Investor Spotlight: Alex Malamatinas of Melitas Ventures

0:02A few years back when I ran a beverage company we had to launch using those plastic sleeves to put our designs on the cans. but they looked bad. The sleeves get stretched out. They don't cover the full can and overall, they just look and feel low quality. Lucky for you, digital can printing technology has come so far over the last few years that now you can launch your beverage brand or new SKUs with a fully printed look and it's at similar pricing to those plastic sleeves. Our friends at CanWorks, which is the largest US-based digital can printer, are happy to work with our community at very low minimums, even one pallet.

0:32They've got locations in the East Coast, the West Coast, Texas. Get in touch with them through our contact form. It's at canworksprinting.com slash startupcpg.

0:58I would say to stay focused. When you're building an early stage company, there's so many distractions. There's retailers, there's investors, there's people that can help you as advisors or team and sort of really focusing in on what you think is going to work for you and your company. Hey, everybody. I'm Hannah Dittman, operations and finance host of the Startup CPG podcast. Today, I'm thrilled to be joined by Alex Malamatinas, founder and managing partner of Melitas Ventures. Alex quite literally grew up in the consumer and CPG world, and that lifelong love for the industry is what ultimately led him to launch Melitas Ventures in 2018.

1:39He partners with visionary founders who are reinventing everyday consumer experiences, the kinds of companies that become part of people's routines, habits, and lives. Over the last 5 to 10 years, Alex has been involved in some of the most compelling CPG growth stories, and he's not slowing down anytime soon. His track record reflects a deep belief in authentic, better-for-you brands paired with disciplined fundamentals and a commitment to supporting founders across every step of the value chain. In this episode, we dive into the realities behind the numbers, including the difference between gross margin and contribution margin and why founders need to understand both long before they scale.

2:13We also talk about what actually matters in an investor partnership, the types of problems great investors help you solve beyond just capital, and how to communicate the right information in a pitch. Alex brings the combination of experience, clarity, and practical insight that every founder needs. Enjoy!

2:33Hey, everybody. Welcome back to the Startup CPG Podcast. This is Hannah, and today I am here with Alex Malamitinas, an investor from Melitas Ventures. Alex, welcome to the show. Thanks, Alex. Great to be here. We're so lucky to have you here today. I'd love to kick off with you introducing yourself. Can you share your title, a brief background of your experience prior to Melitas Ventures, and what led you to investing? Absolutely. So I'm the founder of Melitas Ventures. We are an early stage venture capital firm that invests in better for you consumer brands, everything from food and beverage to supplements to beauty and personal care.

3:13A little bit on my background, so I guess on the personal side first, I was born and raised in Europe in a CPG household. So my father was the CEO of companies like Burger King and Smirnoff in the 90s, which is part of Diageo. And so I really grew up with consumer brands everywhere. And then I ultimately went into finance, so began my career at Morgan Stanley. And then after business school, I was trained as an investor in the hedge fund industry in New York. I worked at a Soros fund and a Tiger fund, so a less conventional VC path. I think I learned a lot about how to invest in portfolio management and ultimately really found my passion in entrepreneurship and supporting founders and saw the opportunity to launch a fund to invest in the space and launched our first fund in 2018 and have been investing out of Melitas Ventures funds ever since.

4:15That's really interesting. And what big shoes to be filling with your father and how exciting to have a childhood like that, learning and experience all that growing up. Very unique and very cool. Before we dive into some more conversation, give me a little bit more of an overview of Malitas Ventures and walk us through your investment criteria. The things I'm thinking about are stage focus, any key themes, which I know you briefly touched on already, how you differentiate as a fund, average check size, things like that. Yeah, sure. So we invest early stage. So we define that as being seed series A rounds.

4:49We look for initial product market fit and revenue traction between one and 10 million annualized. That can be initial traction in retail or DTC. Ultimately, we're looking to build successful omnichannel brands. We're certainly looking for differentiation and authenticity from these brands, talented founders who we can work with. And yeah, we're thematically based. So I mentioned sort of certain broad categories at any given point in time. There are certain subcategories and themes that we're particularly excited about. And given that we're early stage investors, we really want to be early in these innovation cycles and to the extent possible, try to avoid fads.

5:33That's really helpful and great context. Before we dive into some more thought leadership questions, I'd love to ask you the question of what you love about investing. And given you've had such a broad experience and exposure, what made you choose this path instead of a different one? Yeah, so I think to simplify the world, obviously, it's a lot more complex than that. But in sort of our little universe, I think not that one can't be both, but I think sort of the realization of you're either an operator or an investor. As much as I love supporting operators and I sit on several boards, it's very clear in my mind that I'm an investor.

6:08That's what I love to do and that's what I think I'm good at. And what became apparent to me was that what I really enjoy is sort of identifying longer term structural themes and investing in companies behind that and supporting these companies succeed over time rather than short term trading and stock market. I imagine the partnership between investor and operator is a pretty unique one that you have quite a lot of experience with, given that you're on the earlier stage side. How would you describe that working in its most idealistic form? And what do you really like that dynamic to be like? Yeah, I think it's really the ideal combination, the operator-investor mindset.

6:50And it's something that we certainly have at Melis House Ventures. One of my partners, Jacques and Tebby, helped build Kind Snacks into a very successful company. And so I think generally speaking, an operator looks at it through a specific lens, an investor looks at it through another lens. And I think sort of reconciling the two generally makes for more successful investment decisions and also helps the companies themselves succeed. succeed. And I know that at Melodas, like it's one thing once we've decided to invest, it's another when we then help these companies and support them through operational challenges.

7:27And therein sort of having that operational support and expertise, people who have seen these challenges and built large and successful companies can definitely be very helpful to these early state challengers. Most definitely. I think it takes a village really. There's such a huge world of possibilities of things you'll encounter and things that happen. The more learnings, the better. When you're evaluating operators or founders as potential investments or investment partners, what are you typically looking for in them or what really stands out to you? Maybe there's an example of an experience you've had or a company you've worked with where you felt like it did a great job showcasing it, but would love to understand a little bit more about what kind of profile in person really can drive a successful business forward?

8:14Yeah, I mean, it's very challenging to build a business, let alone from sort of the ground floor up. So every founder is different. But if I were to point to common traits, I'd certainly point to resilience. It's generally not an easy journey, even if it's a very successful one. So founder who's truly passionate and willing to focus on this day in, day out. And then it's a sort of important balance between both boldness and humility. I think a founder needs to certainly have that boldness, but then also the humility to know when he or she should perhaps listen to a different perspective from somebody else on the C-suite or a junior person or an investor.

8:59And that generally takes somebody pretty remarkable that can do both. As far as examples, it doesn't have to be the case, but I have to say when it works, the co-founder dynamic can be really effective because then you have sort of right brain, left brain, or sort of two people that are complementary. And we've been fortunate in that we've experienced that successfully in a handful of cases, but I would point out Inolapop, prebiotic beverage company, so that's David and Ben, that I think really complemented each other. And likewise, Magic Spoon, Gabby and Greg. And so generally, these are individuals who are involved from the early days.

9:39And perhaps one side is sort of more focused on marketing, the other is more focused on operations, and they're able to build a successful company. Yeah, it's such a tall ask for founders to do it all themselves. I mean, and some people do, and it's really impressive, but it totally is. The left, the right, bring your hand in so many pots. There's so many things to execute. A lot going on, especially in the early days as you're building out your team and rounding out your capabilities as a company. Alternatively, what do you think makes a strong investment partner for founders when you're working with people like the Olipop founders or your other portfolio companies?

10:16What is it that you think they saw in you that made you a compelling fit for them? I think it's helpful to find a partner whose focus is your business. So in our case, we're a dedicated early stage CBG investor. So we've come across and worked with so many early stage CBG founders and been able to understand their challenges and help them scale. So I'd say that's the first. And then just truly being collaborative partners. And I think that involves the human element of understanding each other, what's important at different stages, challenging each other in a constructive manner, but generally supporting due to potentially a successful exit.

11:00And I think in our case, fortunately, we've, which I certainly don't take lightly, but I think we've built a strong reputation of being helpful partners and good partners to many founders in our space. It's a small ecosystem. So founders, particularly of best performing brands, definitely have a pick of which investor they're going to have on their cap table. And it's something that they should take very seriously because ultimately they're choosing their partner. And I think I would encourage any founder to speak to founders of portfolio companies and really understand how their potential future investment partner is like to work with.

11:41Yeah, that's great advice. I feel like do your reference checks both ways. Make sure you know who you're getting married to going off of that a little bit. I'd love to get what the relationship is like at the beginning, all the way through your first meeting of a company, all the way through the diligence process and post investment, if that's the way that it goes to really shed some color on what types of things someone might need to be evaluating a partner for. What is that relationship even going to be like? How frequently are you talking? How intimately involved are you going to be in their business?

12:15Just some candid conversation between the two of us of what you think that would actually look like in brass tacks for someone who maybe is very unfamiliar with what that dynamic is supposed to look like. Yeah, so I think generally speaking, when we meet these companies, they're really in their infancy. And I love meeting founders when it's even just an idea, because you learn about their vision from the very early days, and you get to know each other, right? I sort of prefer getting to know each other more organically rather than or expect in term sheets in two weeks. And you have to focus on other things, and you can't really build the relationship that quickly, at least in an authentic manner.

12:56And by getting to know each other, you just have a better understanding of the other person, which I think is best from both sides, right? From the founder and the investor side. And the reality is, as you go through the diligence process and the legal process, there's signs. And I think sort of over time, I've realized to listen to these signs because they're quite telling and foreshadowing of the relationship to come, both positive and negative. And so I've really tried to be as transparent as possible with founders before we partner. I mean, you pointed to the analogy of a marriage, right? It's best to go into a marriage with open communication.

13:33And I think it's the same with a partnership with a founder or investor. Great answer. I'd love to double click on some of those learnings that you've had. What type of things do you feel like have been postmortem harder lessons learned that are more watchouts for you now with founders or that dynamic? And what do you think were ones that you wanted to lean into more that you felt like, oh, yeah, I should definitely seek this out again, this behavior or trait? I mean, I think at a high level, like a founder might not always listen to their investor. that's fine. But if you're bringing on board an investor into your company, hopefully you're looking for something more than just capital.

14:13And particularly if it's in a board capacity, hopefully you're evaluating their perspective and occasionally looking for feedback. And so for us, we really appreciate that. We love working with founders who seek out our perspective and want to build collaboration with their team, their investor base. I'd say a telling side is an investor who just wants capital and they don't want feedback from their investors. And that's fine. So that's how some founders built businesses, but it's just we might not be the right partner for them. That's not how we operate. So I think just being, again, sort of intellectually honest is quite critical, particularly in those early days.

14:52This is going to be a big, broad, ambiguous question for you. But I feel like a lot of times I think founders are familiar with the idea that investor might sit on your board, they'll help with your business, they might have advice. But I'd love to unpack that a little bit more of what that actually looks like. Are there any examples you'd feel comfortable sharing or maybe a way that you could portray what exactly what types of initiative strategies or company feedback does an investor really provide to a company? At what level of the business are they getting involved in? Obviously not the day-to-day-to-day minutiae, But what are some of the ways that they direct a company or co-lead some of the vision there?

15:34There's so much. But I mean, ultimately, I think as you allude to it, it's not investors not involved in the day to day. That's for the founder and their team to manage the business. But an investor with the relevant experience and insights can help with everything from figuring out their production, command facility, supply chain, negotiations with buyers and retail, pricing and direct-to-consumer, which channel? Is it Amazon? Is it your own website? Product innovation, team building, what's the right word chart? Should you bring on a strategic investor? When should you look to exit? How you should manage that exit process?

16:17I mean, I've just thrown a bunch of different things at you, but there's so much, right? And a lot of this just comes with the growing business and the needs change as the company scales. So I think choosing an investor who has that experience and can help you as you evolve can be very helpful in determining a company's success and certainly exit. There are some incredible operators out there, but making a difference in terms of a successful exit can really come down to choosing the right banker, not choosing a banker, bringing a strategic early on, not bringing a strategic early on, what type of strategic.

16:55So these seemingly small decisions can really factor in greatly to the outcomes. Yeah, I feel like there's almost no small decision in CPG. Even something as small as the little text on your packaging that, you know, you're going to be agonizing over. That makes a huge difference sometimes. So it makes a lot of sense that from the bigger picture, board level, really game theory, company strategy viewpoint, there would be a lot of nuance and vetting and decision making needed there as well. We'll be right back. Are you going to crush it on Amazon this year? It's such an important channel, but it's so hard to do alone.

17:32And most agencies are a total ripoff. We can't afford$5 ,000 a month and a commission on our sales. They just don't get it. That's why I love our partners at Daybreak. They are full service, meaning they do the creative work, the listings, the logistics, and of course, all the ads, all with the most reasonable retainer out there. I work with them personally. I'm so grateful we have such a good partner to recommend out to you, our community. They do evaluate your product first to see if it might be a fit. So if you want them to have a look, email them. startupcpg at daybreak.agency and they'll do a free audit for you.

18:03Good luck, everyone.

18:08I'd love to touch back on the diligence process. Obviously, that can be a black box for a lot of founders and one that I'm sure most of our audience is thinking about as they embark on their fundraising journeys or have been or plan to. What's your diligence process like? What are your expectations at each major milestone throughout it? And what makes a company really stand out as they go through the process with you? I think what makes a company stand out is a company that's organized. And I know that's hard when you're building a company and maybe you have limited resources and limited financials.

18:45But for us, our diligence process can be pretty quick, assuming the information is there. And so that includes ideally a financial model, or at least organized financials, sort of the key legal documents. And so I think the way that a founder sort of communicates and handles themselves during the diligence process can be quite telling of what they can be like to work with. And for us, I sort of touched on some of it earlier, but we look for distinctive brands that can really disrupt categories. And then sort of behind that, financials. So you want to see that this business has a good enough margin, that the rate of growth is strong enough, and so that the financials really back up the vision to disrupt a category and become a potentially billion-dollar-plus brand.

19:37Wishing that for all of us. when we're talking about margin there's obviously these key core pillar kpis that drive a financial model or that drive a diligence process obviously you mentioned revenue growth sell-through velocities i'm sure as part of that revenue growth and the bigger picture there gross margin is often one that gets anchored on a lot contribution margin cash flow management these are the big picture topics that get thrown around a lot. And just a few of them, there's quite a lot of different, many more terms and things. But we'd love to dig into the core ones that you really anchor on and then ask you a little bit more about margin and understand how will a founder know if they have a quote unquote good or compelling margin or not?

20:23How should they be thinking about that? Yeah. So I think, I mean, I'd say perhaps the most important metric is growth, right? Where early stage investors who are looking to potentially build billion dollar plus type companies. So in order to do that, you need strong growth. And so that will reflect in sort of the top line, the year and year sales growth, but it will also reflect in the underlying drivers. So we're looking at a direct to consumer business. We'll look at retention. We'll look at repeat purchase rates because these can be indicative of sort of sales growth to come. If it's retail driven business, we'll look at sales velocities, and then you can comp those to other brands or in the category or other similar categories.

21:09I mean, it's when we looked at Alipop sort of in the early days, five or six years ago, they were at the time doing about a million in sales. Not that anyone could have predicted how big they would be today, but one of the telling signs was the sales velocities were already three times or more sort of other comps, other beverage comps, and they continue to do that and exceed that over time. So that is one area I focus on, so general growth. And then margins, because to put it simplistically, the higher the margin, the less capital you'll have to raise and the more you'll be able to maintain your ownership stake.

21:48And it's generally hard to improve your margin over time. So the higher margin that you can start with, the better, particularly from the founder company perspective. And I think it's critical to really understand the terminology because a lot of people talk gross margin, contribution margin, but might not have the same definition. And so we look at both and we very much focus on the contribution margin, which is your fully loaded margin after you factored everything in. And that's what really will drive sort of the cash burn. And I'm amazed about how few founders have a good understanding of that.

22:27And it's fine if you're not a financial person, but then I encourage you to work with outsourced finance groups or your investors to really understand that early on. Because I've seen many founders become very surprised about the level of cash needs before realizing that it's because their contribution margin, say, was lower than they'd realized. In terms of rule of thumb, I mean, it really varies in different categories, I would say. You look for different margins, but ideally, I would say food, ideally north of 50 % gross margin, beverage, ideally north of 40%. But these are very sort of high-level numbers and will depend on a lot of factors.

23:10I mean, of course, if you look at beauty and personal care and supplements, then we could be talking about north of 70 % or 80 % gross margins. Great way to summarize a lot of those points and break down some important and somewhat complex concepts for people. I think such a benefit of living in the AI times is that so many of these things you can get a really good understanding, maybe even be able to upload some of a snapshot of your company's financials and get some quick help with ChatGPT even or something like that if it's your first foray into looking at a few of these things. don't have to go down the training the street rabbit hole that many other financial people had to adopt back in the day but yeah i think understanding especially just the terminology the difference gross margin contribution margin and what's the so what in layman's terms for your business that i think that was a great point and a really important one especially by channel you're talking margin structure changes so much by channel by category by what price tier you're even playing in, which segment of the market, all of those things.

24:14So really important to understand, I think, probably your competitive set. I imagine that's where you guys are spending a lot of time looking. And then maybe even speaking with your retail buyers or other people in the industry to get your own swag understanding of what's out there and what's going around too. Have you noticed any changes in margin profiles or margin targets given how aggressive and volatile things have been over the last few years? Or have you guys kept the same benchmarks in mind? I think from our side, we've generally kept the same benchmarks in mind. We haven't always got it right, but we've been focused on margins and potential cash generation and minimizing cash burn since we launched in 2018.

25:00And some of our businesses have scaled successfully and are generating cash, but others haven't. The industry dynamic has certainly shifted. So as a result of With the cycle that we've just gone through, we are starting to see more companies with stronger margins and more of a focus on sort of improving, reducing cost structures and a path to profitability. And so I think that's been very healthy. And I think it will result in next generation of brands that will hopefully be very successful. and for the ones that exit, hopefully the strategic acquirers will be happy integrating these businesses into their large portfolios.

25:44Yeah, nothing will wake you up to business fundamentals like a recession and a tariff smattering and everything going nuclear on you. But it's a great reminder of how important it is to understand, like you mentioned earlier, working with an investor who understands the industry you're in. Because when times are tough, you definitely want to be able to work with people who understand the fundamentals of what real levers need to be pulled to make sure your business is able to move forward. I'd love to take a second to focus on some lessons learned. You've been investing for a while. You've had a long career in the industry and even back to your childhood, you've had a lot of exposure as well.