Fame Sucks, When To Keep That Funding Announcement Quiet

0:00What other publication has jumped on the food emoji train? why Mars saw an opportunity with Meals Made Easy brand Kevin's, what may have contributed to the downfall of Tattooed Chef, and when you may want to rethink that fundraising announcement.

0:26Hi everyone, I'm your host Carol Ortenberg. On the Nosh Podcast, we go inside the business of natural, organic, sustainable, and healthy food. Today, we're going to continue our campaign about why we need more and better food emojis, and then dig right into the news of the week, including sales and shutdowns. Then we'll hear from IMI co-founder Kevin Lee about his advice when it comes to discussing fundraising. Joining us today are reporters Lucas Southard. I was going to try to do the Greek hello, but I figured my pronunciation. Yasus, I heard. Yasus. Yasus? It's not the ice cream brand, Lucas.

1:06Yeah, Yasu. Well, there you go. That's my hello for today. And then also Adrian DeLuca. No pressure on your hello, Adrian. I'll keep it brief. Hi, Carol. Hello. Boring. And then we've got editor-in-chief Jeff Kleinman back from his trip to Greece. Shalom. Jeff, give us a highlight or two. What was one of the favorite things you ate? We ate a lot of squid and octopus and other cephalopods, and it was delicious. You know, a lot of gyros for days, a lot of souvlaki. really just delicious, fresh. So you're saying for two weeks you had a pita party? No, I'm not saying that. It's different than a pity party when you come back.

2:03Carol's been waiting two weeks to use that one, just so you know. When it came out of my mouth, I was like, pita doesn't really sound like pity. No, it doesn't really work. But I figured let's just go for it. Well, I missed you too, Carol. Did you have any of my personal favorite Greek dish, moussaka? I did have some moussaka at a family-owned taverna in Athens. It was fantastic. And there's also some surprisingly good Italian food, good pizza. I think Italian food is the sort of universal solvent when it comes to eating out in other countries. I'm not surprised by that. Yeah, I'm thinking of trips.

2:51I had really good Italian food in Argentina, actually. So yeah, I could see that. We hit a point where we were like, no more steak. You just need a break. And I, I, isn't Argentina, I mean, isn't there a strong Italian current through Argentina? Okay, fine. Just kill my example, Jeff. Well, yes. With knowledge. Yes. I killed your example with knowledge. Really missed you being here, Jeff. Have a pita party. Jeff, speaking of things you missed while you're out, uh, we chatted about emojis. How do you feel about emojis? We were kind of frustrated, or at least I was, and Adrian and Lucas indulged me, that there aren't more natural products emojis, particularly for the new newsletter.

3:36letter. I am not young enough to have emojis just sort of appear as part of my alphabet. And, you know, I, I wish I was because I think it's this incredible expanding part of the language. Strangely enough, while I was in Greece, there was a lot of kind of cuneiform writing, you know symbol writing and it's basically emojis that said we did actually discover in ancient mycenae a uh shopping list for someone who was going to pick up like grain and and i i think some some corn at the local mill which was kind of cool wait were you on like some sort of archaeological dig while you're like you said you discovered you're just like sifting through the ruins in the museum at ancient mycenae but like all of greece is like a giant dig i i mean it's one of these amazing countries where you you sort of we went into a zara and there was you know an ancient bathhouse and if you go down into the subway you see just layers of civilization so it's kind of cool yeah i thought you like tripped on something stubbed your toe picked it up and it was like you know a rock with a grocery list yeah like a old tablet with like corn scratched into it no it was a personal discovery rather than like a global discovery i guess i do have a question about like do you think i mean you probably didn't know this but like is do emojis change in different countries like does does greece have different like greek specific emojis than we do here in the states or is it Is it a universal language?

5:45I think it's more of like an Apple versus Microsoft product thing from my experiences or like Slack. I think it depends on the program you're using, less on where you're located. I will say at one point, I cannot remember what language it was. I want to say maybe Japanese. I enabled the keyboard option on my iPhone. and specifically because it wasn't emojis, but it gave you fun symbols that we don't have here. I think there was like a cat's face or something. I did do that as well at one point in time. I think specifically to get the cat face. I'm glad it's not just me. Some Instagram hack I saw somewhere.

6:29I'm glad it's you though. Adrienne, I do think you're out of luck. Nobody has a granola bag emoji. I've confirmed. I did some extensive Googling after we got off last week's episode. Adrienne also wanted a pickle emoji. Even though I don't like pickles, I just feel like for all the people that are passionate about pickles, that should be out there right now. Is there a cereal emoji and is there like an ice cream emoji or is it just one universal bowl? No, there's definitely an ice cream emoji, but I think the ice cream emoji is like an ice cream cone. Yeah, no, I know there's a cone emoji. They're not going to make an ice cream bowl emoji.

7:10I mean, you know. What about a sundae, Lucas? No, no, there is. I bet there's a sundae. There is an ice cream bowl. But that's like a glass bowl. Don't those have a specific, that's like a dish, a glass dish? It's got the little stem thing. You know, Lucas, I admire your specificity when it comes to tableware. and and i i i think we're we're dealing in different linguistic systems here you know i think we call this uh arguing for argument's sake uh in my household i i think we're calling it a podcast at this point hey i will say jeff there is a cereal bowl emoji however i'm supremely confused because it's clearly an empty bowl with a spoon in it you can like there's nothing in it through the bowl and nothing else in it so is there a cereal box no it's just a bowl with a spoon empty bowl with a spoon apparently that means cereal if i type in soup yeah i was gonna say if i type in soup you can eat a lot of things out of a bowl oh wait when you type in soup you get the same emoji so it must just be anything in a bowl snacks in a bowl wasn't that our new category for food i don't know if jeff was there uh adrian decided to recategorize the store and excuse me that was my idea that was my idea stop taking my million dollar idea you can have your coolicles but i'm doing snacks in a bowl aisle i i like that actually we thought it brought in the categories a bit got snacks that you get a bag snacks in a bowl i think it was nuts specifically that we were discussing.

8:52It's like, it's kind of a odd spot in the store. Well, getting back to emojis, this has become a really urgent problem because the New York Times launched a new campaign where you text them a vegetable or fruit emoji and they reply back with a recipe. Apparently, I tried this. I did not get a recipe back. But this is a huge issue because you're very limited. There's like cherries, tomatoes, peaches. There's no squash emoji. There's no stone fruit emoji like an apricot or a plum. Maybe you can sub in the peach emoji. I don't know. And then my favorite, there's no rhubarb emoji. These are summer core staples New York Times.

9:33You have lists on like things to do with a rhubarb. I'm not asking for a garlic scape emoji. I'm asking for an apricot. Or a pluot maybe. That's my favorite summer fruit, you know. That's a good fruit. Honestly, like I, you know, God bless the times for wanting to share the love of produce, but text us an emoji and we'll text you a recipe. I mean, let's say Carol's punched a lot of holes through it already. Can I text a little headshot of Melissa Clark to get like only her recipes sent back to me? That's a good idea too, actually. Yeah. New York Times, if you're listening, set us up with some some of your chef emojis well for those of you who don't want to cook up a new york times dish there were lots of pre-made meal news this week lucas tell us what mars was up to uh well mars uh has decided to acquire kevin's natural foods um for an undisclosed amount um the news came out wednesday morning and this kind of came on the back of some rumors throughout the first half of this year that Kevin's was looking to sell, or even at the beginning of the year, there was a rumor going around that they were looking to maybe do an IPO.

10:54So it's not necessarily surprising that Kevin's is being sold. I guess it's maybe somewhat surprising that it's Mars who are doing the buying, the acquiring, but Kevin still will operate as a standalone business. And it seems like not a lot's going to change on the production level for the company, especially because they own their own production facility in Modesto. So as far as we know, as far as I've been told from company representatives, things are going to be business as usual, no major staffing changes. Although they were a little coy when I asked about what's going to happen to the actual executive leadership team.

11:38I didn't get a straight answer on if Kevin McRae, the founder, along with the other leaders on the team are going to stick on or stay on as the guiding force of the brand. Advice that we've learned from watching the Miyoko's debacle is if you're going to get rid of Kevin, replace him with someone else named Kevin. A little easier here, Jeff, I think. There's probably more Kevins to pick from. there was my favorite was chef's cut although not named after the ceo amazingly replaced one bart with another bart like that's a hard one you have to go after for ceo especially these days there's not a lot of people named bart that i know of at least well we know that there are at least two and bart simpson if he was a real person but you know lucas what what's the revenue on kevin's So I asked and I didn't get a straight answer, but I did see in other reporting that the company was valued at about$800 million, which is pretty good.

12:47And they've seemed to be doing pretty well. They've expanded their line into shelf-stable sauces and both refrigerated and frozen, as well as side dishes. So they've kind of diversified the portfolio in the, I guess, like five or six years that the company has been doing this iteration. It originally launched in 2012 as a meal kit plan and then pivoted into kind of ready-made refrigerated meals in 2017. So$800 million valuation. What's the core product and what's the thrust of this brand? Well, so they're one of the few brands that kind of stake their claim on being paleo and keto friendly meals, basically.

13:36And they've kind of like rode the wave of the keto and paleo trend. Apparently, according to Axios, Kevin previously said the company was supposed to generate$190 million in revenue this year. And last year, the company had$140 million in sales, while in 2021, it had$100 million. So amazingly, in 2019, at least according to this source, it had only$8 million in sales. So certainly, quick uptake. I think they did a lot of retail growth. But to your point, Lucas, even as those dietary trends changed, they managed to keep growing sales. Well, didn't we see a lot of ready-made meals do pretty well during the pandemic?

14:27Yes, Jeff. Ready-made meals were gaining traction during the pandemic and frozen especially because people were not looking to go to the grocery store every time they need an ingredient. You could just stockpile your freezer and hopefully stay away from the store for about two weeks. Yeah, Adrienne, but not everyone benefited from that rise in sales. We also covered this week that frozen meal maker Tattooed Chef announced it's declaring Chapter 11 bankruptcy. They tried to slip that in Friday right before a holiday weekend, but I think a lot of people still picked up on that news. Their whole focus was plant-based options, but they were across a ton of categories like pizza, acai bowls, enchiladas.

15:13They just really wanted to go straight plant-based and hope that was enough to carry them through and make them stand out. It's weird the tattooed chef has been having so many problems because they have a core principle, plant-based to the brand. And I can't necessarily speak to the execution, But in Frozen, at least, it seems clear that there's some kind of organizational system for successful brands, be it lower calorie, everything from lean cuisine and healthy choice up to what we're seeing now with some of the EVOL and stuff. or it's some kind of ethnic style or you know if you're in minnesota it's pizza but the the point to it is that it's hard to sell an eating system you know kevin's which was organized around a specific kind of diet plan seems to have done pretty well tattooed chef which is also organized around a way of eating, you know, a diet plan is now, you know, bankrupt.

16:44What's the difference there when it comes to these brands success or failures? I think it's interesting, Jeff, because it comes down to just having, you know, some really core specific products that you were, you know, focused on. I think for Tattooed Chef, like they were doing plant-based, but they were also doing smoothie bowls and snacks and vegetable side dishes. And while all those things, some of them are just naturally plant-based, I just don't feel like they had enough maybe of a focus, especially for a newer brand. Things like Amy's Kitchen comes to mind where, yes, they have that organic bent in their portfolio, but they seem to focus pretty heavily on a few core groups with a broader portfolio now that they're an older company.

17:32But they've even tried some things that haven't worked out. Frozen pizza, for example, they launched during the pandemic and quickly shut that factory down and discontinued that line only two years after the fact. That was last summer. That news came out. And, you know, it seems they've focused themselves on mainly like Mexican foods or mac and cheese. Both delicious. Yep. Great choices. Gotta have the frozen mac and cheese. Everyone does. I'm a frozen mac and cheese connoisseur, so I will weigh in on that later. Annie's or Blue Box you know Oh I'm Goodles Goodles Hardcore It's too expensive We make our own Oh gosh you're so good too Alright That's like the preference But if we're ranking Mac and Jesus Blue Box all the way So yeah I think When it comes to someone like Tattooed Chef I just remember the headlines Around Expo past two Expo Wests, I think they were saying, you know, they had launched 75 or 85 new products at each show.

18:38And it just seems when you go that broad on something that's already pretty broad, like plant-based that, you know, might dilute yourself a little bit. But there's something of a sprint to have a, I guess, representative plant-based brand right now, right i mean we're seeing that with with wicked kitchen for example do you think that you know so obviously people think the consumers are there do you think it was timing for tattooed chef or was it just the brand or was it that every chef is tattooed so like it's hard to say the tattooed chef definitely could be the tattooed a tattooed chef yeah everyone got confused because all the chefs are tattooed.

19:22They were thinking it was Lucas cooking their meals. Who knows? With tattooed chef, yeah, there's a lot of plant-based. Like Amy's has been there around a while. And how many times do we get pitched, you know, mac and cheese as a plant-based mac and cheese because there's no meat in there. So it was a little hard to define themselves around that. I also got the feeling that they were trying almost to fill in the gaps in private label, which is just a hard role once retailers start adding in their own private label products. They had a lot of items they had made for specific retailers. I believe they had a pretty strong club business as well.

20:01And, you know, once you start playing that game, you know, there's only so much like cauliflower rice bowls that can stand out on shelf, especially when you've got folks like Green Giant or even retailers doing their own cauliflower rice meals. Had they started this a couple years ago, yeah, maybe they could have. Part of it also was in order to stand out in retailers and get that growth, they spent like$100 million over the last couple years to drive sales. They did a lot of in-store promos, trade promotion, things like that. And unless you can make up the revenue there, it just doesn't make sense.

20:40We saw the same thing kind of with Halo Top. They spent a ton on promotions, but if the growth doesn't match it or the repeat purchasing, you know, it's not a long-term sustainable solution. Interesting. So who did we interview this week, Carol? Well, in our featured interview, we kept with the meals sort of theme, totally coincidentally. We spoke with Kevin Lee, the co-founder of Better For You ramen brand, IMI. The soup brand just announced their$10 million raise in March. And Kevin and I sat down to talk about how they've approach their media strategy when it came to their three raises. This was a particularly interesting conversation because he had posted to Twitter after his last raise that announcing a raise sucks and he wouldn't recommend it.

21:28Well, that sounds great. I mean, was he upset because all the cousins started calling him saying you got cash now? That is exactly one of the examples he used. He says it's like when you win the lottery and then everybody calls you and suddenly wants money and you go bankrupt. Except in his case, it was suppliers who suddenly raised all their rates and he had pricing and suddenly they were like, well, we know you can pay multiple times that now. So yeah, that was a big part of it was negotiation going forward. All right. Well, this sounds great. Let's get to it. Hi, everyone. Today, I'm joined by Kevin Lee, the co-founder of IMI, a fast-growing ramen brand.

22:14Kevin, thanks so much for joining me today. Thanks so much for having me. We're going to talk about your thoughts on fundraising and working with investors. But to get started, can you tell our audience a little bit about what IMI is? Definitely. Carol, you have such a great radio host voice, by the way. Emmy is a better for you Asian American food brand started by myself and another Kevin. So we are the Kevins. Always fun times. Kevin squared, I think I've heard you referred to. Yeah. And we also have these fun ads where we pop in a frame and we're like, hey, we're the Kevins. And it's become a running joke within the team.

22:51But my co-founder and I started this because we both grew up in Asian food families and we've grown older. We've seen our direct families suffer through chronic health conditions like diabetes and high blood pressure. And we decided to go to the drawing board and say, well, can we reinvent a lot of these childhood Asian American foods that we grew up eating, but with added nutrition and higher quality ingredients? And so the first concept that we came to was looking at instant ramen, which is a$52 billion industry dominated by the same Asian conglomerates that have really dominated this space in the past 60 years, and they haven't changed their formulas.

23:30So we set out to create EMI, and that's what we are today. We are a Better For You instant ramen that is the world's first low-carb, high-protein, and fully plant-based instant ramen. So you had this bold idea. How did you go about getting the company funded? And what does your fundraising history kind of look like to date? Yeah, it's a funny story. I think some people look at my background. I used to work in venture capital and also had a long 10-year career in tech before starting Emmy with my co-founder. And they generally assume like, oh, well, you guys came from the tech and venture industry.

24:07You probably did all this planning and worked backwards, all that stuff. And truth is, we didn't. We actually sat in my living room and we said, well, can we bootstrap this? Let's try to bootstrap this, which is kind of the ironic thing that you speak to any VC who tries to start a business, they'll actually try to avoid venture capital most of the times. It's kind of like how Mark Zuckerberg refuses to show his children's faces on social media. It's kind of weird when you think about it a little bit too much. But I think why we had to fundraise really was, I think it was like eight months into the company, We had locked down a co-packer, started to talk to them about what a minimum order quantity would look like.

24:42And we realized that in the instant ramen industry, to produce the noodles and the seasoning, you're looking at a six-figure MOQ to start. For anyone who doesn't know what that means, it's just the minimum order quantity you have to purchase for each production run from your manufacturer. And unlike a protein bar or other more well-known food products with many manufacturers, that's just not the case in our industry. So we quickly realized there was no way to bootstrap this and we had to go raise our first pre-seed run. I remember when you first launched the brand, I think I got like this clear package of vacuum sealed noodles that were like benchtop samples, like hadn't found a co-packer yet.

25:24Yeah, those were rough times. Carol, I remember you were actually in our private community since the beginning where we were just building in public there. And yeah, the first version of our product was not great. We will admit that was just a really hard time trying to find any kind of manufacturer in the US who knew how to make any kind of instant ramen. And the first one, truthfully, just they hadn't done it before. And we kind of had to go back out overseas over time. But I digress. So back to fundraising. We set out to raise our first pre-seed round. Initially had just set our sights on a smaller amount.

25:57I think at the time we were thinking$500 ,000. We just really didn't know what was possible in the industry. And Carol and I were talking a little bit earlier about this, but I think my co-founder and I just truly didn't know our worth back then. We had a working prototype. We had actually spent close to a year and a half on R &D, even while we were just like working in our full-time jobs. We had this very novel product with completely different value props. But when we went out to raise money, we just weren't confident in ourselves. And so we took a much lower valuation than we would have liked.

26:29Luckily, at the time, there just was enough interest where we kept being able to increase the total raise amount. So we went from 500 to 750K to a million. And then eventually, we ended up closing with 1.3 million as our first pre-seed round. And the funny thing looking back, and of course, this is hindsight 2020, is we always say, oh gosh, we raised way too much because by the time we raised our seed round, we still had over half of the pre-seed round in the bank. And so you're looking at a lot of excess dilution, especially in those earliest stages where your valuation is lower. So to date, we have raised close to$15 million, and that's across the pre-seed, seed, and our Series A rounds.

27:12So obviously, the business is in a very different place now. But I would say for me and my co-founder, probably a little, if not a lot more than we would have liked to raise. But again, we know the constraints we had to deal with in a very different kind of food product category. During COVID, no less. During COVID, yes. Fun times as well. We're going to talk about the media strategy around fundraising. When you did those earlier raises, did you announce them? Did you make it part of your marketing play when you were talking to media? Our pre-seed round, we did not. That was actually a very deliberate decision.

27:48I think one thing I had seen from the venture industry was that a lot of companies who do raise, even if they do eventually end up announcing their fundraise announcement, it's usually at least a year, year and a half out. There's a couple of reasons for that. You generally don't want to shine a spotlight on your fledging startup when there are plenty of incumbents out there who would love to eat your lunch and can probably build your product in a couple of months. No pun intended, right? Yeah, exactly. There's also obviously the risk of inviting new entrants into the industry who might see the funding announcements and, you know, try to learn from you, maybe spin, you know, a slightly different value prop and then raise that way.

28:33And I think the last thing is, it's really just a distraction, you know, fundraising cycles will take time, you have to work with great PR firms like Dream Day, shout out to our firm, Dream Day. But there are also just, I think there's, apart from working with the PR firms, you have to then go on this entire press cycle, it's just really distracting for I think the core team, the founders. It's not necessarily going to add anything in the early stages. And so we chose not to announce our pre-seed round. I think you bring up a great point about having to engage in that media cycle, because there are also a lot of brands that put that news out there and aren't prepared to do any media or how to handle it.

29:18And from my side of the table, it's always funny when you get, hey, we raised, you know x amount of money oh we don't have any time to talk about it we're not giving any interviews kind of well why did you put the announcement out there then and sometimes you know sometimes i think it's to drum up interest for the next round so i i completely understand it but like you said at least from the journalist point of view you know you kind of have to have a plan there definitely you didn't announce the pre-seed round what about the seed round then Yeah, it was an interesting decision. We ultimately did decide to announce the seed round.

29:56And what's funny is we actually ended up combining the seed and pre-seed amounts. And actually, we had to do that because a lot of journalists in the industry would not write about our seed round unless the dollar figure was above a certain amount. I guess at the time, the industry was just being inundated with press announcements. It was a better time in the capital environments. And it just seemed like every day there were multiple fundraising announcements. So we announced that round for a couple of reasons. One was we were very fortunate at that time to start bringing in a few celebrity investors, musicians, athletes, so on and so forth.

30:33And one thing we've realized in the food and beverage space, unlike the tech space where we came before is there's really no defensible IP, you know, unless you're creating some sort of novel manufacturing process that you can patent, even then really, do you really want to patent and reveal that patent versus keeping it a trade secret? So if you don't have defensible IP, and you know, yes, you can talk about things like brand and economies of scale or not, I don't think those are truly defensible over a long period of time. And so what we realized was the only way to create some semblance of defensibility was how can you, I think this is important for any founders, like how can you make your food product become part of the mainstream narrative and mainstream conversation as quickly as possible to a point where if anyone is talking about your food product, like ramen, they are talking about IMI.

31:25And one way to do that is to broadcast the fact that you have these celebrities who already have large followings behind the brand. Now, Now, it's funny I say that because I think we've seen so many instances where that can backfire. Obviously, today, influencer marketing is much harder. People are just not as trusting of these influencer and celebrity recommendations. In fact, I have some friends where if they see a celebrity-endorsed brand, they run the opposite direction. So yes, there are going to be instances where this is going to backfire. I think it wasn't just the dollar amount when you guys announced your raise.

32:05There was also a lot of, I remember you guys being billed as like the keto ramen and then plant-based. And so when you hit a lot of buzzwords, sometimes you need a little extra to gain attention, I think. Yeah. And it's also hilarious because we actually spent those two plus years of R &D just trying to work on this low carb piece of the brand, because that's the most important thing for diabetics is you don't want to raise the blood sugar, all that stuff. And when we announced, you know, people were just like, I don't care about any of your value props, I'm just gonna announce what's most relevant to me.