Lunr Capital

0:00Jackie Bae:Welcome to the Emerging Brands podcast. Sharing the stories behind brands you'll want to shop next. I'm your host, Kelly Bennett. I am a New York City-based brand strategist for CPG Food and Beverage Brands. In each episode, I'll take you behind the scenes of founders that are building better-for-you products and bringing them to market. it. Also, I talk to brand builders, retailers, industry experts, and tastemakers who help bring those cool products to your shopping cart. You will hear stories of real-life founders, their launch strategies, and practical advice you could use to grow your own brand or simply discover what's next on shelf.

0:42Jackie Bae:And the best part is you could shop all the brands featured on the show. This podcast is brought to you by Glimpse. Glimpse is an AI powered deduction management tool that disputes and recovers invalid deductions, winning brands, thousands of dollars and hundreds of hours back to founders so that they can focus on what really matters most. If you're a brand selling and retail, go to tryglimpse.com backslash trial for 30 days free and let them know I sent you. Now let's dive into the new episode. Hi everyone. Welcome back to a new episode of Emerging Brands Podcast with Kelly Bennett. This podcast is really for founders in the early emerging days.

1:33Jackie Bae:Either you're starting to build your brand or you're thinking about a very cool product idea you want to bring to market. And I bring on a lot of founders so that you could hear stories. Though I love bringing on industry experts who are critical of making an emerging brand successful. So today I have Jackie Bay. She is the director of client success and Sam Stutzman, the VP of Business Development at Lunar Capital. And I'm so happy to have you both on the podcast today. Yay! We are too.

2:12Sam Stutzman:We're excited to be here.

2:13Jackie Bae:Yes. So I connected with Lunar Capital and I met you both in person at Expo West. You both attended the Ladies Lounge that I co-hosted and it was so great meeting you both in person. And I genuinely got that feeling that you both love champion emerging brands and being in CPG. And so I'm really looking forward to hearing more behind the scenes of Lunar Capital and how you all work with emerging brands. So Jackie, if I could start with you, for someone who is not familiar yet with Lunar Capital, can you explain what exactly Lunar Capital is and how the basic structure of it works. Yes, exactly.

3:01Sam Stutzman:Happy to. So we're both from Lunar Capital and Lunar provides non-dilutive inventory financing for emerging consumer brands as they're scaling into retail. And non-dilutive meaning we don't take any ownership or equity in the company and then inventory financing meeting will come in and help you with your production costs. So we exist for the moment when a founder has incredible retail opportunities at Target, Walmart, Costco, natural grocery banners, Sephora, et cetera. But at that point, when you're maybe one or two years in business, that cashflow and all the demands become, you know, demanding and it becomes a bottleneck.

3:48Sam Stutzman:Your manufacturers may want you to put a deposit to start production and then your retailer partners are going to pay you net 60. So we can come in for that bridge timeframe so that brands can go say yes to all these incredible opportunities and you don't have to give up ownership of your company and maybe equity is on the table for you, but maybe that's not how you wanna spend those equity dollars. And what's great in terms of being financing partners, a lot of our team is ex-retail or operators or founders in past lives. So we know exactly what you're going through, those timelines, the communication, what's actually happening so that we can be a better partner to these brands.

4:35Jackie Bae:Thank you for breaking that down. Because again, when you start in this industry and you don't come from CPG, there's so many different terms and ways of saying things in the industry. So thank you for breaking that down of what exactly non-dilutive capital means and exactly how it goes to inventory. so essentially for someone who's super brand new it's say for example you're a year or two in business you get a purchase order from target you're like this is a major moment this is going to help me take off but you don't necessarily have the cash to put that into inventory and wait to get paid like you're in that awkward in-between stage and that's essentially where lunar capital comes in.

5:25Exactly.

5:26Sam Stutzman:And everyone wants the next cool best thing. And there's always new functions, ingredients, flavors. So this cycle is always happening. You know, emerging brands arrive, retailers want them, and the cycle flows.

5:43Jackie Bae:Well said. And I think also just hearing that for an emerging brand founder of like, Like this is always something similar to fashion, right? There's always something new. There's always something cool that retailers want and supporting that growth to getting it into larger retailers. So Sam, your side is business development, working with the emerging brands that could be good fits for Lunar Capital. And I would love to hear your insight of what you're looking for in a brand and in a business. because it's definitely still a two-way street, right? You need to make sure your ducks are in a row and that you are prepared for this next stage of growth.

6:29Jackie Bae:So I would love to hear what you're looking for from brands that could be a potential fit.

6:35Sam Stutzman:Yeah, definitely. So like Jackie mentioned, we partner with brands usually right when they're entering or expanding in retail for the first time. So we're typically looking for brands who are selling D2C or on Amazon, maybe in a specialty retailer or regional grocery. And they're starting to get a lot of momentum. Maybe they're doing a few million dollars in sales, but they bootstrapped it so far. And they're still looking for partners as they continue to grow into the targets and Walmarts of the world. Because even if you're having success in pretty large channels like Amazon, Sprouts, Albertsons, Target, Walmart, Costco is a whole new beast when it comes to funding.

7:22Sam Stutzman:And it's not always easy to raise a large round of venture capital. And like Jackie mentioned, you don't always want to use those funds just for purchase orders. you want to use them for people and marketing and infrastructure. So that's typically what we would look for is are those type of brands usually around that amount of sales. And we come in and fund production directly. So we actually pay suppliers and then are paid back when the retailer pays, which pretty much takes the whole cash outlay of building inventory off of these founders plates because they're going to have so many demands from these mass retailers that they don't need to worry about how they're going to fund that.

8:05Sam Stutzman:They can come to Lunar. They can look to us for our industry expertise. Jackie and I both worked at Target for many years on the supply chain side, the buying side, the media side. So when these founders only have a few people on their team sometimes, sometimes it's a couple, it's a husband and wife, it's a family. We can really be an extension and provide a ton of value just beyond the capital that we provide. So we're very hands-on with the founders, helping them with forecasting, cashflow planning, retail growth initiatives, really anything that we can help with to be an extension of their team.

8:43Jackie Bae:Incredible. I love that you both come from Target as well. So you understand the other side of the table really well. And what an advantage that is for an emerging brand founder who's speaking to, you know, one of the dream retailers that's probably on their brand vision board, right? But they're in, again, that awkward in between and they're like, okay, this sounds amazing, but how do I actually make this a successful next step? And the fact that you both come from that corporate CPG world and understand what that really means and helping an emerging brand founder understand that I think is such a great benefit of connecting those dots because it's exciting, but it's also daunting, right, to be taking that next step.

9:36Jackie Bae:Yes.

9:37Sam Stutzman:And I think Sam and I both have like brands that come to mind when we think about our time at Target that we love launching and watching them grow and figuring out how to bring something like an emerging brand into the space for the first time to disrupt it, which, you know, aligns with our passion for now being on this side to help make that, make that dream come true.

10:01Jackie Bae:So cool. Sam, what was the shift that you wanted to go from, say, like the corporate side to now Lunar Capital and supporting on the growth side?

10:13Sam Stutzman:Yeah, I've had a really fun career path. So I started at Target on the inventory planning side and Kids Apparel on their Cat and Jack brand, learning a ton about writing purchase orders, allocating to stores, forecasting, all of that. And I ultimately wanted to be a buyer. So I moved over to the toys team, actually, which is adjacent to Kids Apparel, but a very different business model. And I worked with a ton of emerging brands in the toy space. And that was a huge passion of mine to help the smaller brands be able to compete with the larger behemoths of the world, which there's a ton in the toy industry.

10:50Sam Stutzman:So that was really fun. And I always loved the brand partnership side as well. So I went over to Target's media network to work with those same brands to help them grow their business from a marketing standpoint to get that in my background. and then also went over to Moonbug Entertainment to work with brands again in a higher level of marketing, really getting the whole funnel all the way down from writing purchase orders to helping grow a brand at the top level. And then Lunar, as it continues to grow in the finance space, was another thing I wanted to add to my portfolio and tie all my experience back together from a consultative perspective to help these brands grow and also provide something critical like capital at the key stage when they need it the most.

11:36Sam Stutzman:So I've had a bit of a windy path, but I think it's led me to a really cool area where I can use all my expertise to help our clients grow.

11:45Jackie Bae:And what a great feeling too. And I've been reflecting on my own career of seeing how all like, quote unquote, the random jumps and leaps and experimenting of like, oh, wait, That actually all makes sense now. Jackie, what was that path like for you as well?

12:05Sam Stutzman:Yeah. So similar started at Target was in inventory planning in kitchen. And then I also supported big company events and inventory management in the background. So that would be like you're back to college, Black Friday, back to school, and making sure that everything went seamlessly for those short timeframes. And then the last team I was on at Target was the baby team, specifically in feeding and toiletries. And what I found is typically finding and working with the brands that were started by moms who lived through the experience of changing a diaper at 3 a.m., feeding a baby at 4 a.m. those brands that actually got it and made solutions were my favorite ones to work with.

12:54Sam Stutzman:So I was looking for a way to be working with like the earlier brands and helping them out in that capacity. And so when I was connected to Lunar Capital, I was like, this is the Venn diagram of all my favorite things together. You know, I'm consumer obsessed. I love understanding what works and happens at retail. But to then layer on understanding how to finance your business and what it can look like to do it effectively or to utilize a partner like us has been an incredible journey over the last four years, because there are like some really incredible founders who've been able to utilize Lunar to a certain point, sometimes in delay of raising or in conjunction with raising equity.

13:43Sam Stutzman:it's been really incredible watching some of our brands over the last couple of years where they started and how they've utilized us to get to the points they are today it's when when you stack us correctly or you bring us in at the right time I just think that it is such an unlock for your

14:00Jackie Bae:growth absolutely so for Sam when you were saying what you're looking for from a brand they have some D2C business possibly, some Amazon, some specialty, but they're at that relatively speaking 1 million mark. Do you have any suggestions for brands to help them even get to that stage so that they are more competitive in the sense of wanting to be worked with say partners like Lunar or anything else that could just help them have like that next edge of, okay, you've done this work already. This is what we're looking for in a brand, how you're making decisions, how you're building your sales. Any insight there of just like better preparing even for this next step?

14:54Sam Stutzman:Yeah, definitely. I think one really cool thing about Lunar is we're not venture capital, So we're not taking equity, but we treat our clients like a portfolio. So we think of it as an investment in these brands because we believe they're going to be successful. And that also means we don't have extremely rigid parameters. We have some non-negotiables, but if a brand is below that million dollar mark, but they have a ton of traction in retail and we really believe in the brands, we're able to back them. But I would say beyond that, having your margin profile in a really good spot from the beginning, which isn't always very easy, but at least making sure that is a top priority will help you unlock enough cash so you can responsibly grow before you need to bring in a partner like Lunar.

15:46Sam Stutzman:Without that on hand, we often see brands who are taking out various lines of credit with various different partners without understanding the term. So having your margin profiles and understanding them, I think a lot of the time, sometimes brands aren't as focused on it. And it might be secondary to just growing retail sales as fast as they can. But when a brand comes to us with a relatively clean debt stack and a really good margin profile, even if they're a little bit smaller than a client we typically work with, it's a lot easier for us to say yes and take a bet on them to help them grow. and the other good thing is if a brand comes to us and they're not quite ready for working with Lunar we have a huge network of other partners who might be able to assist them whether that's you know a fractional CFO to help them get their financials in a better spot a fractional COO if they need help with margins and manufacturing or even other financing partners that work with smaller brands than Lunar does so we really want to be a partner to the ecosystem even if If someone ends up not working with us, we're really a connector across the industry.

16:58Jackie Bae:I love that you said that. And something else to that point of having things best organized for this next stage, as far as just cash in the bank. So if, say, a brand has some cash on hand, and they maybe could, you know, really stretch it in order to buy that inventory. Would you rather see brands have some cash in reserve and be more strategic with how they are then purchasing inventory so that they have, I don't want to say a better cushion, but like they're just better prepared to invest in that further growth. Like I would love if you could give a little bit more granular insight there, Because again, it's like such a give and take and chicken and egg game that so many emerging brands feel stuck in.

17:52Jackie Bae:They're like, I have some cash, but I need to buy inventory, but I want to make sure I have cash on hand. Right. So if you could give any insight there, I think that would be so helpful.

18:04Sam Stutzman:It's a total circular reference. And I can understand the frustration that this might gain when I say this out loud. but lenders love to give people with money money. Right. So like having cash in the bank is probably the best time to start exploring or looking for lending options, regardless of what that form could be. And so, yeah, working with Lunar, having cash in the bank is obviously a positive for us. We would love to know that there's a little bit of a backstop in the case that things at retail aren't going according to plan. Right. And the ability to eventually find ways to inject cash into the business, because I always say this, Lunar is really just one piece of the puzzle, one piece of the pie.

18:55Sam Stutzman:We can address one of the more like lengthy cash intensive parts of your business, which is building inventory. But that's just one part of many. You need to understand, like everyone needs to know where to find your product and how it works. And you need to make sure that you're going to be able to fund promotions or any other things that your retail partner may want you to do. I know that quite often in grocery, free fill is a really expensive entry point where you just have to provide a free case of inventory per location that you're in. And so we can address one part, but I think we're not the all inclusive solution.

19:37Sam Stutzman:So that's where external capital or, you know, other your your own like cash makes sense.

19:45Jackie Bae:That is super helpful. And that goes back to having good margins as soon as you can, because I think that also trips up people of, oh, I just I'll figure the margins out later and I'm just going to keep expanding. and you're in this wheel, right? Of growing, growing, growing and always needing cash because you're not even covering the cost of making one product when you hit. Yeah, Sam, what were you going to say?

20:13Sam Stutzman:I think a lot of brands will, they'll get their big round of venture capital and immediately say, now I can bundle the inventory to grow all the retailers that I have demand from. And that's another exact moment where Lunar can come in so that you do have cash in your bank account and you're not spending all of that. And you can finance the inventory so that you'll have access to more financing down the line. I talked to a lot of founders in the business development side and it kind of clicks with them that you don't just need to raise venture capital so that you can fund your expansion from an inventory standpoint.

20:48Sam Stutzman:Having that in your bank account and using it towards marketing and other factors and then using a company like Lunar to finance your inventory is just going to be a really strategic capital move that not a lot of founders have necessarily thought about because they're moving a million miles an hour.

21:05Jackie Bae:Sure, and that goes to the original ethos of Lunar Capital is that it's not diluting your equity in the business. And I think that also trips up people. They're like, oh, I just need to raise money, but you really need to think about what you're giving up for that money.

21:24Sam Stutzman:understand that. A lot of emerging brands are small teams and your founder is the chief supply chain officer, chief product officer, CFO. And so, yeah, taking a step back and figuring out how can we slow down for a second and make sure we are understanding where our cash crunches are, what the solution should be.

21:48Jackie Bae:Well said. And Jackie, just to parlay off of that, What piece of advice would you share with someone like the clients that I work with? They're super early on. They have a product idea. We are drilling down their brand, their product, their buyer, their buzz, that first year in retail. What advice would you tell them of, again, creating a really solid foundation so that as they move to that next stage of regional and national retail, they are preparing themselves in a really strategic and helpful way just for their own sanity as they grow this brand. But any advice you would share with them in these very early days?