Founder Fundraising Journey: Jesse Konig, CEO & Co-Founder of Jesse & Ben's

19:46Jesse Konig:For us, we knew that there's big multi-billion dollar pairs in this space. they have hundreds and hundreds of millions of dollars invested in infrastructure and manufacturing capacity and all these things that for us to give people a genuinely better product and compete at that level of scale and price on shelf and all the other things to be a real competitive product and not some niche expensive premium product and health food source we knew that we needed at some point to like unlock that level of infrastructure and capacity for lack of better term. And I think knowing all these things, we kind of knew that ideal world, we can build something up, grow really fast because, you know, now better than never, we've got to move quickly here.

20:27Jesse Konig:And we knew that we could basically go out, prove this out, and eventually find hopefully a big incumbent, big food player that understands that the writing is on the wall and they need to do something innovative and new and do things a better way. And I think when you look at businesses that sometimes get some flack, but you look at Primal Kitchen or you look at Epic Provisions, You look at some of these companies and Siete, they got acquired and they've really been left alone. The big food companies know that like these are the shining stars of their portfolio. Let's not mess up the magic that we bought them for.

20:58Jesse Konig:So I think we're very aligned to that, that if we can find an aligned partner who can bring a level of expertise and know-how and infrastructure that can help us get our product into thousands of more grocery stores or to much more affordable prices so more people can enjoy it with better ingredients. even if our product eventually suffers by three to five percent it's better to be three to five percent worth and be touching millions and millions of households than be the perfect best source premium thing for like the one customer but then you're only touching hundreds of people so all that in mind we kind of knew if we want to go big we want to go fast we don't need to necessarily own it forever there might be a partner down the road we should go out and raise capital so we can move quicker make a couple mistakes and try to get there a little bit faster and also for lack of a better reason too we just came off of basically starting from zero and 10 years in restaurants and you know sort of rolling into this very survival part of the restaurant industry where like we didn't have the luxury of having a 401k we could cash out let alone you know a savings account that we could invest our own money in so it was sort of like we're either going to go all in on this restaurant thing again and really put our minds to that or we can get really excited about the cbg opportunity we can go all in on that but we know we need to find financial backing and a partner to help us go a little bit faster and go further together.

22:16Hannah Dittman:Yeah. What was the conversation with the retail buyers like, given where you were at in the market? And then once you got that PO in, how much time did you have to get through financing and get the actual inventory build as you're kind of getting through the rest of that journey?

22:31Jesse Konig:Yes. So we had a really great product we thought tasted amazing. We had the name and generally an idea of what the kind of brain stood for and where it was going. So when we were getting out there started to pitch retailers we were really trying to get them bought in on the story and how we thought this was totally new and novel and no one else was doing it luckily we were not competing in a category that had tens of other competition it was basically a bunch of people had been around for 10 or 20 years and then us so they were excited and willing to take a bet on us and then the other part of your question is like okay so you kind of get a yes or a maybe at least now you're trying to figure out like okay how are we going to fill these orders and get set up with the distributors and do all the things.

23:09Jesse Konig:One thing that was a really interesting part for us is we didn't know that much about CPG. We knew a lot about restaurants. So we knew we made a great fry that could service restaurants too. So we actually started selling our fries wholesale to restaurant distributors to sell into restaurants. So we started with food service as our primary channel. And we did that for maybe March, 2024 until it went a little bit beyond this, but it was our core business line until June when we launched on retail shelves. So we used that to kind of get the reps in, make a product for restaurant distributors. It's a different part of the business, but it was enough to sort of get us inventory, kind of get the equipment up and running, figure it all out.

23:46Jesse Konig:So when we were able to launch into our first accounts, which were actually Mom's Urbanic Market on the East Coast and also Whole Foods, we launched in the Mid-Atlantic region. And then we launched with a DSD specialty distributor called Rainforest Distribution, who services the Mid-Atlantic and Northeast and Boston metro areas. So sort of these core natural stores in the mid-Atlantic area, some independent stores all over the place, thanks to our friends at Rainforest. And we just sort of ran with those accounts and used that as a way to get off the ground.

24:13Hannah Dittman:Got it. That's really smart and strategic. So you kind of used your base foundation knowledge as a way to get some working capital in the door, iron out some of the creases and keep the momentum going as you were kind of really formulating the big swing down the road. I think super smart and strategic. You know, looking back, obviously you've kind of gone through a couple fundraising cycles now. What do you know now that you wish you knew when you started your fundraising journey? Maybe some lessons learned or other pieces of advice that might be helpful for someone just starting out to pick up on?

24:46Jesse Konig:So one thing I'd say that was top of mind as we were a little bit earlier in the conversation that was really important is that there was two of us. So the way Ben and I have always split things up is that I started doing everything outside the bag. So I get to do fun stuff like this. I'm in a lot of the sales meetings and doing marketing and brand and some painful stuff that's administrative or legal, but generally all the things that are sort of outside the bag, front of house, that's usually my kind of lane. And Ben has always been focused very much on the inside of the bag, the formulation, the operations, all these kinds of things.

25:15Jesse Konig:Why I bring this up is that when we went to go kind of go through this, hey, we just got Whole Foods and Sprouts nationwide. Whoa, how are we going to do this? One part of it was signing a lease and going to figure out how to open a 6 ,000 square foot facility. The other part of it was to go figure out how to go raise the money so luckily both these are very meaty projects and they took a lot of time and energy we were able to divide and conquer where i basically went out and ran a fundraising process and bam was able to hold down the four and figure out how to stand up this facility and get three shifts set up and be running 24 hours a day and all this crazy stuff i got him some gray hairs i mean he did an amazing job hearing that out so i'd say having two of us with different kind of lanes and expertise was really important but maybe like the meta lesson here that I've heard a lot of good advice on.

25:56Jesse Konig:I didn't really believe it, but now I do, is that fundraising really is a full-time job, even if it's something that feels like you can sort of do it nights and weekends, kind of do it 10, 20 hours a week. What we learned is that it ends up making the process a lot longer. It's going to ultimately take you more time than if you were able to spend as much time as possible on it for three, four weeks even, and get a lot of that momentum, because it is such a momentum game. It's something where you can get one conversation to lead the others, people sort of have a little bit of this hive mind that when things are going well, and there's a lot of people looking at it, everyone wants to get to be involved.

26:31Jesse Konig:And you miss out on a lot of those things. You end up having all these one-on-one negotiations and these one-on-one things if you end up having it spread out over a long period of time. Whereas if you run more of a process, as it's sort of like called in doing this, you run a fundraising process and there's a deadline and you're able to have tens of conversations in a very tight window, maybe even 50 or 100 conversations in a very tight window there's this weird one plus one equals three that happens where investors all kind of get a sense that what other people are looking at and just other people being interested makes it more interesting to them which is a little bit of a weird dynamic but we found it to be true especially in a little bit more of an institutional fundraising process whereas the friends and family thing it might just be you can convince people one-on-one to come and kind of believe in you and you're really betting on you more than anything else.

27:18Jesse Konig:When you have data and you have retail presence and you have a little bit more of a buttoned up pitch and a plane of where you're going, you're really trying to just get as much of that momentum and enough of the people looking at this business at once to drive a competitive process. And one thing I can share is when we did run a little bit more of a priced process, we're working with some of the larger, more institutional folks. There was one group we got a turn sheet, it ended up being a safe, another safe with one number on it for the post-money valuation cap, they would call it. The number changed three times in one week.

27:52Jesse Konig:So it started as a very low number. And then, you know, it went up by$5 million or something like that in five days. And then five days later, it went up again. And that was just because they realized at first, it was sort of like, we want to do this deal based on the numbers we've been looking at in a vacuum. All of a sudden, they realized, oh, crap, there's other people that want to do this. oh, we actually didn't look at this other new number that came out from this month's data or sales and how fast it's growing. And all of a sudden, all of the very disciplined processes that are out there in the world, they all get thrown out the window and it becomes a bit of a FOMO game where everyone wants to do the deal and they're able to kind of flex on some of the rules that were very steadfast when you first talked to them.

28:31Jesse Konig:Now they're a little bit more fluid and people are able to be a little bit more flexible with you.

28:34Hannah Dittman:What a nice place to be in. I get to get wined and dined and fought over. That's really awesome. Congrats to you guys for the success. Obviously, you've been very competent on the business side, but also on the fundraising side, and those two go hand in hand. When you think back about what really started making people lean in or resonate with your fundraise the most, what do you think some of the things you were saying or attributes in the business or narratives were what they were really anchoring on and you believe to kind of be attributed to the success you've had on the fundraising side so far.

29:11Jesse Konig:One thing I want to point out is that like fundraising as a skill set is really weird because it's a total side quest. Like maybe it correlates to being good at sales or selling a retailer or something like that, but it has nothing to do with your business being a good business or a bad business. Some people are just genuinely better fundraisers or worse. It's nothing against you if it's not in your skill set. It is something you can learn for sure. But I just want to point out too that like we've been lucky that I've been able to spend time on it. Ben's an incredible operator. He's willing to give me the space to go and do it.

29:38Jesse Konig:Naturally, I'm a little inclined towards being good at it, I think, on the spectrum of things. But it has nothing to do with whether it's a good business or bad business to invest. It's just sort of having the time, the space, being willing to network and not be afraid to reach out to people and ask for introductions and ask for answers on things. So it's more of a confidence game than anything else, which it can sort of be fake confidence, honestly. You can sort of just fake it to make it a little bit. But I'd say genuinely, though, what made our business stand out is just like we had a good product, I'd say a great product, and we had really fanatical customers and really great data.

30:12Jesse Konig:So like that first fundraising round, we didn't have the fun. It was very much of like one by one, just like trying to like leverage every contact and person that ever talked to and ask for introductions and figuring out one by one over the course of six or eight months. And then our second time we went through the process, we had a little bit more of like real regional sales data. And we had authorizations from Whole Foods and Sprouts. And we can sort of paint this picture like here's where we're at today. Here's this incredible velocity data of what we're doing on the shelf. If we came and get 80 % of that or 60 % of that nationwide, like that would look like this.

30:45Jesse Konig:This is how this would look in 12 months. So you can sort of just like paint a picture using real data today and be able to show people what's going to happen in the future. But we had the basis of it working because we had amazing velocity data in our core regions we were tested and learned and it was working really well we had even silly things like really good engagement on social media i had multiple investors that would comment you know either kind of like after the fact when they worked with them or just during the process about oh my god like i was looking at your instagram post you guys have 30 comments from like real people that are obsessed with the product it seems like a small detail but like it is as important as these other things because people can start making those pattern recognition things in their head where they say, oh, this reminds me of that other amazing brand that we invested in at Solo, that one we missed that was really amazing that we should have invested in.

31:33Jesse Konig:And a lot of it comes down to like, do you have genuine fans who love your product, but they'll be disappointed if they go to the shelf and you're not on it. And, you know, being able to send a sample and know that it's going to be an amazing experience and people are going to love the product. Those truly were like the main things was like the velocity, the engagement we'd be able to build on social and the quality of the product that when people sampled it, they kind of understood it they gave to their friends or asked their friends feedback on it really liked it those were really the underpinnings that allowed us to run a good process because we're able to sort of like use that data build a really good story and narrative and then be able to talk to enough people all at once to get a little bit of that kind of FOMO that it led us to be in a position where we were able to sort of like pick who we wanted to work with and super grateful like and privileged to be in that position I understand and not everyone can get there but I do want to encourage people that like there's an element of luck certainly but really if you build a great business you get good advice and you build a good story if you really are thoughtful about like dedicating the time and running a process getting a lot of people looking at all at once way more than you expect there might be 80 conversations to get like eight genuinely interested people looking at it at the same time that's really all you need is you need five eight really true believers and hopefully that leads to two or three people that want to do the deal and if you have two or three of them instead of just one it gives you all the leverage in the world because they're fighting over a precious resource, which is you and your business and believing in you.

32:57Jesse Konig:And at the end of the day, mostly what they have is dollars. And that's not that special. A lot of people have dollars, even though it seems like the only thing you need when you need it, it seems like it's the most precious thing in the world. But if you can take a step back, you realize there's a lot more people with funds, a lot more people trying to invest in brands. And there are amazing founders like you, if you're listening, that are out there pushing through the hard times and figuring it out. So don't set yourself short. Don't think that just because someone's bringing you an offer. It's the only one you're going to get.

33:24Jesse Konig:Make sure you do yourself the service of talking to enough of these funds to get enough perspectives to realize like what does market actually look like? And it might be better or it might be worse than what you think. And if it's worse, you can get feedback and learn from that. And maybe you put a pause for three months, fix some of the things you got feedback on and go back out and run a process once you've solved those things.

33:42Hannah Dittman:I love the mentorship and empowerment. I think that's a really inspiring, energy boosting words of wisdom from you, knowing that you're in the trenches alongside so many of the other founders out there climbing the same mountain and fighting the same fight. When you were selecting investors to join you on your journey, what mattered to you and an investment partner? What was kind of your selection criteria and why?

34:05Jesse Konig:We took this really seriously. And I think, again, it comes back to some of the things we were just talking about, where you have to have the discipline to run a process. You have to have enough auctions around the table. But if you do have multiple people around the table and some of us could just be a level of discipline around like a lot of outreach and more than you think but we look at this as like as important or more important than interviewing for a new employee it's going to be your third or fourth hire first hire or as important as like thinking about your girlfriend or your boyfriend or your spouse like we really wanted to know the horror stories and the good and the bad and the ugly about some of the investors we were considering especially those that might come in and like lead around or kind of be the person helping you set terms for a round.

34:45Jesse Konig:And I think a lot of it, it's easy for investors to be great partners when everything's going well. And it's easy for them to provide references to say, hey, these are, you know, two or three brand founders. I can introduce you. You can talk to them. Get a good read. We wanted to find the nuggets of like, who's not on their website portfolio? Who did they not market that they're a part of? Or who is the brand that was kind of interesting and cool a few years back, but lost a little bit of the luster and get in touch with those founders because you know they're all smart people they're on the same boat as you they could you know one turn in a business could have you be in the exact same position get their feedback because the folks that aren't in the like shiny object cinderella story everything up and to the right which you know is a lucky position to be in and almost every business has hiccups so it's very rare that those things happen for five six seven years in a row without a hitch some of them do happen and god bless them and we hope that could be us if our thing goes according to plan but we know probably won't but i'd say that like if you find those people and maybe things go a little bit flat a little bit sideways you're trying to figure things out how did the investors react then were they in their corner were they trying to help them solve problems were they really annoying and asking for like tons of homework assignments to get them up to speed and help them like solve the answer did they think that they were the smartest people in the room were they genuinely there to help and that's like what became our biggest metric of what we are looking for is like who is the investor that you know you want to call if there's a recall and something really really bad happens it's like it could be the end of the business and you want to call when you get like a huge win with one of your big main you're like big retailers just gigging a new skew or they're launching nationwide like that's the kind of relationship you have but when your phone rings you want to be excited to pick up the phone and kind of jam out and talk to them you don't want to be like oh my gosh this person's calling me again like i can't believe i got to talk to them life's too short honestly to take money from folks that like don't have high integrity or you're not excited to talk to or you're just not aligned with just because they have like a brand name that gets you excited or that's going to look good in a news headline or something like that.

36:41Jesse Konig:That's how we tried to look at it. And I would say like the best investors, and we had some really amazing ones join our group in the last round. Many of them had a very similar pattern that we learned. And they'd say, you can talk to any of our brands. It's like, reach out to any of them on your own. I'll introduce you to any single person you want. They're going to give you an honest assessment. and when there are funds that give that kind of offer and then you take them up on it and it rings true that every single person you talk to is just singing their praises. They're such good people. They always had my back.

37:12Jesse Konig:They were there when this thing happened. Even when their expertise, they're like leveraging their network and sending emails and solving problems for us. That is something that you can't really replace. And I think that's been our biggest thing that we've always been looking for. And then there's certainly degrees of smart money and reputation and all these things. But at the end of the day, you're getting married, for lack of a better term, to these folks for five, seven, ten years of your business. And if you're the co-founder or founder of your business, you're going to have a lot of interactions.

37:39Jesse Konig:And a lot of them could be your own negative things and hard things. And you want to make sure that you're not signing up to be sort of in your honeymoon phase and just excited because someone's throwing money at you. And you realize that you're stuck with somebody that is really not aligned how you see the world.

37:53Hannah Dittman:Yeah, back channel references, so important. And I love your advice. I think it's so true. what a better way to get to know what someone is going to be like for you in a quote-unquote job than hear what they were like in a past job with a very credible person and a lot of data points on it. So definitely echoing that advice and I think it's definitely sage advice. I think a lot of investors will even tell you themselves if you want to know about us, best thing you can do is ask people about what it's been like to work with us to your point as well. So I feel like the more open and collaborative they are and not afraid to be like that, the more they know that they've got soldiers out there with some good data points to back it up.

38:32Hannah Dittman:I'd love to pivot into a Slack question. As you know, Startup CPG has the largest Slack community in the industry with now over 35 ,000 members. I'd love to pull a question directly from our channel and have you answer it as a case study for any founder that may have a similar question. Today's question is, what is the best way to determine the size of a fundraise round that I need?

38:53Jesse Konig:That is a great question and one that we're always trying to figure out ourselves. And I think there's not a right answer. Like so many things in our business, there's a series of trade-offs you make. And I think one thing that we've learned from various smart people or smarter than us and been in the industry longer than us is that you usually need more money than you think. That doesn't mean you need to take it all in today, but you want to make sure you have enough to get you to the kind of next inflection point in the business i think the one thing that we learned a lot that i think could hopefully help people they're thinking about more of a traditional fundraising process is there's sort of an unwritten rule in a lot of ways where you kind of need to just have this plotted line going up to the right and that's how you keep momentum you keep your investors happy and you get your new investors excited is that you need to be able to essentially kind of always go like two or two and a half, three times more valuable than you were previously.

39:44Jesse Konig:And these can be on safe notes or price rounds or valuations, but generally you need to basically show that where you're at today is going to get you to two or three times more valuable with the amount of money you bring in the door. So if you can think about it with that rule in the back of your mind says, you know, just super made up numbers here. If we raised that$10 million and we're not sure if we take 2 million or 3 million or 5 million, and you're thinking about, you know, the different dilution that could come with a$2 million raise versus the$3 million raise and a$10 million valuation could be a huge swing.

40:17Jesse Konig:But you also need to think about like, what does my business need to look like to be worth 25 or$30 million? And what do I need to do to execute? And if you're conservative and thinking about, well, like we need to get our trailing revenue to a certain threshold, then you need to have three times your trailing revenue is going to really get you to where you need to be. Again, like this is all kinds of stuff you have to do your homework on and realize like how are investors going to look at your business and understand how you can work backwards. But let's just say that you think that if you can get to three times your trailing 12 months of revenue, that will get you where you need to be.

40:47Jesse Konig:So if I can get to$10 million in revenue from where I am today, that would get me to a$30 million valuation. It'd sort of be safe at that point to go out and raise money again and have everyone super excited and get to pick what we want to work with. So if you can do all that, you got to figure out what's going to get me from here to there in terms of cash. And it really depends on your business. It could be you're vertically integrating and you've got to make some big infrastructure investments in your space or a co-manufacturer space. It could be working capital and inventory and just filling the orders and knowing you're not going to get paid for 60 or 90 days by your distributors.

41:19Jesse Konig:And how do you fund that in the meantime? And I think the biggest piece of advice I'd give is there are unknown unknowns you can't really plan for. And the only way you lose the game is you run out of money. it's the only way you can lose the game of entrepreneurship and cpg is if you run out of money run out of oxygen you're at you're knocked out of the game so i'd say like you don't want to get too cute and over optimize if you think you need 2.2 million dollars don't raise 1.8 and get a 400 000 line of credit right like maybe you don't even raise 2.2 maybe you need to raise 2.4 or 2.5 and if you're asked by an investor or you're just for your own practices you're writing out where that money is going to go.

41:59Jesse Konig:Just write unknown unknowns or write miscellaneous. And you know, you don't know what you're going to use it for. You just know you want to have an extra few months of runway. So that if that fundraising process takes a little bit longer or that launch gets delayed or one of a million things happens, you're not going to be in a position that you need to go out and fundraise earlier than you thought you would. And now you're risking being in a situation where investors have a lot of leverage and they can kind of give you not great terms or you're going to be in a rough spot so that'd be my main piece of advice is that generally and this is all advice we've gotten and we've been taking to heart it's like you don't want to go too crazy but a little bit extra to keep you in the game that extra four six months if that's going to be the difference to get you maybe to you know be in a really great spot versus being stuck with really bad investor terms just to stay alive in the business it's worth maybe an extra few points of dilution and at the end of the day you're hopefully building something really valuable especially if you are building it thinking you might sell it one day and you won't be kicking yourself you know if you have generational wealth or you have an amazing outcome for your family and your life and it's a few million bucks short because you sold a couple points early to make sure you could get there so i'd say there's a rainy day fun and i was certainly sure i wouldn't say like double the amount but if it's a five hundred thousand dollar a million dollars more than you think you need it probably is going to be a huge difference maker just from your own sanity and keeping you excited and in the game.

43:22Hannah Dittman:Such a great piece of advice and a really smart way to think about runway and all the different dynamics and factors that influence capital needs, not just the straightforward monthly burn, but the growth determination and what that implies for valuation and a future fundraise and all the other aspects that are really important factors to consider as well. Jesse, I have a huge admiration for you as a founder and a lot of appreciation for you speaking with us today. Huge fan of your brand. For any founders or investors that want to reach out to you or follow along on your journey, where can they find you?

44:00Hannah Dittman:And for anyone that may want to join the Jesse and Ben's team as you guys continue to grow and take off, what advice would you have for them?

44:07Jesse Konig:So if you want to get in touch, easiest way would be through our website or even just like DMing us on Instagram. I actually run most of our community stuff on social. still these days so if you're deannaing us it goes to me if you really want to guess or get our attention buy some fries take a picture of them share them we love seeing people trying the fries and like extend what they think so that's always a good way to grease the wheels and then in terms of people thinking about joining the team yeah we are growing the team we've been super scrappy we've pretty much got the business to where it is today with basically ben and i and a ton of amazing fractional people and consultants and stuff like that which is a little bit abnormal but totally in the realm of possibilities nowadays with all the amazing people doing fractional agency work.

44:49Jesse Konig:But we are at the point now we're trying to build out a full-time team and looking for some amazing folks. So if you've got a resume, if you've experienced in CPG and you're really inspired and excited about what we're doing, we'd love to hear from you. Please just shoot us an email. We've got a contact form on our website. We'd love to meet you.

45:04Hannah Dittman:Awesome. Well, thanks again for the time today, Jesse, and all the amazing learning. Huge inspiration for a lot of founders out there. And I know the whole startup CPG ecosystem is really rooting for you as well. So thanks again for your time and for sharing all of your nuggets and your story with us.

45:20Jesse Konig:Thanks. We're rooting for everybody else too. It takes a village. This is our favorite part about food and CPG, whether it's restaurants or CPGs. Everyone's in it together. It's super hard. And if we can ever be helpful, really happy to chat and hopefully help you out. As you know, this business is hard and demanding on time. And when you've got young kids, there's even less time in the day. So you might not be able to answer every question or hop on every coffee or call, but if we can ever be helpful, happy to try to point in the right direction. Wishing you all the best.

45:45Hannah Dittman:Awesome. Well, thanks again. Well, friends, we've now arrived together at the end of another episode of the Startup CPG podcast, the top globally ranked podcast in CPG. And if you love this podcast, you'll love our Slack community even more. Here at Startup CPG, we're a community of brands and experts, and you should join. Sign up at startupcpg.com. You'll then get an invite to our online Slack community of over 35 ,000 all-star CPG members, hear about amazing events near you, and all 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?

46:23Hannah Dittman:I'll catch you on the next episode, and I'll see you on the Slack.