· David Senra, Peter Rahal
[00:00:00] S0: Why was that your initial reaction? [00:00:00] S1: Because I don't want to spend time talking to investors or fundraising. I think in consumer packaged goods, the P&L should work pretty quickly. Unit economics should make sense. So, you should be really capital-efficient. You should not be raising a lot of money, unless you're going to acquire a company or do what we're doing. So, that wasn't on the table in the beginning, so I'm just focused on the business, not thinking about raising more money. So, I thought that was like, "That's it. That's the only capital in." And then we had product-market fit like crazy, and it got bigger, and then- [00:00:00] S0: And you're like, "I need to raise money to find out how to sell fish online." [00:00:00] S1: Yeah, exactly. Well, that was funny. So, we eventually raised a round to finance the acquisition, and it turned out we did need more money on the balance sheet. [00:00:00] S0: Okay, hold on. Before we get there, you raised how much money to do the acquisition? [00:00:00] S1: We raised 85. [00:00:00] S0: And who'd you raise it from? [00:00:00] S1: Greenoaks and Valor. [00:00:00] S0: Okay. We need to talk about, so Neil Mehta, I'm friends with Neil. I talk to him on the phone all the time. I talked to him about you, I don't know, like two weeks ago, and he's got hilarious stories about you that I'm going to bring up on the podcast, too. But you need to explain, like, why did you choose him? Because- [00:00:00] S1: Right, yeah.
· Peter Rahal, David Senra
[00:00:00] S1: Right, yeah. [00:00:00] S0: ... you said, "I'm not putting any more money in." You're a second-time founder. You made a boatload of money before. You have all these other investors chasing you. You don't even like talking to them. You were kind of like, and this is my own characterization, kind of like, not even rude. You're just like, "Leave me the fuck alone. I'm building my company. Go away." [00:00:00] S1: Yeah. [00:00:00] S0: But Neil's been, and Greenoaks was chasing you, right? So explain how you wind up selecting Neil and Greenoaks.
· Peter Rahal
[00:00:00] S1: The investor class believes they're very, very high status, and they always reach out with an entitlement to take my time. And so, I've always viewed it as like, I'm not giving you my time. I will be respectful, but I don't just take investor calls. I just don't do it. I think it's a bad use of time. And plus, I have my own capital, so I was like, "I'll finance it. Fuck it." That's a great position to be in, by the way. I love it, right? Like, I don't need anything. So anyway, my friend Chad Byers was like, "Hey, my buddy Neil wants to reach out to you." I'm like, "For what?" And he's like- ... he's like, "Oh, he's an investor." And I'm like, "Cool. I'm not taking investor calls right now, with all due respect." So I passed. And then two weeks later, Chad says, "Hey, I think you should take their time." I'm like, "All right. For you, Chad, I'll do that." And then I got on the phone, and I was like, I'm just really focused. So I'm like, "Hey, listen. This is not a tech company. The math should work really quickly. We should be profitable sales. That's how we're going to grow, is profitable sales and then line of credit." And they're like, "Great. Well, if there's any opportunity that comes along, let us know." I'm like, "Great. Will do." So, time goes on. We're just heads down. And then I start getting messages from former RXBAR employees where a firm was soliciting them for, like, offering them to pay them for reviewing or reviewing me. And it's not just one. It's like 20 people I haven't talked to in five years being like, "Hey, Peter, should I take the call?" And I'm like, "Yeah, take the call."
· David Senra, Peter Rahal
[00:00:00] S0: So basically what they're saying is, "We'll pay you 1,000 dollars if you get on the phone and tell us about your experience with-" [00:00:00] S1: Yes, with Peter. Like, what kind of leader was he? [00:00:00] S0: Okay. [00:00:00] S1: And I'm like, "Yeah, take their money." I had no idea. And I thought I was going through the litigation, so I was like, "Oh, they're just trying to fucking find dirt." So I had no idea it was an investor. And then I'm like, "All right." And then the Epogee deal happens, meaning the chairman of Epogee comes to me, and we say, "Hey, let's figure out a deal." So then I reach back out to Neil. I'm like, "Hey, this is happening. You guys want to take a look?" And of course, reach out to Valor, like, "Hey, this is happening. We're going to need probably some money for this." Well, this is why I respect Greenoaks so much, is like, even me kind of being rude to them, they had put resources to do diligence on me, and in the best way possible, which was like, diligencing my leadership, which is actually the- I think the most fundamental thing for this investment to work is, like, you got to make sure is Peter the right type of leader. They had already done that when there was no deal on the table. [00:00:00] S0: Not only there's no deal on the table, you already told them there won't be a deal.
· David Senra, Peter Rahal
[00:00:00] S0: Not only there's no deal on the table, you already told them there won't be a deal. [00:00:00] S1: When I found out it was them, I was like, "Oh, wow. These guys are like, they're good." And I didn't do an auction. I want the right people on the cap table. And Greenoaks won just out of my respect for their approach. Kept it, like, with just friends I know. And then Valor had a conflict of interest because they were in the deal, so they couldn't do M&A because the deal was to finance the other company. So, Greenoaks led it, and yeah, they're amazing. I'm very lucky that Chad connected us. [00:00:00] S0: So, before I tell you the story that he told me about you, you just said, "I didn't do an auction." Why is it that important to not do an auction when you're fundraising? [00:00:00] S1: The reason why I didn't want to do an auction is, one, we didn't need a lot of money. So, it's very important. If we needed a lot of money, I think it's different. But we only needed, like, one or two players. We were growing like crazy, and I did not want to consume the company's resources in a way that would harm our operating our business. So I'm very sensitive to the resources an auction would take. [00:00:00] S0: What are the resources an auction would take? [00:00:00] S1: Well, you got to run tons of management meetings. You have to constantly answer diligence questions. Like, it's a lot of time. [00:00:00] S0: So your whole thing keeps going back to you're intolerant of wasting any time. [00:00:00] S1: Yeah.
· Peter Rahal, David Senra
[00:00:00] S1: Yeah. [00:00:00] S0: You've said this thing in like half a dozen ways, like in subtle ways since we've had this conversation. [00:00:00] S1: Yeah. [00:00:00] S0: You're obsessed with time. [00:00:00] S1: Yeah. So if you think of it as, like, the analogy is like aerodynamic. I want to be super aerodynamic through things. And then my goal also is, like, being on the other side as an investor, I want to maximize value, but not really. If I want to maximize value, I would run an auction and I wouldn't care. But I don't really want. I want to make sure the investors make money and they're good with the underwriting. So, like, you want to walk to the line where it's like rich, but not too rich, right? You can actually, if I'm on the other side, I can underwrite it pretty easily. I want to make sure all my stakeholders make money, and that's my approach. So, the con of that is maybe we could have gotten an extra 100 million valuation, I don't know, but I don't really care. Like, I want to make sure that everyone feels good. And then I- [00:00:00] S0: Why do you not really care? And I agree with this. I want to get your thinking out in the open. [00:00:00] S1: What's, like, 2%? It doesn't matter. It just doesn't matter. And I care about money, but I don't really care about that type of money. I care about how the people on the team feel and are excited and aligned. And I've seen on the other side of the table, and founders just prioritize enterprise value that early, and it's just fucking gross. [00:00:00] S0: Why is it gross?