
Yeah.
28:28
Daniel Scharff
How did excitement and stress, I would say, morph during that time?
28:33
Paul Voge
It's a good way of thinking about it. Yeah. I'd say in the first couple of years, you know, 20, 20, 21. What was most exciting was seeing consumer reactions to the product. And just by nature of us just launching, like, those were the first consumers trying the product. The very first trade show we did at the end of October of 2019, it was like really fun of, hey, the only people who've tried this so far are like my friends and family or friends of my friends and family. And now totally random buyers are trying it. And that first week, you know, a buyer from Whole Foods tried it. That was so exciting. So there's consumer reactions or retailer consumer reactions. That was certainly the most exciting thing of the first couple of years.
29:09
Paul Voge
The most stress of those first couple of years was, hey, I've got a totally unknown number of sales coming in the next month and I need to have a very known number of cans. You know, you can't go to a manufacturer and say, hey, I want to manufacture around this amount, depending on how sales come in. So you end up just needing to say, like, I'm going to make 30,000 cans and hope to sell 30,000 cans in the next three months. And then I'm going to make 50,000 cans and hope to sell 50,000 X. And you're constantly doing this balance of supply and demand. So that was the stressor of those first couple of years.
29:39
Paul Voge
I would say that morphed into, not that I don't get excited by consumer reactions and not that I don't feel stressed by our manufacturing, but they're both just not the. These days, that's not the thing I'm most excited or most stressed about these days. There's a similar dynamic of the stress is always, did we forecast correctly? Do we have enough cash? Did we raise enough money? Are we in the process of raising money? And kind of a lot of back of house, like, hey, we need to get money into this business. And some of it we're spending on marketing, some of it we're spending on manufacturing, some of it we're spending on people. We need to make sure we got all of those numbers correct. And same thing, you are guessing.
30:13
Paul Voge
You're guessing to a lesser extent than you were in the first couple years, but you're still guessing. So that's always the biggest stressor is, hey, did we fundraise enough? Are we fundraising again? Will this retailer that we thought would say yes? Did they say yes? But it's more stores than we thought and now we're all out of cans. Like, it's kind of the same problems, but just Larger Those are definitely the stress. And I'd say now the most exciting part is probably as stupid as this or not stupid as a, I don't know, kind of as not fun as this sounds is like big macro data reports are now the most exciting thing of running this business of hey, we launched this new raspberry vanilla SKU in 300 doors. How is it you know, resonating with consumers relative to our other SKUs?
30:55
Paul Voge
And that's like not something I ever thought about in 2021 and it's now like the thing I think most about in 2024.
31:01
Daniel Scharff
It's super interesting. Also I was talking to one of our partners that does that helps get expiry and short dated product to people in need and I was explaining to them why brands consistently have extra inventory. And I was like, yeah, a lot of it's about the forecasting process because the fundamental thing in our business is the cost of underage which is not having enough inventory is much greater than the cost of overage which is having too much. Because that's a cash problem. Like you're going to have to pay for it. If you don't have enough inventory you are asked because the retailer, they might never work with you again. You're going to be living in hell. They're not going to trust you. Right, right.
31:37
Paul Voge
Totally, totally. Yeah. It's a lot easier to have too much inventory and find somewhere to sell it or as you get larger somehow to finance it so you're getting paid on behalf of that inventory. But yeah, if you short a Walmart order like congrats, the largest retailer in America now will never buy your product.
31:54
Daniel Scharff
So I wonder, can you remember just a few specific days, weeks, months that were incredibly hard for you, where the stress level was the highest and what caused it. And I will say for me the things that usually caused that were there was some horrible operational problem that really can make your life hell for a while or it's just some account that you worked so hard on and then just ended up not getting. Yeah, those probably for me those were the big two and then some stuff that's just totally out of your control.
32:27
Paul Voge
Yeah, I've got two of those. And I'll say as long as we're continuing to focus on like people that are kind of thinking about you know, starting or commercializing a product they make in their kitchen right now for some reason and I'm not sure why but oftentimes consumer products is, or CPG in particular is kind of like equated to Technology. And I think some people think, oh, it's just the opposite. You know, in technology you spend a lot of time on R and D or a lot of money on R and D and then you have this product and you get to go sell, sell, sell. And CPG is kind of the opposite of like, hey, you don't spend as much money on R and D, but you spend a lot of money on the selling. And then you sell, sell, sell.
32:59
Paul Voge
The difference is when you are selling a line of code because you have a software as a service product, it is literally the exact same line of code that you sold to the last customer. When you are selling a new can of sparkling water, it is literally a different can of sparkling water. And even though it seems pretty similar, it's a different smelted aluminum, it's from a different lavender flower, and it's a different product every time. And as a result manufacturing anything that is going to be different each individual time that you make it, there are so many, so much room for error. And to your point, Daniel, like a lot less is in your hands than you think. I'll give one example of There was about a.
33:38
Paul Voge
It's probably like a 400 day period, you know, a year and a half or so where I did not take a day off. Not a Saturday, not a Sunday, missing friends, weddings, you know, just at home, stressed, trying to make this business work. And I finally, I thought like scheduled a good time for myself, my wife Maddie, to leave the country. We were going on a trip to Europe and using our airline miles finally. And the first Monday I was going to be off, I got a text at probably 8:00 Pacific Time and it was like afternoon there and were hiking, so there was. I wasn't getting the images that followed this text. It was clearly a picture and then a message, but the picture was loading. And it was a text from our3pl at the time.
34:18
Paul Voge
And the text read as follows, and apologies for profanity, but this is an honest text that I got. Paul comma, all your shit is fucked. Okay? And then a picture and a video that we're loading and I'm like running, running, running and trying to find service to get those to load. And again, this is supposed to be my first day off in like a year and a half. And I finally get wifi at this little cafe and it was a video of a pallet of cans and like every half second, pop, pop. Like fireworks. And we had done A big production run. We'd done our biggest production run ever to put real dollars to it. It was the first time we did a production run where we had run a quarter million dollars worth of product, which, you know, is huge.
35:08
Paul Voge
We're working with a much larger co packer like it was. We had kind of graduated to this step and were just about to launch into sprouts nationally and I don't know what to do. I don't know anything about, you know, canned science at this point. Now I know a lot about canned science, but I'll skip through six weeks of back and forth. We did get paid back for this. It was an error from our contract manufacturer. It's an error. That overcarbed. It was not high carb. It was high fill. This is a high fill can. Just put too much stuff in there. And then it was a hot day and there was extra pressure. And next thing I know, cans are popping. But a quarter million dollars worth of product that I had paid. I paid for those cans separately.
35:47
Paul Voge
I paid for those raw ingredients separately. I paid the deposit on that contract manufacturing run separately. I'm now out of those dollars. Like, thankfully, it was soon after a fundraise, so I had a little bit of wiggle room, more than I, you know, have normally. But that was a particularly stressful day. And obviously, to add insult to injury, of course, I was like, trying to be on vacation, and obviously that vacation was very much ruined.
36:07
Daniel Scharff
How dare you try to take a vacation.
36:09
Paul Voge
Yeah, exactly. That's what it felt like. Of course, it always feels cosmically like it was the universe saying, like, oh, you think you can take Monday off? All right, we're going to explode some cans for you, big buddy.
36:17
Daniel Scharff
Let's just wait until you're as remote as possible, and then we're going to tell you how effed your S is.
36:22
Paul Voge
Yes, exactly right. So that was one particularly tough day. We had another one where there was a huge. I remember this as a Ted Cruz got a lot of flack. And it was very funny on the Internet because he went to Cancun during the big Texas ice storm.
36:35
Daniel Scharff
Yep.
36:35
Paul Voge
Whenever that week was in the world, we had a huge truck full of product in Texas as well. And it was to a very important retailer and it got delivered and it was just a truck of ice. And unfortunately for me, like, you'd think the retailer would be like, oh, makes sense, you know, got left over the weekend and the temperatures were surprisingly like 10 degrees. And now you're loading this big truck of ice instead they were not at all understanding, and they were like, how dare you send us this garbage product? And obviously, I thought it was very clear, like, you know, we obviously didn't load a truck of ice. We loaded a truck of sparkling water. It is just being unloaded as a truck of ice. And we will get products as soon as possible.
37:12
Paul Voge
But it did create a tenuous relationship with this customer. Yeah. Anyway, we have had a million stressful weeks, but to your point, I think it is the most stressful. And it feels like something that is totally out of your control, but it will be totally your fault. At least when it's in your control and your fault, you feel like, oh, well, I messed up. This feels like, oh, my gosh, something just awful happened to me.
37:32
Daniel Scharff
Those are real ones, man. I can definitely imagine what that can feel like. So, you know, what about now then? Like, you know, okay, once you get into 5,000 doors, 7,000 doors, 10,000 doors, I mean, you mentioned already you still have the same challenges around fundraising. You're still working hard to get your business towards profitability. What is your how. What about your excitement level now and your stress level now?
37:58
Paul Voge
I'd say as it gets larger and you go from, you know, maybe the store down the street to a collection of five or ten stores down the street to, like, a major regional grocer, depending on where you are in the country, to major national grocers, you do get kind of a schedule to your life, to your year, which is nice.
38:15
Paul Voge
But the negative part is this part of the year, for me, the last three years between October 1st and Thanksgiving is so painful because you are just sitting around waiting of, hey, there are seven retailers that we've had substantive conversations with in July, August, September, and they could say, yes and totally make our year by nature of these businesses, because you raise money from outside investors and because you are making more product you need to grow, you cannot have a stagnant CPG business. And that's, of course, true. You know, publicly traded companies have the same pressure. But I'd say for CPG startups, like, what investors are investing in, no offense, is not your dynamic personality or your amazing, delicious product. It's like, can you prove to us that this is a growing, scalable business? And if it is scalable, it needs to scale.
39:01
Paul Voge
So you do all these meetings and you hope for the best. And, like, where there are seven retailers we're waiting on. If we get six of the seven, I will be over the moon. If we get four of the seven, I'll be Really happy. If we get one or fewer of the seven, I'll cry, you know, like, it's just. And this is totally out of my hands now. We can send them data and send the new reports and send them more samples and, you know, try our best. But ultimately it's a human deciding whether or not to fill their set with my items. And that is what next year looks like. Next year could be 40% bigger or 40% smaller, depending on what comes in.
39:33
Daniel Scharff
I gotcha. I know what that's like. So as you've gone from two stores to like 7,000 stores. For me, when I was growing and getting those bigger regional chains, I felt like it was like going from a go kart to like an F2 car or an F1 car. Like, all right, now I'm on the stage. Like, I've got a vehicle and I can do some cool stuff with it. It just felt like a bigger stage. Does it feel like that to you?
39:56
Paul Voge
Yes, I do think it's a bigger stage. I think, I mean, one tangible thing, you know, when we used to sell into those regional stores, like, they didn't often think about Lacroix, Perrier, San Pellegrino. It was just like, oh, this is part of our. You're kind of like one of those emerging brands. We just think we should add to our set to add diversity to set. And now we are actually delivering value to those retailers. Like, now we are being compared. You know, what are your sales on a linear inch basis relative to sparkling ice? What are your new innovative SKUs relative to Bubli's? Like, that's crazy. You know, those are big, big brands. I'm just, you know, this random guy, Paul in San Francisco that is trying to sell sparkling water.
40:30
Paul Voge
And I mean, compared to these massive companies, in the eyes of this retailer, they need to add a couple of items. Which of them will come from us? Which of them will come from one of our competitors? It does feel like a bigger stage. Where it really feels like a bigger stage is we are now constantly looking at, okay, what was our trade spend last year in this retailer? Like, it becomes a game, ironically, a game not of yards, but of inches. As you get larger, you know, hey, do we lower our price more frequently? Do we lower our price to a deeper level more seldomly? Like, that's an ultimate question for a lot of food and beverage companies when we're doing below the line marketing. Like, is it more effective to sample or is it more effective to do out of home?
41:10
Paul Voge
Is it More effective to do retailer owned media like there become these very big things that at the beginning you're just trying to get stuff on the shelf sample where they let you get more stuff on the shelf. And even though all those dynamics are still true, there are so many ways to get on the shelf and there are so many ways to move the product off the shelf and you have larger budgets and larger stores at your disposal. And to your point of, hey, when you're getting into a 2000 store chain, amazing, you're going to immediately see a huge impact to revenue. But you need to finance that with a huge new finance agreement to make that product. So it does become in some ways a game of interest because you're looking at a little point of trade spend here and there.
41:47
Paul Voge
And in some ways, and were adding more stores now at a clip than I added in three years of running the business. Like that's just kind of an insane fact.
41:55
Daniel Scharff
So how hard has that transition been for you from being Paul, the guy who's driving around and selling into indie store retailers and has all the energy to do that, to Paul, the guy who really needs to go deep on data analyses and analyze linear inches on facings and decide, you know, big strategic decisions around marketing allocation. I know you're a big reader also and very resourceful, but you know, has that felt seamless and a buildup of experience over time or there parts of it you struggle with?
42:25
Paul Voge
I'd say if you have a business that's like roughly at this stage, you know, I can speak as specifically as you'd like, but you know, we have 15 employees, we're in 10,000 stores, we have eight SKUs at retail. We are trying to go, you know, above $20 million in sales next year. There are certainly items to your point that yes, feel big and strategic and I'd say like, you know, more zoom calls with spreadsheets. Unless I'm stuck in a traffic jam in a Subaru full of cans on the Bay Bridge. But they're kind of not that different. And I'd say both of them felt strategic and existential. One of them might just be more, you know, dressed up. I mean, I'm wearing the same outfit I was when I was in that car, so it doesn't look all that different.
43:06
Paul Voge
And I'm still working from the same home. I'll say. As to the transition, you know, your job changes and this maybe this is another one for what to expect. And you're expecting like your job changes every 60 to 90 days. You know, I have a very different job today in October than I did in January and a very different job in 2024 than I did in 2021. So it doesn't actually feel like a big transition. It feels like a million small transitions. And one day you wake up and you know, I was laughing the other day of like I am now constantly looking at the percentage of sales that happen on display versus on planogram for my competitors. I didn't know that phrase two years ago. And now every four weeks it's the first thing I'm looking at when spins gets released.
43:42
Paul Voge
It's kind of crazy that something can go from something you didn't know to now it's the only thing you're tracking. To your comment about F1. If you just started watching F1 because of that new show that came out a few years ago, you went from not knowing any of the drivers names to like knowing the driver's kids names. That's like kind of crazy that you have that new knowledge. And same thing I do think, hey, the only way to do this well is if you are willing to constantly realize like I know nothing relative to what I need to know in this next stage, you know, we hope to sell, you know, significant products, six packs to Walmart next year. I've never sold a six pack to Walmart. I have no idea what it's like selling multi packs in the Walmart set.
44:23
Paul Voge
And that might seem like a small thing to learn, but it's a huge thing to learn. There's an assist that do $40 million of sales selling multi packs to Walmart. So everything you don't know gets larger and larger in terms of the magnitude of it. And I do think if you're not interested in being a lifelong learner, like you have to want to be very creative and to constantly be learning and constantly be humbled as a result of that learning and frankly constantly need others help, whether that help is in the form of money, etc. In order to do this well. And if any of those three things don't seem interesting to you, same thing like don't do this, you know, SBA 7 loan, laundromat, cash flow and that's what I recommend.
45:00
Daniel Scharff
And I mean at that point it's not just like one truck full of stuff popping, but it's like a fleet of trucks going all to all the Walmart DCs all over the country. So I mean hopefully you figured everything out by then and it's everything, you know, you like learned the lessons early on. But, like, the one thing, you know, with OPS is stuff will always go wrong. It's just a question of how big of a deal it is and how you can react to it.
45:20
Paul Voge
If you are manufacturing or shipping physical goods like you are destined for a world of pain, that's for sure.
45:27
Daniel Scharff
So, okay, looking back then, is there anything that you feel like you could have done differently along the way to just have a better experience of all of it, or do you think you felt the appropriate amount of stress always that you needed to drive the business?
45:44
Paul Voge
Great question. No, I mean, I'm a very regretful person in general, so I regret, I mean, almost everything to some degree. You know, sometimes I think about a restaurant I was at three weeks ago, and I think I should have got a different entree than the one I got. Like, that's like, I do that too.
45:59
Daniel Scharff
Like, it was so unsatisfying. Damn it.
46:01
Paul Voge
Yes, yes. Or, you know, like, oh, man, I was the quarterback on my sixth grade football team and I threw the wrong pass to the wrong guy and we lost in the championship. And I think about it today, and that was, you know, two decades ago. So that is certainly my nature, which is not a good. Not a good nature to have. But, yeah, when I look back early on, I one, I wish I set better expectations for myself and frankly, my investors and to some degree, you know, our team members early on, because I just didn't know, you know, I didn't know what a normal growth rate looked like. I didn't know what it would take, but I was just making guesses.
46:34
Paul Voge
And I always joke that, hey, I mean, maybe even things I'm saying on this podcast, like, six months from now, I'll look back at and cringe. Which the good part about that is, like, hey, it means you're learning very fast. You know, if six months later, you look back at something you said and cringe, that's good. That means like, hey, you learned a lot in six months. Then the negative is every time I make a sell sheet, I look at all my old sell sheets and I think, oh, why did I say that? Or every time I make a new investor deck, I look at all my old investor decks. I'm like, oh, my gosh, the idiot that put together this deck, what was he thinking? And unfortunately, that's the idiot that I see every morning in the mirror.
47:06
Paul Voge
So in terms of mental framework, what I wish I had known at the beginning is there is no fast way of doing this. There's no shortcut to Doing this. I usually say, hey, if you want to start a beverage company, and this is true of a lot of fast moving consumer goods. But I know beverage better. Like you need 30 years or $30 million, ideally both. And I didn't know that at the beginning. I felt like I remember the first investor deck we made. I was like, hey, I only have to raise money once. You know, I don't know where I got that idea from, but it was stupid.
47:36
Paul Voge
So I wish I had a longer term view of it and realized, hey, even though, yes, you need to be stressed and frantic and every day matters, if you can remember that this is a part of what will probably be a decade plus experience. If all goes well and you don't fall off the tracks between now and then, all of a sudden you can enjoy each little win a little bit more. I wish I had enjoyed that call we got when we got to Sprouts National. I was really excited that day and the next day I was no longer excited. I wish I was excited for like a month, not a day. So I think there's a lot of different ways of packaging that mentally.
48:10
Paul Voge
But I certainly regret some of the ways that I just, I felt like myself in the business have become one person. And whether Ourobora is a huge smashing success and we see a big Pepsi acquisition or not, like it was a success in that I was willing to do it and have now spent many years of my life learning it and being so tied to the outcome, like a big flashy exit is not the only way that makes these businesses a quote unquote success. And I think that's a very hard thing to put in your brain. And of course it's not the sort of thing an investor would want to hear, but it's the truth of, hey, when you're doing something, you know, the best baseball player in the world has a less than.400 batting average.
48:49
Paul Voge
Like they are getting out more than they're not getting out more than they're getting on base. Same thing. This is a way worse than that. You know, one in 10,000 of these businesses gets to 10 million in sales. And those that get to 10 million in sales, another one in 10,000 get acquired for any meaningful number of dollars. So by definition you are playing a one in many million game. To win that game is very hard. To play that game is very fun. But to play that game and knowing that you can only have fun if you're going to win the game, well, don't play the game. That's a Crazy game to be playing. So I am trying to keep that perspective more and more, but I wish I had known that three years ago.
49:22
Daniel Scharff
All right, so I appreciate you hearing your retrospective, because when I look at the numbers now on my piece of paper, it's like 20, 2700 doors, your first full year, building all the way up to 10,000 doors in your fifth year. That's amazing progress. Very few brands can actually do that. And I think you're talking about being kinder to yourself at the beginning. On expectations, I'm like, no, those are great numbers, though. But I know what the pressure is. Like when you have outside investors who are just like, no, 3x growth, it should be 5x growth. And, you know, they're not in the business and it's not really based in reality. And then you feel that pressure every day. Right.
50:00
Daniel Scharff
And the highs that you're talking about, like, we got sprouts, but, like, that's not your goal to, like, just get sprouts and you're done with it. Your goal is sprouts and then Whole Foods and the Target and the next one and then huge and keep going. Right. And that's why. That's what makes you good at doing this.
50:15
Paul Voge
Yeah, I'd say, like, it's crazy. I'll use a real example of, you know, in the year 2022, I think we did three and a half million dollars of wholesale revenue. Not our website. Awesome. I told people we do four and a half. We came up short. That's too bad. And at that time, it feels like such a massive miss. I mean, it is a massive miss, but it's certainly not why I got into this business of, like, I want to be right every time. You kind of have to be right because you set these expectations. Or, hey, I think our Peppermint Watermelon Skew is going to be the best one. No, it's the worst one. We just discontinued it. I was wrong, and there's so many ways I was wrong. And I.
50:51
Paul Voge
I of course, hate the feeling of misleading people, and not intentionally, of course, but I just hate that feeling. But I also hate the feeling of having myself on this hamster wheel, of feeling like, oh, man, if I don't get all of these things perfectly right, then it was just a bad month, bad quarter, bad year, bad week. And I wish I could be like, hey, you know what? I'm going to get some of them right. I'm going to get most of them wrong by definition. And you just hope that the impactful ones you Got right are right enough that the impactful ones you got wrong don't sink the whole ship. But even if it does sink the whole ship, and this last couple of years, yeah, I feel like every week I hear about a business that's going out of business.
51:26
Paul Voge
It's a really hard game. Like it's not at all an indicator of, oh, that founder messed up or that product's no good. Amazing products and amazing founders don't succeed. And you know what? Oftentimes awful products do succeed. And it's like not a matter of that's like another what you expect and you're expecting. I think most people get into us thinking, because I have an amazing product, this will be an amazing business. And it's just like a little like saying, because I bought an amazing dog, I will be amazingly wealthy. I'm like, those two are not connected. Those aren't connected at all. I see how you came to that conclusion because a lot of wealthy people have amazing dogs. But you just inflated the two in this ridiculous way and it seems like, what are you talking about?
52:05
Paul Voge
Like these business, you know, Siete has amazing products. Yes, Siete has amazing products. What if I told you the products were less than 5% of the reason why cite had this amazing exit? Like, they executed so well. Having an amazing product is easy. Every person I knows someone that makes an amazing chocolate chip cookie. We can all think of someone. My mom makes an amazing chocolate chip cookie. That does not mean she has a billion dollar chocolate chip cookie company. She's very far from having a billion dollar chocolate chip cookie company. But that just proves, hey, it's clearly not about the product. And if you're going and thinking my product is the reason this will succeed, oh my gosh, your product is so the 20th least important thing. Which sounds painful to hear, but that's just the truth.
52:46
Daniel Scharff
And I think if you look at the biggest CPGs in the world and you really see that proven out like mars where I used to work, like, those products are not so impressive really. Like, you know, if you take away the branding and everything, like a lot of people can make better products than that and do. But you know what they're amazing at is delivering, making and delivering that product to Walmart where it could sell for under a dollar and they have an incredible margin on it and they just execute that all day better than anybody.
53:15
Paul Voge
Yeah, totally. I mean, I always say, hey, if you want proof more than anything that amazing products clearly don't equal amazing businesses, go into the grocery store, there's 40,000 SKUs. How many of those do you actually buy? Like 100, maybe 200 if you have a huge family. Like, that means there are 39,000 products you don't buy, you don't want. You would never want in your house. You'd be embarrassed if someone saw them in your house. And they're massive businesses.
53:40
Daniel Scharff
So. Okay, Paul, I don't only want to give people the doom and gloom, but I really like this perspective of like, all right, this is what it's going to be like so that you can be prepared and just know that these are the, this is what it's going to take and you're still not guaranteed success. But I also believe that I couldn't have done anything else because, okay, my opportunity cost started at like, okay, I went, yeah, I went to like a good business school and then I was doing management consulting and I could have just stayed in that and like risen through the ranks and been a partner and I hated it. Honestly, the learning was good, but, like, I did not give two shits about any of the stuff that were doing, like back office cost reduction. It was not fun.
54:20
Daniel Scharff
It was not fun for me to talk about people. And then that's where I had the realization of, like, well, what's the opposite of this? Like, oh, physical products, like, fun stuff that you can touch. And it just, my life became so much more fun and interesting. And then getting on the trajectory of actually getting to, like, do it myself and be in the driver's seat, that's when I would say my career became one that was really fulfilling to me. Right. And so I always tell those founders, like, yeah, even I believe, even if you aren't going to be one of these massive successes, it's going to be an incredible journey. Even if you have to wrap up after a couple of years and don't get to do it anymore. Like, getting the learning from that, the journey is exciting.
55:02
Daniel Scharff
Like, you can take your, you can put your career on a different trajectory for sure if it doesn't go so well, like from where you could have been. But I just, I think there are also just so many benefits to doing it even if it doesn't work out. What do you think?
55:14
Paul Voge
Yeah, I'd say it is funny, you know, to your point about, hey, you know, to business school and we're working in management consulting. It is true that it's, it is harder to be an entrepreneur when you have higher opportunity cost and that some of that's just a numbers game. Like, I Met a corporate lawyer at Bevnet in New York two years ago. And I have a good sense, I think he probably made somewhere between 4 and $500,000 a year just knowing the firm he worked at and how many years he'd worked there. And he wanted to start this kind of cycling based energy drink. It's just a lot harder for that guy to start. And to be honest, it might be literally the wrong decision because of his opportunity cost.
55:55
Paul Voge
To your point, on the one hand, yes, maybe he's not enjoying the work, maybe he doesn't want to be a partner. Maybe, you know, being a lawyer is. It's a pie eating contest where the prize is more pie and that's all fine.
56:05
Daniel Scharff
Do you think, could you say to somebody like that, okay, just take a certain amount of your income and decide to do this on Amazon and hire a good agency, do the branding, pay for the branding, get a good company.
56:15
Paul Voge
I guess I should say in beverage there probably are categories as possible. I won't pretend to know everything, but in beverage I'd say, no, it's just not possible.
56:21
Daniel Scharff
Or you can invest.
56:22
Paul Voge
Yeah, exactly. I always say to people like, if it's possible, show me an example. And if you can't find.
56:28
Daniel Scharff
Yeah, I can't think of one.
56:30
Paul Voge
If you can't find an example of it might mean it's not possible. And there is always this problem of you can read about the cite acquisition, it's in the newspaper. You can't read about the thousand non cites. They're not in the newspaper. They close.
56:43
Daniel Scharff
I think a better example is like if you listen to the Halo top how I built this episode of how that guy did it. Yeah, he was a corporate lawyer and then I think he just basically started taking like time off and doing his job.
56:53
Paul Voge
Worse.
56:54
Daniel Scharff
I mean, I'd have to listen to it again, but I think that's kind of how it went. And that's like, you know, maybe took a leave of absence or something and built his business that way while he had the income from it.
57:03
Paul Voge
Yeah, I mean, this guy at Bevnet, effectively, he was asking the question, not dissimilar from the one you asked at the podcast. He was like, hey, how soon before you think I'm making what I'm currently making? And I didn't know how to tell him, like, I know like founders and CEOs of beverage businesses that are doing $100 million in sales and some of them don't make the amount you currently make as a corporate lawyer. So if it's a dollar thing. Don't do this, man. But just to your comment though, about opportunity costs, like, yes, that does make it different. There is an opportunity cost. It's one that I can't put a dollar figure on. And it all depends. In the same way that I said, hey, if you're thinking about getting to cpg, make it clear what your goals are.
57:40
Paul Voge
I have a friend that runs a flan business here in. They say flan. I just Americanized it in the worst way. But they have a flan business here in the Bay Area. She has a wildly profitable flan business. She's in a number of stores. She loves it. She makes it in her kitchen. It's great. She has amazing customers. People that the third year in a row they want flan for their birthday party. That was her goal. She did it. If she wanted to build a billion dollar flan business, it'd look very different. So I'd say in the same way that it's very clear to have goals, there's an opportunity cost to your life for that guy that I talked to was a lawyer. Or even for younger Daniel, who just graduated from business school. Yeah.
58:17
Paul Voge
You could see very clearly how the income grew or the opportunities grew if you became a partner at that firm. But you could also see like, well, will I do anything fulfilling? Will I have the feeling of being creative? Will, will I get what I want out of life? Not in terms of tangible dollars, you know, 401k, but experiences. And I do think that's what I appreciate the most. I'm so grateful for this job. You know, I've had experiences that I just couldn't even imagine. And some of those experiences are literal of, oh my gosh, you know, I got to go to Walmart headquarters and tell them at our product, that's cool. And some of them are like, I got to have emotional experiences I wouldn't have had otherwise.
58:52
Paul Voge
Yeah, the feeling of watching someone agree with you and say, hey, this thing tastes great. Like, that's a very weird. I can't put a price on that. But I really enjoyed it. It's very satisfying. So I would say it does kind of depend on how do you value a good life. You know, I always say to folks, like, when we're hiring people, the first question I try to ask people in the first interview is, hey, let's just pretend that, you know, you're a reasonably healthy person and you're going to live to 100. Just to pick a nice round number.
59:20
Paul Voge
You know, there are 78 years after college where you can do a lot of things to make money and to spend your time here in the universe when you're a hundred looking back, like why do you want sparkling water to have been one of those 78? Or why do you want CPG to be one of those 78? Or 10 of those 78 or 40 of those 78. And I think it's just a good way of putting someone in a framework of, hey, you know, where you spend your days or where you spend your life. I don't remember who said that phrase. It's the same thing. To your point about opportunity cost, do you want to spend your days in a boardroom as a corporate lawyer making a lot of money and having a great 401k? And maybe you enjoy it or maybe you don't.
59:53
Paul Voge
Or do you want to spend your days worrying about frozen trucks? But man, at least you're in the game and you're building something tangible. It kind of depends on, you know, I can't say it's for everybody, but for some people that is the way they want to spend their days because it's the way they want to spend their life.
01:00:06
Daniel Scharff
I think that's the thing that you've said that's resonated the most with me. And now I kind of have pieced together why I do this. Like, yeah, that's true. I just did not want to be in like doing the thing every day that consultants do. That was not very fun for me and this has been the most fun for me. And so. Okay, last question for you, Paul.
01:00:22
Daniel Scharff
You were talking about how it could have been a lot easier for you if you hadn't maybe set such high expectations, which I know you have to do because I've worked at high growth startups like trying to get investment for money and you just give them these kind of ridiculous projections like we're going to do this crazy volume and you're all the assumptions that make sense to it and then you hit a third of it, right? And then like you've raised money at that higher valuation based off these ridiculous projections, which then makes it really difficult to raise the next round. And you have to like it's kind of a cycle, right, that you like a self permeating cycle you've created for yourself around these projections and the valuations and what you have to raise and then the stress that you have.
01:00:57
Daniel Scharff
But like sometimes you do kind of have to do that to raise the money, right? So do you feel like you actually could have just been reasonable about it all along or would that have really just impeded your ability to even get checks from people?
01:01:10
Paul Voge
So I don't think that I ever. Not ever. That's not true. My first seed round deck I think was absurd. Not, not in what we would say we would do next year, but what we said we would do in three years. And I just, I don't think I was purposely misleading anybody. I honestly thought that was the case. I just didn't. I didn't know what I didn't know. And that's actually the biggest scary thing about life is even today, I don't know what, I don't know how terrify that you know, you can make a one second horror movie where that's the only sentence that showed on the screen. You don't know what you don't know end of the movie terrifying the. You're right.
01:01:40
Paul Voge
That perhaps it was the very large year three numbers in our seed round deck in 2020 that got certain people to chip in 20 grand. Maybe. I think they were probably at that point more so evaluating me and the product and less so evaluating the business and its scalability. I guess what I meant by man, I wish I had set better expectations. I honestly wish I'd set better emotional expectations for of, hey, this is going to be really challenging if you're doing this part alone. Or this is going to be really challenging if you're doing this part without, you know, a marketing resource. You know, you're just kind of destined for failure. And of course you don't know the easy way of doing something till you do it the hard way. And then it allows you to kind of figure out the easy way.
01:02:21
Paul Voge
And it's why, to be honest, there are so many CPG founders that failed once, then come back because they feel like, hey, I now know where the pitfalls are. I can do it again and have it be a lot easier. So for me, I think, yes, I needed to show a robust growth rate in a lot of those fundraise rounds, but I wish I had a better sense of. I'll give one tangible example, like, yeah, there are marketing dollars I spent when we had a lower fully loaded gross margin that I regret spending. This is from three years ago in that they weren't as impactful because I wasn't in enough stores or they weren't as impactful because I was losing so much on the actual item of the product.
01:02:53
Paul Voge
And I wish I'd spent less time trying to market well in that store and more time trying to get more gross Margin from one individual co packer such that I could market have more money to market in a smaller store. Like there's a million examples that are along those lines that are easy to point to now after the fact. You know, Hindsight is always 2020. Yeah, that's kind of what I mean by expectations. Less so about lofty goals. Of course it's good to have lofty goals. It's better if they seem both aggressive but not delusional. I hope no one would ever call me delusional. But it's hard when you don't know exactly the strategy to get there. And I think that's often what investors are poking at is like, hey, you say you're going to do 10 million in 711 next year.
01:03:32
Paul Voge
How many stores is that? How many SKUs? How many per week? Let's get all the way down. When are the promos? How many days have you worked in for out of stock? When are your competitors displaying? And all of a sudden you realize, I can't just throw 10 million on a piece of paper. It actually needs to be built out, which is a good thing. Like, that's what investors are here for. They want to make sure that you're thinking through things. So I would say just to myself, I didn't think through the emotional impact of a lot of the goals I had. And yeah, it did. You know, I used to be 25 pounds heavier than I am today because I was just so stressed in 2021 and 2022 and not seeing anyone and not taking any days off.
01:04:05
Paul Voge
And on the one hand, hey, we still exist. And a lot of that is because of the work I put in those years. On the other hand, I wish I'd kind of scratched my head about like, is there an easier way to be doing this or am I just going to keep pushing through because it's the only way I know how. And I didn't have time to zoom out and say, is this the easiest way of doing it? Now I know there were easier ways to do it that wouldn't have taken so many hours, but at the time I was just doing the thing right in front of me.
01:04:28
Daniel Scharff
I gotcha, man. I remember the whole dad bod thing. I think that we also should have normalized early stage founder bod so we're all like that. I remember when that photo of Elon came out and everyone was like talking about him like, that's what an entrepreneur looks like. A lot of the time. It's so stressful. It's also your comment about marketing gave me an idea. I think we should do a top marketing investments you regret as an episode on the podcast. I think we'd hear some pretty good stories on here.
01:04:57
Paul Voge
Definitely.
01:04:58
Daniel Scharff
All right, Paul, man, as always, this has just been an absolutely enlightening episode. Just to wrap up, is there any way that people can support you? Any, you know, anything out there that the community can do to be helpful to you, Any contacts you need, something you're looking for, or just ways that people can kind of follow along and support ourobora?
01:05:17
Paul Voge
No, I mean, you can. The obvious one. Of course you can buy Ourobora. We're selling multi packs at four Kroger divisions, qfc Ralph's, Fry's, King Super. If you live on the west half of the country, all of Albertson Safeway. If you shop at a Safeway Albertsons Shaw's Jewel Osco store. Obviously all the sprouts I've referenced a few different ways. Yeah, that would be the most helpful, of course. And I'm an easy guy to reach. If you have any questions, just Paul at the name of our company, Dot com.
01:05:45
Daniel Scharff
What's your favorite flavor right now?
01:05:48
Paul Voge
You know, we just launched a pumpkin spice one for our online audience and I. I'm not ashamed to say I love pumpkin spice lattes. I love pumpkin spice everything. I love pumpkin bread. So if you want pumpkin spice sparkling water, we've got some for you. There's a few cases left.
01:06:03
Daniel Scharff
All right, perfect. Hey, Paul, thank you, man, so much. Really appreciate it and we'll look forward to having you back on the podcast soon. Thank you everyone. To listening. I hope you guys got as much out of this as I did.
01:06:15
Paul Voge
Thanks, Daniel.
01:06:16
Daniel Scharff
All right, bye everyone. See you. All right, everybody, thank you so much for listening to our podcast. If you loved it, I would so appreciate it if you could leave us a review. You could do it right now. If you're an Apple podcast, you can scroll to the bottom of our Startup CPG podcast page and click on write a review. Leave your company name in there. I will try to read it out. If you're in Spotify, you can click on about and then the star rating icon. If you are a service provider that would like to appear on the Startup CPG podcast, you can email us@partners tartupcpg.com lastly, if you found yourself grooving along to the music, it is my band. You can visit our website and listen to more. It is super fantastics dot com. Thank you everybody. See you next time.