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The Startup CPG Podcast - Episode Summary: Investor Spotlight with Ryan Springer
Episode Overview In this episode of the Startup CPG Podcast, host Hannah Dittman interviews Ryan Springer, Managing Partner and Co-Founder of Midnight Venture Partners. The conversation delves into the rapidly evolving landscape of CPG (Consumer Packaged Goods) investing, covering Ryan's journey into venture capital, insights from his retail strategy background, and the vision behind Midnight Venture Partners.
Key Topics Discussed
- Midnight Venture Partners Overview
- Ryan's background and founding of Midnight Venture Partners with partners Chris Adem and Alex Bodney.
- Transition from Fund 1 (worth $23 million) to Fund 2, focusing on higher potential outcome investments in categories like wellness and beverage.
- Average check sizes expected to rise from ~$500K in Fund 1 to $2-3 million in Fund 2.
- Understanding Venture Capital
- Definition of Special Purpose Vehicles (SPVs): Investment vehicles used for single investments, allowing flexibility and the ability to engage more capital from Limited Partners (LPs).
- Importance of founder-investor alignment: The compatibility of timelines and expectations between investors and founders for successful partnerships.
- Investment Strategies and Success Factors
- Critical traits for successful entrepreneurs: Tenacity and grit.
- Differentiation and defensibility: The need for brands to clearly define their unique value propositions amidst competitive markets.
- Consumer behavior shifts: Understanding how trends and preferences impact investment decisions and brand strategies.
- Navigating the Founder-Investor Relationship
- Discussion on the typical holding period for investments, typically 7-8 years, and the importance of matching investor timelines with founder goals.
- Emphasis on the importance of communication between founders and investors, particularly concerning expectations and performance metrics.
- Advice for Founders and Investors
- Founders should actively seek to understand how investors make money and what constitutes a successful exit for their investments.
- Founders are advised to build relationships with investors who share their vision and values, as misalignment can lead to increased pressure and complications.
- Case Study: Differentiation in CPG
- Ryan discusses defensibility in CPG brands, emphasizing the significance of identifying real consumer problems and solutions.
- The discussion highlights that innovation can lead to rapid imitation and that maintaining differentiation requires ongoing evolution.
Key Takeaways
- Founder Tenacity: Successful founders often demonstrate an unyielding drive to overcome challenges, which can be a predictor of long-term success.
- Flexibility in Funding: The ability to secure additional funding through SPVs provides a strategic advantage for both founders and investors.
- Consumer Obsession: A deep understanding of consumer behavior is foundational to creating a successful brand and maintaining market relevance.
- Communication is Key: Transparent dialogue between founders and investors can mitigate misalignments and promote better decision-making.
Conclusion This episode provides practical insights and guidance for founders looking to scale their CPG brands and build effective partnerships with investors. The conversation reinforces the importance of tenacity, consumer understanding, and strategic flexibility in navigating the complexities of CPG investment.
For more information, you can connect with Ryan Springer on [LinkedIn](https://www.linkedin.com/in/ryan-springer-466a02aa/) or visit Midnight Venture Partners [website](https://midnightvp.com/).
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Thank you for tuning in, and we hope to see you in the next episode!
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Transcript
Automatic transcript. May contain errors.0:09Ryan Springer:That misalignment of timeline and speed and all that kind of thing is where DC starts to get a bad reputation that I believe it kind of earns. because a lot of VCs, including myself when I get lazy, aren't clear to these founders about, hey, I need you to do this in this period of time or I'm going to start getting antsy and whatever levers I've got to kind of push you further along. Or for instance, I'll get a lot of brands that'll say, hey, a VC on my board is telling me to launch an RTD version. And I'm like, well, there's a reason. They need you to go for the fences and they're totally okay if you're a zero.
0:48Ryan Springer:That's not true for you. it is your one thing. If it's a zero, that's a giant bummer.
1:19Hannah Dittman:himself, a second generation CPG-er and the co-founder of High Desert Vodka. Ryan shares how investors think about the math behind venture returns, the factors that truly matter in defensibility, plenty of hot takes on industry topics, and how to position yourself so investors recognize your edge. We also dive into what makes a strong investor-founder relationship work, and the role a great capital partner should play beyond just writing a check. Whether you're figuring out when to start fundraising, how to stand out in a crowded market or what investors think like, you'll get invaluable perspective from someone who's built both brands and a venture firm.
1:53Hannah Dittman:Enjoy.
1:57Hannah Dittman:Hey, everybody. Welcome back to the Startup CPG podcast. This is Hannah. And today I am here with Ryan Springer, a founding partner from Midnight Venture Partners. Ryan, welcome to the show.
2:07Ryan Springer:I'm going to be on. Thank you for having me.
2:09Hannah Dittman:We are so excited to have you. I'd love to kick off with you introducing yourself. Can Can you share your title, a brief background of your experience prior to MVP, and what led you to investing in the first place?
2:20Ryan Springer:Definitely. My title is Managing Partner. I co-founded Midnight with my two partners, Chris Adem and Alex Bodney. What led me to this? I feel like I make a lot of nepotism jokes because I was kind of born to do this. My dad does retail strategy at CPG. His name is Al Springer, and he forced me to work for him in the summers of my teens. and then voluntarily not getting paid very well. In my 20s, I learned retail strategy from him. So, you know, what retailer should you choose? How do you get there? How do you use data to tell a story? How do you get in front of a buyer? Once you're on the shelf, what promos do you run?
2:55Ryan Springer:How do you maximize velocity? Basically how you grow a brand in retail. And that's what I did prior to starting this fund. I started it with Alex and Chris. We're starting our fund too now, starting to deploy our fund too. Another kind of fun fact about me, I have another business. We're all in the same office here in Austin, Texas. But I co-founded a Cat Desk Vodka called High Desert with my co-founder, Logan Slager. He came up with the idea. I just kind of helped try to get it to where it needs to go. And those are the two things I do.
3:25Hannah Dittman:That's so interesting. I love the name, the branding. I totally see where you're going with that. And how exciting to learn from your father. I feel like investing in CPG kind of is such an apprenticeship model since it's so experiential and anecdotally based, a lot of the learning. So what a better person to learn from. That's a really unique opportunity and experience.
3:45Ryan Springer:Yeah, I tell everyone that was kind of my advantage. My unfair advantage was sort of, I shouldn't have had that network. I definitely should have had that knowledge base. But I was lucky enough to get it and not smart enough to do something else. I needed to take advantage of it. I was smart enough to know I needed to take advantage of it. Yeah, or you were smart enough to know. Not too proud. Somewhere between those two things.
4:06Hannah Dittman:Love it. But can you also provide an overview of Midnight Venture Partners and give us the kind of formal intro to your fund? I'd love to touch on things like key investment criteria, your thesis, stage focus, any key themes you focus on, how you differentiate yourself, average check size, things like that.
4:24Ryan Springer:Sure. We're in a period of kind of transition from Fund 1, which we've almost finished deploying, into Fund 2, which we just started deploying. and we've written one check out of Fund2. I can't share yet who that is. I think that'll get announced down the line. But we basically, we started as a wellness fund. I think we are very much still that. But going into Fund2, we've discovered that we love beverage. We love kind of power law, higher potential outcome investments. We're comfortable with risk. And so we are pushing further into, you know, billion dollar potential deals rather than more traditional CVG investing of like, hey, let's own a bunch and hope it sells for 300.
5:09Ryan Springer:So I think I can go deeper into it later, but it's dictating what categories we'll invest in. And in the other categories, maybe the ownership percentage we'd need to have to make it work. Fund one was 23 million. And then we've invested 27 million in five SDVs into fund one brands. So a total of like 50 million AUM in the fund one universe. and that's a strategy of ours. We invest out of a fund and then when businesses begin to scale and get to a certain point, we allow our LPs to get into SPVs. Largest one we've ever written is 14 million. Smallest one we've ever written is a million. Average check size out of fund level is about 500K.
5:48Ryan Springer:Fund two, that's going to change. Average check size, I think it's going to be between two and three million. But that strategy of like one-to-one plus ratio of fund dollars to SPV dollars is going to stay the same. And I think what's exciting for founders about that is if we get involved, we can follow the business, continue to build into our position and be a source capital beyond just like a seed check.
6:10Hannah Dittman:I'm so excited that you came out the gate with some of this information because you're touching on a lot of concepts that I think tee up conversations that I wanted to have today really nicely. Can you maybe break it down in a little bit more simplified terminology of what exactly you mean with some of those concepts?
6:27Ryan Springer:So keep me honest, I'll start with SPV. So special purpose vehicle, it's like a fund, but it's just for typically one investment. And so a lot of funds increasingly, these days they'll invest out of the fund and then they will have an ability to do, all the people call it a sidecar. For us, it's a lower carried RLP's chance to double down into a deal. So in fund one, our max check size was a million dollars. but when Olipop came across our desk, like a lot of funds in our industry, we jumped on it and we're really excited. We showed it to our LPs. And so we had 1 million out of the fund and then it ended up being a total of 6 million through an SPV from our LPs to invest into it.
7:06Ryan Springer:So it's like an investment vehicle that goes into one business. That's not always true. That's how we treat it. That's usually the case. And so I hope that clarifies things on the SPV side. It's a critical part of our strategy, both to the founders and to our investors to be able to say, hey, as these businesses grow and get to a point where we're confident enough to bring in more direct capital and venture outside of the portfolio effect safety of the fund, that's where a lot of our LPs are going to make most of their money. And that's where our founders can rely on us to be able to be much larger check writers later on, which has been helpful.
7:40Ryan Springer:For example, one of our portfolio companies, they had a lead that they were aiming for and wanted. We agreed we wanted them in, but we really liked this deal too. And so what we told them was like, hey, tell that lead, we'll do the whole thing if they don't. And fund model alone, we never could have done that. We had already reached our max check size and it was nowhere near what these guys were looking for, but it helped them in negotiations and it helped land the person we wanted to land. And we were serious too. And so I think that flexibility that SPBs allows you makes it more exciting, in my opinion, on the fund side.
8:14Ryan Springer:And then I think founders like that ability too.
8:16Hannah Dittman:Yeah, it definitely keeps you able to be flexible and dynamic I think for founders, that allows them to have you as a more leading partner, I guess I should say, where they know that you can be with them in a little bit, you know, to swing for the fences a little bit more to make a bigger bet if things are going really well and they are getting the traction and they need more support from you. And then, you know, we're touching on LPs. So just to break it down a little bit simpler. So LPs are the limited partners that are giving you the capital to then go invest. And an SPV is a way for them to co-invest alongside you.
8:49Hannah Dittman:So you get some dynamic opportunities to get more capital quickly into a company, as you're describing. that's really awesome and advantageous of you guys that you're you know hustling and have enough conviction that you want to be able to play you know the longer game with some of your companies I think this is a perfect launchpad uh point I think to kind of dive into a conversation I wanted to have which I feel like a lot of founders out there would really benefit from understanding how investors make their money and kind of wrap their head a little bit more around you know what holding periods are like for you guys, how you think about how long a brand needs to perform or what the end cycle of your investment needs to look like for it to be a success for you.
9:33Hannah Dittman:I think, as you kind of touched on earlier, this changes based on category and kind of strategically when you need to get out and in can dictate a lot of what you're looking for at the beginning, which I think helps take some of the ambiguity or confusion out of that initial evaluation process. So, yeah, I would love to kind of get an understanding of, and obviously this is going to be different for every company, but in general, what point do you like to get involved at the beginning? And at what point do you think that you're ready to exit with a company and what is happening that ends an investment for you guys?
10:07Ryan Springer:A lot going on there. I would say our average whole period we underwrite on the early side is 78 years. 7 to 8, to be clear, that's 78. We're not that patient.
10:20Hannah Dittman:I think I'd be long gone by that.
10:21Ryan Springer:Yeah, right. It's like, yeah, my grandchild will realize these returns. But I think you're touching on something super important that I talk to a lot of brands about. And that is understanding their investors. You got to think beyond just, can I get the check? Or even can I get the value at? Which a lot of smarter founders think, okay, you know, it's not just about money. It's about value. But then, okay, is that person aligned with you? I talk to founders often who are like, I need to take venture capital at the first round. and I want to build this to an IPO. And I go, okay, well, are those people willing to hold for that long?
10:53Ryan Springer:Or are they going to get antsy, try to get sketchy with the board? That's where I think that misalignment of timeline and speed and all that kind of thing is where VC starts to get a bad reputation that I believe it kind of earns. Because a lot of VCs, including myself when I get lazy, aren't clear to these founders about, hey, I need you to do this in this period of time or I'm going to start getting antsy. in whatever levers I've got to kind of push you further along. Or for instance, I'll get a lot of brands that'll say, hey, VC on my board is telling me to launch an RTD version. And I'm like, well, there's a reason.
11:30Ryan Springer:They need you to go for the fences and they're totally okay if you're a zero. That's not true for you. This is your one thing. If it's a zero, it's a giant bummer. For a VC, if one of their 27 investments is a zero, that sucks. It's a bad day. It might not even be a bad week for a lot of VC investors, especially ones that kind of focus on the fact that a lot of great venture funds, it's about a couple of big winners. So that's the mindset they're in. They're going to be way more risk heavy than most founders. There are definitely some exception founders out there who are cowboys and cowgirls, and they just are willing to gamble everything all the time.
12:06Ryan Springer:Those aren't necessarily bad founders, depending on category. But I think what you're really touching on there is that alignment of timeline, alignment of incentives. And that's super important. It's why I tell a lot of pre-revenue businesses that you probably don't want venture capital. We're a little bit hypocritical because we will do some pre-revenue deals, but the pre-revenue deals we've done are with oftentimes, not always second time founders know exactly what they're going for. Other investors have a similar mindset. So everyone's kind of on the same page. We're going for this. We're capitalizing well, and we're hit hard from the jump.
12:40Ryan Springer:And so, yeah, I told a lot of founders, if you need some time to experiment, which is how I have been with my other business, I purposely didn't take venture capital and I'm not open to it in the near term either because we haven't, we've only just maybe begun. I'm not used to changing my answer. We've just maybe begun to figure out product market fit and a playbook to scale. Before that, it makes no sense to get some antsy folks on my cap table who have a five-year clock because at High Desert, it took a year and a half to even figure out which end was up. Honestly, before we started really building momentum, I don't need somebody going like, what is going on?
13:14Ryan Springer:You're burning money and the growth isn't there. You're still experimenting. So you want to match up the people you're inviting onto your account table with the phase or stage or position you're in, I think, as a business.
13:28Hannah Dittman:I think that's such sage advice. I love that you have such a strong founder lens to be experiencing some of these things firsthand yourself as well. Yeah, having had an investor background, I felt like I had a lot of empathy for founders coming in first institutional capital as well. But even being on the founder side, like anything in life, you don't know it until you do it. And you interact with so many little decision point moments where you're like having the little aha moments of, oh, yeah, that makes sense. Oh, yeah, I guess I'm seeing it from that perspective. And I think, you know, going back to your hold period, talking about seven, eight years, that's kind of a longer hold period, I think, on the venture side.
14:06Hannah Dittman:I'd love to kind of break down your guys' ideal expectation because I think different firms, as you kind of touched on, have a little bit of different approaches. Like there might be some investors that get in early and as long as they get marked up by another investment firm and get kind of a quicker in and out. Or, you know, some investment firms might be waiting for your big first retail PO and then they're ready to move on. Or some people might be riding with you all the way to hoping you're getting a strategic exit and they're kind of with it for the long haul. So how do you guys kind of see yourself as partners and how do you think that you like to work with companies and scale alongside them?
14:45Ryan Springer:Well, I want to touch upon two things there. I'll do the second piece first, which is we invest in multiple stages. So we invested at Olipop much later stage. We're already doing almost 100 million revenue run rate. We invested in Joe Lee or California Naturals, tree revenue and everything in between. And fund two, we're still, we don't like the term stage agnostic necessarily, but it's really is, okay, how much cash can we write out of this business from the fund that we're comfortable with in a portfolio that could theoretically, we can underwrite a return that would return a really significant amount of the fund.
15:23Ryan Springer:On the early stage side, it means to return the entire fund. We do some later stage deals. We even have kind of a bucket for that. Our first deal out of fund two that I can't talk about yet is in that bucket where we're putting three plus million in and we're underwriting that to a shorter period of time. If that's five or six years, hopefully it's because they came out with an RTD version and now they're worth 1.5 billion and we're all zoogravely. If it's towards what we really underwired for like three years, They don't do the RTD and they transact or some kind of liquidity event happens within three years because they're already not mature, but certainly not as early stage anymore.
16:01Ryan Springer:This business is doing above 50 million revenue revenue. To get back to your founder lens perspective, it's funny. I don't think there's a right answer there. I've gotten multiple screaming matches in a healthy way. I believe with my two co-founders because one of them, Alex and I have this reputation of like, we just love arguing all the time. And neither one of us ever gets offended, but people on the outside are like, you guys are psychos. Uh, but we just have a kind of brother relationship. Chris is more mature. It doesn't need to do that with us. But Alex is important because he brings the venture mentality of like, we are representing our LPs and we need to make sure we're getting deals that make sense for them and protecting their interests.
16:40Ryan Springer:And I fundamentally come from, I grew up only integrating with founders. That's the weird upside down world I grew up in working for my dad was our clients were always the CEO or the founder most of the time. And so that's the person I know. And then we founded Midnight, which was hard. I consider ourselves founders there in terms of starting a venture fund from scratch, which is not even a good idea. It's gone really well, but it was crazy we even thought we could do that. And then High Desert as just a classic, genuine consumer founder, you know, it's insane how stressful and anxiety inducing and difficult in trying to juggle all these things.
17:18Ryan Springer:And when a venture fund's like, hey, this one term that we put here says this, you're like, dude, I got 99 problems and this is not one of the more important ones. And so I tried to view a lot of things from that lens. I think the founder is the thing that makes it go on the CPG side. Alex would not disagree with me there. But, you know, I talked to VCs, very successful ones, and there's not like a uniform viewpoint on what lens you really should be viewing it from. Are you purely an investor or are you kind of a founder adjacent party that's an investor but tries to be in the foxhole with them?
17:53Ryan Springer:There's points to both sides, I think.
17:55Hannah Dittman:What do you think that you wish, you know, having a seat at both tables, what do you think investors would benefit from knowing about the founder experience? And what do you think founders would benefit from knowing about the investor experience?
Read the full transcript
18:09Ryan Springer:Great question. I think investors seem to always forget, in my opinion, they don't see the whole picture the way the founder does. And I mean that in two ways. Number one, they don't see the whole map, so they might not see all the moves. but number two their brain isn't stuck with all this unbelievable amount of information and founders you're like why are you in a whole foods yet the founder's not telling you but like my franchise tax didn't get paid and technically my bed now shouldn't even be working but it is right now but i'm nervous i gotta get that set back up and my girlfriend says i'm not spending enough time at home and i don't have very much money and the whole foods guy didn't email me back is the answer, but I've got, you know, there's like not, I'm stressed out about this.
18:53Ryan Springer:My distributor is stealing from me. And so I think a great investor to me, one of many things that makes a great investor is reminding yourself that this person's in the middle of the jungle. And you're like, Hey buddy, I'm not telling you you're doing a bunch of stuff wrong. I'm just telling you, I get this kind of outside view and maybe focusing on the things that move the needle the most would get you a little bit further down the line and allow me to be an outlet to listen to this stuff and to also tell you, hey, the bank account's still working. Worry about the franchise taxing. Tell their account to fix that.
19:25Ryan Springer:You focus on getting into Whole Foods. That's the update. It's going to get you more money and raise more money and all that stuff. And on the flip side, I think this one's less emotional. Founders, exactly what you just asked. I actually think, number one, founders don't understand how investors make money or even how we make decisions. and I've had a lot of founders be like, man, if I 5X your money, like your guys are happy, right? And we're like, no. If I'm a$20 million fund and I put a million dollar on your brand and you 5X it, I've returned 25 % of the fund. Cool. I want to 3X the fund. That means I need 12 wins.
19:58Ryan Springer:That ain't going to happen. And unless my portfolio is 100. And so I think a lot of founders, that's what they forget or don't understand. I try to do a good job of when we pass on a brand I'm telling them like, hey, man, your business is good. It's better than what I've been building for two years. I'm not telling you your business isn't good. I'm telling you this math doesn't add up to make sense for our fund based on the checks we write and the return we would need. That doesn't mean you haven't built something really cool. So I think that part gets lost in translation. That's why I thought that was a great question before this one.
20:29Hannah Dittman:Yeah, I think the math and to the founder defense, and I'm sure you are saying the same thing too, it's hard to know what the math, if you've never been an investor and if investors aren't candid with you either. How would you know the math? I mean, it's hard to know it. And I think that's one of the reasons we're doing these podcasts. But also, I think a great empowerment moment for founders to ask. Don't be scared to ask those kind of questions to investors of what outcome would you need to see for this to be a successful endeavor. And then to your point on founders having the full picture and investors not, I think then the founder can do the mental load of thinking, what does that entail from me as a founder for me to be able to get there?
21:11Hannah Dittman:Like, if you need a billion dollar exit from me, what do I have to believe about my company and myself for me to be able to get that for you? And do I think that's achievable? And what time frame and all those hard questions, then you need to go back and ask yourself. And I think that's how you really understand a good investment match a lot of the times, aside from the burning pressure of I need money in the bank right now. So whoever's willing to give it to me, give it to me.
21:35Ryan Springer:I agree. And I think it's important to realize on the investor side, it's an art and a science. Like if you would ask me that if we needed a billion dollar exit and fund one, we specifically were like, we don't need that. That's how we're building the fund. And that's true of fund one. We don't need that. That's fine. Coming into fund two, we thought, okay, we were inspired by some other groups. My partners make fun of me. I'm always studying Thrive Capital and what they've been able to do and their concentration of bets. I think that it's incredibly cool. And also the more I've learned about venture in this moment in time, I think that's a really smart position to take.
22:12Ryan Springer:And Alex and Chris, we all kind of arrived at it together. This wasn't my idea to change the strategy at all. All three of us. A lot of time spent on couches, looking at each other, talking out what we thought fun two strategies should be. And we're really confident in where we've landed. And it's super different. than fund one, which is funny. It's like you learn things, but fund three, we're going to look back, I think on fund two and go, man, you know, look how much we've learned, look how much has changed. It's the same is true for founders too. I just want to make sure I don't come across as somebody telling you like, this is the way venture is or should be because the more different you are, I think the more excited I am to hear about it.
22:46Ryan Springer:So it's certainly not like a one track industry at all.
22:50Hannah Dittman:No, not at all. I try to highlight in every podcast episode too, Every investor is different, even within a fund. And every firm is very different. I think there's akin to running businesses, there are some business fundamentals that are objectively, this was what makes something good or bad. And I think in investing principles, that makes something good or bad. But other than that, I think it is so dependent on, you know, from my own perspective, I think a great investor is kind of like a great sports coach. they should be able to see everything that's going on on the field but they know they're not playing and they should be able to kind of be the north star and cut through some of the noise to keep the roadmap where it needs to go or the plays that need to happen but every sport is different every sports team different every athlete's different like I mean there's no way to have a one-size-fits-all for any of this it's so situational I'd love to jump back to you touching on some of the learnings you had you know what was the post-mortem you know if you had to boil it up to two or three things coming out of fund one, that's kind of changing your perspective a little bit for fund two and a little bit more concrete terms.
23:56Ryan Springer:Real quick, before we get to that question, I want to echo something you said. One of my dad's favorite lines, one of my favorite lines my guys told me, or I've seen him tell other people actually, you didn't even tell me because I didn't ask, but he helped with some of the strategy on one of the largest energy drinks in the world. And people have come to him in the years since and said like, hey, how do you build energy company. And my dad's favorite goofy old guy line is like, hey, first step you need is a time machine to the year 2003. And then I have an unbelievable playbook for you that I saw a lot of what they did.
24:27Ryan Springer:And here's the little bit that I contributed. He's like, but if you don't have that, I don't have a whole lot of advice because social media didn't exist. Retailers were different. Distributors were different. Consumers were different.
24:37Hannah Dittman:And if you could follow that exact
24:38Ryan Springer:playbook now, I feel like you would lose. And so I wanted to echo that.
24:44Hannah Dittman:I'm glad you brought that I'd love to meet your dad. He sounds sharp. And yeah, like a great like a great person with a great understanding of the CBT space. What were some of the postmortem learnings you had coming out of Fund 1 that has dictated some of the thoughts on Fund 2? You know, if you had to boil it up to two or three concrete things, where's your perspective shifting?
25:03Ryan Springer:One thing, I don't know. I've got some theories. Some like Fund 1 is just ending. I'll give you some problems. How about that? I need to figure out. Yeah. I need to figure out how to judge a founder's tenacity when we're investing. We had some founders in Fund One that blew me away, even in a struggling business, with their ability to make us proud of how hard they were grinding and trying to make things happen and being creative, even when their backs are against the wall. And, okay, how do I make sure all my founders have that level of tenacity? And the only thing I'll brag about on High Desert, Logan and I's company, is we prove not to each other.
25:46Ryan Springer:We've had a very low bank account. When anybody else with a brain would be like, hey, man, you were out of money. We kept going. We kept trying to figure stuff out. And now we're in a much better position, but we should have died twice. is basically what I'm trying to say is I don't know. And I've asked other venture fund people or private equity folks. I haven't heard a great answer, but how do you know that this person's going to have that don't quit psycho attitude? I'll give you one example of how you know is, and it's tough because you can't invest early stage. This does not work with early stage.
26:18Ryan Springer:Ben Woody of Recess. Recess is doing unbelievably well. People don't even believe me how well it's doing. You'd have to have access to the numbers. Some really big players in the space have been circling it at every level, whether it's strategics, investors you've heard of that have backed huge, successful beverages. But Ben Whitty, his business should have been dead. I think the whole industry thought it was, like took their eye off of them. And then we woke up a year later and it's like, well, how the hell is he doing what he's doing? And instead of throwing in the towel. Now he's like absolutely crushing it.
26:52Ryan Springer:It's because he's a little bit, and I've never told him this, he's a little bit of a lunatic. Like a moral justice human would have quit. And he probably got a lot of good advice to quit. And he didn't. And now he's where he is. I don't know how you bottle that. I don't know how you predicted that the person's going to be like Ben, but he's my favorite example of that. Like this is going to work no matter what. And I will do anything to make it work. I don't mean immoral, but everything up to that is sort of, how do you want to write that? I don't know.
27:21Hannah Dittman:Yeah, there's a great book I think calls this concept Grit, and the book is called Grit. And I feel like, yeah, if you could bottle that up and sell it, we'd all make a lot of money.
27:30Ryan Springer:Yeah, exactly. I think another issue we're looking at is like, basically early stages are all about the founder. It's kind of crazy. Margin's super important. There's a lot of great things, burn. But, you know, for us, it's kind of on the early stage, the two holy grails are founder and retention. If it's early enough to update up, product market fit just is retention. If your consumers buy it again and again, then you have a product market fit. If they don't, you don't. I don't care what anecdotal you have. And that's not rocket science. But we're starting to realize, you know, we knew margins would improve a lot.
28:00Ryan Springer:We used to think founders would sort of develop and improve. And I guess maybe they do, but not as much as you think. What you get, I think this is a theory. This is not law at all. For me, I think the people we've invested in have mostly stayed the same. So were they the people that could get it done or were they not? You know, when you invest it, that's been interesting. In fact, this is not conventional wisdom, but I keep joking on the early side. I believe the only thing that improves for sure is the product, which everyone told me in the beginning was like, invest on the product. And maybe I'm leaving the pack on this one, but the product actually gets better.
28:34Ryan Springer:That, you know, people, it's very rare. Money should help that. Yeah, money, time, feedback, that the product will get better. The margin will improve as much as you want. The founders won't improve as much as you want. So those need to be good, you know, when you invest. I don't know. I think I've gone in a circle on your question, but.
28:50Hannah Dittman:No, I think those are really helpful points. I agree with you. I think the early days should be founder bootcamp, but I do believe now having had the founder experience, you're in a vacuum. Like it's not like working at a firm where you're interacting with a lot of new people. When you're the tippity top two, you don't have a boss pushing you anymore. You don't have people questioning what you're doing as much. there's a lot less chances for you to develop as a person unless you're putting yourself in situations where you're going to get some new spaghetti on the wall new learnings new thinking new anecdotes from other companies that you can learn from as a founder i think one of the best things you can do is stay a sponge and and keep learning and try to learn from other peers and learn from other people and hopefully find investors that you can also learn from and have a kind of rapport that you can pick up some anecdotes from from them as well your company can only grow as much as yourself have your capabilities or the team you assemble have the capabilities.
29:47Hannah Dittman:It's a people business and business.
29:49Ryan Springer:And I couldn't agree more. Yeah. And a lot of times the advice you get is not very satisfying because people that have really done it are kind of aware of like, you know, this might apply to you, it might not. And I'm going to be a little vague because I don't want to get quoted on something exact. The only guys that I think made me laugh, guys and girls are DTC founders will trade actual tricks of like do A and B and then C will happen. I've never seen another thing like that. No one else in the industry have I seen somebody go like, have you tried this specific thing? And then it will lead to this specific outcome most of the time.
30:24Ryan Springer:And I'm like, that looks great. You know, that looks so awesome to be able to tell someone like, have you tried? I remember somebody, this is, I don't know if this is going to offend anyone, A DTC expert I know was talking to a brand looking to target elderly people. And he was like, if you tried advertising on Bing, and we were like, Bing exists? And he was like, well, Bing's number one search thing is Google. I don't even know that. Like the number one thing, search something, it's Google. And then the users are all like very elderly folks who like power up a browser and Bing shows up and then they just search.
30:55Ryan Springer:From there, I think it was like, it was a cheap way to get to it. Now, I'm not sure if that's so true. This was years ago.
30:59Hannah Dittman:Yeah.
30:59Ryan Springer:But it made me laugh because in retail, nobody's going to say anything like that.
31:03Hannah Dittman:Yeah, totally.
31:04Ryan Springer:You know, they're going to be like, yeah, that's tough. Talk to this guy. He's probably gone. Now it's a new guy. Not sure how that guy works. This broker used to be good. Now they're not. Now it's a new one. But that one will be good in two years. Yeah, I feel like it's tough.
31:16Hannah Dittman:It's a wild west. Yeah, it's a totally different mindset in general. Understanding the structure of your business and where you're trying to have momentum happen dictates your strategy just so much and so differently. And yeah, I think the D2C little tips and tricks. It makes sense, though. I love consumer psychology and that makes total sense to me. So I see it working. I think like a lot of people talk about Reddit threads in a similar way to, you know, we've got like something polarizing. Reddit's a great place to be because people duke it out so much there. You'll get so much easy traction talking about like a hot topic.
31:50Ryan Springer:60 % of AI pull is from Reddit.
31:53Hannah Dittman:Yes, it does pull a lot from Reddit.
31:55Ryan Springer:And you're like, oh, God, I use Reddit. And that's terrifying.
31:58Hannah Dittman:Yeah.
31:58Ryan Springer:I think one thing I do have one trick for, well, one thing to keep track of for brands that I've watched some very intelligent people. And my partners will kill me for even saying this because we think we like have this secret, but I think everyone's waking up to it. Chan GBT is SEO now, like AIO, whatever people, that's where a big chunk of search is moving there. And people searching for what's the best liver supplement are trusting Chan GBT over Google. and I'm not going to reveal the answers it gave me. I can let everyone else do it. I was looking at different brands. I was actually going to take one myself.
32:35Ryan Springer:I ended up taking Symbiotico, one of the best supplement companies ever. And I asked it, you know, what's the best liver supplement? And it was trash and sellable. And I'm like, Google didn't do this. You just didn't show up. It didn't say this doesn't work. And I didn't even think that was necessarily true. Chachamity is pulling from a very small amount of data and brands aren't aware that they could game the system on their website and through a little bit of our media and just saying certain things. And then suddenly Chad Gbt reads it and puts it as number one. We were going through a lot of our brands being like, I want a shower filter.
33:10Ryan Springer:I want a prebiotic soda. I want a relaxing magnesium beverage. Weird things to Google. But Chad Gbt had all these opinions. It's going to be a fantastic new frontier for brands to realize like, okay, I can be the answer in certain niches that I like prepare my website and media and whatever to do. One of our partners, the guy was at Red Krypton, they're like literally building a division of their service agency to do this. And I think it's going to be fun to watch because it is the wild west right now. You get some crazy answers when you ask ChatGPT stuff.
33:47Hannah Dittman:Yeah, I had this thought for my own brand, actually. The first time I really got into ChatGPT and started Googling recommendations and I was like, oh, I think, but at first on my to-do list, I was like, figure out how to get our SEO on ChatGPT. And then my mind immediately went to, oh, man, as soon as they start to monetize this, this is going to be crap. It's like there's going to be. I was like, I was my next Google was, is ChatGPT monetizing placements at all yet? I definitely think, you know, consumer as behavior shifts, which we're saying with that could be Googling behavior, that can be preferences behavior, that could be interest in an ingredient like protein or whatever it is.
34:22Hannah Dittman:my perspective, both for investing and building brand is it's so important to follow just the daily life of the consumer, similar to your dad's quote on, you know, the 2003 playbook just doesn't matter anymore. The way to kind of gut check anything you're doing is what are consumers doing right now and what is their day to day like and how do I stay step and foot with that? I think if you live and die by the consumer, hopefully that never leads you astray. Easy to say, hard to do.
34:47Ryan Springer:I never quote these guys because I just think it's like a little over the top intellectually, but a long time ago, I read a Harvard Business Review article that said that the greatest CEOs are the number one thing they have in common, which there's a bunch of articles saying a bunch of this stuff, was a very unusual obsession with the customer experience. And I always thought to resonate to your point, that is a lot of the best founders are really upset that the closure on their power for powder isn't closing right. And they're freaking out. My co-founder at the Vodka, Logan, he's always like a label starting to fall off and he's like doesn't sleep i sleep like a baby i don't have that part to me uh with your strengths and weaknesses he's that like consumer obsessed uh
35:32Hannah Dittman:founder yeah i think um definitely i feel like there's been a lot of uh cold sweats at night over something some packaging flip or something like that or yeah i feel like it's great to compliment yourself on a founding team and leadership team in general maybe even an investment partner too. It's good to have people think a little bit different than you and push your thinking so that you're covering all your bases. I want to make sure we have enough time to hop into a little bit of a case study question. As you know, Startup CPG has the largest Slack community in the industry with over 30 ,000 members now.
36:03Hannah Dittman:I'd love to pull a question directly from our channel and have you answer it as a case study for any founder that might have a similar question. The recent question was, how would you argue defensibility or differentiation as a CPG brand? in your mind, what would be a strong answer?
36:19Ryan Springer:Man, we talked about this this morning as a team. I am, I'm not speaking for the whole Midnight Team here. At least I don't think I am. From an IP defensibility, I think it's borderline non-existent in CBG and I don't want to hear about it as remote. I had a group pitching me a supplement in a certain format that was telling me that no one in the world would be able to do it like them. We passed and within four months, three other companies did it just like them. It turns out they were completely full of it and had no concept or awareness with these other competitors, which is another thing we were talking about this morning.
36:52Ryan Springer:A lot of founders, a good answer when somebody asks you your competitive set, you need to know it. Give the most honest version. I've caught some founders where they either didn't know, which is horrible, or they were lying about who their main competitors were. They're just wrong. I don't know. All three bad answers. Lying the least bad of those three. Not knowing is terrible. Not being aware of your competitor. Anyway, speaking of competition, back to your question. For me, differentiation is whether it's on macronutrients or how you're branded, you have a clear stake in the ground and nobody else is, I don't know if it sounds really lame, but nobody else is exactly like you.
37:40Ryan Springer:Otherwise, you're in trouble. I think Ollie Pop and Poppy had some level of differentiation. They had a lot of the same and they both worked. So I would say my first reaction would be differentiation to me is both critical and not 100 % necessary. There's a lot of examples of I'm not in this space, but I have no idea how truly it's different than White Claw. both of them have made an enormous amount of money. I don't like either one as a product, but I've had plenty and I have no clue what the differentiation could possibly be. So I wouldn't, I wouldn't take it's like the end of the world if you don't have it, but I wouldn't start a business that doesn't have a clear idea of who you are, who you're for and why you're for that person.
38:23Ryan Springer:And if you're honest with yourself and you're starting a business, you know, and it's for you, it's for people like you, or it's for a certain demo. If there's already a solution for them, that's just like yours, then why should you even exist? The only answer is I have more money. I'm a celebrity, which doesn't work all the time at all. You know, whatever. Otherwise, if you're just a regular person, why on earth do you start my business? That's dumb and you're not solving anything. So I think if you view it more from the lens of like, am I solving something for a consumer that's a problem? Then you're just going to be differentiated a little bit because you're solving a problem.
38:55Ryan Springer:And it's not a problem that there's already a solution just floating out there that's easy and available. So once I would tell you it's not the most 100 % necessary thing. There's plenty of undifferentiated brands that did well. I do think it's important. And if you solve a real problem for a consumer, you're going to find yourself differentiated. And then the final part I would say, because I'm really going off the cuff here, is you will only be differentiated for so long. If you are successful in CPG, that differentiation is going to disappear. There are going to be many copycats, some of which will have very intelligent founders who are going to come at you.
39:31Ryan Springer:And so whatever your differentiation is, you can't rest on it. You need to keep pressing and moving and attacking. The best mode is execution. And the second best mode, to me, is continue to just be true to your connection with the consumer and evolving and adapting the depth and what they're looking for.
39:48Hannah Dittman:I really love that answer. I think you hit on so many things that I think or have experienced or have observed in others as well. I think a lot of venture investors, I think, can get really caught up on like the first whatever, you know, very, very niche specific things, which I think has a time and a place, can be good investments, can be good businesses. But I don't think every single investable company needs to have that kind of a shtick because otherwise we'd be in a very fragmented, hyper niche industry and world where nothing gets big mainstream scale.
40:27Ryan Springer:And that ignores the whole concept. I don't actually have an opinion on this, but there are fast follower believers and there are pioneer brand believers. And I think there's more data behind Pioneer, but fast forward, if the Pioneer stumbles at all, that seems to be a great place to be. So, you know, I also I agree with you. Whenever like we're the first to whatever, I'm like, oh, well, the second guy who had a chance to iterate a little more and optimize, what's that person's business like? Because the first doesn't mean anything to me if I'm a consumer. What's the best one?
40:56Hannah Dittman:Yes. Also, maybe less marketing education costs on the second one, too.
41:01Ryan Springer:Yeah. Yeah. My buddy, Wes Van Dyke, who's made a lot of money in the marijuana space and is kind of venturing back in, which is crazy to me, but he knows what he's doing. He has this quote I love that I talked to him about this week. He's like, I hate educating social change off my balance sheet, which he's had to do in marijuana before. And he was like, that is expensive. If I can have a business I don't have to do that, that's going to be a whole lot better. I'll raise a lot less money. I'll have a lot less risk. I won't name them because it's kind of shaming, even though I don't think of Shami at all.
41:31Ryan Springer:I can think of multiple pioneer brands that have had to burn a lot of money because they were the ones who showed everyone that this was a thing. And then someone came behind them and spent one third as much and did about as well. You know, it's kind of give and take on that first something or other.
41:47Hannah Dittman:I totally agree. I feel like it's just navigate your niche and know it well. I know we're coming up on time, but before we wrap up, I wanted to just take a second to make sure our audience can have an actionable next step to apply all this amazing knowledge too. It's been a great conversation for founders that want to get in touch with you. Where can they find you or what's the best way for them to get in contact? And for any operators looking at transition or other people that might be interested in a role investing, what advice do you have for them?
42:13Ryan Springer:I'm going to, this is the only question that I really thought about, like for a long time. Because I have a study, I don't start, don't be offended by that. But there's the only question I'm like, hey, I gotta, because I used to say these kind of throwaway answers. But I would say the best way to get in front of me is the real answer is a warm intro. If you reach out to me cold, we've done two of our best deals ever have been cold to info at midnightvp.com. So don't think that that doesn't work. We're about to get liquidity from a brand reached out at info at midnightvp.com. So we're very thankful for info.
42:47Ryan Springer:But the best brands, the ones that I've paid the most attention to, the ones with the biggest chance are the ones that, you know, whoever down the hall introduced me to or somebody I trust or somebody in the industry. And the easiest way to do that is to find my LinkedIn, see who you have in common, see who you think is the best go-between and do that. And if there isn't anybody and it's cold, that sucks. Go through InfoApp or try to message me on LinkedIn, not promising we're responding to those. There's so many and we're kind of underwater on that. But I think the honest answer is find a way to get a warm intro to somebody.
43:21It's an exponentially higher chance of converting in anything.
43:26Ryan Springer:And then what was your second question?
43:27Hannah Dittman:Great advice. And I think also, you know, for operators looking at transition or other people that might be wanting to get into on the investing side, what advice do you have for them?
43:36Ryan Springer:That's tough. Would be my first piece of advice. When I got into alcohol, a guy named Sean from Nine Bed Whiskey, he's like, can you not do it? He's like, is that an option still or are you sold on this? And I was like, I'm going to do it. And he's like, OK, well, then let me give you advice. And I wouldn't say that. Investing is a great, there's some wonderful parts about it, but it is hard. Alex, my co-founder at Midnight always says, we're the worst people to ask. We never even thought, we knew we couldn't get in traditionally, so we started our own. That's been so hard. And so I don't know, I don't know how you go get a job at a venture fund.
44:13Ryan Springer:I've never done that. That seems to be the easiest way. if you're a successful founder, you can go start a venture fund in a day. That you're qualified, you'll find some money, you're investors from the brand. But I would encourage, there's a lot of former founders I've talked to who didn't take investing seriously in the beginning because it had to be easier than running a brand, which it absolutely is easier than running a brand.
44:37Hannah Dittman:Thank you for saying that.
44:37Ryan Springer:Who come in and been like, man, I had to learn a bunch. I had to learn a bunch. It turns out I'm bad at investing or whatever. So I'd tell people like, be careful before you get into it. It's a whole new thing you got to practice and learn. And it's different. I guess my advice is I don't have much advice. We did it by just Kool-Aid man busting through a wall. And I don't recommend that necessarily for most people. But it's how we did it.
45:00Hannah Dittman:I think always helpful to learn from other people's experience and thoughts on things. And I love the analogy. But this has been such an amazing chat, Ryan. Thank you so much for your time. It was awesome to learn from you and to have you on the podcast today. I'm sure a lot of people will be really grateful for the nuggets and thoughts that you shared.
45:18Ryan Springer:Awesome. Thank you, Hannah. I appreciate it.
45:22Hannah Dittman:Thanks so much for tuning in, everyone. If you like this episode, show us some love with a five-star review at ratethispodcast.com slash startupcpg. I'm Hannah Dittman, podcast host and correspondent here at Startup CPG. I hope you'll join me again as we dig into more juicy topics like ops, finance, and all the real talk founders actually need. Come say hi on LinkedIn or ping me on Slack. I'm always eager to hear your questions or brainstorm future episode ideas. If you're a potential sponsor and want to get in on the fun and appear on the podcast, shoot us an email at partnerships at startupcpg.com.
45:53Hannah Dittman:And last but not least, if you haven't already, don't miss out on our free Slack community for emerging brands and CPG lovers alike. Join us at startupcpg.com. We'd love to have you. See you next time.
From the publisher
In this episode of the Startup CPG Podcast, Hannah Dittman welcomes Ryan Springer, Managing Partner and Co-Founder of Midnight Venture Partners, for an in-depth conversation on the evolving world of CPG investing. Ryan shares his path into venture capital, insights gained from his early experiences in retail strategy, and the vision behind building Midnight Venture Partners.
The discussion covers strategies and viewpoints from Midnight Venture Partners, exploring how investment theses evolve to adapt to category dynamics, market factors, and shifting opportunities. Ryan also offers valuable perspective on founder-investor alignment, holding periods, and the critical traits—such as tenacity and grit—that set successful entrepreneurs apart.
From navigating differentiation and defensibility to understanding consumer behavior shifts and new growth frontiers, this episode provides practical guidance for founders and industry professionals alike.
Listen now to gain actionable insights on scaling a CPG brand and building lasting investor partnerships.
Don’t miss the chance to connect with investors and brands—secure your spot at fandf.startupcpg.com
Listen in as they share about:
- Midnight Venture Partners Overview
- How Venture Capital Works
- Investment Fundamentals
- Founder–Investor Alignment
- Lessons from Fund I → Fund II
- Differentiation & Defensibility in CPG
- Consumer Trends & Growth Channels
- Founder & Investor Perspectives
- Advice for Founders & Aspiring Investors
Episode Links:
Website: https://midnightvp.com/
LinkedIn: https://www.linkedin.com/in/ryan-springer-466a02aa/
Don't forget to leave a five-star review on Apple Podcasts or Spotify if you enjoyed this episode. For potential sponsorship opportunities or to join the Startup CPG community, visit http://www.startupcpg.com.
Show Links:
- Transcripts of each episode are available on the Transistor platform that hosts our podcast here (click on the episode and toggle to “Transcript” at the top)
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- Questions or comments about the episode? Email Daniel at podcast@startupcpg.com
- Episode music by Super Fantastics