#237 - Inside Founders & Funders with Alex Michaelsen from Leisure Hydration and Alex Malamatinas from Melitas Ventures

17:28Alex Malamatinas:Yes, I think there's a few. I mean, I think Gabby from Magic Spoon, you know, we're meeting at a coffee shop in Flatiron and you just very clearly articulated how cereal is a very large category and there hasn't been innovation in decades. And this is their innovation. He showed me visuals, which showed me the product. And at the time, it was a lot easier to sell cereal online. Not that it was easy, but I think these days it's more challenging. And that resonated with me. And obviously, Gabby's a very smart, charismatic founder. So I was convinced. All right.

18:03Alex Michaelsen:So Alex from Leisure, I know that probably you were catching up with let's say half of the meetings, the investors that you already had a relationship with. For the ones that you hadn't, what is your approach to a 10 minute meeting? What are you gonna try to accomplish?

18:15Daniel Scharff:Yeah, well, I think recognizing that 10 minutes isn't a lot of time and there isn't a ton of time for fluff. So my approach was, I don't know the investor, get like a 30 to 60 second rundown of who are they? What is their role at the firm? what stage does the firm look at, and just like general things around their thesis and what they're looking to do, maybe understanding what they've invested in. You kind of want to find out what are they wanting to know, and then you can tailor your pitch to make sure you're getting them the information that they're looking for. And then I was probably giving a couple minute introduction into the founder story when we launched, the opportunity we saw, and kind of the positioning of our product and of our brand.

18:59Daniel Scharff:and then quickly having the most important numbers memorized and contextualized. So what is your margin? What is your contribution margin? Where are you in retail and what does your velocity look like? What does that compare to in the category? What is coming down the pipeline? What are the opportunities ahead of you? Having every single one of those things kind of memorized and ready to go is super important. I mean, the most important things are velocity and margin and how big is the category and those types of things. So having that ready to fire is kind of the place to focus. And then hopefully once you get that out of the way, they have follow-up questions and you can start to get into more of the meat of it.

19:40Daniel Scharff:But you don't want to leave a 10-minute meeting with an investor not knowing what margins look like and what velocity looks like.

19:46Alex Michaelsen:That feels like a super pro answer to me. That was really impressive how you actually started more about interviewing them. I feel like if I was a brand pitching a VC, I'd just be like too excited and I'd sit down and I would just vomit out of my mouth all the stuff I was excited about my brand. But it seems like that is a very cool headed, rational way to approach them where you would really impress them just with your understanding of how it works. We'll be right back. Friends, did you know that a party has been going on this whole time with 35 ,000 people and you're invited? it's our startup cpg slack you hear about it all the time on here and if you haven't yet joined in this is your moment take out your phone type in startup cpg.com and then click to join our community you'll be at the party you'll hear about all our events you'll get in front of buyers investors brands whatever's most important to you we have such big plans ahead but you got to be in the community to hear about all of it see you on the slack

20:55Alex Michaelsen:Alex from Melitas, you actually, you were on one of the panels with us and the panel that you did was how to vet or how investors evaluate brands. So if you're evaluating a brand, does something like that really impress you when they're actually asking you that?

21:10Alex Malamatinas:Yes. And also gauging just what's relevant to you rather than just, Hey, here's my deck. I want to go through the whole thing because you might really want to focus on one or two things and the rest of it you might have read or you don't think is relevant. So absolutely. And yeah, always good when there's some numbers, relevant numbers shared like sales velocities and contribution margins because you don't, you rarely get that volunteered and you rarely get that answer when you ask for them.

21:40Alex Michaelsen:I love it. And can you tell me a little bit more about your experience doing the panel with any of the content that you saw from around the day? And just to recap for people. We really put a lot of effort into having good content. We were very fortunate to have a couple different VCs look at our content plan. So just to recap it, we started off with hot deals of 2025, where we had a few different VCs recap some of the biggest deals that they had done over the year, why they did it, what they saw, what's happened since all of that stuff. Then we had a really cool one on what's in and what's out, where people just literally listed all the trends that we're seeing right now.

22:14Alex Michaelsen:And everybody said whether they thought it was a trend or a fad, something that would be lasting or was going to fizzle out. And there were some very hot takes on that one. It was really cool. We had real talk on margins. And so Alex from Leisure mentioned about contribution margin. There were great discussions during that. In fact, Alex, I think maybe you even told me from it, like that was actually a great panel. That was one of the first times I've really heard a very good definition of all of the different margins during that. Am I remembering that right?

22:42Daniel Scharff:Yeah, it took me a couple of years to kind of figure out what the hell everyone was talking about on margin. And oftentimes when you hear it on podcasts or LinkedIn or events, it's just not everyone is saying a contradictory definition. And oftentimes it's not what is correct. But that panel was the first time that I've heard it in a super impressive, clear, actionable way for founders to think about their business.

23:08Alex Michaelsen:And how would you put you on the spot? How would you explain it to all those founders out there who could maybe benefit from your interpretation of it?

23:17Daniel Scharff:Of margin? Yeah, well, I think when you're first getting started, everyone focuses on product margin because it's the highest number and you can talk about how good it is. But the more sophisticated the investors you work with, the more they'll see through that. And I think ultimately as a founder, there's only one margin that matters and it's contribution margin because that is the operating expense budget that your business has that will determine what the bottom line is. line looks like. So you obviously want to focus on all of gross and on contribution. So product is going to be the sale price minus the COGS.

23:51Daniel Scharff:The gross margin is going to come after you deduct all of the trade spending deductions minus the COGS. And then contribution, you're going to be adding in the warehousing, logistics, freight, the cost of selling the product. And then that all feeds into the bottom part of the P &L. So when you're making decisions, contribution margin is like the only thing when looking at the total business. Now it does get helpful though to look at gross versus contribution by channel. Because for example, your gross margin will be higher on Amazon and e-com because your sale price is likely 2x your wholesale price.

24:27Daniel Scharff:But your contribution margin as a beverage, I will guarantee will be lower on Amazon than retail because the cost of shipping liquid across the country in one case versus pallets is drastic.

24:40Alex Michaelsen:So it's important to

24:42Daniel Scharff:understand all of them, but I do think that contribution is the most important when operating a business.

24:48Alex Michaelsen:Alex from Melitas, how is that? Is that indeed how you guys really like to look at it?

24:53Alex Malamatinas:It really is. I thought that was a great description. In fact, I think I discussed it on one of your podcast with Hannah. So it's something we really focus on across all categories, as Alex pointed out, even more so in beverage. So it's something we calculate if a founder is at least aware and can share some of that information with us. It's very helpful.

25:16Alex Michaelsen:All right. And so I kind of diverted away from my question, Alex, from Melitas, but coming back to it, how was the panel for you? Did you hear any cool perspectives? You were on there with Ryan Springer from Midnight Ventures and William Cortner from Prelude Growth Partners. How did you like the discussion? Was there anything that was new or interesting for you? I know you do this stuff all the time.

25:36Alex Malamatinas:Yeah, I enjoyed sort of hearing the various perspectives. I think William, you know, invests at a slightly later stage. I think Ryan, it's some combination. So I think there were some overlapping answers, but also slightly different perspectives. And I found the overall setup very approachable. It was great to speak with founders and other people in the audience immediately after the panel. I love it.

26:02Alex Michaelsen:And I was super excited to get those guys there. And Ryan, I know, is an investor in Leisure as well.

26:08Alex Malamatinas:So I'm sure he was happy to see you guys there.

26:10Alex Michaelsen:The other panels that we did, we did flipping the script, how to vet an investor. And I feel like Alex from Leisure would be very good at that because he knows all the right questions to ask, but I really appreciated having that panel because it is important. You don't want to just go to the dance with anyone who will take you because it's a long relationship, right? Especially at the early stages, hopefully you can find the right kind of partners. And then we did a really cool one, deal terms 101, an insider look. And the idea for that was really supposed to be, hey, brands, here are some things you should really be asking for or be wary of when you get those term sheets and the requests that are coming in.

26:47Alex Michaelsen:Here are the things that could really change the game for you. So that was the main stuff. And then we capped it off with an incredible keynote. It was so much fun. So we had the guy who did the fireside chat for it. So the interviewer was David Bell, Alex from Melitas. You know him as he was a professor at Wharton when we were there and is like the legend of D2C because he was the early advisor and investor for some of the most incredible D2C companies that ever were, including Harry's and Warby Parker and diapers.com, Cotopaxi, Carraway, Touchland. That was really cool. And he interviewed Paul Vogue from Ourobora, who basically, I don't think he's doing anything in CPG now, but he just has been such a great, transparent podcast guest for us with so many learnings and vision from the industry.

27:37Alex Michaelsen:And he just basically let us all have it. It was so good. It was just here are all the things that I learned from this journey and not being PC about it. It was just really hard hitting. I was so excited to see that. And then Alex from Melitas. Also, we really excited to get to do a dinner with the VCs the night before. Honestly, our goal for it is we really believe that it's super helpful for VCs to be in close contact with each other because you guys do like to give each other a heads up. Like, hey, we're going to do this deal. Do you want to come in on it? Or it's not right for us. Maybe it's really helpful for someone else.

28:10Alex Michaelsen:We love when we can help facilitate some of the connections. Do you mind telling me a little bit about what your experience was like at that dinner? There were, you know, it was a 50 person dinner. Do you know all those VCs already? Were you able to meet new people? What kind of discussions were you having? I know most of them.

28:25Alex Malamatinas:And yeah, I think you did a great job getting all the top investors in one room. And I think it's impressive that everybody shows up. There's a lot of events and conferences to attend. So I thought it was a great turnout. And there were several investors that I hadn't seen in a long time or some that you just know in a virtual COVID world. So it was really good, again, seeing people in person. And then there's also sort of a recency bias, as you point out, like as VCs were sharing opportunities, but there's a sense of sharing deals with the people that you're in regular contact with. Or if you bump into someone at one of these events and you start talking and you see why there might be sort of relevant opportunities for you to collaborate on.

29:09Alex Malamatinas:So I thought it was great.

29:11Alex Michaelsen:All right. Alex from Leisure. So I think you've covered some of this already, but just to ask you kind of that same Paul Vogue type question, what advice do you have for brands looking back on this amazing journey that you guys have had? Everybody has learnings along the way. from a fundraising perspective, anything that you would really hope for earlier stage brands trying to get on that leisure trajectory?

29:34Daniel Scharff:Yeah. And it's actually something I learned from Paul earlier on because I used to call him all the time with questions. So that's one thing is finding a small group of people that can help give you feedback and point you in the right direction. A lot of emphasis on the word small. I think it's really important to not put too many people at the table. If you get 10 people giving you advice, you're going to get 10 different responses. And a lot of them are going to be in completely opposite directions. So I think finding the right people at different stages and in different parts of the industry that can guide you is super impactful, but then not always taking advice at face value.

30:15Daniel Scharff:Like I think it's really important and something that's helped us a lot is getting advice, digesting it, and then contextualizing it to your business because what Paul does in sparkling water versus someone in salty snacks is not going to be the same for RT dehydration. And maybe they won in 2019 and we're operating in 2026 and it's a completely different ballgame. So I think it's like not what they said, but why are they saying it? And then how do I take that well-intentioned advice and think about how I can implement it or maybe not at all. But I think for fundraising, understanding it's going to be a long road and it's going to feel impossible in the beginning unless you already have the relationships.

30:57Daniel Scharff:You slowly need to make connections and meet people over a long period of time. A lot of the investors in our business, we met and would talk to every couple of months for a couple of years. And it took two years to kind of build the trust to where the business got to a point where they were comfortable entering. So I think a lot of when you start to look at an event like this, a lot of the work is done before the event. Building the relationships, ideally, when you go to a Founders and Funders or an Expo or a BevNet, it's not your first time meeting them, but it's your follow-up touch point. And you're able to give them a couple of quick updates, move on with the day, and then you follow up after the event.

31:37Daniel Scharff:But I think it's not 2021 anymore. It's not 2020 anymore. You have to run a good business and you have to understand your business. I've been working with this concept of the CPG triangle. And on all three sides, you have margin, velocity, and cash flow management. Those are the only three things that matter as an operator of a business because they all tie into everything. And if your velocity is good, that means the branding is good. The packaging is good. Your marketing is effective. You're getting repeat purchase. Your margin is important because it's the oxygen to the P &L. But without margin, velocity doesn't matter.

32:12Daniel Scharff:Without velocity, margin doesn't matter. And none of that matters without cash flow management. If you don't have cash in the bank to pay for marketing, to buy or inventory and to build your team, none of the rest of it matters. So I think making every decision through that triangle, how does this decision affect margin, velocity and cash flow? And then also understanding your strategy. So when you talk to investors, you can say, this is how we're going to go about it. Here's what it's going to do to these three things. We also have the option to go maybe more aggressive or maybe softer on the plan.

32:45Daniel Scharff:And that's how it'll increase margin or will temporarily decrease margin, but we're able to grow a lot faster. Being able to really understand the numbers and contextualize it has been important. And I will say some people have said that the only reason they got across the line of investing was because our margins were good. And had the margins not been as good, they wouldn't have been as excited about the other things. So I think it's just very important to prioritize that.

33:09Alex Michaelsen:I love that. The CPG triangle. Ding! That's really cool. And, you know, talking about that prep work, part of the prep work is just building a good business, right? So that it's just ready to talk to people about, like, having the right margins in place already, not just doing your homework ahead of the event. But yeah, we did ask you guys to do a little bit of homework, right? We asked you to fill out the application and then also the one pager. So the one pager, honestly, like I hate when people ask me to do anything, but we really felt like those one pagers were critical to this. We had one page that was a standardized template.

33:45Alex Michaelsen:We tried to make it very beautiful that just had completely prescriptive sections that were just, yeah, like what is your fundraising history? What's the traction of the business, key data points, all that stuff. Does that fall into where you really intent on doing a great job on that? Or is that pretty easy for you to churn out at this point because you just know your business so well and have all these conversations?

34:05Daniel Scharff:It's very easy now. I would have spent an incredible amount of time on that earlier in the business. In the beginning though, and everyone has a different journey, we did not know what we were doing. I didn't know how to calculate margin when we started. So doing an exercise like this was like a whole production. We're at a different point in the business now where I think we have very clear bullet points. If we're looking at velocity, I can tell you the one, two, and three, the best data stories we can tell you. If we're talking about financials, you kind of know the margin, the revenue. So it was fairly simple to get that going.

34:39Daniel Scharff:I would say, though, in the beginning, there isn't much data in any part of your business. And maybe your margin is X, but it's not really proven over a long enough period of time to know if that's truly your margin. You maybe haven't even received the deduction yet from Unify or Kehi to know what that is. So I think it depends on the stage, but it's definitely important to be able to convey the most important things very quickly for someone to understand.

35:03Alex Michaelsen:All right. That's a great answer. So in a second, I'm actually going to ask you both for some feedback on the event. Like, what do you think we could do next year to make it even better? But Alex from El Toss, I'm just curious, was there one meeting that you had that was very special? You don't have to give the name of the brand or anything, but I wonder if you just could describe maybe if there was one that really stood out to you. maybe you already knew it going in or maybe you just realized it during the meeting, but can you just tell us a little bit about it?

35:29Alex Malamatinas:Yeah, it was a brand that I think I had heard of or I'd come across, but I'd never met the founder. It's a category that I'm very familiar with. And so I was very impressed about how the founder very clearly articulated why their product and brand is differentiated and showed me kind of that competitive chart and their positioning, talked me through it, had the product. And I walked away from the meeting wanting to learn more and thinking, wow, this is something that despite my incoming skepticism about the category, you know, this is something I could potentially invest in.

36:10Alex Michaelsen:All right. And also just a quick follow-up. Is there some unicorn company out there that you're looking for? Like, hey, if somebody out there is in this kind of a space with this kind of a margin, this kind of attraction, hit me up. Is there something out there that you're just like the golden goose? If anyone listens to this and is that company, they need to reach out to you and tell you. It sounds like Alex is building that company.

36:33Alex Malamatinas:I want to know. Doesn't it? His contribution margin and his sales velocities. I mean, Beverage is very scalable and he has a beautiful brand.

36:41Alex Michaelsen:All right, I'll take it. So it sounds like then for you really, yeah, a lot of it will be around having all of those key things in place and knowing your way around the CPG triangle. Okay, so Alex Malijia, let's start with you.

36:57Alex Malamatinas:What do you think that we could do next year to make the event even more productive?

37:01Alex Michaelsen:And I can also I can share some of the things that we know we want to try to level up even more.

37:05Daniel Scharff:Yeah, I think for earlier stage founders that have less data and their one pager inherently is going to be less attractive because they have had less time in the market to achieve things. I think it would be valuable to have some sort of system that ensures that they have more meetings, whether that's like some sort of matchmaking process of this investor might like this type of category and making sure they get meetings. because I do know some founders had one meeting or two meetings or three meetings, and then some people had 10, 15 meetings. So I think making sure that everyone is getting touch points.

37:43Alex Michaelsen:I love that. We could do wild cards where we ask the investors to leave at least one or two slots open for us to try to fill them with some of the brands that didn't get as many meeting requests from the VCs.

37:55Daniel Scharff:Yeah, and even maybe everyone has a wish list, and they list their top three investors they want to meet with in order, and then you try to get them at least one of those meetings if they're not pre-selected. I know it's tough with people on the venture side maybe not being able to be there the whole day and getting the select meetings they want, but I think it would be good for more brands if they were kind of forced into some meetings. That's so smart. I'm so glad that I asked that.

38:20Alex Malamatinas:That's such a good idea.

38:22Alex Michaelsen:Okay, Alex from Melitas. How about you? Anything you feel like we can do to level it up next year?

38:28Alex Malamatinas:I think including an additional social element or event, which includes both founders and investors. I thought, you know, as we discussed, the investor dinner was a great one, whether it's sort of a cocktails or a dinner, sort of mixing founders and investors so that you can have a discussion outside of the 10-minute speed dating. I love it.

38:50Alex Michaelsen:Okay, I've already got ideas for how we do that. All right, this is good. You know, we're always so nervous about how much of your time we're asking for, but if you're giving us the okay, then we will add something on. It'll be amazing. Get ready for something amazing. Okay, cool. Well, hey, I really want to thank both of you for supporting us at this event, outside of this event. Really, both of you guys have helped us out so much. Leisure has hosted some of our favorite gatherings in LA at your epic backyard, our founder dinners. So much fun stuff. Alex, we really appreciate all of the knowledge sharing that you've done on the panel, on the podcast.

39:30Alex Michaelsen:It really, your support means so much. And, but just more than that, what you do for early stage brands. And, you know, it's no surprise that so many of them are really eager to attend the event when they know that people like you are going to be there and your whole team. I mean, we had tons of your team there. We only missed poor Peyton, who we love because Peyton had like a skiing accident or something the day before and was devastated to miss. She'll be there. Absolutely. All right. Thank you both so much. I'm really excited. And everybody, you don't have to wait all the way until next year for founders and funders, because I'm really excited to let you know that we will be doing a mobile version called The Roadshow that will hit a city near you, if you live in a major city, sometime throughout this year.

40:15and so our goal with that is this event because of the nature of it it is curated it's we just

40:21Alex Michaelsen:can't put absolutely every brand into the room and have the event run the way that we have designed it but we do want to have events that are more open just for any brand that is interested to come and attend and meet these incredible vcs so the roadshow is going to let us do that we're really excited to share more details about that soon so stay tuned and we will see you in the Slack. Thanks, everybody. Thank you.

40:46Alex Michaelsen:Well, my friends, we've now arrived together at the end of another episode of the Startup CPG podcast, the top globally ranked podcast in CPG. As you may know, we're not just a podcast, we're a community of brands and experts, and you should join. You can sign up at startupcpg.com. You'll then get an invite to our online Slack community. You're going to hear about amazing events near you, all of our special opportunities to get you in front of buyers, investors, brands, and more. It's a free community. So what are you waiting for? I will see you there or on our next episode. Bye-bye.