271. How to Fund Growth Without Losing Control of Your CPG Brand

0:01Emily Reeves:Welcome to Startup to Scale, a podcast by FoodBevy. I'm your host, Jordan Buckner. Join me as I talk to aspiring entrepreneurs, seasoned industry experts, and everyone in between as we unlock the keys to growing from startup to scale.

0:18Emily Reeves:Every founder eventually runs into the same challenge. Growth costs money. So whether you're expanding retail distribution, increasing your inventory, funding purchase orders, or investing in marketing, capital becomes one of the most important decisions you'll make as a business owner. But not all funding is created equal. Today's guests bring two unique perspectives on the topic. Dakota has lived the realities of building and growing the CPG brand as the founder of Dog Sauce, while Emily Reeves helps brands navigate financing options and growth capital through her work as VP of Capital Solutions at Bridge.

0:52Emily Reeves:So today I really want to discuss what growth actually looks like from a founder's perspective, how capital decisions impact a business, and what founders need to understand before taking on debt. Dakota and Emily, welcome. Hey, Jordan. Really great to be here. Appreciate you taking the time.

1:06Dakota Sheets:Yeah, thank you so much, Jordan. Looking forward to it.

1:08Emily Reeves:Awesome. So Dakota, I want to start with you. I want to know a little bit more about Dog Sauce. I love the name. I would love for you to describe the product, tell us what it is, and the original vision for the business. Sure. So dog sauce is sweet potato and bone broth, gourmet sauce for dogs. The mission was always to bring something to enhance dry kibble and, you know, be a bridge between the raw dog food diets and the hard kibble market that's existing. We want to be an affordable option to just bring excitement to mealtime again. And, you know, in 2020, I set off and knew that it was going to be a long journey before we got to a moment like this.

1:39Emily Reeves:But we started off on Shopify and as an e-commerce business and just, you know, really leaning into the 2026 digital advertising space and made sure that we were growing the business with the first level of a safety net is I'd like to bring up over and over as we go through this conversation. I love that. So what did growth look like in those first few years? and I knew you started on Shopify. Did you find that like easy to grow as e-commerce is like continue to be a good channel? What does that look like? You know, I'm so grateful for the tools that we have as entrepreneurs today. I don't think that anything is super, super easy, but you know, those first couple of years are proof of concept and making sure that you can get the people around you to believe in the product at that point.

2:19Emily Reeves:You're not a brand or, you know, necessarily a business even. It's making sure that you're solidifying the vision that you have with those around you and getting proof of concept from, you know, starting to be the strangers of the world through e-commerce. And, you know, we lean heavily in creator relationships and what is kind of the frontier of marketing in 2026 and making sure that we're using the right tools. And so I wouldn't say anything's easy, but if you stick it out long enough, things will start, you know, to go your way and you will keep improving every week, which I think is, you know, the most important piece.

2:50Emily Reeves:Love that. Tell me about the kind of structure of your business between like your focus on e-commerce now versus retail. So at that point was e-commerce, you know, making sure that the awareness was there. In 2024, fast forward four years, we were able to get our first opportunity at Walmart's U.S. Open Call. And that was an incredible experience to go into a room of, you know, truly my biggest goal, getting onto a retailer like that shelves and being able to bring the same quality ingredients we're doing at a small scale. but because of minimum quantities and ordering process economies of scale, we're able to bring that to the masses.

3:28Emily Reeves:And so that was really where the shift happened from, okay, you know, we have a great product. Now, how do we produce it at scale and bring this to the public at scale? Yeah, I'm curious, was Walmart like one of your first big retailers? Were you doing some like smaller retail and doubling in that before? Yeah, we were in smaller retail, mom and pop shops, but nothing like a mass retailer like Walmart. And so they were a fantastic early and current partner. So, I mean, that's a big jump going from like e-commerce and a couple of stores to selling them Walmart. What were some of the biggest kind of cash flow or capital challenges you encountered?

4:00Emily Reeves:Yeah. You know, initially it's a dream come true when you get the POs from Walmart and it does allow you to look at that safety net a little bit different because now you're trading purchase orders for things like packaging, things like fighting for line time become easier because you know what the next six or eight weeks can look like. Now, does that mean that things are all easy from there? Absolutely not. But you have the right tools needed to move forward and execute on a large deal. I mean, that's really exciting. So for you as the business, though, like what were you kind of looking at? Was there a specific moment when you realized that kind of growth itself was becoming a financial challenge to manage?

4:37Emily Reeves:How did you think about getting the kind of capital to start fulfilling those Walmart orders? Well, I've always been a bootstrapped entrepreneur and putting everything I have into the business got me through the first, I would say, oh my goodness moment. And, you know, being able to grow into those initial 1200 stores in 2024, there's challenges there, but I pushed all my chips in and made sure we got through it. Now I would say February of this year, and I'm still in it right now, we've gone through hyperscaling and into an additional 3000 stores or 2500 stores and being able to grow at that rate caused a whole lot of new challenges.

5:14Emily Reeves:But that was the moment, I would say in February of this year, understanding I needed to bring on a bigger partner. I needed to have to give up some equity and bring somebody in or figure something to be able to accomplish these POs. So I know this is kind of a big inflection point. And having been a founder myself, I understand, right, you can look at, can I raise equity or sell equity in my business to raise money and bring cash in that way? But it's a permanent direction and can change the directory of your business as well, depending on how much you bring in. You can also look at financing options, which has costs associated with it, but ultimately results in you maintaining that ownership.

5:52Emily Reeves:How did you think about that decision between raising equity, raising financing, doing both for your dog sauce? You know, from an investor relations perspective, I'm very limited network in that realm. So I've always, you know, waited to get that PO and then had to take on high interest debt that would get me through that bridge, so to speak, to accomplish what I needed to. So what feels like an easy switch to flip as an entrepreneur growing in these moments and giving up equity feels often like that's the easiest thing to do. And, you know, really proud that we were able to get through these moments and consolidate high interest debt with Bridge.

6:29Emily Reeves:And, you know, that's what got me here. And that's what allowed me to meet Emily. And yeah. So, I mean, tell me about like you're kind of had this high interest debt as you were growing. You were looking to kind of consolidate that. How did you find out about bridge and how are they helping you scale using that financing? Yeah. So bridge was involved in around in the open call scene and, you know, growing a CPG business at the rates that we are right now, it feels to be a smaller and smaller group of people that get involved. And, you know, I was introduced to bridge and the relationship just continued to unfold as we proved ourselves of being able to, you know, be worthy of a great loan at a great rate.

7:07Emily Reeves:And thank goodness, everything's panned out the way I could ever dream of. Yeah, and that's really exciting. So was it around like a particular, I know you said kind of consolidating debt, were you, was it this kind of new store launch of 2 ,500 stores that you're like, okay, we need to find better financing to be able to support this? Absolutely. Just ordering ingredients, materials, packaging at that next wave of the business became something that was outside of what I could accomplish with my personal assets and, you know, out of pushing everything back in. So completely needed. Yeah, I mean, that's a very big moment.

7:38Emily Reeves:Emily, you've been waiting and listening patiently, and I'd love to bring you in at this moment to, you know, tell me more about Bridge and the company and, you know, what you do to help founders accomplish within their business.

7:50Dakota Sheets:Yeah, absolutely. So Bridge was founded within Citibank by what I affectionately like to call two recovering bankers who saw that lending for small to medium-sized businesses was broken. And that's actually where we got our corporate partnership with Walmart was through Citi. We've since spun out of Citi. We still work very closely with them, but we've been standing on our own two feet here now for the last two years. And we've worked with a ton of Walmart suppliers in helping them find capital to scale within Walmart. And we quickly started to see that a very big missing piece in the market was inventory and purchase order financing.

8:22Dakota Sheets:There were limited options that just didn't really fit the needs of Walmart suppliers. So we went out and raised$500 million to serve the needs of Walmart suppliers that are either scaling like Dakota did. It's very easy with Walmart to go from 1 ,200 stores to 3 ,000 stores or launching into Walmart. You know, you get this massive PO from Walmart and all of your cash can't just go to that order. So we've seen a big need in the market and we're so excited to be able to support Walmart suppliers like we did for Dakota.

8:49Emily Reeves:Yeah, I absolutely love that. I'm curious, like, what stood out around like Walmart as a partner that might be different than maybe some of the other financing that might be out there for smaller retailers?

8:59Dakota Sheets:Yeah, absolutely. So, you know, there is inventory financing out there in the market, but it all comes with its nuance. It's usually very expensive because you have to think supply and demand. There's maybe five or six other PO and inventory financing lenders out there. So there's not a lot of competition to drive down that cost of capital. So we wanted to see the cost of capital come down a little bit lower. We wanted to see structures that make sense. Like for us, you don't need to have a PO in hand to get financing. We can go off of forecasts. we can go off of projections because we know there are some suppliers to Walmart who that PO gets issued every week, but your lead time to make goods might take three to six weeks.

9:34Dakota Sheets:So the capital doesn't align with how lenders look at, you know, needing that PO in hand.

9:40Emily Reeves:Yeah, I mean, that's a good point. So tell me about kind of some of the different stages that financing is usually available because, you know, there's inventory financing, which is usually like when the invoicing due, PO financing, as you mentioned, kind of going off of forecasts. And so So talk through that journey a little bit and the implications of kind of when brands can typically get financing and then what Bridge does.

9:58Dakota Sheets:Yeah, absolutely. So Dakota kind of touched on this loan type earlier where you have these high interest rate loans. They're very easy to get. As soon as you apply for one, your cell phone's probably going to be ringing morning, noon, and night with them offering you a loan and they can get it for you tomorrow. But that comes at a serious cost. Those loans can be anywhere from 30 to 40 to 60 % APR. They can get really expensive. And worse than that is the way that those loans are paid back. So those loans are going to be paid back on a weekly basis, sometimes monthly. But man, you get that PO, you're making the goods for weeks, you deliver to Walmart.

10:31Dakota Sheets:Walmart doesn't pay you for a couple weeks. Those loans don't meet your cash cycle. And so that's what we really focused on in making this product was, hey, you know, the cost of goods, that order needs to go out four weeks before you're even delivering the goods. So you get our cash when you need it for your COGS or your cost of goods. And then once you deliver the goods to Walmart and Walmart pays, that's what pays back. mismatch of repayment on the loans is so key in navigating things as a founder.

10:56Emily Reeves:Yeah. I think that was one of the biggest surprises I learned from my own journey as a founder, too, is just like how stretched out the cash conversion cycle is from the point where you need to order ingredients and start producing to the point where you finally get the check at the end. And the fact that usually the check is not 100 percent for a lot of payments that come in after deductions, chargebacks and everything else. And, you know, they can stretch three to three Three months to nine months in some cases for brands. And so it's important to have that capital and financing in place. You know, I'm curious when Bridges is evaluating a brand, what separates companies that are ready for financing and those who are not?

11:32Dakota Sheets:I would say this, you know, especially in CPG, like it takes a lot of cash to start something. You know, a service business, you're going to go clean up Airbnbs. You need to buy some cleaning goods, maybe pay your staff once you get paid. Pretty low capital intensive. When it comes to goods, you need to have a little bit of a treasure chest going into things. When we look at brands, you know, we're looking at have you sold these goods before? Like for Dakota's case, you know, he'd sold them in, you know, on Shopify. He understood how the product sells. He understood who his customer was. He understood what it takes to make these goods.

12:02Dakota Sheets:We look to see maybe have you sold to smaller retailers before? Or alternatively, if you haven't, do you have a background in this? We're working with a company right now where she's one of the sharpest founders I've met. She's worked in beverage, you know, her whole career. She's slowly starting to launch and she has POs from retailers as she should. It's a great product and she knows what she's doing, but she hasn't really sold the goods before. But we understand that she understands her numbers. She understands her financials and she understands what goes into scaling a brand. So we want to see that someone kind of knows what they're doing.

12:33Dakota Sheets:They've done it before in some capacity. And that helps us, you know, get things over the finish line.

12:38Emily Reeves:I know one thing about Bridge is you have this close relationship with Walmart, Sam's Clubs to be able to help founders grow within those businesses. You know, if a founder is expecting that they'll need capital within the next 12 months or so, what should they be doing today to put themselves in the strongest position possible?

12:55Dakota Sheets:I would say start to look at debt sooner than later. It doesn't cost you anything to have a conversation. So start to learn about what lenders are looking for. You know, I can talk to a founder and say, you know, look, you're looking 12 months out. Let's think about these things. Let's think about, you know, where you're spending your cash, you know, how you're going to scale. There will be people who, you know, they're going to want to. And I understand what they're doing where they're saying, look, I want to buy, you know, 60 ,000 units in preparation for this order. And the reason they're doing that is because their costs with their manufacturers are lower.

13:25Dakota Sheets:They have no idea what that order is actually going to be. So they're buying a ton of inventory, not knowing what's going to be sold and talking through the implications of that with a lender. Because a lender isn't going to just say, oh, good, you're going to improve your margins. We'll give you a bunch of money and hope it sells. There needs to be some line of sight into what those numbers are going to be and what the sales are going to be. So that's something that I think is important to understand that, hey, no one's just going to buy your inventory and let it sit there. You know, they're going to want to see that there is some type of commitment from retailers.

13:53Dakota Sheets:There's some idea of store count. Even if you might have to order a lower amount from your suppliers and your margins might get compressed a little bit. Wait until you have some kind of confirmation from retailers before you start going out and confirming things with your co-man.

14:05Emily Reeves:Yeah, I think that's really important. And I think, you know, talk with me about how founders should think about PO financing, invoice financing, even if they might have equity investments as well, because there's some things you can get finance, right? That might be a cheaper source of capital over the long term than giving up equity in your business. And so it's not just like, do I sell equity or do I get financing? I like to think about in terms of like a financing stack that you can start building up for different parts of the business.

14:33Dakota Sheets:You teed it up for me here, Jordan. I always say this, get debt for the things you can get debt for. So don't dilute yourself because equity is always going to be the most expensive money you take. So if you can get a loan to buy your inventory, do that. Take on the debt, maybe give up a little bit of margin to finance it, but preserve as much equity as you can. Or if you're going to give up equity, that's okay. But use it for things that you can't get financed. Maybe your marketing costs, maybe hiring a new sales manager or bringing on a broker. You know, you can't get debt for that, but you can certainly get debt to buy your inventory.

15:05Emily Reeves:Yeah, I think that's so important, especially usually for debt products, right? You can use it for the initial launch or you can just build that into your growth plan so that you always have that cash coming in and making that available.

15:17Dakota Sheets:Absolutely. And to that point, you know, we built this really closely with Walmart, but it's not exclusive. So we're able to finance, you know, any inventory or PO financing needs with larger retailers. We just deeply understand selling into big box retail because of our close relationship with Walmart.

15:31Emily Reeves:I know a lot of founders will be applying for Walmart open calls and other events throughout the year. How should they think about timing from getting connected with a financing company like Bridge kind of before even having those conversations? Does it help having kind of going in there, being able to pitch your product and saying that we have a process of actually building and delivering the product kind of for those meetings?

15:54Dakota Sheets:I think Dakota and I can both answer this. I've been to quite a few open calls now. And you go to open call, but that PO, if you get that golden ticket, you're still onboarding. I think Dakota calls it the University of Walmart. There's still a ton to learn. There's still a ton to get set up. That can take months. And so you get that golden ticket, it doesn't mean you're going to be on shelves in the next couple of weeks. So it's always great to have a call to the lender to kind of think about, hey, how should I think about financing this? Can I use debt to maybe finance my other customers to free up cash for other things?

16:25Dakota Sheets:And then, you know, because we work so closely with Walmart, we understand that supplier experience and kind of give guidance on, hey, this is what you can expect over the next couple of months. But Dakota can certainly speak on that as well.

16:34Emily Reeves:Yeah, I would just say that oftentimes you'll be walking out of your meeting with your merchant with a rough understanding of what the next six months could look like. And I don't think that there's any harm of building a relationship with Bridge or a lender earlier on and letting them know this is where I'm at and this is what I have been told. You know, as soon as you do have purchase orders coming through, that's really when everything can move quite quickly. And I do think, you know, being set up before that and everybody understanding where your business is, what your lead times are, are a big advantage to needing to move quickly when the moment comes.