#208 - Fundraising Reflections with David Fudge (Aplós) and Amanda Amos (Collaborative Fund)

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25:06Okay, so David, did you have all of those elements in the early days? Because, I mean, I know I can immediately think of some of those boxes that you would check off automatically, like just, you know, being a really strong founder coming in, having a pretty, you know, incredible background. I think a lot of people know this about you, but just kind of being one of the OGs at Bonobos, which is like the OG digitally native brand, carries a lot of weight. I'm sure with anyone you were talking to, like, oh, this guy knows how to build a brand online. That's very powerful. What about all the other stuff that Amanda mentioned?

25:37Do you feel like you had that all at the beginning or you learned to include all that later? Yeah. I mean, I would say I've done hundreds of versions of pitch decks. Like, you know, I think as a founder, your primary job is sales, right? You're always selling. And I think the more people you talk to, the better your pitch gets. And so I always encourage people to get in the practice of even pitching to friends and people that aren't necessarily investors or at a party telling someone about your business. But yeah, early on, I had all those pieces. I mean, I think a big part of it too, as Amanda sort of alluded to previously, is like, how big is the opportunity, right?

26:18If you're raising venture, it needs to be a big opportunity, right? If it's niche, then you're going to have a difficult time and it might be better that you bootstrap or you raise from angels. And so, yeah, I mean, I would say every, the other thing I would say that I learned is like, everyone has an opinion. And so other founders that have raised investors, like everyone, I thought like dozens of times I had perfected our pitch check and would show it to someone and they would always have feedback. People always want to get in like their point of you. And so it's really important that you have a strong conviction and vision, because if you're constantly like people are going to give you advice and be like, you should think about this, this, this and this.

27:02And you could it can be really dizzying and it can send you on all these wild goose chases where you have to learn how to filter feedback as well. Like, what am I going to listen to and what aligns with my vision? And oh, I didn't think about that. Let me include this and what doesn't. But in terms of the nuts and bolts, it is like, how big is the opportunity? What's your reason for existing? What's the insight that led to your business? What is your vision for the brand? What's the team behind it? What makes you better or different than the competitors in the market? What advantages, unique advantages do you have that could maybe help in distribution or brand building?

27:41Because there are thousands and thousands and thousands of brands out there. And so you need an edge in getting distribution and getting shelf space and being able to afford to the trade spend required to ensure that velocity early on in the brand awareness. And so, yeah, I mean, I think I have every pitch deck I've ever written for Apolos. I could show you the first one that I actually ever pitched and wrote and it had all those core elements and I sort of have refined it over time, you know, based on how the business has evolved and based on like building the most compelling story that does the business justice.

28:22Can I post that pitch deck online? Like this deck got this founder X million dollars. That's all you need. Yeah. After six years and like 500 pitches. This simple slide. Yeah. I like what you said about, one, the founder always selling. And I also, like, I wonder, David, if you knew that you were ready to be always selling and if you felt really confident about that before you started the brand or if you just kind of leaned into it and you're like, oh yeah, this is what I have to do now. Not at all. No. I, like, have always had this identity where I'm like, I hate being in a sales position, like asking people for money.

29:03Like, you know, I always felt like if I like projected positivity of vision that the right people would come to me. And that's true in a sense, right? But you also have to do the work of like proactively finding those people and reaching out to them. But yeah, I don't think I really, it didn't really sort of, I didn't realize it to the effect that it would be true. And I would say that's true of so many things. I don't know that most people would start a business. If I knew now what I, what I didn't, if I knew back then what I know now, I'm not sure I would do it. I mean, I think part of, I'd say that a bit now, but I'm always like, you know, I feel like I'm always going to be building something because it's just my personality.

29:45But it would feel really daunting if you overthink it early on. And there is a certain level of, I think, trusting your gut and just like taking a risk and like going for it. And if you're a growth minded person and you're resourceful and you have grit and resilient. I think building a company reveals, it peels the layers off of you in a way that is really, it's such a valuable and rich experience, no matter what the outcome for me. Right. And I say that, you know, still with full conviction that Applos will be a global iconic brand in the bar of the future. And at the same time, I feel like I'm all over the place now, But if you overthink it, it's difficult.

30:32But we're also our brains work in that way. We're like, if we think something's going to be difficult, it's going to be difficult. I know what you're saying. And I really it actually helps me think about the different kinds of founders out there, because like, David, I know you socially, you're a super nice guy. You're not like crazy extroverted the way like there are many founders who are out there who are like that. You're like a very nice and smart person. and you like that. I can understand like you are doing this because you like building stuff. It's not because you wanted the spotlight. There are many other founders and I would even maybe put me into this bucket where like I like it.

31:05I like to have the ball. I want to have like the spotlight. I like to perform like I'm a musician. I like I really actually thrive off a lot of that stuff. I like adding value and building great stuff as well. But I think I've just, you know, I've met a lot of founders who kind of approach that from different ways or there are different things driving them. So I definitely understand that about you. Amanda, what do you think? Do you, does this, like, have you, because I know you meet tons of different kinds of founders. Can you recognize the ones who are like, look, I want to build this thing to build this thing.

31:33I must be in the spotlight. Thus, I'm now in the spotlight selling this thing versus ones who are like, I want to be out here selling something. Let me have a company and now I'll sell it. I mean, I love the way that David talks about pitching, also building a company. It actually just reminds me of why I get excited to come to work every day. It's meeting amazing people who have a greater vision for a business, whether that's, you know, feeling compelled to put something out in the world. And it takes so much work. And, you know, to all the diligence that we do on the investor side, I try to ask founders, Like, what is the personal diligence that you did when you went out to put in your personal savings, to put in your friends and family savings?

32:16And what gave you conviction that this was the idea? Honestly, super inspiring. And I just feel honored, frankly, to be part of it. So not to get too mushy, but I love hearing about this. And it's really inspiring. Also, just to qualify one thing you said, Daniel, like I'm not someone who naturally gravitates towards the quote unquote spotlight, but I do like to be in charge. And, you know, I think that that has been a growth opportunity for me is I'm a person who naturally wants to come in and be like, OK, I think this is what we should do. But like the other thing I've really learned is you can't do it yourself.

32:58It takes a team. Right. And the second you decide to raise venture or bring other people in, the business is no longer just yours. Like I try to avoid saying that Apples is my brand, right? That it's, you know, and I have a co-founder as well. But I try and avoid that because my natural tendency in my youth too was to like sort of bulldoze in and like take charge. And there is a part of my personality that I'm naturally like a bit type A, even though I'm more introverted. But it is important that to build something big, you have to, like I said, be selling and bring a lot of people under the tent with you.

33:39And you have to, the other big thing that you're doing is I often, you know, one of our other values is stop selling, start serving. And it's about sort of serving other people and inspiring the team. And as a founder, you also have to inspire people constantly, right? Like I have to inspire Amanda if I'm trying to get her to invest in my business that I have this big vision and I can execute it and I can create the world that I want to live in and create this big, huge thing. And also your team internally and inspiring your team to want to be a part of what you're building and not just follow you, but like build the thing together.

34:26and so so yeah but i did want to get that point in there my natural tendency is like to take charge i believe it and you know i think also when yeah when you do inspire amanda and many other people also it makes them want to take a bet on you not just because they feel inspired but also because they're like oh he's gonna be able to inspire consumers and buyers and influencers and a lot of people who then want to support the brand and that's what's gonna make this brand have a good chance of being successful. David, I wonder, can we just take it back a little bit? Can you tell everyone a little bit of the story of Aplos with a frame of like the funding history as well?

35:06So like, why'd you start it? What'd you end up doing? But then also take us along that kind of funding journey? Yeah, absolutely. You might want to edit this in post if I'm too long. But yeah, I mean, I think, so my background is I've been building consumer brands for over 20 years, right? And aging myself now, but I was in New York City for the first 11 years of my career. And I got the opportunity in 2010 to join a startup called Bonobos. And I've been really fortunate to work alongside two founders and see two successful exits. And so in my second exit in late 2018, I thought, hey, I really feel like I understand how these businesses are built.

35:47I want to build something myself. And so I knew from my previous businesses, I mean, Bonobos was like, I think, 50 ,000 SKUs when I left, like incredibly capital intense, operationally complex business that I don't know would get the same amount of funding that today that it did at the time. A lot of it is timing. And so I knew I wanted something that I could build a billion dollar plus business on like a handful of SKUs that a high repeatable purchase, but also something that was something that really I felt that I needed. And so there's one side of me, I'm a very left-frame, right-wing person that I wanted something that was like a great sort of creative idea and concept, but also like operationally and logically was a business that sort of looked and felt like something that I would want to build.

36:38And so for me, that was the idea of disrupting the bar. And the reason is because, you know, my co-founder, Emily, we met at Bonobos and she always calls me a reluctant drinker. And I grew up in the South. I went to a big state school. I was like the kid nursing a beer at a keg party, pretending like I was drinking. I just felt like I was barring tomorrow's happiness for today. And I also felt like I was in the upside down when people would shame me if you didn't drink. Like growing up in New York in my twenties, I had girlfriends that wouldn't date people that didn't drink. Like I would, if you ask for a drink, something not out at a bar, like the bartender would sometimes shame you or like assume you had a drinking problem.

37:19And so I felt like at the same time, I really loved the experience in New York, particularly of after work going with your coworkers or your friends to a great crap cocktail bar. Like, I don't know if you've been to the Swan Room at Nine Orchard in New York, but beautiful bar and the experience of the environment itself, sitting down, the craft and care they put into their cocktails where they make it in front of you and they present it in front of you. When I'm a 26-year-old guy in New York City, felt like a small luxury, right? And I thought, I feel like I can't participate in this if I don't want alcohol.

37:57And that feels exclusionary. And I thought, I think there's an opportunity here to elevate non-alcoholic beyond the moniker of mocktail. On the other side of that, you know, There were some brands early to market in the non-AWC space that didn't speak to me personally because I felt like they didn't address why we drink in the first place. We drink because we're stressed or we want to have fun. Nobody likes the hangover, but at the same time, we like the way it makes us feel in the moment. And so I felt that there was an opportunity to lean into elevating non-AWC beyond the moniker of mocktails so that it could stand toe-to-toe with the best spirits and cocktails in the world.

38:34and also create something that was functional that gave you people a healthier buzz without compromise. And so essentially I thought there was, alcohol has existed for thousands and thousands of years and no one's iterated out the flaws of the experience. And there's a big opportunity here. And so that's really the insights that led to building Aplos. And I just followed my curiosity. Like early on, I asked, I didn't know anything about beverage And seeing Andy at Bonobos really, I felt like that was an advantage because he didn't come from traditional fashion. And so it gives you a beginner's mindset where you can look around, you can think of new ways of doing things.

39:15You're not encumbered by a career in an industry where you're like baked in ways of thinking, especially when you're trying to disrupt an industry. And so I always saw that as an advantage. But I started at Bloss, I think, when I was 37, and I knew what I didn't know. And so I thought, I need to surround myself with people who understand the rules of the game. And so I proactively sought out investors, people to join me in building this that really understood that. And a big piece of that early on was meeting Lynette, our mixologist, Lynette Marrero, who is a James Beard honoree. She created Speed Rack, which is the world's largest female-only bartending competition.

39:55She's essentially a celebrity in the bartending world. She did the master class for mixology. And I met with her, and it really resonated with her what we were trying to build. And Emily and I sort of incubated this idea during pre-COVID and then COVID hit. and then you know we met her and developed the product and really that's how it started that is very cool and yeah i know i know lynette we actually were on a very cool trip um a number of years ago together and got to learn about her story and she is a pro and yes she like literally teaches the class on spirits on master class that is super cool um and works with j-lo and yeah cool stuff um and i also i had totally forgot about this but i was actually just I think three weeks ago I was out just unexpectedly ran into some friends when I was out walking my dog and they were sitting having a beer.

40:51I was like, oh, great. I'll just do this then. Cool. Like we'll have fun, had a beer. And then we ended up going to Soho House and then had like one or two drinks there. Really like hitting the point where I'm like, OK, I can't drink more than this anymore. I used to be able to when I was a younger man, but now if I have one more drink tomorrow, I will feel horrible. And luckily on the menu at Soho House, they have Apolos. And so I ordered that and I felt like, you know, I was with like three dudes, didn't want to be a buzzkill. Like, what do you mean you're not drinking? Like, are you not trying to have fun anymore?

41:25Is this not a fun night? Like, this is not special or, you know, you're trying to bum everybody out like, no, no. Okay. So it was really cool that there was a great option on the menu there that I could order and not feel like I was probably people who there are people out there who are like more secure than I am who would have no problem being like, I'll have a water, but it's cool, guys. Let's keep hanging out. I'm not that person. I'd be like, oh, you know, can I can you hold the liquor on this one? Like, you know, whisper it. But I just ordered the Apollos and it came and it's the RTD. I think it actually was the Kola Fashion that I ordered there.

41:57And it's beautiful. You know, it looks it looks special looks very premium and there's something exciting about it and so you know nobody batted an eye and i just could keep participating and having a really fun night um without paying for it in a major way or just you know being feeling like i was past my limit where i just didn't really want to be although i didn't want the fun to stop so yes to what you're doing yeah it's actually the ume spread steak carry which is my favorite yes okay that's right yeah as i mentioned I was two or three drinks in at that point, so I may not exactly remember, but I was quite happy that it was on the menu.

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43:21Okay, cool. So then, yeah, let's, can you just then go back to a little bit about the funding trajectory that you were on as you started to grow? So like, you know, what was the, you know, revenue climb or stage of the business and how much were you raising along that journey? Yeah. Yeah. I think the other thing that I've, so sure. I developed a pitch deck very early on in 2019 and started, we formally incorporated the business early July 2nd, 2019. And I started pitching it first to angels and i had met like i said with a couple of vcs but we were pre-seed and we didn't have a final sample of the product yet which i actually would recommend that you have when you're meeting with investors um we were basically pitching a dream at that time and so my first investors were angel investors that many of whom were my friends um and i remember actually just to be you know completely honest the first check one of the first checks i had taken was from a friend i had been to la we were doing some formulation work there based in la and i had a bit of a panic attack after to be honest because i think the weight of taking a friend's money who had given me more than i had assumed they would be comfortable losing And I think early on, I actually was pretty, very direct, especially with like my personal friends and contacts of like, don't invest where you're not comfortable with not getting back.

44:58Right. Because startups are high risk. And I appreciate that you believe in me, but like, you know, I want to make sure that this is clear up front. And, you know, that that moment actually sort of led me to get a business coach so that I could manage my mindset more productively, which I highly recommend for all founders. But it was it was challenging early on, you know, was taking mostly angel checks and basically like cold outreach to a lot of people that, oh, you should meet this person or, you know, everything. single connector I knew and friend that I had early on. I emailed and told what I was doing and asked if they knew anyone that I should speak to.

45:47Got so many good intros. And so many people ask me now, like, I think I have six beverage alcohol executives on my cap table, like the former CMO of Diageo, the former CEO of Krug, the former CMO of LVMH, Wine and Spirits. Like, A lot of people now that are really heavy hitters and people are always like, how did you get those people? Six years in and networking every day for years led to that. But early on, I think it was challenging. I was getting, you're not good at, if you've never done fundraising, you're not good at it when you start. And you don't get good at it until you do it more and more and you pitch more and more.

46:34And you get feedback and you refine and iterate and get back out there. And I think that is that resiliency and that grit and that determination that I will make this happen and an unwavering belief in that is really important. because if not, then you will. Some people give up pretty early on. And I think, you know, the experience too, like often in media, you hear the story of found-ups and how they raised money and how they grew. It feels so linear, but it's a pretty messy process for most people, to be honest, when you're going through it. And so a lot of these things I'm saying, just to make people to feel that it's okay to make mistakes and not be perfect and not know what you're doing because most people don't.

47:28And I think for me, it was, we raised a seed round and I think it was 2021 was the first kind of institutional investors that we had brought in about a year, 18 months after we started. But, you know, I think in it, then we raised the A in 2023, but it's been a, it's been a journey for sure. And yeah, I don't know if that's helpful. Maybe that's too broad, but. No, I think it is helpful. And I think, you know, it doesn't surprise me that you were able to also include some of those big wigs in your dream that they would want to be aligned with you. I mean, I remember talking to you about your business in the very early stages.

48:04And, you know, not that I know everything and I certainly didn't then. But I think one thing that really struck me about you and your business is I think just kind of the like maturity that you had about it, where, you know, you would talk about it and like what was going well and not well. But, you know, you weren't phased by anything on it or just like, yeah, this is our plan to build a brand, like really confident in how you're going about it and your ability to figure out this like stuff you hadn't done yet or didn't know yet. And I think just like it really was clear that you were going to be very patient about your approach also to growing the business.

48:36So I could see people like that responding really well to your just overall, yeah, like demeanor, confidence and patience about growing the business. Like, yeah, this is somebody who can probably get that done. One thing, sorry to talk over you, but one thing that was challenging for me early on is like, I'm not a hyperbolic person. I'm pretty pragmatic. Like my father is an entrepreneur, like very kind of responsible, safe, fiscally minded person. And I like to over under promise and over deliver. And that doesn't always work with the game of fundraising, particularly for like institutional investors.

49:11They want to see like a big vision, right? a big opportunity that you're swinging for the fences. And early on, I definitely struggled with like we doubled what we thought we were going to do in our first year because I was so in our forecasting, you know, the assumptions behind building a forecast for business that's not in market. It's like a house of cards. If one or two assumptions is off, then the whole thing falls apart. And so I was pretty conservative with what I put out there originally, which in hindsight probably hurt me with like some early stage, you know, institutional investors.

49:49But, you know, it's just that's who I am. Right. And I think I've learned over time now I'm incredibly bullish about our business and how big it's going to be. But I think that definitely worked against me a bit early on. I gotcha. And it's most of the pitch decks that I see from earlier stage brands, whatever number they're putting out there for their revenue, I'm like, it's a third. But like the assumptions are so aggressive that you're like, whatever you're telling me it's going to be, I think, yeah, like, let me just assume maybe you'll hit a third of that. And is that a good business if you do?

50:26And it might be somebody's like throwing out a second year revenue number. That's absolutely absurd. I'm like, I know that's ridiculous. Like, you know, anyone who's been in a brand knows that. But if you hit a third, is that OK? Amanda, you must see this kind of stuff from brands all the time. Like, do you see ridiculous assumptions like that? Would you challenge them on it? Or you're just like, yeah, no, I get it. Like, but maybe maybe if you hit a third, I still am interested. Yeah, I'm really looking for both the inputs of, you know, what are the assumptions modeled off of? For example, if you have built in distribution, if you're able to make some assumptions about, okay, this retailer wants to put me in X number of doors, I think I can get to this based off of comps, that can be really helpful just to kind of ground you in some type of economic reality of where you think you might be able to hit directionally.

51:14If it's a DTC only business, oh my gosh, that is much more difficult to predict. But it does say a lot to your point, David, about ambition, how big it can get, and the fact that for VC, you really have to swing for the fences and know that you're signing up for a rocket ship, right? Really, really fast growth. And so a lot of times we're just pressure testing that of, are you ready for this? Do you think that this is sort of the product, the brand, the company that can sustain that type of growth? And are there comps in the market that might be able to point to that growth and that trajectory having happened before?

51:52All right. David, let me ask you, because I know people must ask your advice all the time around fundraising specifically. Can you tell me, what do you tell them usually? Well, the first thing I ask is, why do you want to raise money? Most people don't expect to be asked that question. And I would say eight out of 10 times, they're surprised by the question and fumble with the answer, which is a red flag for me. it means to me they haven't really thought through the why and you know a lot of people get caught up in the ego of wanting to say i raised x millions of dollars and you know my valuation is x if that's why you're raising money then don't it's the wrong reason to raise the money um you know i think it's it's really depends on the person and sort of what do they personally want from a lifestyle perspective from the business itself what is their vision not only for the business but for their life to really understand you know to dig under the surface a bit and their motivations because you know it's the profile of the business but also like the context of the person and what they want and that's really important when thinking about why to raise and then it's to me also like digging into the idea.

53:15A lot of the ideas that I've heard from people that have asked me for advice feel, frankly, a bit niche. And it's a problem that they have themselves that's hyper specific that they haven't really thought through the TAM. Or maybe it's something that is like, maybe like a decent number of people need this, but there's not a high lifetime value because because there's not a repeat rate, a strong repeat rate, or the category is really competitive and difficult to compete in. So you're going to have to raise a lot more money, or you're going to have to have an edge in distribution or whatever it is.

53:49The context of what, all of that matters. Like, what is the idea? What is the sector? What is the distribution behind that idea? How do they see like the core business model working? What are the resources that they think to they need to get to that next milestone because I always sort of viewed it as like an almost like a marathon slash relay race where it's like okay I'm raising money and that's like a baton I've gotten where I'm trying to get to the next phase where I can pass where I can like get to this one milestone so it's often like you need a story right whereas like what are you saying to investors of like early on I think I was saying I'm raising I think I raised half a million to launch the business get the first 1 ,000 customers and understand the core unit economics of the business, right?

54:39Like, what does it cost me to acquire a customer? What's the repeat rate? What's the lifetime value? Those sorts of things so that I can understand a lot more and then leverage those insights to get to the next phase. And part of it was like 1 ,000 customers and maybe like, I think, half a million or a million dollars in revenue or something. and so a really clear sort of mindset of like what's the story i'm telling of why i'm raising and what am i using that money for and what's my strategy to get there and then what's the longer term strategy and so it's people want like a silver bullet and it's it's just not doesn't exist it really depends on the person the category the idea all of those things so let me here's a dumb question.

55:27This is about market size. Like, how do you know if you are talking about the right market size or TAM? Or if you're like, hey, maybe you're talking about your specific niche, but it's actually part of a broader one that you're going to be taking share from. Or, you know, like, I'm just trying to think of some examples. But OK, let's say we're talking about poppy in one world. You'd be like, no, your market size is prebiotic soda, which was very small. Right. But in another instance, oh no, it's just regular soda. And, you know, for like, even let's say a non-alcohol drink, like you could say, you know, when you launched your spirits initially, like, okay, the market size for non-alcohol spirits was not huge, even though there had been at least one really notable success, but the overall market for, you know, alcohol and just like, you know, drinks in general, where a lot of that volume was going to be coming into non-alcohol is quite large.

56:19So like, how do How do you think about that, David? And Amanda, I want to hear from you also. I still get a lot of skepticism around how big our category can be, which I find really interesting and motivating. I'm one of those founders who like when I get rejection or, you know, when people don't believe in it, it fuels me. I'm like, that'll be fun when I can go back to you in a couple of years and be like, what do you think now? But I think that for me, what I find helpful is to make it relatable to the person you're pitching. And so again, we like respond more to stories than we do like pure like numbers, I think.

56:58Right. And so I often say like, when's the last time you went out to dinner? Like, did you notice not out cocktails on the menu? Are you going out to dinner tonight? Look on the menu and tell me if you see a not out cocktail there. that's like a hyper specific answer but like for me the tam is like i think how many of your friends have complained about having a hangover before or have made some comment around like wanting a drink but like weighing the trade-offs of that like just anecdotally how many people do you think you've had those sorts of interactions with and think about how many millions of those people there are globally and then you can put it in the context of like in our industry there's a body called iwsr that does a lot of like research andy our investor is actually on the board and so we see all the data the trends of like consumers drinking less the motivations behind that where they're discovering non-alc drinks the trends in the category and so we can show directional trends But like the challenge for my category two is I think like people often try and predict the future by looking at the past, which is just like flawed in itself.

58:15Right. Like it's history rhymes. It doesn't repeat itself. And so I think that can be difficult when you're building a category like us to sell that opportunity. community but I always try and do it in two parts one is just like here's some data and let's look at the data and like look at the growth trajectory of our business specifically and then like the softer more kind of personal side of it with the other examples that I gave I gotcha and I mean that I can feel that because I would just think about when I have a party now how many people are not drinking alcohol and it feels like about half which it would you know that's a huge huge difference versus five years ago when you'd be like, oh, you're not drinking?

58:58Like, what's wrong? Now it's just like, yeah, half the people just want sparkling water or, you know, one of your lovely Apollos drinks, which I usually have in my fridge. Well, and the other thing people assume is like they're drinkers and non-drinkers. That's not the case. The growth in the industry is really driven by moderation. And so it's people that are still drinking, but they want to moderate and they want an option in certain occasions. And so I say often it's not. We are going through a once in a generation realignment of the adult beverage industry. And it's really about a diversification of the industry, whereas it's been monopolized by one functional ingredient, alcohol, for thousands of years.

59:40And that cultural grip is loosening pretty rapidly. and so you know i think it's it's like to me it's still five past midnight when it comes to the non-hawk space um broadly i think we may get to a point to where it's like you know um maybe even look down on if you drink alcohol at some point yeah for sure definitely um okay amanda let me ask you that same question around market size tam how people talk about it when it's like all right, that was a bit of a stretch how you phrase that. Like your TAM cannot be the universe, you know? Yeah. I think the biggest challenge with TAM, especially to your, even the question, like total market size, total addressable market, it can feel super obtuse.

1:00:27If you Google or search, what is the market size? Let's just call it soda. There are a ton of different calculations that kind of go into informing that answer. And sometimes I see people do the bottoms up approach of being like, okay, there are X billion people multiplied by the price of my good equals this as a total market. That's a little bit of a challenging intellectually. I think to make it a little bit more tangible, if you can find revenue figures of similar companies. So for example, if you have a personal care brand and you are marketing in men's personal care, can you use Axe and can you parse out what their revenue figures look like for their personal care lines or looking at what your acquirer set, how much revenues they're doing.

1:01:13And then also being able to look on the M &A side, if any of those acquirers kind of publish their comps of how big those acquisitions are. So for example, men's personal care, you might want to point to Dr. Squatch, or maybe you'd want to point to Dude Wipes recently. And being able to use those proxies of those sort of very large valuation or liquidity events to be able to point to, here's how I'm thinking of the market size. This is also speaking to how acquirers are thinking of the space. And it also points to consumer trends and really kind of grounds in here's how many different parties are pricing this category.

1:01:49All right. Very helpful. So as we're just kind of coming towards the end of the episode here, David, just very tactically, can you explain to people how did you structure the investments? I know there are a lot of different ways you can do it, like safe notes, all this other stuff. Can you just explain what was the route that you went and do you feel like that was the right way to go? Yeah, for sure. I mean, I would say another recommendation I would have is just like get a mentor and a lawyer early on that has experience in working with startups that have raised money. And for us early on, we raised as a safe before we did a converted round.

1:02:26And so it's very common now, sort of, you know, coined or created by Y Combinator stands for simple agreement for future equity. And the benefit of that is you are not putting a price valuation on the business before you understand how big the business can actually be and what traction you're seeing. Right. And so pre-seed, there's some comps, right, depending on your category of like and sort of the your background, like your team's background, like any sort of like edge you may have in the business of like, you know, you may raise a pre-seed safe at a valuation category. of$3,$5,$7,$10 million on a safe, right?

1:03:13Which just means that when you convert in a price round, so when you raise money where you negotiate a valuation, where you actually sell preferred stock in the company and you set a share price, those people that invested at, say, that$10 million safe will convert their investment at the$10 million valuation. So if you end up raising your first price round at 20 million and you raise a safe at 10, then those people are getting quite a discount and a benefit because they made a bet early on in the business. Now, safes often come with a discount. It can be the lower of the twos you can do. And you should do your own research for this.

1:03:54And it's very easy to do. And there's the forms are very simple. That's literally why It's like one of the words in the acronym. It's a very easy way to like raise money without spending a ton of money on legal fees. Before that, the most common was probably like a convertible note, which is like a warrant for future equity. But in my experience, and I'm curious what you see, Amanda, but like a safe is more common. And then for A, we raised a price round and sold preferred stock shares. Yeah, I think from my side, I agree. I've seen a lot of safes. They're very, very popular for pre-seeds and they also help with, I think, saving legal fees from the founder perspective.

1:04:35I think sometimes the benefit of doing a priced round is that you have complete clarity on how much of the business everyone owns. And so if you have legal budget or resources or if there's kind of a preference one way or the other, but yes, very common to have a safe early on and then do a price round a little bit at the early growth stage or at a priced seed or at an A. And the watch out, I think, too, Daniel, there is like to Amanda's earlier point, is you should use a tool early on like cap table.io or something like that, where you really understand dilution. Because if you don't really understand the numbers behind it, you could raise a lot of money in a safe that can end up, depending on your price round, you know, when it converts, could be a huge amount of dilution.

1:05:24And so there's a pre-money safe, there's a post-money safe. Like, I'm not going to get into the detail of what all those are. But, you know, the benefit, as Amanda said, of a price round is there's real clarity of, like, what your dilution is and what you own. And there is a danger when you're not actually selling, you know, when you're not doing a price round where you're maybe going to be surprised by dilution down the road. And I've seen that from quite a few other founders. All right. So just as we wrap here, I would love to just ask one final question, which is, is there any big mistakes that you feel like you might have made, David, on the journey that might help another founder just to avoid it?

1:06:12obviously you guys have been very successful and managed to continue capitalizing the business and growing just a ton and come out with great products but any anything we're like yeah okay kind of wish i had that one or two things back that somebody could avoid and for terms um i think that i mean i've made a ton of mistakes or a ton of things i've learned from right like we learn so much more from mistakes than we do from successes but i think um yeah i would do this i would do it totally differently i think i was like figuring a lot of things out as i went early on whereas now i have a much better sense of like you know just like the dilution the sort of even the common stock shares and sort of the vesting behind those right i've learned a lot there um and but one specific mistake um you know i think a mistake people make and i certainly made early on is like reaching out to investors and wanting to like know if they're going to invest right away like this is a relationship thing right so you should if you if you think you may want to raise like the sooner you can meet someone if they're willing if amanda or someone like her is willing to meet you for coffee then that is a privilege that she is you know giving you her time and you should take it and you should develop those relationships and share information over time of your progress and not just be okay i'm ready to raise now like let's do it.

1:07:57You know, that's just it doesn't work that way. Amanda, what do you think? Does that resonate? Any other final tips? That's very nice to say that my time is a privilege. I adore you. I would say to your point about manufacturing false scarcity, that's something that sometimes happens not too often. But when folks are like, my round is going to close tomorrow, I'm looking for commitments by the end of the day today, a lot of your shrewd investors are going to see that as a flag of, you know, is there either something under the hood or a reason why you would want to speed along diligence and is a difficult timeline for people to make, especially when there are formal processes for a reason.

1:08:38You really want it to be a great fit, given that, to your point, David, and what you've been saying also, Daniel, it's a really long-term relationship where you're working as a team and you want to have a great mutually beneficial outcome. I think another thing is that it's just really on timing and practicing the mechanics of the pitch. Of course, you want it to be conversational, but not getting too tied to the timing of certain slides or it has to be with certain materials. I have to get to this point. Getting comfortable enough with what the kind of core ask is, what the pitch is, and being flexible on that timing.

1:09:14There are certain times where I meet with founders who are fantastic, but end up giving the whole pitch for the full 45 minutes that we've budgeted with very little time for questions. And it can just make it a little bit challenging for follow-ups, especially when maybe there was a small element of the pitch that is more resonant to one investor or another, and you kind of don't get to delve into the fun conversational bits. So I would say, you know, be ready with sort of what the core mechanics of the pitch are, but also have some flexibility to make it conversational. And just remember that at the end of the day, you know, you're looking for a mutually beneficial partnership.

1:09:52It really is a partnership. You're on the same team and it's a really long relationship. And I can at least say for myself as an investor personally, my favorite part of this job is being able to meet amazing founders, support them on their journeys. And the conversation is exciting for me too. So I I love whenever it is conversational. Has someone really given you a 24-hour commitment timeline? I don't know if I've personally, I would say more of the spirit of that, of saying like, I am looking for something by like five o 'clock tomorrow. I don't know if it was exactly within 24 hours, but yeah, across different windows, there is a little bit of that.

1:10:32Yeah. And if it works for you, maybe it works, but that's an Amanda asterisk of, I don't know if I can work with that sometimes, but we can move quickly. And I've heard that from a few early stage investors, like don't try to over FOMO us. We don't really work that way. But I don't know, FOMO is also a powerful thing. So you got to FOMO the right way, not, you know, hey, I need this right away. Otherwise, they probably are like, why are you out of money and you're absolutely screwed unless I give you this bad money check. Yeah. To David's point, also about so much of it is market timing and so much of everything is timing, looking back at your careers and how everything happens.

1:11:09And so I respect the game, I guess. All right. So a lot of amazing insights here today. As we conclude, do you guys each mind just letting people know how they can kind of follow along and support your journey? David, do you want to go first? Yeah, sure. So you can find Applos at Applos.world or at Applos World on Instagram. You could find me on Instagram at David Fudge or on LinkedIn and on TikTok. But I think I have one of those underscores, David underscore Fudge. I think I should know this. All right. It's an Applos World. If you need me to write a jingle for that, I will. Amanda, what's the best way for people to follow along with you?

1:11:52So we're Collaborative Fund. Our website is collabfund.com. And then if you want to reach out to me personally, I'm Amanda Amos on LinkedIn. I try to answer all of my LinkedIn DMs and love, love, love meeting all of you guys. All right. Thank you so much, guys. What a pleasure this has been. Thank you. Yeah. Thanks for having us. all right everybody thank you so much for listening to our podcast if you loved it i would so appreciate it if you could leave us a review you could do it right now if you're an apple podcast you can scroll to the bottom of our startup cpg podcast page and click on write a review leave your company name in there i will try to read it out if you're in spotify you can click on about and then the star rating icon if you are a service provider that would like to appear on the startup CPG podcast, you can email us at partnerships at startup cpg.com.

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1:13:11Thank you.