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In this episode of Founder + Funder, Hannah Dittman sits down with Alex Michaelsen, Co-Founder and CEO of Leisure Hydration, and Ryan Springer, Co-Founder and Managing Partner at Midnight, for a conversation about fundraising, founder-investor relationships, retail expansion, and what it takes to build a next-generation beverage brand.
Leisure Hydration was founded by brothers Alex and Steve Michaelsen after recognizing that hydration products had remained largely focused on athletic performance while millions of consumers were struggling with everyday hydration challenges that impacted focus, stress, energy, and overall wellbeing. Their vision was to create a hydration brand built for modern lifestyles rather than sports performance, pairing healthy ingredients with a brand experience that felt approachable, creative, and enjoyable.
Since launching, Leisure has grown into one of the fastest-rising hydration brands in the country, securing placement in major retailers including Whole Foods Market, Target, and H-E-B while expanding into thousands of retail locations nationwide.
Joining Alex is Ryan Springer, Co-Founder and Managing Partner at Midnight, a consumer-focused venture capital firm investing in the next generation of wellness and consumer brands. Ryan and the Midnight team first met the Leisure founders years before investing, providing a unique perspective on how founder-investor relationships develop over time and what ultimately drives conviction from an investment standpoint.
Together, Alex and Ryan share the story behind Leisure's fundraising journey, why relationship-building matters more than most founders realize, and what both founders and investors should be looking for when evaluating long-term partnerships.
Listen in as they cover:
· The founding story behind Leisure Hydration
· Why modern hydration needed a new approach
· How Leisure built traction before major retail expansion
· The unconventional strategies that helped the brand grow
· Building relationships with investors years before fundraising
· What Midnight saw in Leisure early on
· The role of trust and consistency in fundraising
· Lessons learned navigating multiple fundraising rounds
· Why founders need curiosity and a willingness to learn
· What investors really look for when evaluating emerging brands
· How Leisure secured national distribution at Whole Foods
· The importance of creating a differentiated brand in a crowded category
· Advice for founders raising capital in today's market
· Why investor-founder alignment matters after the deal closes
· The future vision for Leisure Hydration
Whether you're preparing for your first raise, navigating retail growth, or trying to understand how investors think about emerging brands, this episode offers valuable insights from both sides of the table.
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- Episode music by Super Fantastics
Creators and Guests
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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.
Alex Michaelsen
Ryan and the team does a good job of not saying this is the way it has to get done or this is what you need to do, but more so thinking of what's happening, where can we take things, how should we go about it, working collaboratively, trying to be flexible and finding the right solutions. And I think you don't want someone that's going to start getting really mad at you when things are going not perfectly. And I think you want going to be a problem solver because it's going to be up and down.
00:35
Ryan Springer
What everyone says is true, which is it's all about the people and do you believe in them. And the pattern that Alex is saying I think is one of the strongest patterns that a fund manager could see or an investor overall. And it's actually influenced why we're doing a little bit of an unusual thing at Midnight in that we are stage agnostic and it's because if you get to know a founder, I don't want to have missed them. I want to be able to right size the checks and the fund to somebody that we just think this person just is not going to lose. They're going to find a way and I think Stephen, Alex, hit that bucket.
01:08
Hannah Dittman
Hey everybody, I'm Hannah Dittman, operations and finance host of the Startup CPG podcast and today I'm super excited to be joined by Ryan Springer from Midnight and Alex Michaelsen from Leisure Hydration for another founder and funder episode. Midnight is a consumer focused venture firm built to help scale the next generation of iconic consumer brands. Ryan brings a unique operator investor perspective to the table with deep experience across retail strategy, go to market execution and scaling high growth CPG brands. He's also co founded a beverage company himself and knows intimately what the founder journey is actually like. Leisure Hydration is building a modern hydration brand designed to help consumers take a true leisure break, pause the scroll, forget the to dos and take a moment to hydrate, refresh and recharge.
01:56
Hannah Dittman
Alex co founded the company with his brother Steve and has grown Leisure into a rapidly scaling beverage brand now carried nationwide at Whole Foods and other retailers. It is so delicious. So do yourself a favor and grab a can while you listen in. In this episode we dive into the founder investor relationship and unpack what initially stood out about Leisure to Midnight. We get into their fundraising journey, early stage scaling and beverage, the investor, founder relationship, retail growth strategy and what both founders and investors are prioritizing in today's market. We also cover the importance of relationship building and fundraising, thinking through capital needs and Timing and how to approach feedback and strategy along the way to gather critical insights.
02:39
Hannah Dittman
If you're building a beverage, thinking about fundraising, or trying to better understand how investors evaluate emerging consumer brands, this episode is packed with actionable insights, lessons learned and wise words of wisdom from two consumer vets. Go grab some Leisure Hydration and give it a try. Enjoy. Hey everybody, welcome back to the Startup CPG podcast. This is Hannah and today I am thrilled to be here for another founder and funder episode with Ryan Springer of Midnight and Alex Michaelsen of Leisure Hydration. Ryan and Alex, welcome to the show.
03:17
Alex Michaelsen
Thanks for having us.
03:19
Ryan Springer
Thanks.
03:19
Hannah Dittman
Thank you for being here. This is going to be a really fun one. Everyone at Startup CPG are huge leisure fans, so we're super excited to be chatting with you both today. I'd love to kick us off with a brief background from each of you and the context of the path that led you here today.
03:35
Alex Michaelsen
I'm Alex Michaelson. I'm co founder and CEO of Leisure Hydration. We make modern functional hydration drinks and you can find us in about 4,000 stores across the country like Whole Foods, H E B, Target and a lot of others. And we just closed our Series A, so I think it's good timing to talk about the founder funder relationship.
03:58
Ryan Springer
I'm Ryan. I've actually done one of these before. It was a blast. Hannah, I grew up in CPG working for my dad. I usually make a bunch of nepotism jokes that I will spare anyone here and was on the operating side and then started Midnight with Alex Botney and Chris Adam in 2021. Same year also got off the ground and started really launched in 2023 a small but growing liquor company called High Desert Vodka and Midnight. We invest in next generation wellness brands. We love beverage. Majority of our portfolio will be CPG was in fund one. The same will be true in fund two. And we're stage agnostic and we'll write like one to $5 billion checks out of the fund, but we'll flex up with SPVs very occasionally into fund investments.
04:47
Hannah Dittman
Thanks so much to you both. We've got a powerhouse team here today. And yes, Ryan's a vet. You should check out his episode. He deep dives into all things Midnight and what they've got going on there at their firm and a lot more of the specifics. So check that out if you get a chance. It's a great episode, Alex. I'd love to get an overview of Leisure Hydration and the founding story, the brand mission and what you guys are all about.
05:13
Alex Michaelsen
Yeah, absolutely. My brother and I started the company and four years ago to the week we sold our very first can. Was born up in Covid when I was at ucla. My brother and I were both athletes in college and we drank Gatorade, Powerade and vitamin water our whole life for physical performance, on the field, in the weight room, sweating, running, whatever it might be. And when we left sports and moved to our everyday life, working at a desk, were still dehydrated. But we're not getting cramps and having issues performing or maxing out on squat. We're having issues, thinking, we're getting headaches, feeling stressed, anxious, and people around us were constantly dehydrated. So that's when we started to look into this and realize all the brands of the past were focused on athletes and formulated for your body.
05:59
Alex Michaelsen
Yet 80% of your brain is made up of water. And three quarters of Americans, not just athletes, are chronically dehydrated. So all of us need to be more hydrated throughout the day and it really affects how you feel mentally. So we wanted to create a healthier, better for you option that had functional ingredients for mind and body and really creating a brand that was less about performance and more about lifestyle and enjoyment. So we're positioned more for all day, every day than at the gym and after the gym and really have built a brand with a younger, more creative, laid back generation.
06:36
Hannah Dittman
And it's such a great product and so true. It's such a big shift. Leaving the youth world behind and stepping into adult world and sitting at your desk all day and what that can do for you. I think anything that brings you a little bit of joy and puts a little pep in your step to get through those moments or those transitions and manage the stress is such a win and makes such a positive impact on people's lives, especially when it tastes great like leisure. I'd love to understand your journey from a fundraising perspective as well. What was the capital story of leisure and what led you to the need to fundraise and your most recent raise?
07:16
Alex Michaelsen
Yeah, not a typical beverage story. And the need to fundraise. I think as simple as a beverage is expensive business to get into. So if you're not prepared to raise money or not interested in raising money, either stay local or don't get into beverage. We initially started with family, friends, angels, anyone that we could meet that would be interested in giving 5 or 10 or $50,000. My brother and I each sold all of our stocks and some of that stuff initially to Fund some of the early business. Something that's a little lesser known, but before we had the beverage, we had an NFT project during the wave of NFTs. And that's where the Leisure Creature mascot comes from. And that sale actually funded our first couple production runs.
08:02
Alex Michaelsen
Now those NFT holders now get lifetime discounts on the product, but that was a little bit of a startup. We didn't have a ton of money to get this off and going ourselves, but from there, I think the first 18 months we're raising money on a convertible note, just any little check that we could get along the way to survive. We, for the first almost two and a half years, stayed away from any CPG investors. I'd like to say now that was intentional. At the time, the market wasn't very good and we had nothing to show for our business. It ended up being to our benefit because were in control of our plan and our timeline and our strategy.
08:39
Alex Michaelsen
So we raised a seed round, we raised a second seed round from 23 and in 25, but we ended up meeting midnight, I would say two or three months into our launch. So this will become a recurring theme of the episode. But we started to meet people and build relationships and portray our vision early on and that came in to benefit us down the line when we had a lot more data behind the story. Getting into the Series A though, we got to an inflection point last year where went national with Whole Foods and started to build up distribution. We tripled our revenue and we're having discussions coming out of our last round and we ended up giving Ryan a call and saw a really good opportunity to bring together a really good group of investors, capital and distribution, all at the same time.
09:27
Alex Michaelsen
That's what led us today.
09:28
Ryan Springer
I had a guy in the office yesterday who saw the Leisures in the Fridge and he's an NFT owner and I was like, what? I'd never met one, but he had bought an NFT. He starts talking about the NFTs, which we've been an investor's else, I think since August of 24. So a little bit, I. I've never met one. And then one was in the flesh literally yesterday. He was so hyped about it still.
09:49
Hannah Dittman
That's awesome.
09:50
Ryan Springer
Which made me laugh. But it's like he's still a big fan of the business and the NFT is like permanently attached him, I think, to the business. So he was hyped. He didn't know about the Leisure Connection when he came in the office. In the fridge he started grabbing a few and telling me stories. So it was strangely effective. Very unusual strategy for the boys.
10:11
Hannah Dittman
I love that. What a full circle. It's like when people like are so in love with a brand that they get a tattoo of it. It the NFT ownership is like modern tech era brand tattoo. That's awesome.
10:22
Ryan Springer
I was thinking the same thing. Literally was like a tattoo to me. Except this guy bought one when the brand was meant nothing and had just begun. It's crazy.
10:32
Hannah Dittman
Yeah, maybe he should get into investing. He's got some good spidey senses.
10:36
Ryan Springer
Yeah, I don't need another competitor but yeah, he does have good senses.
10:39
Hannah Dittman
Well, congrats on the Whole Foods success on the round, getting closed on all of the traction to date and navigating a hard, challenging journey in a hard market. Times to your point. Not easy to start a brand that's capital intensive around those years and what a testament to the resilience that you've made it through. Ryan, I'd love to get your perspective on the journey and the relationship from your end of the table. What was the meeting like? What pulled you into being excited about the brand and how was the relationship early on and how did it grow to where it is now?
11:14
Ryan Springer
Meeting Alison, Steve. I would say the first green flag we got was my first call with them was a little bit rare. Some of the best founders don't do this, but a lot of the best founders do this. It was like half pitch, half information gathering session from them. They're smart guys. They were like trying to gather instead of saying hey, we'd love your advice on things. I on the first call they were like, should we do X? What do you think about Y? And they didn't feel like they were just going to do whatever I said. They felt like they wanted viewpoints that they were going to talk to more than one person and put them together and make a decision.
11:55
Ryan Springer
It's funny that happened on the first call and that's been one of my favorite things of getting to know Steve and Alex over the years. I was telling another, the last person, committed Alex, that these guys are students of the game. They know other brands gross margins in different categories. They just certain people love it and I think Alex and Steve love it and that continued to another level because you have this desire to constantly be pushing and iterating. So the first call was that we kept in touch for quite a while. My partner, Alex Botney always loves to tell a story that he judged leisure in a SKU competition and he put them in seconds and he gave them like a moderate amount of monopoly money and. And then $3 billion in the next two years.
12:40
Ryan Springer
And so that indicates, like for our team, we always thought there was a lot of potential. And then getting to know them, I'm going to take credit for it along with my partner Chris. There's three of us. Chris and I sort of went to the team and said, hey, we need to do this. The numbers are showing. The guys have been super impressive. The product is incredible. The people we show it to like it. And the team really quickly got behind it. And now I think Alex is one of the most value add people pushing leisure. He's a giant believer, but in a fun. Not everyone's going to agree off the jump. And Alex was never anti. He just was focused on our things and for us, internally, things we're excited about. Really high, great margins.
13:21
Ryan Springer
Crazy early with a competitive price point, a product that competes. We have a nicotine pouch and Ollipop and Leisure, I would say are equally just. People are addicted to them. Nicotine jokes aside, in our office, people that come in, it's the shelf that gets cleaned out the most. Leisure's probably number one. And that helped us get behind because we wrote a First check in 24 leading this new round. And it's just been a really fun experience getting to know Alex and Steve. And a huge piece of this has been just believing in the two of them as human beings who are coachable and learning and growing in spark. And it's crazy to watch how far they've come since our first conversation.
14:02
Hannah Dittman
So awesome. And I can tell you have a lot of respect for one another. I often wonder with these episodes if this is like a happy version of couples therapy where you get to hear all the nice things you wouldn't normally get to hear from the other party.
14:16
Ryan Springer
Yeah, you got to do one of these with an investor and investee. They've been together for like six years. That could even be more fun than two.
14:23
Hannah Dittman
Well, Ryan, coming in on the early side, you've had the benefit of being able to watch the company grow intimately and the journey behind the scenes up into its most recent round. What were some of the big milestones that you both were kind of thinking about and working towards in 24? And how has that evolved now to the way that you're thinking about the business Moving forward post 2026 in 24.
14:48
Ryan Springer
But they had a really unusual amount of traction in alternative channels back then. It was meta offices, Google offices. We were telling an LP of ours in a meeting about leisure. And this is in late 24, and were at a coffee shop in Austin and a woman walked in holding one and were like, where did you get that? We just finished telling them how popular they were at offices. She's like, my office, I love this stuff. I drink it all the time. And we thought that was really cool and unusual and how they had built the business. Alex mentioned sometimes he's really glad and I think there's definitely merit to this.
15:20
Ryan Springer
I always had a little bit of experience in CBG actually, but they came from sort of outside the industry and so they were doing things a little differently than I think the playbook or normal advisors would tell you to do it. Alex, correct me if I'm wrong, one of the goals for both of us was to get it into a major national retailer with a large footprint to see how it would do in the deeper waters. And one of the ways that's changed and been exciting now is they got into Whole Foods National. They've done exceptionally well. They've just gotten to heb. The early numbers are really good. Same with Target. Now some of the H E B movement may literally be our office.
15:58
Ryan Springer
Our office manager just finished telling me that every single day he buys some for our office from the NHB on South Congress Avenue. So they're probably really artificially high numbers. But to watch a goal in 24 become something they've just like checked a box on. This can thrive with not that much promotion and do exceptionally well from a sales velocity perspective. In national retail, that's been super cool. The next thing we gotta prove, I think, is that scalable and have we built a playbook of promotion and brand building and there's way more to it than that. Alex's life is way more complicated than that. But those are two things I would focus on for the business.
16:38
Alex Michaelsen
Yeah, I'm trying to put myself in the shoes of an investor. It's so hard to know what's going to work because nothing's really a surefire, especially in cpg where one production run could end your career. Olipop is a great example of this, is that no one really believed in that brand until they were doing 20 plus million. And a lot of people were still down on that brand when they were there. And now they're in 40,000 stores or so and doing over 600 million in revenue. So I think a lot of it has to come down to some early traction pieces. And I think were focused early on how do we show that the consumer we're trying to win with is adopting leisure? And we had no money or interest in trying to build that immediately in big retailers.
17:24
Alex Michaelsen
So were trying to put our brand into the hands of our customer, where they are at. So were thinking 20 to 35 year old creative people is the most likely early adopter of the brand. So went to the coolest cafes, went to the tech offices, creative agencies. We even did a collaboration SKU with a sandwich chain in la. I think they have seven locations now. They're called Giada, but they're probably the hottest sandwich chain from like a brand perspective in Los Angeles. Their logo one of our cans and we have an Arnold Palmer inspired half and half in their locations. And I think how do you win in hydration? I think you win by competing in places that the category doesn't play.
18:10
Alex Michaelsen
So Gatorade would never collaborate with a chicken parm restaurant because that goes against being fit and playing football and dunking a basketball. But for us we're all about it. So a lot of the things that were trying to build on early, obviously it has shifted now with being a retail focused business and Whole Foods was the first dip into that and we're using that success to expand beyond.
18:35
Hannah Dittman
So. Well said. And I think such a great highlight of the way you have to think as a founder in the earliest days when your hands are tied behind your back. It's like a chicken and egg capital game. You need to like make movement, but you also need to do it in a very thoughtful, strategic, low budget way. That's a really hard puzzle to put together. I think the way that you're thinking about your consumer, not demographics, but psychographics so intimately early on, I'm sure is a big pillar of why you've been so successful. Like understanding the customer journey, meeting them where they're at, like you're saying, understanding the difference of your customer base versus other customers that are purchasing different competitive products on the market.
19:18
Hannah Dittman
I think those are all really thoughtful, high value add ways to be strategic as a founder early on and I'm sure was noticed by a lot of the people that decided to partner with you as you think forward into like not just this next phase of what your series A can unlock, but think the big vision and future of your brand. Where do you see leisure hydration going in its final big life dream? Like what's the big picture vision?
19:50
Alex Michaelsen
Yeah, I mean I think we want to build a modern hydration category. I think this has been dominated by Gatorade and a little bit of Powerade for decades. And you're starting to see the shift, especially in soda and energy in some of these categories that are able to create healthier, more beneficial products that win over the next generation with their branding and their marketing. But I think, how can we bring something that's truly valuable and healthy to the next generation? But I think most of all something that's fun and tastes good and people actually want to drink and enjoy. And we always think of leisure as like a sliver of vacation in your day, like something that's fun. It's a break, like we like to say, taking a leisure break. We want to become the category leader for the next generation.
20:38
Alex Michaelsen
So I think what you've seen Olipop and Poppy do to Diet Coke or Celsius and Alani, new to Red Bull, we would love to do to Vitamin Water and be the leader in that segment.
20:50
Hannah Dittman
Really well said and big dreams that I am rooting for you all to achieve, as I'm sure Ryan is as well.
20:57
Ryan Springer
Pretty arm.
20:58
Hannah Dittman
Yeah. Reflecting back throughout this journey, especially the investment portion of it, what lessons learned have you gathered throughout the experience that you think others can learn from? And as you're speaking to other founders in the audience here, what's a few pieces of advice about fundraising or working with investment partners or just the capital journey in general that you think would be really helpful for them to know?
21:24
Alex Michaelsen
The first things first is you need to know what you're doing. And no one knows what they're doing in terms of making every right decision. But I think what Ryan was saying of early on, were having half of our day was talking to people and trying to consume information. And I think if you're new to an industry and you want to succeed, you need to have a insatiable curiosity that you aggressively pursue. And you need to go and gather information, parse through it, learn, get advice. Don't get advice from too many people. And when you do get the advice, don't take it straight up. Take that advice, filter it through the context of your own business and then make a first principles decision and get better at what you're doing.
22:08
Alex Michaelsen
Because I think like what worked for Olipop or what works for Koya or GTs Kombucha or Celsius is not the same thing for us. It's a different brand, it's a different consumer, and it's a different time. So, like the marketing every couple of years changes. So I think that is a super important thing. Is just learning as fast as you can. The second thing too, I think is building a business that fundamentally an investor can see how the foundation will scale. So a margin or cash burn will kill a business. So how do you build a really simple and understandable foundation of this is where the margin is, this is how we're going to get it here. They can feel more safety in that. And I think directly for fundraising, you have to build relationships really early.
22:51
Alex Michaelsen
We met Ryan two years before they ever wrote a check and three and a half years before they led our Series A and a lot of other investors that are on the cap table. We met years ago and followed up every couple months and got them up to speed. I don't want to speak for Ryan, but I think it's helpful for him when we say we're going to do this and then we come back and he said, hey, we did it and then we do it again. And we did it again. And we did it again. It definitely eases an investor's mind.
23:18
Ryan Springer
I was about to make a selfish portfolio plug, but it's true, and I think you'll like the comparison is that the other two groups that I feel that come top of mind that we watched what they did, they said what they were going to do and then they did it over and over again and just made us feel dumb for not being on the cap table. Will Hicks at Magic Mind and Ben Witty at recess. And I think the Michaelsen brothers are that third group where we just watch them. There's only so long you can sit on the sideline and go, just keep doing what they say they're going to do. So do we want on board or not? And all three of those founder groups were people we just believed in.
23:57
Ryan Springer
And the more we do this, I think one year older than leisure as a fund, we are also very new. I don't have a ton of wisdom to share because I think you should develop more than five years usually before you come to a bunch of big conclusions. What everyone says is true, which is it's all about the people and do you believe in them. And the pattern that Alex is saying, I think is one of the strongest patterns that a fund manager could see or an investor overall. And it's actually influenced why we're doing a little bit of an unusual thing at midnight in that we are stage agnostic. And it's because if you get to know a founder, I don't want to have missed them.
24:33
Ryan Springer
I want to be able to right size the checks in the fund choose somebody that we just think this person just is not going to lose. They're going to find a way. And I think Steve and Alex hit that bucket.
24:42
Hannah Dittman
Very kind and thoughtful words and I think a really interesting strategic approach to investing as well. Allowing yourself to be nimble and to really be focused on finding winners versus just finding a company that might fit a certain portfolio construction with maybe like a percentage less conviction because it's the right stage or profile for what you're focused on. I'd love to dig in a little deeper here and ask for both of you. When you're giving updates throughout a period of time or you're talking to investors and you're getting feedback in a bit of a crass way, they're hanging around the hoop in some way, waiting and watching you. What do you think it was that they needed to see more of to get conviction in your brand?
25:27
Hannah Dittman
Like, what did you feel like the feedback was early on and what do you think the tipping point was for people to start getting really excited about wanting to lean in and really commit to the investment?
25:38
Alex Michaelsen
Ryan said about our business early, that was a strength is also a weakness, is that 65% of our revenue through 2024 was in places that gave our product away for free. So like offices and airport lounges, which were really great for getting the brand out there for driving high margin revenue. And it helped us scale our production so that we could even set up margins so that when we launched nationally, our margins were already in the top tier. Now when we tried to raise money off of that, we constantly got feedback of, we need to know how this is going to perform in retail. Like, we need revenue that's coming from retailers. That's repeat, that's over time. And it was a challenge to get funds and investors that are knowledgeable of the industry to put in money.
26:27
Alex Michaelsen
So that's why, I mean, were forced to focus more on people outside of the industry, which I do think can be really helpful, because I think at least us, we like to have our opinions and we like to learn and run on our own. Eventually, as it gets bigger, you need to bring more and more people to the table. But I think early on, going 0 to 10 million in revenue is honestly a lot more about creativity and art than it is like science. You have to figure out ways to change your brand, change your product, change your strategy. So I think when were able to finally have conversations with real consumer investors is when our distribution was big enough to where we could show a velocity story in different Places.
27:09
Alex Michaelsen
Here's how we're doing on Amazon and how that looks at Whole Foods in comparison to the rest of the category. Any other regional places, conventional channels, and then what are the conversations happening with future partners that will grow the revenue. But that was kind of the inflection point. We had maybe raised midnight, put in their intro check when were still food service heavy and then we maybe had one other small fund in the rest were angels or non industry people until recently. And that has come just purely from the hard facts of growth, margin, velocity and a brand that is differentiated in big category.
27:51
Hannah Dittman
That's really helpful color and thank you for being so transparent about that. I feel like, as every founder knows, like the road is full of rejection. And I think understanding what needs to be the goal or to change or how to improve the business versus just internalizing that rejection is half the battle of getting where you need to go. It's just understanding the pieces that need to be in place for an investment to feel less risky or more compelling. And I think that painted a really clear, beautiful picture. And kudos to you all for the resilience and the tenacity because that's not easy. And going about things a scrappy way and having to build up an additional business model while you're trying to get everything going and challenging times without a ton of capital, I mean, that is no easy feat.
28:36
Hannah Dittman
I don't think that's lost on anyone listening. So really exceptional job to you all.
28:40
Alex Michaelsen
Thank you. I appreciate it. It's a mental game too, when you're not doing the conventional path because this industry is set up on PR hype. Every day you see a new LinkedIn notification of X, Y or Z brand launching nationally at XYZ retailer while you're emailing kitchen managers at LinkedIn trying to get into their refrigerators is a little bit of a different thing. But you got to do what you got to do.
29:07
Hannah Dittman
Yeah, it's that moment of like, what am I doing with my life? Am I totally crazy? Why am I doing this? Ryan, anything to add?
29:15
Ryan Springer
No. I think for us, well, I guess something at High Desert, we get told no all the time when we're raising money at midnight. Recently, less. But in the beginning, we got told no almost every single time. Raising fund one was brutal. And I think the advice I would give if any investors are listening and I do an okay job of this, there's a lot that falls into the cracks because email is almost impossible to keep up with at this point. It's really important to Try as much as you can to give feedback on why you're not investing in something because it's the second most valuable thing. How you can give a brand besides a check is sort of like, why aren't I writing a check? And should they be considering and changing and thinking about this as they go forward as a brand?
29:58
Ryan Springer
I think when you hear no, I think you should not in too pushy of a way, but kind of hungrily try to gather why that no came through. Because that's like so valuable in terms of information as to what patterns these investors are seeing that you're not matching. And that doesn't mean it's a bad thing. Sometimes it's a good thing. Sometimes you're thinking outside the box. And 65% of your revenue is coming from these unbelievable marketing channels that Alex uncovered. That he was getting paid to hand out free product that he didn't have to pay for the infrastructure to hand out. It was one of the greatest marketing billboards I'd ever seen. Most billboards don't pay you to be on them. That was really cool to see. I think Alex was bright.
30:38
Ryan Springer
We and other investors, we still just wrote the check, but I understood a lot of other investors thinking I need to see if people pay for this first. It's definitely an art, as Alex said, not a science early on.
30:50
Hannah Dittman
Well said. And I love the way you framed that. Yeah. If there's always, like, doing something different and non traditional, you're learning a lot and you're showing the path to another way and others learn from your playbook as you're building it out. And I think that's part of being an innovator and a creative problem solver.
31:06
Ryan Springer
There's also the fact that times are always changing.
31:09
Alex Michaelsen
Just.
31:09
Ryan Springer
You got me one of my few soapboxes I really believe in.
31:12
Hannah Dittman
Give us the insights.
31:13
Ryan Springer
I'm genuinely annoyed, and I should be. This isn't my role. But I'm annoyed when founders of a business from 2016 think that somehow or even now that their path up the mountain is the only way. And they give advice to brands as if, like, you need to do this. My dad helped build the strategy of a very major beverage in the early 2000s. And a lot of people will come to him and say, how do I build the next X, Y and Z? And he's like, if you have a time machine to the year 2002, I have an unbelievable plan for you. But if you tried what we did then, it's not going to work now.
31:49
Ryan Springer
And so I think brands need to think outside the box, the way leisure did, because what worked five years ago, some of the principles are always true, but largely that vein of gold has been mined by now. And you're going to have to get more creative and think of something else to make it going forward, I think.
32:07
Alex Michaelsen
And if I can add onto that, this industry is very small and it's easy to be influenced by others. And I don't recommend copying other people's strategies because you don't even know if it's working. Like, if you haven't seen someone's books and all you've seen is an article on an industry publication and their Instagram, you know zero about their business. The amount of times I've been sent something, whether it's someone's raising money and I have a deck and I read through the financials, and there is a mismatch between what you think a brand is and what their business actually is. So, like, try to take advice, contextualize it into your business. But ultimately the founders that win figure out how to make their own plan work.
32:51
Alex Michaelsen
And I'm not even saying that ours will work because we're still going along for the ride, but I think that's really important. And I think the industry in some ways is set up to make you feel insecure as a founder and that everyone can sell you the silver bullet. And I can guarantee you that there are zero silver bullets and thinking that way will lead to your destruction.
33:12
Hannah Dittman
So well said. And I think if you look at like the glamorized, really successful founders that have been really innovative and made it to the top of the mountains that they were climbing, I don't think any of them have the story that they were like riffing off of someone else's journey or thinking about it the way another business or founder was necessarily. I think there's some business fundamental similarities or like some case study learning or competitive analysis, things that sometimes are in common. But I think the key is going back to the root of your own customer and understanding how to best meet them.
33:47
Hannah Dittman
And I think if that's always your guiding light of how you're operating a business with your consumer in mind, it's hard to go wrong because that's your job at the end of the day, is to serve your consumer really well and to be focused on them. So well said and obviously showcases your really thoughtful approach to business and having the ability to take information and digest it, ask the questions and be curious and learn, but have your blinders on at the same time and know what's going to be right for you all and for what you're trying to achieve as a business and a brand. I'd love to quickly touch on the investor company relationship.
34:22
Hannah Dittman
Obviously, we've gotten a little bit of a showcase just from this conversation, but would love to ask you both, what's the relationship like and where do you find the most value in the investor relationship to come from? And if you had any words of wisdom or quick advice to help explain it to another person who's considering getting into a partnership like that, what do you think the things that they need to know are?
34:45
Alex Michaelsen
I have to imagine that this experience is very different for every fund and brand. Midnight certainly isn't like a. Even if you visit their office in Austin, you're not walking into a finance office.
34:57
Hannah Dittman
We see Ryan's office right now. He's got style.
35:01
Alex Michaelsen
I think the photo behind him does it justice. But I think for us, especially this round, we raised this round when we initiated it. We didn't need money and part of it was around an inflection point and what the future was looking like. So I'd called Ryan and we'd sat down and thought about should we raise a round collaboratively that is patient and brings on the right partners that can help the business move forward. So a lot of our relationship has been trying to figure out how to get the right people around the table. I kind of think of our business. We have our core team and employees. We're trying to build out some of the new AI type of stuff that's coming around that Ryan's also a big fan of underneath the business.
35:44
Alex Michaelsen
But I kind of think of us trying to build like an outer shell that is a advisory board per se, that has operational leaders, sales leaders, executive leaders, marketing leaders, can help be advisors to our top team members. And a lot of that was part of this round. If you look at the people that got involved as who can add value, who can help us guide our strategy, who can maybe even get deeper into more involved when we need it. So Midnight played a big role in leveraging their network and helping us set up meetings and warm meetings and vice versa, of us bringing stuff to the table. So I think that's been a lot of our relationship is how do we best set up the business? And again, that goes back to the belief that this is a people business.
36:29
Alex Michaelsen
You need good people, Ryan. And the team does a good job of not saying this is the way it has to get done or this is what you need to do, but more so thinking of what's happening, where can we take things, how should we go about it, working collaboratively, trying to be flexible and finding the right solutions. And I think you don't want someone that's gonna start getting really mad at you when things are going not perfectly. And I think you want to be a problem solver because it's going to be up and down. So that would probably be my advice.
37:00
Ryan Springer
I think one of my favorite quotes to like humble myself and our team was this is old Texas. He had made a ton of money in energy and I was 24. So I'm asking really open ended questions and I said what's the biggest mistake founders make and what are the best kinds of investors? And I loved his answer and there are people who disagree, but he was like, I'm like value add investors are the best kind of investors. And he was like, no, no, they're number two. He's like, there's only two good kinds of investors. Second best is value add and the first best shuts the fuck up. He's like, they just put in money and they shut up. He's like, those are the best. You're never going to beat those. Just they forget they've invested practically.
37:40
Ryan Springer
They check in once a year because those are the best. If you can find those, just do those. And if you have to bring in value add and everyone else sucks, was his opinion. And I'm not sure I 100% agree. But I always think it sounds fun to think about it that way. I think a big important thing we learned pretty quick was that the value add we thought we could bring at midnight wasn't sustainable. You can't go grab a sales department and start helping run it. You can. Not if you're going to make 25 investments. Not if you're going to spend time finding the best deals. I think you got to find things you can do super easily. And to Alex's point out for us was network.
38:20
Ryan Springer
That takes such a small amount of time to connect the CEO of a major beverage brand. With Alex and Steve, we have full faith in them. We're on a lot of calls. We're blah, we're not on plenty and they crush it. Those guys get interested and suddenly we got a killer investor or advisor. And the group that we built together for this round I'm like super pumped about there's multiple billion dollar beverage CEOs, investors, board members of other businesses. And I think we supercharged collectively between Alex, Steve and Midnight. That like phone a friend aspect that leisure can have. And so I think that's really important. And then another thing that's super important is to be in the trenches with the brand. I don't mean be annoying and always be in the business.
39:14
Ryan Springer
I mean when things have gone wrong for us, how are we going to solve this? Why did we make that mistake? I think is really important instead of putting pressure on a factor because if you put pressure on a founder in that aspect in a negative way, they're not going to share negative shit with you that maybe you could fix or help fix or even take some pressure off of them. I think those are all really important things and it only works if you invest the check knowing like things are going to go wrong all the time here. And we're just trying to help solve it. And something we say really positively about the leisure guys a lot when we talk with our investors, with other brands, whoever is, they keep us in the loop.
39:54
Ryan Springer
We have a group text called the Men of Leisure. We need some more women involved. It is men at this point, but as men of leisure. And it's the three midnight co founders and the two leisure co founders. It's a very active group chat and that leads to more visibility in the business without some stiff monthly email.
40:14
Hannah Dittman
Shared suffering, shared wins and a shared journey. I think a very thoughtful investor mindset and a productive one to be in. I'd love to pivot now. As you know startup CPG has the largest slack community in the industry with now over 35,000 members. I'd love to pull a question directly from our channel and have you answer it as a case study for any founders with a similar question. Today's question is what is the sweet spot revenue wise to fundraise? A lot of investors say show traction but some also do precede when is it realistic in reality?
40:48
Alex Michaelsen
Yes sir. Day. Those are questions that I asked early on and I think it's well intentioned and it's. It can consume your whole life to try and think of when should I do this or do that. And I think with investing, raising money from investors, you have to always be doing it and that doesn't mean you always have a deck prepared and that you're raising around that has terms. But you're building a network and you're talking to people like there's some funds that I think might invest in the future that we had been talking to every single round. I kind of hold it over their head at this point because it's kind of a joke that the valuation keeps getting higher and they keep missing it. But early on, like, you need money.
41:25
Alex Michaelsen
If you're in beverage, you need $500,000 for the first 18 months and that's approximate. Like to get your branding done to formula manufacturing, get things going, have enough money to spend on some marketing to push the ball forward. You need money, so anyone that you can go get checks from is helpful. Don't wait for X, Y or Z CPG fund to want to put in money. Go get the money from someone else in whatever way you need to. But that's my advice.
41:53
Alex Michaelsen
I think being realistic of when funds that invest in a Series A are going to want to be involved, you probably want to be talking to them at 0 in revenue and 500k in revenue, but they probably aren't going to be that interested until you're a few million in gross revenue and a few million in gross revenue contributed from a lot of distribution that's doing well. So I'll be completely transparent. When were talking to the first round of funds in the end of 2024, we had broken 2 million in revenue, but 65% of that was like offices. So it was like, okay, you're doing two and a quarter million in revenue, but less than a million of that is coming from retailers. So then we flipped that the next year and went majority retail.
42:42
Alex Michaelsen
That would be my advice, is that you needed money yesterday, especially if you're in beverage and talk to people that you know aren't the right fit today to build a relationship over time and always ask for connections and build your network. But yeah, the goalposts are always moving. I talk to founders that are like, they told me, get to a million and I could raise. And now they're saying 2 million and now they're not investing anything under 3 million. And I think that sometimes investors, from my perspective, say those things to kind of just end a conversation. Yeah. No investor is saying, oh, you did 990k, I need it to be a million. That's not actually how they're judging the business. If it's a good opportunity with a great team and a lot of momentum, that doesn't matter. It's like it's the people.
43:25
Alex Michaelsen
It's showing other factors in getting to an exact number.
43:29
Ryan Springer
I'll keep it super short, but I want to double click one thing Alex said and then one new thing I don't believe the reason we did recess when they were 65% of our things and things have gone really well since then. The reason we didn't write that check wasn't because were like super smart. One of the reasons we wrote that check is we knew them for two years. To his point about getting to know doing the things you say you're going to do, you build trust with someone, even if now's not the time that they could invest and you build a relationship and they begin to see you as someone they want to invest in or as a winner or whatever.
44:04
Ryan Springer
And that can overcome a fund that if we had just met them at that point, maybe we invest, maybe we don't, because we don't know them that well. Most of the cans have been free. That there's a big reason why a smart investor might go, I need to get to know them better, whatever. But we knew him for two years. So Alice is dead on. That talking to us for that amount of time is the reason we wrote a check. Just like Ben, Witty, just like Will Hicks in our experience. And the second thing that I think is really important for founders to realize is that, and you know, this is just my opinion, pre revenue is one of the easiest times to raise money. And you should raise as much money as you can early.
44:48
Ryan Springer
And I'm not saying dilute yourself some enormous amount. One of the things I see a lot of founders go, I'm going to raise just barely what I need. And I'm going to go out and I'm going to prove it. But guess what? You never prove it the way you thought you would. The experiment almost never goes perfectly. Right. And if you really need money during one of the times you haven't figured stuff out and the numbers are going down for like two months in a row, you're dead. You cannot erase money. You will not. I found that out at High Desert. We've had negative $3,000 on the bank twice during times we didn't have the right trend as were figuring things out. Now we do. Now the trend is up and to the right.
45:21
Ryan Springer
And we figured stuff out because my co founder is a psycho and he just will not. He's one of those people will not quit. But to Alex's point, I just see a lot of founders overthink it. We found when you're a PowerPoint slide, it's one of the easier times. Raise money, there's no performance people can hang on your head. And most businesses don't hit the traction in the first year or two. Leisure did. That's really rare. A lot of great businesses don't hit it for a couple of years. They have to Figure out and change what the product is and then they nail it. And great founders could do that. That's what I would say. I just, I get worried because I see founders go like, I'm not going to raise much money.
45:59
Ryan Springer
I'm going to put this in market, then I'm going to do the laboratory phase and try to raise money while I'm running experiments and my revenue is going down or up or sideways and the margins changing. And those are really tough times. So it's almost like pre revenue and two years in for most businesses. And that's all real esoteric and there's massive amounts of exceptions to what I'm talking about. But I know a lot of founders who could raise more money free revenue and wish they did because they needed more Runway to figure it out before they went back to market.
46:34
Alex Michaelsen
The advice is always selling the dream. And you can sell a dream when there's no data. As soon as there's data, you're judged on the data and not the dream. And people that don't know anything about the industry love the dream. They love that Vitamin Water got bought by Coke for four and a half billion dollars 20 years ago. And why hasn't that happened again since? Which you can joke in knowing that's kind of a crazy story. But I think the big picture is what you're selling when there is no picture to sell. And I also do want to relate to founders that it wasn't very easy for us and we didn't immediately catch traction. We changed the branding, we updated our formula seven times in the first two years. We're still changing the formula, we're still changing the branding.
47:16
Alex Michaelsen
My co founder's in Seattle right now because we launched a rebrand and we're not fully satisfied with the colors. So we're like a plant for fixing the colors. Nothing's ever perfect. And I think you have to raise money to be able to have time to get through that. Because I'll tell you, when we met Ryan, our biggest revenue month was $10,000 at the time. I remember hitting $10,000 in revenue and like high fiving, thinking that was the coolest thing I'd ever seen. Like, it is an accomplishment in the beginning. Like you got to over a hundred thousand dollars run rate but like, it takes time. You need to figure yourself out.
47:53
Hannah Dittman
So well said and really honest and candid, both of you. This has been such a great chat. I could clearly be talking to you guys all day long. I love the honesty. I love how real you guys are and how helpful you just genuinely want to be to those listening. For any founders that want to get in touch with you, continue the conversation or follow along on your journey, what's the best way for them to reach you? And second part of my question, do you have any advice or are there any current opportunities for those interested in joining your teams or your industry in general?
48:25
Alex Michaelsen
Message me on LinkedIn. It's just my name. You are going to start hiring soon on the sales and marketing team. So if anyone has director level sales experience, feel free to reach out to me.
48:37
Ryan Springer
For me, I'm trying a controversial new thing. Look on my LinkedIn, see if you have a warm intro to me. Use a warm intro. If you don't have one, find one. I would say don't reach out cold. I'm not going to reach out see it. I just do not have time to do that. So if you can find warm intro, find it. Otherwise network your way around to figure that out. We are not hiring right now at midnight. We are adjusting to see how many jobs Claude can do. We just made a hire, name is Kate Davis. She's wonderful and she does the jobs like three people. But so between Claude and Kate, we always joke we got like 10 employees now from zero like four months ago. So we're good. Currently we will be hiring in the future and we'll do something then.
49:17
Ryan Springer
But in order to get into venture capital, I tell everyone, just start doing it either writing tiny angel checks yourself. I was in a position to be able to do that, so that's easier said than done. But me and my two co founders just started a fund which was insane in its own right, but just start doing it. Figure out a way to work for free at a fund if you're a young person trying to get an adventure. And then finally I would say if you're trying to get a venture. One of my favorite paths that nobody likes is I'm not saying do what Alex and Steve do, but be on the operating side. That's always super valuable.
49:47
Ryan Springer
Like know how to run one of these businesses, even working at one of these businesses, learn how the sausage gets made and I think you'll be a lot more valuable than you think in terms of getting in on the fund side. Thanks.
49:59
Hannah Dittman
Yes, a lot of portfolio companies out there. So be strategic and select a good one and maybe you'll even get a chance to meet someone in the boardroom at some point. Well, both of you, thank you so much. Ryan and Alex, huge pleasure chatting with you all today. Can't thank you enough and everyone listening. Make sure you check out Leisure Hydration. Go get yourself a can. Do yourself a favor. It's awesome and you definitely want to try it if you haven't already. And if you're already a customer, then you made the right choice. Thanks so much again to both of you. Well friends, we've now arrived together at the end of another episode of the Startup CPG Podcast, the top globally ranked podcast in cpg. And if you love this podcast, you'll love our Slack community even more.
50:44
Hannah Dittman
Here at Startup cpg, we're a community of brands and experts and you should join. Sign up@startupcpg.com you'll then get an invite to our online Slack community of over 35,000 All Star CPG members, hear about amazing events near you and all our special opportunities to get you in front of buyers, investors, brands and more. It's a free community. So what are you waiting for? I'll catch you on the next episode and I'll see you on the Slack.