The Fusion of Innovation and Leadership with YuChiang Cheng

0:01Hello, I'm your host, Mike Gelb, and this is The Consumer VC, where we discuss the intersection of venture capital and consumer innovation. This show is brought to you by Propeller Industries, the leading strategic finance and accounting partner for venture-stage companies. If you're enjoying the show, please subscribe on YouTube or whichever platform that you're listening on. And if you want the full experience, sign up to the newsletter at theconsumervc.com. I share a weekly recap of all the consumer deals that are happening, and you'll be the first to know when a new episode drops. All content episodes are for informational and entertainment purposes only and is not investment advice our guest today is yusheng chang or as he also goes by yc yc is a ceo of hero bread hero bread produces delicious real bread with benefits zero grams of net carbs zero grams of sugar and it's only 45 calories per place previously he was previously he founded world previously he founded world golf tour which was acquired by Topgolf.

1:04And after the acquisition, he became the president of Topgolf Media. We discussed his approach to founding companies and also the differences of working with tech companies and CPG companies, why he shifted from being a founder to joining companies early stage, his overall philosophy of businesses he loves and why he loves them, and why he joined Zero Bread. Also, their transition from selling into subway restaurants to retail. So without further ado, here's YC.

1:39YC, thanks so much for joining me here today. And I know we've been thinking about doing this for a while, and I'm so happy we found the time, especially the new year. How are you doing? Hey, I'm doing great. Welcome to the new year and a longtime listener. So happy to be here. Gosh, well, thanks so much. Thanks so much for listening. What I found really interesting about your career, especially when we've been talking, is you have a lot of experience building media businesses, software businesses, sports technology businesses, and now also with HeroBread, CPG. What's the through line when it comes to what type of company you want to be a part of, you want to build?

2:23Yeah, I think at the very core of it is that I'm just a really curious person who wants to learn a lot. So, you know, I want to understand how it's to sit in different seats and how things work and different parts of industries and things like that. But so beyond learning, it's just I love interacting with consumers and I love solving their problems and I love delighting them with solutions. And, you know, all those businesses are directly interacting with consumers in those different positions. And I just continue to learn there and love how it's changed in the last 30 some years. And for you, when does it make sense?

3:07Because I know that you are obviously a serial entrepreneur. You've started many businesses. You've also joined businesses as well. When does it make sense in your mind when you look back through your career thus far? when it actually makes sense to actually start your own company versus joining a company that you're already maybe a user or particularly fond of what they're building? Yeah. Well, I think a lot of entrepreneurs fall in love with the inception. And I think there's a lot of mythology around that. And I would love to be the person who comes up with the idea and all that stuff. But what I've learned over time is that there's a lot of great ideas.

3:47And what's really lacking is sort of the alignment of execution, the team and capital. And so I've more transitioned away from, you know, dreaming up things myself and looking around the world and seeing what's available, what is under managed, underfunded. Because basically what I've learned, at least, is every great idea and every problem I'm trying to solve, someone's already trying to do it already. and they just may not have the right team execution or capital. And if it's a great founder, I'd love to help them. So is that kind of a transition from earlier in your career up until now? In that earlier in your career, you were much more about ideating and building from the ground up.

4:37And now it's more so, okay, I'm going to let someone else or, because you say there's so many different ideas out there. And obviously, great idea is I'm going to let someone else kind of build it from that standpoint and be the founder. I want to come in and actually help execute and scale that business. Yeah, yeah. And I love going even earlier, the better. You know, so a lot of the opportunities that I've done and continue to nurture now is sometimes just the founder by themselves. There's no one else. They haven't done anything really yet except for their own. but you know they they need capital they need a team you know they need to take it to the next sort of grade so yeah I just love partnering with people and you know something that I've grown a huge passion around other than just this consumer experience in building products is I went through a lot of hard difficult lessons starting the companies I have and being parts of teams.

5:42And I just really felt like founders had an asymmetrical amount of knowledge compared to the investors. And that I wish that investors or someone held my hand as an entrepreneur, like decoded a bunch of stuff and shared a bunch of information. I felt like I could have been much better if I had that kind of guidance. And so now I'm just really passionate about bridging that gap of information and knowledge and execution between what are investors and what are people who see hundreds of thousands of companies all the time versus what a founder and that energy and that passion and that execution is.

6:19And how do you marry the two together and try to help the founder be as successful as possible? What was the opportunity you saw back in the day building World Golf Tour when it started? Yeah. Yeah, well, I've been very lucky in having the ability to join a lot of startups and great mentors and people who are running companies. And previously to World Golf Tour, I was part of WagerWorks where that company and one of its founders, Andrew Paschal, they were solving a huge problem of, you know, how do you bring cash gaming legally, you know, around the world? and in that business you know we we primarily operated out of the UK where it was legal and regulated and we built these experiences that were very very compelling like slot games online poker even some sports betting modules and things like that with the biggest brands in the UK like Virgin Games and B-Sky B and Paddy Power and all those folks.

7:29And what I learned there and what I also learned at UBet previously to that was just compelling content always kind of wins because you're providing something for the consumer. And I feel that same way about food. I feel that same way about digital experiences. It's just you're making compelling content that people really want and bringing value to the consumer. And what I learned at WagerWorks was that, you know, massively multiplayer games that allowed people to play digitally online with other people around the world or connect like a father and son, you know, across the country, that these are very compelling experiences and could not be easily replicated.

8:09And I felt like they're evergreening that you're always going to want to kind of play with people that you can't physically have time to do. So after trying to go IPO in the UK with Wageworks and then ultimately getting bought by IGT in that process, I wanted to go start my own business and take that theory that, hey, if I can create an online compelling experience with massively multiplayers connecting people, then we can win. And, you know, I looked around and sports content was kind of like the golden egg at the time. And I still feel like sports is a really big consumer proposition. And I felt like Electronic Arts was asleep at the wheel with Tiger Woods franchise.

8:58And they weren't going on mobile and they weren't going massively multiplayer. So there was a window of opportunity there to create online experience that was legal and could be in the U.S. and didn't have all the regulatory friction that WagerWorks had. Were you a golf fan? I love golf. I would say that I'm mostly somebody who just loves a good walk outside and play with friends. But yeah, I find the game very, very challenging. So it takes a lot of time. Same here, same here, same here. What is hard about building a sports content business or sports gaming business? yeah i think gaming in itself is really hard and i know you've interviewed some people in it i love it because i i like to think and i'm totally biased is that it's kind of like the best minds it's like the most innovative most critical thinkers because you're you have to be multi-disciplined um and it's a highly competitive place because everyone wants to be involved in it It's fun.

10:03It tends to draw a lot of really good talent. And the user acquisition and go to market and everything is very hard and very difficult. And, you know, this was a time where, you know, Facebook was just starting. The Apple App Store was just starting. So the whole performance marketing, you know, CAC to LTV, you know, had some of the best minds working on it. And so that's the challenge there is that you're just competing against a lot of money and a lot of really smart people. And the technology is not simple. So it's a great rubric of problems to solve, which gets me excited. Do you find that competing against the legacy in gaming was more difficult than, for example, competing against legacy CBG companies?

10:58I do. I think that both technology and gaming, the legacy incumbents, are open more to change. Though, I wouldn't say a lot more. They just are slightly more. But yet I think they have access to talent that I think traditional CPG does not right now, but I see that changing pretty rapidly, actually. So I think my theory is that technology is slowly becoming more and more commoditized through AI. Like at the end of the day, some AI program is going to be able to write code better than any human can. So where human intellectual capital will go to and flow towards is things that will help humans more and that only humans can do.

11:55And health and wellness and food and CPG, I think, are at the heart of that transition and that more and more brainpower will move towards that direction. So do you think on the gaming side, due to AI, do you think that we're going to see a lot smaller teams be able to produce a lot more output when it comes to innovative games? Yeah, we're already seeing that. And you see that in general tech, Google and Amazon, Facebook, you see them all decreasing their headcount and number of engineers and project managers and everything because they are the canary in the coal mine about automating computer assisting of work that has to be done.

12:40On the AI, I know that we're taking a slight detour, but on the AI side, when it comes to gaming, do you see a world where due to AI and you're not actually going to have to then presumably or theoretically hire as many folks? and also typically quite expensive salaries, right? With software engineer, if you don't have to actually hire as many of those types of folks, which I think a lot of the investment dollars goes towards, do you think that we're going to see a plethora of gaming companies that maybe aren't venture-backed or don't need to be venture-backed actually come into the world and be successful?

13:24Yeah, I think so. Yeah, I think so. I think so. So I think due to the tools platforms and AI is included in those tools. And by the way, the tools have been around for a long time. They've, you know, everything from how transformative Unity as a platform has been to Turbine and all the engines. All of that has enabled smaller and smaller teams to be able to execute great titles. um i i do believe that the creativity though in the vision and what evokes emotion and loyalty within a game um that still needs human guidance and that that won't be solved for a long time and do you think that gaming companies in the world of ai do you think that they need their own lm or uh or their own or um or their own databases or or do you think that that it's that they don't or don't need to be maybe as capital intensive.

14:23Yeah, I think that we're still in the first inning, right? So you need more specialized prompting and databases and add data to work against. But, you know, I think, I don't know. I think it's just a matter of time before there's sort of like a unifying theory there. But yes. So World Golf Tour, talk to me a little bit about how it was acquired by Topgolf. What was the opportunity that you saw that it made sense to, what it makes sense to actually go through the acquisition? Did you approach Topgolf? Did Topgolf approach you? How did it all come to pass? Yeah, I think that we built a huge community, a huge game, over 14 million players worldwide.

15:20And we expanded into other genres like baseball. So we were trying and test other games. And I think we just hit a point where we said that the user acquisition is just too expensive to expand much more. And we would be much better served being part of a large organization where we can leverage resources. So we took the success and, you know, we tried to find people who we would have the best fit with to be able to leverage user acquisition, quite frankly. You know, Topgolf really came to us. You know, their chairman, Eric Anderson, I'm going to paraphrase this, but basically came and said, hey, we're the largest, you know, physical number of golf players.

16:12And you're the largest digital number of golf players. There's got to be something we can do here together. And I think between the lines, Eric and Topgolf, you know, really had strong aspirations to be much more than just a physical venue business. And, you know, they're true believers in digital innovation and building a brand and connecting with all of their fans and patrons, you know, more than just at the venue itself. And so that was really the mandate of the acquisition is buy WGT, build the digital assets, and place YC in a position where he can drive innovation and position this company in a way where we're more than just serving burgers, fries, and hitting golf balls.

17:09And I think we largely accomplished that. that's that's awesome i mean yeah makes makes all sense on the acquisition front in terms of the synergies from you all having 14 million players worldwide digitally and then of course top golf having being the largest i guess real golf kind of um organization um in an in an entertainment setting not that golf normal golf isn't it isn't entertaining on its own but i'm a I'm terrible at golf, I'll be honest with you, but I love Topgolf. Every time I go, I just think it's great. I'm the worst player on hitting, but I think it's so, so cool. But how did that come to pass post-acquisition?

17:53And now you're part of Topgolf. How did that mending happen between the digital world and utilizing the 14 million players that you all had and as well as Topgolf's, obviously their real estate, all the various locations and their whole business. How did the two kind of combine together? Yeah. Well, I think it was a really sticky and could have been potentially a very difficult situation, right? You have myself and my team come in, placed in a position of large influence, and there's established team there that is really about, you know, food and beverage and logistics of physical business. And I think the success story there, and, you know, maybe Callaway and Topgolf can take note of, you know, how they proceed in the future was really the alignment of the whole executive team on, you know, what makes Topgolf great and what does winning look like?

18:58And that is about, you know, driving a really valuable consumer experience that merges digital and physical together. And the whole team was bought in on that. So, you know, the other presidents of Topgolf at the time who were in charge of the physical business really bought into that vision that we will be worth more and we will drive better consumer value if we embrace innovation and technology. And so, you know, you know, I was placed in a position where I had a large amount of influence over the entire customer experience at Topgolf, everything from the menu to the marketing and a lot of the physical assets, the incorporation of the technology.

19:42So like you can play Angry Birds there and they just continued with releasing other IP games recently and building the digital experience and really, you know, credit to all the people at Topgolf, like putting up with me and my ideas and, and about like, you know, doing reservations and using a digital app to book it instead and modernizing the event planning experience and stuff like that. Like all of that, including, you know, improving the menu and the food and making it really something that all people could enjoy and emerging in celebrities and influencers and all that stuff. Those were all new muscles that Topgolf had to embrace with the change.

20:26We did it for five years and created a lot of value. In terms of just merging the digital and physical together, is it creating digital experiences as well in Topgolf's venues? use. Was that one of the major pushes? Yeah, yeah, for sure. So the content itself, which we call the game and the food and beverage, so is modernizing and innovating those two together and creating digital games that were more than just hit a golf ball and, you know, see how far it goes, right? Actually gamifying it, playing Angry Birds, busting things using augmented reality. So you hit a golf ball and you can look on the screen and the screen will show the ball breaking glass or whatever.

21:11But it was also largely around making Topgolf understandable, you know, and telling the story of connecting people together and building a media asset around it so that you could watch Topgolf shows and you could see celebrities and how they interact with Topgolf. And additionally, you know, expanding and putting music venues and events into Topgolf and then bringing Topgolf into sports stadiums. So, you know, you can play Topgolf Crush and hit golf balls off, you know, the top of AT &T Park or whatever. So it really was kind of 360 merging digital and physical together to give what the consumer really wants, which is entertainment, fun, bringing generations together.

21:57And having these unique experiences, um uh almost like pop-up experiences it seems uh that kind of well that that also that also drives people to top top golf and also builds the brand for for for top golf with with these experiences that's that's really cool you've been an entrepreneur and obviously you then went to a large organization with top golf you've also you've also worked at uh swift which i'm also um certainly i don't own a swift but uh certainly a fan up on the sidelines i think it's super super neat. And I love, I love bike riding. What have you learned about innovation, be the entrepreneur, doing it yourself, building from the ground up independently, or, or with a small team that, that, that goes into a larger team versus entrepreneurship and actually doing it, you know, in large organizations.

22:46How do you think about innovation in those, in those two different environments? Yeah, I think at the core of it, it's about the people. And the people, if you create the right environment and give it the right nurturing space resources, you can nurture innovation. And the beauty is, you know, on your own with a startup, there's already rules and a framework in place to allow you the freedom to do what you need to do and innovate and empower the teams. I think that's very hard in certain organizations in trying to do the entrepreneurship. Unless you have a lot of buy-in from the main powers that be within a large organization who would say, hey, no, we're going to carve out these funds, the structure, the team, and give them time and space to be empowered to do things.

23:40And this is the budget, and we're not going to take it away. And align on what the goals are. And that's what I've learned is the same thing as a startup, same thing within a big company. if you can align on what the goals are, right? If it's just say, hey, we need to cannibalize ourselves. We need to show, you know, 10, 20 % growth year over year within this category that's been stagnant. And if you can agree on that and hold true to it and not be afraid, right? It takes a ton of courage, right? If you're the CEO of a billion dollar company and you have innovative skunk works going on that's chewing up 50 million, 100 million in capital a year, it's just like investing in VC or startups.

24:22It's up and down, right? You're going to have good times and bad times. And if you're going to knee-jerk reaction when it looks really bad, then you're going to stifle the innovation. So I think success to innovate within a big company is to establish the framework, have the alignment on what the goals are, and to protect it at all costs. I love what Eric taught me on Topgolf. He said, hey, it's not really a risk and you should have courage if you're not betting more than 10 % of the business. So that's how you can innovate. It's like you're not afraid and you're willing to stick your guns to it to know that you have to innovate or else someone else will and they're going to eat your lunch.

25:06This episode is brought to you by Propeller Industries. If you run a high growth business and you're focused on profitability, extending your runway, and improving your operational efficiency, you probably need a finance and accounting whiz that will grow with you. Well, instead of hiring someone full-time, what would be cost-effective is working with Propeller Industries. Propeller Industries is the leading strategic finance and accounting partner for venture stage companies and has partnered with over a thousand startups and high-growth businesses across consumer products, consumer tech, and enterprise.

25:37Some of the brands that they've worked with are Liquid Death, Ollie Pop, Hims, Farmer's Dog, Away, MoviePass, and Giphy. Propeller also provides specialized support for fundraising and M &A with transaction advisory services. Propeller's TA team of former investment bankers and investors can step in on more of a project basis when pursuing full-scale financing and M &A. There's a link to Propeller Industries in the show notes if you want to learn more information. After this experience, and obviously after working at Swift, you decided to become CMO of a bread company, Hero Bread. And what was that transition like going from content, software, digital businesses to a physical product in terms of selling bread?

26:30What attracted you at the opportunity of Hero Bread? Yeah, I think the seeds are really planted with talk golf, where, you know, I fell in love with physical stuff and the experience of it and how it influences the consumer, how tangible the results are. The food and menu at talk golf is a huge part of it. And I personally, I would say I'm foodie. I love eating. I love experiencing new things that way. Um, and, uh, I think the second thread there is that, you know, after Topgolf, um, you know, I really felt like, wow, the big opportunity here, um, and where the value is, is really on the investing side.

27:14Um, and, you know, I can toil away as an entrepreneur, but I really want to learn the investing side more. Um, and quite frankly, I felt like a lot of times companies didn't reach their full potential, because of the investor and board makeup and construction. And so, you know, I said, hey, why don't I go to that side bit and learn? And so, you know, even with Zwift, I was helping the founder and the investors there. I really ramped up my angel investing, you know, ultimately joined Charlie D 'Amelio and her family's office at 444 Capital. also helped some other offices like that, including Tandem Capital and a few others.

28:00So I really just wanted to see if I could help create things on the other side, on the investor side. And so one of the main theories was that health and wellness was a big trend. And so, So, you know, we were doing a lot of investing and sort of that and personalization and fell upon Hero Bread. We were brought it by an investor, a co-partner that we've worked with a lot. And they said, you got to just try this product. It's going to change bread forever. And I said, oh, you know, I've heard all these better for you things before. Whatever, there's like ollipop and soda and all this stuff. And, you know, to be very honest, most of the time I feel like all the products under deliver over promise.

28:50And there's no way I would really eat it unless, you know, even if it like could save my life. I'm not sure I'd eat some of these products because they just weren't tasty and delicious. So I took a bite of the Hero Bread and I was blown away. I was like, this is like one of the first better for you products that I could honestly say is a one for one replacement. and you just have to be willing to stomach a little bit more price. And so I convinced the family and the fund and I put my own money in and we participated in a round of funding there. And, you know, to win the deal, you know, I pitched what I honestly say, which is like, we're more than just money.

29:32We will help you with your business. You know, we will be muscle. And the founder took it very seriously and said, come on as our interim CMO. Uh, we just, uh, ended our relationship with Subway and, uh, you know, we, we need a reboot. Um, and so I, I, of course had to hold to my word and say, yep, I will roll up my sleeves. I'll help you as the CMO. Um, and as things progressed, uh, they just asked me more and more to get involved. And now I'm, I'm the CEO of the business and hand in hand with the founder. And, you know, we've really built an amazing journey the last two years. That's awesome.

30:11And also totally. I'm with you in terms of when I try, sometimes when I try better for your products, I'm more, sometimes I find myself more consuming them just because the nutritional facts are great or are better for you as opposed to the actual taste and actually loving, you know, the actual taste of, of the product itself, not for every product, but, uh, for, uh, for quite a few. uh so uh totally totally see you there so for hero bread from from a distribution platform it first started off subway i know there's like a lot of reports about how that's a lot of kind of interest that a lot of um even celebrities uh found out about hero bread when the founder cole called you and said hey we're pulling out a subway we need to reboot how did that come to pass?

31:01Yeah, I think that, you know, again, Hero is a product-like business. It has an amazing product, so it can garner a lot of, you know, celebrity investors. You know, that's how they got Subway in the first place. And so I think things were coming a little too easy for the founder, right? Money, distribution, things like that. And so there wasn't the discipline to how to run the business and how to, you know, operate it and, you know, what is good money and what money should you take and all that stuff. And I think it really was, you know, a moment of self-realization from Cole and, you know, plenty of urging from his investors aboard that, hey, we need to level up the business here and do a pivot.

31:45And credit to Cole to really embrace that and want to change the business and pivot from food service to controlling their own destiny with D2C first and then use those facts to drive retail adoption. And so, again, we met through a common partner that Cole and I both had. We've done business with them before. They were minority investors in Hero. They brought me on in 4-4 Capital as an investor in Hero. So yeah, I guess the rest is kind of an ongoing story right now. Well, why pivot from food service to DTC retail? Why did it make sense for the business? What's challenging about food service that it didn't make sense to look at that as the main go-to-market strategy?