[00:00:10] Shalant Patel: Hello, and thanks for tuning in to the Top Podcast for the food and beverage industry Taste Radio. I'm editor and producer Ray Latif, and you're listening to episode 185, which features an interview with Jeffrey Hollender, the co-founder of pioneering natural products brand Seventh Generation, and the co-founder and CEO of progressive business organization, the American Sustainable Business Council. Tune in on Friday, October 25th for episode 57 of our Taste Radio Insider Podcast, when we're joined by Shalant Patel, the co-founder of Distil Ventures, the venture capital arm of British spirits conglomerate, Diageo. Just a reminder, if you like what you hear on Taste Radio, please share the podcast with friends and colleagues. And of course, we'd love it if you could review us on the Apple Podcasts app or your listening platform of choice. It's commonplace these days to see household and personal care products that are designed to be better for you and less harmful to the environment. But not too long ago, those items were far and few between and marketed by just a handful of brands, one of which was 7Seventh Generation. Jeffrey Hollender co-founded the company, which was launched in 1988, and was its CEO until 2009, when he also co-founded the American Sustainable Business Council, or ASBC, an advocacy group that represents the interests of socially responsible companies. Seven years later, consumer products conglomerate Unilever purchased 7Seventh Generation for an estimated $700 million. Despite an acrimony split with the company in 2010, Jeffrey returned as a board member in 2017. He also sits on the board of environmental organization Greenpeace. He's currently the CEO of the ASPC and an adjunct professor of sustainability and social entrepreneurship at NYU Stern Business School. In the following interview, I spoke with Jeffrey about the mission of the ASBC, his initial foray into entrepreneurship, the genesis of 7Seventh Generation, and how the company eventually grew into its own. He also explained why he was nicknamed the Chief Inspired Protagonist, and what he believes were the reasons behind his ouster. Later, he discussed the ways in which he exerts his influence and resources to support responsibly-led companies and progressive social causes, and why he urges brands to confront the reality that they may be less bad than truly good. Hey folks, it's Ray with Taste Radio. I'm gonna call with Jeffrey Hollender, who is the co-founder of 7Seventh Generation. Jeffrey, thank you so much for being with me.
[00:02:42] Distil Ventures: My pleasure, happy to be here.
[00:02:44] Shalant Patel: So many people are familiar with Seventh Generation, and I have a feeling that folks know who you are, but I don't know if they know your Stern Business. You were the founder of a successful company that produced audio educational courses, and one of the most well-known was one called How to Lose Your Brooklyn Accent. Is that still a relevant business class, and where did that idea come from?
[00:03:11] Distil Ventures: Well, I'm not sure that it would be politically correct to do that. That class together with others like the Art of Flirting and How to Marry Money were part of Network for Learning back in the early 80s. So I'm not sure that I would be comfortable running those classes today, but they certainly generated a tremendous amount of interest several decades ago.
[00:03:43] Shalant Patel: You have had a very active role over the last three decades in conscious capitalism. And I was on your website. Jeffrey Hollender and I saw a pretty striking note that read, quote, my goal in life is to fundamentally alter the negative trajectory that our world is on. That seems like a bigger challenge by the minute, um, and a pretty overwhelming mission. Uh, how do you achieve focus and perspective when that mission is so big?
[00:04:22] Distil Ventures: Yeah, I mean, I think part of the reality is recognizing that all of the good work we're doing is not achieving the results that we want it to achieve, and that we need to think differently about how we solve the challenges we're facing. I say that not because I'm a pessimist about our ability to do that, but really as a reminder that we really need to move from incremental change to much more revolutionary change. And I accomplished that in part as a teacher and a professor at NYU, where I have 50 undergraduate business students at the Stern School. I accomplished that through my writing and my speaking, by serving on boards like Greenpeace and Seventh Generation. And of course, as the CEO of the American Sustainable Business Council, So I do what I can, which means I never feel like I probably am doing enough. But part of this is to also be strategic about what you do. Otto Scharmer, a MIT professor and author, talks about acupuncture points to bring about change. And I think what we need to do is, all of us, need to really think about where those acupuncture points are and where we can create waves that bring about the biggest change.
[00:06:02] Shalant Patel: You mentioned the American Sustainable Business Council, of which you're the co-founder and CEO. For folks who aren't familiar with the council, what's the purpose of the organization?
[00:06:12] Distil Ventures: Sure, the purpose of the American Sustainable Business Council is to get companies involved in progressive public policy. Business has a huge influence over public policy and spends much too much money trying to influence our legislators. But there's a real absence of businesses that are focusing on progressive issues, issues like increasing the minimum wage, ensuring that we have a Family Leave Act, putting a price on carbon, making sure that companies can't offshore their profits and avoid paying taxes. So ASBC is really dealing with issues of that sort and bringing Stern Business voice of companies like Ben and Jerry's and Stonyfield and Patagonia, as well as Lego and the Organic Valley Company, bringing those voices to Washington and to local state houses. to try to change the rules of the game. And one of my reflections when I left Seventh Generation in 2010 was that it was great to build a wonderful company that was an exception to the rules. But what's even better and more important to bring about the change that we want are to change those rules so that all businesses have to perform to a higher standard.
[00:07:45] Shalant Patel: It sounds like a more socially conscious version of the Chamber of Commerce. And I know some folks have described ASBC that way. Do you see it that way?
[00:07:57] Distil Ventures: Absolutely, I mean, there used to be a time, and it's thankfully a little less true today, where you could figure out what ASBC stood for by looking at the opposite of what the chamber stood for. And again, I'm talking about the US chamber in Washington, I'm not talking about local chambers, because individual local chambers, like the Manhattan Chamber of Commerce, have their own agenda and their own public policy initiatives. But the U.S. chamber based in Washington has been for many years a denier of climate change and fight against chemical reform to make sure that dangerous chemicals were taken off the marketplace. So we do like to think of ourselves as a progressive responsible chamber of commerce.
[00:08:51] Shalant Patel: So you mentioned some of the partners that participate in the council. How do you advise them on communication, marketing of that vision, those ideals of the council, and do it in a way that is streamlined but also allows for independent thought?
[00:09:09] Distil Ventures: Yeah, I mean, first of all, one thing that's critical is that just because you're a member of ASBC doesn't mean you have to endorse all the public policy positions that we take. So each company chooses to opt in or not opt in to a public policy position that we're taking. They also have the choice of how actively they want to work on those issues. One of the things that we're working on right now is some packaging legislation to try to encourage companies to minimize packaging waste and make their packaging of recycled, recyclable, or compostable materials. We're trying to get a tax credit for companies that do that to provide some financial incentives. And that's the type of issue that we probably have 20 companies actively engaged in a working group. They are sitting down with legislators, working on the beginnings of some draft legislation.
[00:10:16] Shalant Patel: Is Seventh Generation part of the council?
[00:10:19] Distil Ventures: Seventh Generation is a active supporter of the council and Joey Bernstein, who is the CEO of Seventh Generation, also sits on the ASBC board.
[00:10:31] Shalant Patel: Let's talk about Seventh Generation for a bit. Many folks are familiar with the brand. I'm not sure how many people know what the genesis of the company was or what Seventh Generation, the name means and what it represents. So could you talk a bit about that?
[00:10:48] Distil Ventures: Sure. So Seventh Generation's name comes from the Iroquois, and it comes from a saying that translates into, in our every deliberation, we must consider the impact of our decisions on the next Seventh Generation. And it's a name that I have always loved. It's a name that's both inspirational and aspirational, a name that we always try to live up to, but probably can never fully achieve. And that name was suggested by one of our staff members back in 1988 when the company was first founded. And we put out our first mail order catalog because Seventh Generation back in the 80s and early 90s was a mail order catalog before we started to develop products to sell in retail stores. And Seventh Generation started off with energy efficient and water conservation products and then quickly expanded into household cleaners and paper products as well as a whole range of educational books and videos about the environment. And over time, we expanded our focus to not just environmental products, but products that were better for you and the environment. And we focused both on health and wellness, as well as environmental products. And around the mid-90s, we first developed our Seventh Generation branded products for sale Sustain Natural product stores. One of our first and biggest supporters was a chain in Boston called Bread and Circus that was subsequently purchased by Whole Foods. Bread and Circus was our first big account. We had a wonderful buyer there named Tim Sperry, who was a huge advocate of the brand. And the ability to have our products in retail stores like Whole Foods and Bread & Circus really increased our revenue and also dramatically increased brand awareness because many people who had not seen the brand before first encountered it in their local natural food store.
[00:13:18] Shalant Patel: Had you had any experience in consumer products, Stern Business of consumer products prior to launching Seventh Generation?
[00:13:25] Distil Ventures: Well, my dad ran an advertising agency. I probably picked up some of that knowledge through osmosis. I remember that probably his biggest client was Procter & Gamble, funny enough. But I didn't have any formal training. I was a college dropout. I lasted about a year and a half at Hampshire College and never finished my college education. One of my claims to fame is that I never took a business course or a marketing course. And pretty much everything I learned, I learned on the job by doing the work rather than studying it in school.
[00:14:03] Shalant Patel: A college dropout who now teaches college classes. That's, that's pretty interesting. Who was crazy enough to fund this idea? Because it does sound like, I'm sure at the time it sounded like a, you know, sort of a radical idea, especially given the mission that you had at the time. You know, how'd you come up with the initial money to start this thing?
[00:14:24] Distil Ventures: So interestingly enough, before Seventh Generation, I had this company, which we talked about earlier, Network for Learning, and we ran classes and we produced books on tape in a whole variety of different topics. And fortunately, that company was quite successful financially. People that invested a dollar in the company in 1979 earned about $10 when we sold the company to Warner Communications in 1985. So I had a good foundation of prior investors who followed along with me into Seventh Generation and funded Seventh Generation when I started the company with Alan Newman back in 1988.
[00:15:17] Shalant Patel: Alan Newman, quite well known in the beer industry as the founder of a brand called Magic Hat. It's interesting you mentioned him because I didn't know of his involvement in Seventh Generation until doing some research about the company. Again, you guys are co-founders, but there was a little bit of a falling out.
[00:15:35] Distil Ventures: The company went through some rough times, and about three or four years after we launched Stern Business, we weren't hitting our sales goals, and we had to reduce our staff dramatically. We had about 120 employees, and we had to cut back to about 60. And at that point, Alan felt burnt out, exhausted, and wanted to take a break. And again, Alan would probably give you a different story than I would give you. But from my perspective, I said, this is the wrong time to take a break. The company's about to go under here. If you leave, don't come back. And he decided to leave anyway. And we parted ways, not so amicably, which hopefully we've now at least repaired the damage to the relationship. But I think having a partner is a challenging experience. After Seventh Generation, I started Stern Business called Sustain Natural with my daughter, Mika. Fortunately, we had a much more successful partnership. And recently, she sold that business to a wonderful company called Grove, based out in San Francisco. But partnerships are tough, just like a marriage or any deep relationship. They require a lot of work, a lot of commitment and no coasting, always reinvesting in the relationship and making sure that it stays in a healthy place.
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[00:17:50] Shalant Patel: I gotta mention, what the company that you started with your daughter was selling, perhaps you could enlighten our audience.
[00:18:00] Distil Ventures: Sure, we started out by selling fair trade vegan condoms that we made in southern India. And we got into the condom business not because either one of us were desperate to sell condoms, but we were really interested in improving the social and environmental profile of the products we sold to try to achieve something called net positive. Many green products sustainable products that are on the market today including Seventh Generation are what I would consider less bad. Paper towels are fundamentally problematic. They require energy and water to make. We use them for a few seconds and we throw them away. Certainly Seventh Generation paper towels are the best you can find because they're made of 100 percent post-consumer recycled fiber and they're not bleached with chlorine. So they're better than the alternative but that doesn't necessarily make them good. And so what we were trying to achieve with sustain and our condom business was good products products that had more of a positive impact and a negative impact. And we went on from the condom business to get into the feminine care business, selling both cups and underwear that you could reuse instead of dispose of. And it was an interesting experience being in the condom business with your daughter. We certainly got a lot of media attention for that. And it was great. I think she learned quite a bit and ultimately became the CEO of the company and has done an amazing job running it.
[00:19:57] Shalant Patel: I can imagine that might be awkward, but kudos to you guys for making it work. I want to talk about this notion of less bad, but not good, but I don't want to skip over the problems that you were facing with Seventh Generation after, or right around the time that Alan Newman left the company. It sounds like there were some pretty deep seated issues. How'd you get through them? I mean, what were some of those problems and, you know, what was the strategy to getting past them?
[00:20:25] Distil Ventures: Yeah, I mean, part of the challenge was the inefficiencies of the mail Stern Business. I mean, basically, when you're sending out mail order catalogs, your business depends upon 99 people throwing the catalog away and maybe 1% or so actually opening it up and buying something. So it's an inefficient, environmentally unsustainable business just by its very nature. We were also really early on. There was no language that talked about sustainable green products back in the early 90s. So we were way ahead of the market. The market had yet to sort of develop an interest in these types of products. And it was also challenging to be in the mail Stern Business as well as to get into the retail and wholesale business. And ultimately, we decided that we couldn't do both. Really, the turning point for the company was deciding to focus exclusively on Seventh Generation brand products sold at retail. And that was really the key to our success. Together with a partnership with Whole Foods and some other key natural retail stores, the retail business is really what caused us to be successful and generated a tremendous amount of growth. I mean, we maybe between 1988 and 2000 grew to $10 million in sales. But from 2000 to 2010, we grew from about 10 million to about 150 million in sales.
[00:22:15] Shalant Patel: You had the nickname Chief Inspired Protagonist when you were with 7Seventh Generation. How'd you get it?
[00:22:21] Distil Ventures: Yeah, I think that was on my business card and still is on my business card today. It combines two things that I think are really critical when it comes to leading a business. One clearly is inspiration. I mean, you've got to keep people excited. You want to help people become passionate about what they're doing. And by inspiring people, we can accomplish extraordinary things. But I also want to be a bit of a protagonist and I want to challenge people to do better and I want to challenge the current solutions that people are pursuing. So I like that title and other people seem to like it and it seemed to suit who I was and how I worked. So it sort of stuck and never went away.
[00:23:12] Shalant Patel: 23 years after you started the company, you were ousted from it. And after a few weeks, you wrote a post that listed four reasons as to why it happened. Can you elaborate on what those reasons were and why you think it happened the way it happened?
[00:23:31] Distil Ventures: Sure, I mean, you know, first of all, being fired from a company you started is a very, very painful experience. And, you know, I wanted to sort of reflect on my role in why that happened as well as others. You know, there were a couple of things that really stood out and I think caused increasing tension between me and the board. One was my aggressive pursuit of employee ownership. I was deeply concerned about the financial inequity we have in this country that gets worse by the day and I think is a dangerous thing for our society. And one of the things that I strongly believed is that by helping to ensure that employees are owners in the company the value and profits that get created don't just go to shareholders but they go to more broadly shareholders and stakeholders. We got to the point where about 20 percent of the ownership of the company was held by the employees. The board was uncomfortable with that. My goal was to try to get it up to 30 percent, not something that they were interested in. So that was certainly one point of disagreement. And another point of disagreement was we hired someone to run the company on a day-to-day basis because I wanted to spend more time writing and speaking. And while it was primarily my decision to hire this individual, I came to the conclusion after about six months that he wasn't the right person. and voiced my concern to the board that we had made a mistake. Unfortunately, the board liked him and felt that he would make a better CEO than I would make. He was a much more traditional business person than I am. And they thought that my efforts to, I guess, oust him were not in the best interest of the company.
[00:25:39] Shalant Patel: One of the other things that you mentioned was that you took too much money from the wrong people. Are those the people who were on the board who ended up signing with the CEO?
[00:25:49] Distil Ventures: Well I you know I took money from traditional private equity and venture capital investors and I think people have very different definitions of what it is to be a socially responsible investor. And clearly my understanding of what that meant was not the same as theirs. we took a lot of outside money into the company and had I to do it over again, I would be much more careful about who I took the money from.
[00:26:21] Shalant Patel: Yeah, it was interesting. I read a quote in which you said you can be sustainable as long as it doesn't get in the way of making money, or at least that was the position that some of your investors took. Would you say that the vetting process for investors is more important than the money itself, given what happened in the company?
[00:26:45] Distil Ventures: Yeah, I think you need to vet investors the same way, if not more thoroughly, than you would vet an employee. You got to do reference checks. You got to find out what it's like from other people who have taken money from that investor. And that due diligence is critical. And in many cases, I failed to do it. I think that, you know, especially when you sell a majority of your company, I mean, it's one thing when you have investors, but you still control the majority. When we as owners in my family lost that majority control, you really become an employee. You're working for the board. You might be the founder, you might be the person who owns a significant amount of the stock, but if you don't have 51% ownership and don't control that majority, you're basically working for the board as an employee. You're still thinking that you're the founder, but that really doesn't matter very much.
[00:27:43] Shalant Patel: Did you worry about that scenario when you were trying to fund the company? Did you anticipate that this could have happened?
[00:27:50] Distil Ventures: I didn't, and I was foolish not to, but I had not had that experience in any of the Stern Business I started, so I wasn't worried about it.
[00:28:01] Shalant Patel: One of the other things that you mentioned out of the four reasons why you think you were fired from the company is that you said you failed to create a truly sustainable brand. What did you mean by that?
[00:28:12] Distil Ventures: Well, we talked about that a little bit earlier. We talked about the difference between less bad and good. And there's a real difference between a product that is less damaging to the environment and a product that is truly regenerative and net positive from an environmental and a social perspective. that's a big challenge for all consumer products. It's much easier to be less bad than it is to be truly good.
[00:28:45] Shalant Patel: But given the systemic problems that you were talking about earlier in that, you know, you want to fundamentally change or fundamentally alter the negative trajectory that we're on, isn't that sort of like a Band-Aid to a gaping wound?
[00:29:02] Distil Ventures: Well if you mean less bad products are a band aid. Yes absolutely. They are a band aid. If you look at the commitments that all companies have made to decrease their CO2 emissions they will do virtually nothing to change the trajectory we're on for the worst effects of climate change. So even if companies accomplish the commitments that they want to make in terms of reducing CO2 pollution, It's just not enough. It's not good enough. It's not going to make a big enough difference. And I think in some ways, our society is a little bit in denial that all of the good work and good efforts that so many companies are making, people don't want to come to terms with the fact that right now they just don't add up to enough of a positive effect to offset the challenges we're facing.
[00:30:04] Shalant Patel: Hence you launching the American Sustainable Business Council.
[00:30:10] Distil Ventures: Yes, absolutely. You know, as I said earlier, the goal is to not be an exception to the rules, but to actually change the rules. There's a wonderful book by a guy named Anand called Winners Take All, just came out in paperback this week. And the book does an amazingly articulate job of explaining why companies that created the problems to begin with aren't always the best ones to solve them. and how important public policy is and how important our government is. And we can't walk away from the responsibility of being citizens and participating in government, despite how upsetting and depressing it might seem. We need to stay engaged. We need to make a difference. We need to vote. We need to participate in the political process.
[00:31:06] Shalant Patel: Have you ever thought about running for office?
[00:31:08] Distil Ventures: I have. My wife doesn't think it's a good idea.
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[00:32:23] Shalant Patel: It's a pretty brutal environment out there. How do you approach politics these days? How do you advise politicians on how they should connect with Americans about the problems that we're talking about?
[00:32:36] Distil Ventures: Well, I'm really excited by the campaign today. I think candidates like Elizabeth Warren and Bernie Sanders are talking about the kind of revolutionary change that's required to repair our society and the environment. rather than discussing small incremental changes. They're really discussing critically important bold ideas whether it's health care for all or a wealth tax that taxes the assets of millionaires not just their income. and sets a goal for completely stopping carbon emissions, I think there's really bold and really exciting ideas on the table that make me optimistic about the future of the country.
[00:33:32] Shalant Patel: Given that Seventh Generation was eventually sold to Unilever, did you do well from that sale? I mean, you still had ownership in the company when it did sell, correct?
[00:33:42] Distil Ventures: I did. I did quite well. And I'm very thankful of that. Okay.
[00:33:49] Shalant Patel: So not to go off on a tangent, but let's go off on a tangent. What do you think of the deal when it happened? Because, you know, Seventh Generation was supposed to replace Unilever, not be acquired by Unilever, right?
[00:34:01] Distil Ventures: Yes, that was the original plan. I must say that Unilever was the only company that I would have been happy having Seventh Generation sold to. Paul Polman, who was the CEO at the time, was a transformational leader. And of all the large companies, particularly household product companies, I think Unilever, through its sustainable living plan, really set a high mark for what we might expect and hope for out of large publicly held companies. So I was thrilled to become part of the Unilever company. And one of the amazing things is the ability for Unilever to expand the Seventh Generation brand globally. By the end of this year, we'll be in 40 different countries around the world. We will be doing some really exciting things from an educational perspective all around the globe and offering people better products not necessarily good enough products but certainly better products that will allow them to reduce their negative impact on the planet and society.
[00:35:16] Shalant Patel: So as a board member and as someone of means, how do you use your influence and how do you use your money personally to affect the change that you're talking about?
[00:35:31] Distil Ventures: It's really a wide variety of things that I do, as we talked about a little earlier. Teaching at NYU is probably one of the most important things I do. Being able to be in a dialogue with students about the state of the world and the future role that they want to play is critically important. And having the financial resources to donate to candidates is also an important part of the process. So I'm fortunate at this point in my life to be able to devote most of my time to creating change. and to be selective about what I want to do, the boards I want to serve on, the companies I want to consult with, and the students I want to teach and what I want to teach them.
[00:36:27] Shalant Patel: Do you feel like you're making progress? Do you feel like you're contributing to progress? As you mentioned, we live in a pretty turbulent time in America, and a lot of people are depressed and turned off by everything. They feel like there's nowhere to go. Do you have a more positive outlook on things?
[00:36:47] Distil Ventures: Well, I believe that absolutely positively things will turn around because the path we're on is not one that is sustainable over the long term. The question is how we'll get to that better place. and really how much pain people will have to experience before we get there. So in some ways, part of the goal is to lessen the negative impact that this situation has on those people that can least handle those negative consequences that come from things like climate change or social inequity. I believe that things will turn out well, and that today, one of the things that's important is creating models of what those new possibilities will look like. Again, that was a big driver when we started Sustain. How can we create a model of a net positive regenerative business? That was really a big part of our goal. Hoping that other people would imitate, follow us and learn from what we were doing. So that's important. But despite all the challenges we face, luckily I get to spend about half my time in Vermont. You can't be totally depressed if you live in such a beautiful location.
[00:38:14] Shalant Patel: I agree with that for sure. I think a lot of people would agree with that. You mentioned climate change. I still come across entrepreneurs who don't believe in climate change. How do you talk to folks about global warming and some of the impact that humans are having on the environment in a way that can change people's minds?
[00:38:35] Distil Ventures: You know, I think you have to make it very personal. I mean, one of the things that we learned at Greenpeace is that you have to meet people where they are when you have this conversation. So one of the things that was very impactful in talking, for example, to hunters and people that were fishing was to help them see how the environment in which they did something that they loved was changing. That the fish that were once in the stream are no longer there. That the animals that they went out to hunt, now they had to go 1,000, 2,000 feet higher on the mountain because the climate had changed and those animals were no longer living where they used to live. And when people see things they love fall into jeopardy, when they experience that those things that they love to do might not be available to their children, all of a sudden they become interested in a way they are not interested when you talk about the Arctic melting. You know it's hard to visualize that as much as we get wonderful pictures of it. But I think you have to make it very personal. You have to connect it to their life and to what they have at stake and what they will lose.
[00:39:57] Shalant Patel: One of the other things that you're doing to support your beliefs and your mission for a more conscious business environment is investing in small startups. One of the companies that you're invested in is a company called Cafina, which is a energy shot, it's described as an organic energy elixir. But there was a time when you once asked, does the world need Stern Business? So why invest in businesses if you're concerned about the impact Stern Business are having on the planet?
[00:40:37] Distil Ventures: Well I think that as much as businesses are a big part of the problem they can also be part of the solution. And that really starts with the entrepreneurs who are running that company. Heather Beach I've known for many many years. And Kathleen O'Brien, her partner, also worked at Seventh Generation. So it has to start with the entrepreneurs themselves, their values, what they believe in, why they're Stern Business. Also you know identifying an unmet need from a health perspective. There's a lot of challenges with the energy drink market. And they came along and really created the first natural organic energy drink that really meets a need that consumers have. So, you know, you've got to find the right consumers. You've got to find a company with the right mission. You've got to find a company who is creating healthy, safe, responsible products. And I believe that those types of visionary entrepreneurs can really be part of the solution as I tried to be running 7Seventh Generation and Sustain.
[00:41:56] Shalant Patel: How aggressive is your investment philosophy? I mean, are you making a lot of bets in small startups? And if so, you know, what are some of the things that you're looking at beyond food and beverage?
[00:42:07] Distil Ventures: So I make few investments. You know I'm not a big investor. I make them very very selectively. And you know I look for as I said who the entrepreneurs are. I strongly want to see the companies I invest in become B Corporation because I think that's a really important process to go through. And, you know, I also look at who else is investing in those companies. John Rapogel, who was the CEO at Seventh Generation for about five years, and the founding partner of One Better Ventures, joined me in making the investment in Cafina. And we're excited about what they'll do for people's health, as well as the kind of change they'll bring about by having a really sustainable, responsible business.
[00:43:03] Shalant Patel: You talked about the founders, Heather and Kathleen, and whenever you're launching a company, when I've talked to entrepreneurs who've launched companies, It's challenging sometimes because your personal values may not align with the strategy that's going to make your brand successful. How do you resolve the, I guess, inherent issues with that dynamic?
[00:43:28] Distil Ventures: Well, I mean, sometimes you give into it and sometimes you don't. I think there's times where my values were not aligned with what other people thought I should do running Seventh Generation. And sometimes that presents you with the opportunity to learn and grow and see things differently. And sometimes you just have to be the protagonist and you have to sort of hold your own and fight your way through it and see if you can convince other people to see the world the way that you do. You know, one of the most amazing gifts of being an entrepreneur is that you need to grow along with your company. And I think the best entrepreneurs are really entrepreneurs who look at running a business as a journey, who look at it as an opportunity for personal development. And I couldn't go from running a $10 million business to $150 million business without going through a tremendous amount of growth and learning myself and helping those around me to do the same.
[00:44:40] Shalant Patel: Well said, Jeffrey. I sincerely appreciate everything that we've talked about today. And I sincerely appreciate the fact that you introduced a brand like Seventh Generation to consumers who frankly needed a product and a brand like it. So thank you so much for that. And thank you so much for the time. Good luck going forward with the ASPC and let's stay in touch.
[00:45:02] Distil Ventures: My pleasure. Had a lot of fun and thanks for doing what you do.
[00:45:07] Shalant Patel: All right. That brings us to the end of episode 185. Thank you for listening and thanks to our guest, Jeffrey Hollender. You can catch both Taste Radio and Taste Radio Insider on Taste Radio, the Apple podcast app, Stitcher, Google Play, SoundCloud, and Spotify. As always, for questions, comments, ideas for future podcasts, please send us an email to ask at Taste Radio. On behalf of the entire Taste Radio team, thank you for listening and we'll talk to you next time.
[00:45:51] Jeffrey Hollender: Hello, I am Melissa Traverse here for the Taste Radio podcast, talking about some of the biggest tension points that CPG brands and founders face when they're scaling a brand, and those are financial accounting and inventory management. I am joined by Matt Lynn, inventory accounting guru from Belay Solutions, and he is going to shed some light on all of this that is going to help everybody out quite a bit. Matt, thank you so much for joining us today.
[00:46:21] American Sustainable: Thank you for having us, Melissa. It's great to be out here at Expo West and it's great to sit down and be able to chat this because it's kind of a passion project of ours, working mainly with CPG brands and hoping to help them scale.
[00:46:32] Jeffrey Hollender: It's been such a pleasure chatting with you and the team and learning all about what you do over there at Belay Solutions. Can you tell us a little bit about yourself and what your role is and the kinds of solutions that Belay gives to CPG brands and founders?
[00:46:48] American Sustainable: Yeah, absolutely. My role with Belay, I'm actually our inventory accounting manager. I run our inventory department, so we work with CPG brands, taking them from spreadsheets, putting them on inventory management systems, and really helping connect their tech stack between their sales online marketplaces to that inventory management system, even down to their financial systems like QuickBooks. Belay overall is kind of an outsourced accounting firm. And with that, we're helping teams. We have different levels with bookkeeping, controller level work, even high level into CFO type items. So we really help those brands in any way that they need financially. And then I just have a subset of a department where we're really just laser focused on inventory.
[00:47:31] Jeffrey Hollender: It's certainly a complex topic and there are plenty of places to go wrong. Let's start by going right and start super simple. Can you tell us what some of the biggest red flags are that would help a founder understand or, you know, the person running a brand understand that it really is time to get some help with some of these areas?
[00:47:51] American Sustainable: Yeah, absolutely. I think some of the early red flags is just everything is chaos. So when they're looking in their financial software, maybe they don't really have an accounting background, and they're kind of just piecing it together and doing their best. And what they'll see is that reconciliations take forever, if they even happen. They have a lot of transactions that don't get coded, or they just put them into placeholders to just get rid of it so it's not an eyesore. they'll notice they have revenue but no cash or they notice that they have a good amount of cash but their blind spot is really seeing the vendor invoices that are sitting there just needing to be paid and so they just lack that clarity that's going to really be around the corner.
[00:48:29] Jeffrey Hollender: You know, you were talking about one of the red flags that comes up that I think makes so much sense. When somebody asks you what your numbers are and you can't come up with the right number, that's a big problem because that's something that you really should be able to share with decision makers who, you know, you're ideally looking to do business with. What should you be able to call up at a moment's notice?
[00:48:53] American Sustainable: Really at any time, you should be able to know an accurate margin. It's amazing how many founders we end up talking to that they can tell you their revenue numbers, they can tell you their selling price, and then the minute you start talking about cost or their cost of goods sold, they just get a deer in headlights look. So really it's very hard to tell, am I even making money? or if you don't know your entire landed cost. Maybe you know what the freight cost is, the duties separately, but you're not really getting that as part of your unit cost. So it's really hard to tell. Am I even making money or am I losing money from the very beginning?
[00:49:26] Jeffrey Hollender: And do you recommend that founders are able to call up a margin by channel?
[00:49:31] American Sustainable: Absolutely. And depending on the number of products and channels, you kind of want to know what are your best sellers, which ones are making the most and which ones maybe you're not making as much. But especially if you're branching out and you're doing D to C with B to B, absolutely want to know that.
[00:49:47] Jeffrey Hollender: Gotcha. You mentioned that when things feel really chaotic, that's probably a red flag. I would say that it probably almost always feels chaotic if you're running a CBD brand. And I know this may be hard to quantify, but is there a revenue number? Is there a number of doors number that would help a brand understand whether or not it makes sense to bring on a partner like Belay? Understanding that so many brands are bootstrapped or they might be tight for cash. What is that friction point?
[00:50:18] American Sustainable: 3 3 3 3 3 But as you're growing, as you're getting to those six-figure revenue numbers, and especially as you're approaching seven, you want to make sure you've got good financials. Because as you scale to that point, most likely you're going to be looking to raise capital. And investors, the first thing they're going to look at is your books. And are they clean? And do they show a clear picture of your business?
[00:50:51] Jeffrey Hollender: You know, another area that folks might look to to organize some of the chaos are their systems. So many folks stick with Excel spreadsheets for a good amount of time. How do you know that you need to outsource some of your accounting to an organization like Belay Solutions versus maybe signing on to a Synth7 or a NetSuite or something like that?
[00:51:13] American Sustainable: Well, that's actually something we really help with when it comes to that cost question. That's something that trips people up. And sometimes if you just have Adam Stern Business, you buy and sell a finished good, you can maintain with spreadsheets. And we've had clients with million dollar revenue that can do that. But we see so many brands nowadays are using contract manufacturers. and they're just sourcing certain parts of their product. So when you start talking costs, they have no idea exactly what their unit cost is. So that's where we come in and we kind of understand, we'll speak with the customers and the clients and get their needs. And then if we think they're ready for a system, then we'll help put them on that system so they can get some of that clarity. And it's not something we force on anybody. There are plenty of times where founders come to us and we'll tell them bluntly, you're not ready for it right now, but we'll let you know when we think you are.
[00:51:59] Jeffrey Hollender: That sounds like excellent advice. What should a founder or somebody running a brand look for in an outsourced accounting partner? Are there certain checklist items that they should make sure that their partner be able to execute or be able to help them understand?
[00:52:16] American Sustainable: Absolutely. I think one of the keys there's, there's a lot of outsourced accounting firms out there. Some focus on service-based SaaS companies, but if you're a CPG founder, you really want to make sure that your accounting firm has CPG experience. I would ask them, you know, what kind of brands have they worked with? And even beyond that industry specific, because there's so many subsets of CPG. And that's something that I think is great about what we do with Belay is that we kind of run the gamut. It's kind of like the insurance commercial. We know a thing or two because we've seen a thing or two across a broad spectrum.
[00:52:46] Jeffrey Hollender: Probably getting references is always helpful, right? Absolutely. All right. So this all sounds great. I think we have a really good understanding of would it make sense to hire an outsourced partner? You know, what some of the things you should be looking for are. What does offloading this kind of work mean for the brand? What can this do for lightening the load of a founder or lightening the load of a brand operator? Like, how does that help them in their everyday business?
[00:53:15] American Sustainable: It just tries to really help quiet the chaos. So what we're looking to do is just take some of the weight off that founder's shoulder, let them focus on building the brand, building Stern Business, getting that exposure. If you don't have sales, you really don't have anything. So we want them to be able to focus on that while we take care of your back end office work. And we can just present that to you on a monthly basis, you can help make decisions, you can take that to investors. And really, you can just focus on growing your business.
[00:53:41] Jeffrey Hollender: I feel like I felt founders and the folks who are running brands collectively sigh. Breath of relief just hearing that. How can people learn more about Belay Solutions?
[00:53:52] American Sustainable: So people can text TASTE to 55123 for their free inventory guide to get started.
[00:53:57] Jeffrey Hollender: Matt Lin, inventory accounting guru at Belay Solutions. Thank you so much for joining me here at Expo West. It's been such a pleasure to chat with you and learn about what you all do over there to help founders and brands with their financial accounting and inventory management. For everybody else out there, thank you for listening to the Taste Radio podcast. I am Melissa Traverse and we'll see you next time.
