The Entrepreneurial Mindset: Why Being ‘Crazy’ Pays Off

I look for functional lunatics. Best [music] investments I've ever made are non- consensus. To be an entrepreneur, you got to be a little crazy. There's a [music] million people who are saying, "This will never work. You're an idiot." This light bulb went off my head. They're like, "This is that [music] product." You know, in my head, I was like, "Hey, these guys ever get to $50 million in sales, you know, it'll be a home run." And, you know, now they're doing [music] that in less than a month. This brand is 12 months old now. Uh, and it is the fastest growing company I've ever seen or been a part of in my life. How big do you think that business can get? How big do I think that business can get? All right, welcome to a new episode of Power Players. And watchers and listeners of Power Players know that I love following all the trends in consumer products, uh, from food to toys, you name it. So, excited to welcome in my next guest, Barrel Ventures Magic Partner and founder, Nate Cooper. Nate, good to see you. I feel as though you have uh invested in so many companies of brands that I've have emerging that I have tried and that I enjoy. So good to see you. >> Good to see you. Thank you for having me. >> Uh take us inside of your portfolio. Let's let's start there. Some of the brands that you have invested in and why have you made some of those investments? >> You know I started doing this eight and a half nine years ago. I was an entrepreneur in the category as well. Uh, and the first real check I wrote was into Lollipop when it was just an idea. Uh, you know, the I remember meeting Ben and David and I had David over to my house and took a sip of the product. The product looked the same as it does today. It tasted, you know, 99.9% similar and closed my eyes and I thought I was drinking a Diet Coke. And the thesis was, you know, you had kombucha, which had become a billion dollar category, you know, over a decade, and millions of people like myself want to drink for its functional benefits, but don't because it tastes like crap, uh, in my opinion. Uh, and on the other hand, you got soda, which, you know, is this the biggest category in the world in beverage that tens if not hundreds of millions of people want to stop drinking, but don't because it's addictive and there's nothing that really fills that gap. And this light bulb went off my head that like this is that product. You know, in my head I was like, "Hey, if these guys ever get to $50 million in sales, you know, it'll be a home run." And you know, now they're doing that in less than a month. And uh it's exceeded everyone's wildest expectations. Uh and you got to get lucky sometimes. Uh and we certainly did with that. And you know, our experience with that and how they've captured the consumer mind share and taste profile has led to some other investments as well that uh we've been really fortunate to make on Alipop. I we recently just talked to the uh founder in Bed Goodwin and those founders like him are hard to find. How do you is he the quintessential founder that you look for when putting money to work? someone who's just like, man, their sleeves are rolled up and they're they're grinding and they just have this unshakable vision of where they want to take their company. Yeah. So, Ben, I I don't know if I coined this term, but it's something that I put into words and many people have said this in many different ways, but uh I look for functional lunatics, right? So, to be an entrepreneur, you got to be a little crazy. um you know because there's a million people who are saying this will never work. You're an idiot. You see that on all sides of the table. On the investing side of the table, right? The best investments I've ever made are, you know, non- consensus, right? When I met Lollipop, I sent it to 30 people, you know, trying to help him raise money, and they all said, "This will never work, right? You got to be right, you got to be early, and you got to be non-conensus." Um, and Ben is certainly a functional lunick. You know, that's a guy who is product obsessed like no one I've ever met in my life before. I would bet that he is probably the single best beverage formulator in the world. Uh or one of them. Uh and him and David, you know, started this company and built an incredible organization. You know, Ben has made every single formula uh in a lab uh by himself. uh I think maybe first testing in his basement and then in a commercial lab but you know you don't find people like that frequently and you know a lot of our most successful CEOs I would say are sort of functional lunatics >> when you are cutting checks to these functional lunatics what becomes your role >> I tell them um you know I'm not here to tell you how to run your business uh or invested in you as a founder because we believe in you uh that being you know we are a very specialized fund. All we invest in is food. You know, pre-farmmed to post fork, if it touches food or has the potential to touch food and beverage, we'll take a look at it. Our network is our superpower. Uh so, if you need help, we're here to help you. If you need a connection, you know, we can connect you. If you need help fundraising, go to market, storytelling, branding, whatever it is, we're here to help you. You know, there are founders I talk to once, twice a week, uh and there are founders I talk to once a month. Our mission is to be the single most value ad fund on the cat table and you know because we are so specialized uh in this vertical that you know I've been in my entire life my family's been in for hundreds of years all of our LPs have been in for forever uh you know there's a lot of people that say hey we add value and you know I think Travis Kellanick was on some podcast um the other day saying like very few venture firms can actually add value and we take pride in like really really doing that. >> On Lollipop, I I asked Ben if he sees, you know, he's been approached, I'm sure, as you know, by the larger companies and he hasn't sold out to them. I asked him if he would take the company public. Uh he didn't shoot me down. Um so that was kind of interesting to see. But is, you know, what's you know, some of these brands once they get to a size of an Lollipop, what do you think they're inclined to do at this point? Um, do they think they can create the next Coke or Pepsi? >> Do they think they can create the next Coke or Pepsi? Uh, you know, I was always taught that dream big because if you reach all your goals, you didn't set it high enough. Um, you know, it's interesting there if you look back, uh, Coke has a lot of the advantages it has today globally because of some really interesting like World War II, >> right? They set up these distribution plants and bottom plants across the world for the troops and that gave them the advantage. I think it'd be ignorant to say that Lollipop's going to create the next Coke or Pepsi, but I think they can create Do I think they can create a $10 billion beverage company plus? Yeah. You know, this category um was at zero in sales, you know, 8 years ago. I think, you know, we'll do north of 3 to 4 billion this year. If you look at eight years into this category versus eight years into energy, this category is actually well ahead of where energy was eight years in. And now energy is probably a $50 billion a year category, right? Um so the potential is certainly there to create a massive business. >> What pitches are really interesting to you right now? You know, I think in general there are very few like mindblowingly original ideas and you know if you look at the biggest companies over the past on the consumer side you know when you look at AI that's over my head but uh on the consumer side the most successful businesses are not like crazy new things that nobody's ever thought of. What they do is they like ease the friction a little bit or change the form factor a little bit, right? Like Uber, what they did was they like just ease the friction and change the form factor, right? Look at Grooms, right? They took vitamins and put it into a form factor that people loved and 3 years they sold for a billion too, right? Uh we've got another company called Ultra, which is a nicotine-free pouch company. Uh and so, you know, Zins have taken the world by storm. I think Zin as a brand sold 800 million tins last year. I've never done a Zin. Nicotine is actually not good for you. And what Ultra did was said, "Hey, we've reached this tipping point of society where pouches have become an acceptable form factor." And what if we use that form factor and put, you know, a focus pouch or a calm pouch or an energy pouch? And the future vision is, hey, could you do hydration, protein, creatine, vitamins, minerals, supplements, and pouches? And this bet, you know, this brand is Ultra is 12 months old now. Uh, and it is the fastest growing company I've ever seen or been a part of in my life. >> How big do you think that business can get? >> How big do I think that business can get? um you know where they are 12 months in I think this business could be a I think could be a billion dollars in sales within 5 to 10 years. >> Wow. Where do the where where do you think that a brand like that is taking sales from? Um, so I think there's a portion of people who, you know, are using the nicotine pouches that say, "Hey, I realize this is not good for me. Uh, but I want to, you know, I need that oral fixation." Uh, there's a portion of people like I've never done a Zen, uh, and I'm using this like in place of my afternoon coffee. >> Um, and then there's a portion of people who just look for a different form factor, right? And they You know, I was um I did this long hike this weekend and you know, I drank 30,000 uh milligrams of sodium over the course of the weekend, right? If I could instead of having to drink that in a liquid form, right? If I could do it in a pouch, right, and like have that oral fixation like almost like a Jolly Rancher, that would be cool, right? So, it's almost taking sales away from gum. No, but but I get it. I get it. >> Yeah. >> Yeah. >> Interesting. Where, you know, I looked at the rest of your portfolio and there's a lot of snacking brands. Um, where I think it was one company uh focused on bananas. Uh, you had another one on on beef jerky. What What made you allocate to those two flavors or or types of food? Uh, so the banana company, it's called Go Nanas. Uh, and they started with a, it's actually my sister-in-law's business. So, I saw this business from zero. Uh, she started selling banana bread out of her dorm room at the University of Michigan. Uh, and co hit and she was, you know, in early 20s and said, "Hey, we want to do this." And we were sitting her on a table and said, you know, selling freshly baked loaves of banana bread is not scalable. What if we did mixes? Uh, and that business has taken off. And then they recently, do you remember Little Bites? Those mini muffins. >> Mhm. Yeah. >> Probably billion billion dollar a year product. They released a better for you version of that. Uh that has, I think, exceeded their sales expectation by like six or seven times in the first 3 months. And this business is on fire. And the idea is, you know, permissible indulgence, right? uh nostalgia, you know, similar things that Lollipop has done of like take these form factors and flavors that you loved as a kid, but you know, when you become an adult, you can't eat the same way as you you did as a kid, right? Uh but do them in a similar taste profile, but just a better version. >> You know, I uh you know, I always tend to still listen to the the earnings calls of a lot of these snacking giants. PepsiCo with of course Freda Lelay, Campbell Soup with uh Snyder's Lions pretzels and and Goldfish and they are all they're all pushing back on this notion that GLP1s are going to impact the snacking business longer term. And I get it. I mean, they have giant businesses, but as someone investing in emerging brands. I mean, how do you how do you think GLP1s will impact the business of snacking and those brands that will pop up over the next 5 to 10 years? I so I don't think GLP1's I think it's going to have like a slow drip effect on snacking and you know snacking is ever going to disappear but you know it'll just be like a little bit drip less and maybe emerge from like where protein becomes higher or fiber becomes higher you know these where you need more nutrition packed into less because people are eating less what GP1s does as a science is like decrease addicted behaviors Um and so I think GLP1s are going to have a more significant effect uh in a different area. Uh and so at the end of the day you have to eat right. What you don't have to do is you don't have to drink alcohol. And so I think TLP1s are having a much more severe impact on alcohol consumption and they are included. What is you know is there a new I guess we've seen those functional like alcohol brands like the non-alcohol athletic brewing um is there going to be a next wave of those that try to you know capitalize on industry being disrupted >> so we invested uh year and a half two years ago into a company called nowadays which is a hemp THC beverage >> um and so again I'm someone that never smoked weed uh and this you you know, was legal through the farm bill loophole uh started in 2018. Uh and then the loophole was they snuck in a closing of the loophole which starts in November. Uh they got an extension in the Senate continuing resolution. So if this stays legal, uh I think this category of hemp derived [clears throat] THC beverages will be exponentially bigger than anyone imagines. So in the largest liquor retailer in the country last year, um the number one selling skew in the chain was Tito's vodka 750 ml. Uh and the number two was Nowadays, which is our hemp THC beverage. In Minnesota, in some of their liquor stores, the category is making up 15 to 20% of their sales. And so when you take a step back and say, "Hey, what does this do?" You know, we're of a similar age. I have a drink now. You know, I've got three kids, six under six years old. I have one, you know, if I have a drink or drink and a half at dinner, like I wake up the next morning, I feel like crap. >> Yeah. Same here. [laughter] >> Same here. Horrible. >> This this category, it basically gives you a similar feeling of having a drink or two without the downside effect of like waking up and feeling like crap in the morning. And so like when you that's sort of the holy grail. And so I think that this this category, assuming it stays legal, and I'm very optimistic, you know, it's a category that probably has a half million jobs, a billion dollar in total sales, uh, you know, it's hard to imagine either Democrats or Republicans wanting to get rid of a category like that, but what they should do is put it into the three- tier alcohol system, age gate it, put a cap in milligrams that are allowed in it, uh, and eliminate the synthetics. This is a category I think will be it, you know, it's not out of the realms of possibility to say this could make up 10% of alcohol sales, liquor stores, which would be a, you know, you extrapolate that across the amount of alcohol that's sold in the United States every year. That's a $50 billion a year category. It didn't exist 5 years ago. >> Yeah, it's huge. You know, as you look, not all investments, especially in in areas that you play, they all they all work out. I mean, as emerging brands, um, what have you learned from some of the investments that haven't worked out and how do you apply that to the future ones you're making? >> I think there's trends that seem super hot within a moment that if you have the ability or wherewithal to like take a step back and zoom out, you realize like the chatter makes it seem much bigger than it is. And so that was like the the alt meat like the beyond and impossible. >> Um I think the cultivated meat companies are very similar. Um and there's a lot of these companies that you know take millions upon millions of dollars to get to commercial scale and commercial realization where makes sense from a consumer product, right? like these cultivated meat companies of like the burgers grown in a lab, but then beyond that you have consumers might not ever accept it, right? And so, you know, it's execution risk is one thing, but like consumer adoption risk is another. And um I'm okay taking one, but both of those at the same time is a scary scenario. >> Lastly, what's the next big food trend that is likely to start popping up in all our lives? And I go back to lollipop. Uh, it's like that brand just started appearing in the supermarket out of nowhere. I mean, and now I'm seeing the same thing with energy drinks. Like every day there's a new brand that pops up. Where should I be looking next? >> I think you're going to see like every section of the grocery store is going to have like a new age a little bit better for you version, right? Ciiete did it with tortilla chips. Masa and vodka are doing it with with tortilla chips now uh in cooked in beef tallow. Uh you know Grun's did it alternative form factor for vitamins. I think Ultra is going to do that. You know if you think about it, Ultra is becoming an alternative form factor for energy, right? Um, and so I think you're going to look through this the grocery store and see, you know, there's the brands of, you know, the 80s and 90s and 2000s and then there's the brands of today. >> So true. Uh, Nate, good to see you. Tell Ben we said hello. Uh, good luck on his what he's going to be now executive chair, right? >> Executive chair and chief formulator. Um, I think he's going to be more involved than he's ever been without uh some of the challenges of, you know, being the CEO, but very very similar role with some more support around it. So, I don't think he's slowing down at all. >> Yeah. No, I didn't get that sense he will be slowing down anytime soon. Nate, good to see you. Uh, continue up the continue the great work. Look forward to uh continue following your journey. >> Thanks, man. Cheers. Chat soon. >> All right, that's it for today's episode of Power Players.