Why Marketing Doesn’t Matter Until You’re $100M+ SALES - David Lester, Co-Founder of OLIPOP

0:00In one sentence, what should a UK brand, let's just take beverage, what should a UK beverage brand consider if they're being asked to go into the States? The main thing with the States is just the scale of it. You know, it's very hard to imagine unless you've worked here for a while. It's overwhelming. Each state is different. It's like a bunch of different countries.

0:25David Lester is co-founder of Olipop, which you probably know as one of the fastest growing functional beverage brands in the US. We first spoke last year at the Bread and Jam Fest 2024. And after that, David promised to come back and get into some real nitty gritty about what it's like to super scale a humongous brand in the United States. On this call, we get right into it. We talk about fundraising. We talk about people at different stages of growth. We talk about what it means for you as a founder to scale a business that big. You're not going to want to miss this one. Dive in.

1:03David Lester, co-founder of Olipop. Welcome back to Brand Growth Heroes. How are you doing? Doing very well, thanks. Yeah, great to be here with you. While the brands continue to grow, each year is sort of a new adventure in that respect as we take on the challenges of the bigger business and everything that comes along with that. And it's now a business with how many people working there? 250 to 300.

1:33Welcome to Brand Growth Heroes, the leading podcast for the founders of Challenger Grocery Brands. I'm your host, Fiona Fitz. My 25 years at global giants such as Nestle and Challenger brands such as Goo Chocolate Puds, Chobani and Strong Roots, as well as coached to over 400 scaling brands, means I have the experience to ask the questions that truly matter and get you the insight that will inspire you to think differently and drive serious growth for your brand.

2:05so would you be able to take us through what it is like at different phases of growth you know when you've got a team of five and a team of 50 and a team of you know 100 and a team of 250 like are all of those businesses very different in terms of how they run it's really interesting for the people out there who are listening and thinking about being a super scaler like olipop you know what can what they should they be thinking about and what can they expect at different phases of growth and size. It is very different. Yeah. And I think the, you know, one of the challenging things for us is how quickly the business has grown as well.

2:41So that requires as a founder to evaluate your role every six months, maybe three months. Wow. You really need to see around corners. You know, hiring is very important. I found vast majority of my time over last seven years spent on on hiring um because by the time you realize you need the people uh if you wait to that point you know you're kind of two three months to hire high quality people you're too late and then you're always chasing the business has grown again and you know so seeing around corners to hire the the people the infrastructure you need i think is very important And there's lots of things that are, you know, changes other founders listening will know is, you know, you start out and you're using one co-manufacturer that maybe is managing, you know, small scale production.

3:38So it's not quite as professional as some of the larger co-packers you might use further down the line. So, you know, you go from one to three co-packers at scale. you know five years later you our business is profitable now so that's a big difference from you know relying on venture funding and managing a you know capital runway different people at different stages of the organization as well you know where you can all sit in a meeting room is like 12 of you or 20 of you is very different than when you get to kind of 40-50. So if you're a founder and you're leading a business and it's getting to you know say 20 people what kind of things should you be expecting to be spending your time on?

4:29You're going to be spending less time in the operations of the business and relying more on your senior team for that kind of stuff aren't you? I would say so. Yeah I think there's generally maybe up to three business critical things that you should probably always be across. And the kind of spoiler is one of those is very unlikely to be marketing, which I find a lot of founders spending like burning a lot of time and money on on marketing. Marketing doesn't really come into play, I don't think until you're like well over a hundred million in revenue. Um, you can get away with pretty basic, uh, techniques up to that, up to that point.

5:15Um, you know, things that are really going to cause you problems are kind of, um, yep. Manufacturing and your supply chain, something goes wrong there. That's, that's almost, you know, uh, life threatening to the, to the business. Um, you get your commercials wrong. Um, you know, you're not selling marketing will not save you that either in a startup. So, you know, I'd say, yeah, maybe two, three business critical things. If it's like, you know, you've really got to figure out your cogs or you, you know, have always had issues manufacturing and you have to, you know, find a new co-packer or whatever it is, or there's one key retailer that is like, you know, 80 % of your revenue that just has to work those are things you know I would I would stay across and I I would just you know often have a running list myself just jot you know for me I'm like working on bits of paper so I just jot down you know what are my uh three things I think to be honest maybe I had five at times there's probably too many um but you know everybody in a startup is busy um you know you're know more so as a founder you speak to any employee in a startup and that it can feel very overwhelming and you know I told the people that work for us as well it's like you could work 24 hours a day seven days what you would not get through all the work it's impossible so you know at some point it comes down to being choiceful about it and And nobody should ever be working on more than five things.

6:53So you should be able to jot a list down, five, any person working in the business. You should know exactly what those things are. And you should review them reasonably frequently, I'd say every couple of months or so. If I like it on a piece of paper, because I could just constantly look at it and be like, are these still the five things or has something changed? That is great. That's so actionable. I love that. I'm thrilled to introduce Brand Growth Hero's newest partner, Jolson Jolson is a leading B Corp certified commercial law firm that specialises in guiding the founders of scaling CPG brands With long term relationships with clients like Little Moons, Trip, Eat Natural, Bear, Graze and Pulsin Jolson is also famous for advising the Innocent founders in their landmark sale to Coca-Cola and believe it or not, they still work with the Innocent founders at Jamjar Investments today.

7:46I'm especially impressed by how Jilson sets founders up for long-term success and by their commitment to championing female founders. Recently, I asked managing partner Paul Chappie, why does a scaling brand need a corporate lawyer?

8:01David Lester:So you definitely need someone that's going to have your back, that is going to be looking at those pitfalls that may be coming in the future, preferably someone that knows the industry because having that context is really important when negotiating be that commercial agreements or funding arrangements and at the end of the day you really need to have someone that you can trust and obviously can can negotiate hard when they need to huge thanks to brand growth heroes podcast sponsors jolson now let's get back to the show how would you paint us a picture of each of those stages in terms of investment partners and team yeah i mean it would be nice to be able to wrap it all up in a little hey at this stage this revenue size you're gonna need these investors in this team unfortunately i don't think it works like that and each business is different so you know investors will often look closely at team founders um when they make early stage investments because you're gonna have to make a bunch of subjective calls.

9:07Whereas, you know, at large scale, you know, in corporate environment, I think you can perhaps follow some of these models a little, a little more closely. So interesting transition points, I would say is going from where you can no longer all fit in a meeting room together. So that's, you know, going from under 20 to 30 to 40, I would say that's a transition point. I would say a transition point is certainly for the US market, maybe different for Europe, UK, but over 10 million in revenue, you're massively de-risked versus under 10. There's not many businesses make it past the 10 million revenue mark.

9:54So once you do, I think that it kind of de-risks the thing a lot. I think you show, you know, provided that your revenue isn't massively distributed amongst 40 ,000 doors or something, you're showing real traction in markets, a lot changes. And I think there is an inflection point, as he was saying on Dunbar's number there, around 120 or so. So as a founder, this is really complicated stuff. And Most of us have not done it before. So having an executive coach or, you know, somebody who's like, hey, here's typically what happens when you reach this point. That advice you can rely on. You know, when you get to 40, here's the problems you're going to start to see.

10:44And, you know, having somebody, you know, an advisor, a coach who can sit ahead of that. and while you're sort of head down in the business say hey you know on your weekly bi-weekly call whatever it is to be like hey David just so you're aware you guys are rapidly approaching 40 people in the business here's what that's going to look like and here's the problems you're likely to see and here's the things you need to start thinking about you know I think that is very helpful while the things don't line up quite as neatly as as I think you were alluding to at times there is some consistency and in the issues that you see at each stage.

11:25And, you know, yeah, it's amazing how many times we would have had that conversation be like, Oh, my God, yes, that's exactly what's happening right now. And so org design and hiring become very important. And as you said, big challenge for founders, and I'm very empathetic to it, because, you know, I went within a seven year period from primarily decanting soda stream bottles into glass bottles and hand capping them, wrapping them in bubble wrap and take them down to the post office to then managing a team of 150 plus people. That's a difficult transition to make where you're extremely hands-on.

12:09And in the very initial stages pre-revenue, you have to be because you don't have a team. so you can't sort of be like well that's not really my thing everything has to be your thing very rapidly you should be hiring people into roles that they you know and what i say to people when they're hiring is you should get immediate relief so you know on day four of the person coming in you should be like thank god you know whatever sarah or john is is here um i don't know how we would survive without them. And then you're going to have some bumps and nobody's perfect. And you should be clear on every person you hire, what their development areas are, because everybody has them.

12:52Even the super senior people. And I made that mistake before of just being like, oh, great. This person seems to know a bunch of stuff. I'm paying them a ton of money. But even they have development areas as well, obviously, that you can, it's your responsibility to support them with. But if you don't feel that immediate relief, you should give direct feedback. If within a couple of months, absolute max three, it's still a problem, you find yourself complaining about the person rather than, you know, eulogizing about how amazing it is to have them there, then you should respectfully move on. I totally agree with you.

13:28And I think that's a mistake we all make. Founders almost, they feel like it's their fault. You know, I employed that person, I put a huge amount of work into interviewing them, and there wasn't anyone else out there and they'll be fine. They'll change, you know, they'll, they'll improve. But if they don't course correct really rapidly after you give them that first piece of feedback, if they don't get it, the feedback, and then they can't deliver what you need them to deliver. It's very rare that people actually change, isn't it? Yeah. If you've given direct feedback and it's like, it's short shot, it's like, here's these two things, um, that I really need, you know, maybe there's been a misunderstanding or something in the scope or they're trying to do something that, you know, and that's where any, you know, psychological analysis or whatever you do when people come in, often you can kind of preempt some of the issues.

14:20And you can actually talk to people about before they come in, you can say, hey, you know, your profile is a little more rule following than we tend to operate. So I want you to make independent decisions and stuff. And I know that's going to be hard for you. So let's talk about that. And, you know, so but it should be short, sharp adjustment. I'm going to, I'm going to let you into a secret as well about the founder mindset, which can trip you up as well, which is, it's kind of, you know, it's embarrassing, but it's, I think it's true, which is, you know I found myself caught in this trap at times where you have somebody that is not doing the job adequately and maybe it's a senior person you've hired who's got a lot of experience and perhaps you're paying them a lot of money and in your head you're thinking hold on I'm doing this better than they are and you have to be careful with that because what you know when you self reflect as a founder, you realize actually there's a little bit of ego in there where you're like, I rock.

15:29Yeah. With Jack of all trades as founders, there's a little bit of an existential crisis of like, what do I actually do? You know, what is my role as a founder? You got, and you start to hire these experienced people. And it's like, well, you know, what am I not? So there can be some comfort in a weird way in having an underperforming employee. And the more experienced they are, the bigger the ego massage you get from it. So if anybody catches, you know, catch yourself in that and be like, no, I shouldn't be, I shouldn't be better than this person. That's a bad, that's a bad thing, not a good thing.

16:06I always say to people I work with, you need to know how to do that role inside out. You don't need to be very good at it, but you need to know what really great would look like. Because if you don't know how to do the role, you can't evaluate the person that you've just brought in yeah so like for example I find that all the time founders will bring in like a head of supply chain or you know a head of marketing but they don't understand supply chain or marketing yet and they're hoping that that person is going to teach them how to do it because they don't know what they don't know they're stuck in that Johari window quadrant where they don't know what they don't know the new person comes in doesn't like can't negotiate with retailers at the level they're supposed to be able to negotiate or doesn't know a good co-manufacturing agreement from a bad one.

16:50And because the founder is relying on them to show them what great looks like, there's a huge risk. So I don't know what you think. I mean, my question is more like, do you think you need to be able to understand what every role in the business, almost at a certain point in time before it gets too big, do you think as a founder you need to have a good grasp of what each role needs to deliver? You don't need to be able to do it yourself, but you need to know what it would need to deliver to be good. Perhaps. I think it's hard to do that. Inevitably, you will because you would have had to do pretty much everything to get your business off the ground.

17:23So that will happen. I think the way that you can evaluate or advise I would have is having, you know, an experienced external advisor that you trust. so that might be a somebody super experienced in industry or i mean these are people that maybe don't really want to work full-time anymore and stuff that sort of towards the end of their career or it's someone that's too senior for you to be able to hire but you convince them that what you're doing is interesting and exciting enough that they're like sure i'll give you some time and you can get them to interview uh some of these people and then get a get a perspective of them?

18:05What do you think? And then a great thing to look at is outcomes, right? So if you're getting a lot of problems, if the person's bringing back a lot of problems, it's probably not a good sign. If your problems that you had previously start to disappear, that's a good sign. And that's you know a pretty good indication i think um there's always you know excuses for stuff and um you know i think often sales people just by nature because they're good at sales are good at creating excuses for things they're they're not listing right now the the category is in big decline there's less space there's lots there's lots of good reasons why something didn't happen But as an entrepreneur, you know, it's either a good outcome or end of the road.

18:56That's it. It's just the excuses don't really matter. So by the time they're stacking up, it's like, well, it just doesn't really matter. I need to, as an entrepreneur, find some way to get this thing done. It works better in a large corporation. An intelligent excuse or an intelligent reason why not can go down quite well in a startup. It's pointless. It's either done or it's not done.

19:23If this episode is inspiring you to think about new ways that you can drive growth for your business, don't forget to click follow or subscribe on your favourite podcast app and even leave a review. Your small gesture has a big impact on me and my business and will be truly appreciated. I interviewed Eddie Yoon from Category Pirates last week. I don't know if you know Eddie. I don't know Eddie, no. Oh God, he's such a great thinker. You've got to follow Eddie on LinkedIn, but also the Category Pirates newsletter is just incredible. And they talk about thinking about thinking, right, and doing great thinking about thinking.

19:57And basically, if you can name and frame and claim a category in a different way than anybody else, that's how to compete rather than competing in a Red Sea. So it's just really great thinking. But Eddie was basically saying last week that in a big company, in big FMCG, you can hide so easily and nothing ever gets done because you spend 18 months in a row and there's lots of reasons why things can't happen because there's so many people involved in delivering something rather than just you on your own. And then you move up the ranks. So usually if you're doing well, after 18 months, two years, you'll move to another role.

20:29Whereas in founder-led challenger brand, that won't happen. People stay in role longer. But in big companies, everybody's moving all the time. In 18 months, two years in, you're on to the next role and nothing needs to really be delivered because your projects you were working on aren't necessarily going to be the same projects that the next person comes in, will choose. And it's kind of, you know, I don't want to swear here, but it's kind of fucked up, right? In BigCo. You're right. And it's a different skill set, I think. So, you know, trying to navigate your way through a, you know, 5 ,000 person organization, billions of dollars and how you line up that resource.

21:08And, you know, there's so many. I remember my time at Diageo, there's so much time spent on alignment. You know, sort of political element to it as well. You've got lots of different competing agendas, very smart, intelligent, powerful people. So it's, you know, and the skill there is getting in an organization of that size or a Coke or whatever. If you can actually line up the full weights of that organization behind something, you're kind of unstoppable, but it's very difficult to do. So, you know, it's as you say, it's a different skill set. But, you know, typically we would not hire people into our business directly out of a corporate role with no startup experience.

21:52But it would be the same the other way. Like it would be a disaster for the Adjo, for example, to hire some art team that had no corporate experience. They would be very ineffective in that organization. And the same is true the reverse way. You know, for me, coming out of my corporate tenure, corporate career, it took me probably three to maybe five years to properly adapt to entrepreneurship and a founder mindset. And that was like a lot of getting whacked in the face. Let's talk fundraising at different stages of growth. So fundraising is a really scary thing for people who haven't done it before.

22:34talk to us you know just spit out all of the key learnings that you've had at you know seed and series a series b series c because you you got all the way to series c right yeah fundraising is one of the most difficult aspects i think it's hard as well because it takes you a while to realize how important part of your job it is um because founders tend to be obsessed with like whatever it is that they they're not obsessed with fundraising which is good right they tend to be obsessed with whatever product it is they're making or you know the service that they're constructing um you know as an entrepreneur you tend to have a hyper focus so you tend to be very interested in the certain things and like just not be bothered with others so um i think a mistake that first time founders make is they just don't put enough effort into fundraising.

23:30And when you're fundraising, it's hard. It's always the busiest times for me because you can't plan it as part of your job. You have a full-time job and then all of a sudden you have fundraising to do as well as your full-time job. And you have to go all in on it. You cannot Not just be like, hey, I'm just going to knock this thing out and get back to the important stuff. So you have to carve out the time, which is hard. That's really, you know, the working very long hours, times in fundraising. A lot of what you're told or you read about fundraising, I think, is misleading. Okay. In very early stage or like pre-revenue, I would say it's important to have a deck.

24:17But that's more just to show that you can pull a deck together, really. Nobody is investing in your business off that deck. So any businesses that charge you money to write decks, I don't know if they exist in the UK, they do in the US. You know, pull it together yourself, design it nicely. Any forecasts are BS, you know, they're made up. And any investor knows that as well. So basically what a very early stage investor is putting money against is you as a founder or founding team and then your idea and it being talking to them in some way. You know, it's like, I don't know, they have a particular passion for it or they thought themselves at some point, yes, this would be a huge thing or you've managed to convince them.

25:06and I think one of the major skills you need to have as a founder is being able to convince people to do unreasonable things so you have to do a lot of that you have to convince somebody who really shouldn't be joining a company of your size based on their skill set to join you and help you build this thing you need to convince people who to make an investment the odds of which are minuscule that they will make any type of return on it. You need to convince a retailer to stock your product when they're getting presented with a hundred different products each year. You know, that comes into play in fundraising.

25:47You know, it's 100 % your responsibility to convince investors of your idea. Can I ask you a question? Yes. Is someone cutting your lawn? Basically in Atlanta, the leaf blowers are like constantly. Oh, that's cool. So it's just a leaf blower. So anyone listening to this, that is like live from Atlanta leaf blowing. That's cool. Just so that everyone knows what they're listening to. Atlanta is known as the city in the trees. Okay, nice. Okay, so that's a leaf blower. It's very green, but there is constantly flows and there's lots of controversy around petrol leaf blowers versus eco friendly ones and raking your instead of blowing and whatever else.

26:31Okay, that's a discussion we just do not have this slide. It's funny, isn't it? Different places, different conversations. We have lots of conversations in our village about dogs being let loose on the beach. That's like one of the big things on the residence page, you know? What's the difference then? What kind of things are you thinking about differently raising series A, B and C versus that first time around? Well, revenue is the big thing, right? So in the seed stage, if an investor is getting into the detail of like, justify why you think the numbers will be this and you're in trouble because they will talk themselves out of the investment because it doesn't make any sense.

27:11It's made up at that point. okay so it's just founding team idea and if they're not sold on that then you you know you'll have five meetings with them and they will say no at the end of it um after digging into a bunch of financials that you've spent ages trying to make up so what then becomes different after that is i was listening to podcasts the other day where i had to quote from a was it one of the tech companies i maybe it was in silicon valley the the show if anybody watched that i actually couldn't watch that comedy show um when it was on at the time because it was too close to reality but it was like i think it was this idea of you know pre-revenue being like way more it's sort of attractive in a way than actual revenue because when you're pre-revenue everything is like it's going to be this it's going to be there it's all a dream as soon as you have revenue then that's where the road meets the road right so so that's what changes so people are then going to start analyzing and extrapolating your growth curve.

28:09So I would always tell our team we're in the growth game. So if you're not growing, like that is the critical thing. If you're not growing, it's not interesting for anybody, particularly if you want to raise venture capital, which not everybody does, and not everybody should. You know, venture is for fast growth, high burn businesses that have a potential for an exponential return. So beverage tends to fall into that a little bit more because it's very expensive it requires a lot a lot of capital you know um other businesses not so much yeah it's not right for everyone but for those that it is those are some of the things i would think about and then another thing i've spoken to entrepreneurs about recently is dilution i think you should be trying to raise as much money as you can at each funding round provided you know you're not raising whatever 10 million on a 20 million dollar post and losing 50 of your business but anything that's kind of diluting you 20 or under i'll just take as much money as you can at each phase because you're gonna need it your your estimates are always um are always wrong it's hard to raise capital and sometimes you find a pocket where your growth is good and your business is attractive, take it because you may hit a difficult period that you need to survive and get out the other side of.

29:36But, you know, when you need the cash, whenever you need cash, it's very difficult to raise it. Put it that way. We always tried to make sure we had at least 12 months runway all the time, which is counter what the advice you're given. Because you get told to sort of raise and then, you know, to minimize dilution, you go right down to the edge of your fundraise and then raise again. But you have very little leverage with investors when you have no money in the bank. Okay, that makes sense. If you can genuinely walk away and say, look, here's the terms I think are fair. And if you don't like this, then we'll just keep building our business and you miss out on the opportunity.