Gregory Sewitz is now on his second food startup. Since selling his first company, he has raised $100M to make your breakfast both healthy and delicious. Gregory’s latest startup, Magic Spoon has attracted funding from top-tier investors like HighPost Capital, Siddhi Capital, Coefficient Capital, and The Chainsmokers.
In this episode, you will learn:
- What’s inside Magic Spoon cereal
- Amazon versus omnichannel marketing
- Direct-to-consumer businesses
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About Gregory Sewitz:
Greg Sewitz is the co-founder of Magic Spoon. Greg Sewitz is a native of Los Angeles, Greg studied Cognitive Neuroscience and English at Brown University, writing his thesis on the neuroscience of morality. He always assumed he would be a writer, or a scientist—or a science writer.
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Read the Full Transcription of the Interview:
Alejandro Cremades: All righty hello everyone and welcome to the dealmakerr show. So today. We have a very exciting founder our repeated founder he is doing some really really interesting stuff and we’re gonna be learning about it building scaling financing all the good stuff that we like to hear so without fartherdo. Let’s welcome our guest today Gregory . So. It’s welcome to the show. So originally born in a a give us a little of our walk through memory lane. How was life growing up.
Gregory Sewitz: Thank you so much for having me.
Gregory Sewitz: Well I now live in New York so it’s very different from l a where it’s always sunshine and everything closes early nobody you know there’s a lot less drinking involved but I wouldn’t I wouldn’t swap New York for for any other city and we have actually very intensely chose to. I guess build 2 companies in in New York um I think there’s just a big opportunity here for Cpg and and startups in general. But I loved growing up in l a.
Alejandro Cremades: And and out of all things will go you into neuroscience.
Gregory Sewitz: Why went I college I studied neuroscience and english actually to sort of weirdly unrelated majors I always my mom’s ah my mom’s a therapist. So maybe that played some role in it. But I always really love neuroscience I thought I would go into. Neuroscience probably into academia or something never thought I’d start my own company actually um, but 1 thing led to another and I met my cofounder in college and things just snowballed very quickly as we were approaching graduation on our first business and then now here I am with.
Alejandro Cremades: And we’ll talk about the second business in just a little bit but let’s say and let’s double click on that so you meet your cofounder and then you were saying that things noble towards saying building your first company exo. So how was that process like of you guys brainstorming and and thinking about a future where you would bring a solution to it and.
Gregory Sewitz: With my second business. So.
Alejandro Cremades: And the problem that you thought it was meaningful enough for you guys to take action. So how was that journey or that the ideation to bringing it to life you know, kind of journey.
Gregory Sewitz: Gabby. Ah, he’s from Scotland actually and he was studying economics so he was more interested always in having his own business. He was very involved in startup groups. At Brown where he went to college and he was originally planning to join a hedge fund or go into banking some sort of more traditional finance route but he he was always noodling on different ideas and he was really into fitness. Across. It was really big at the time when we were in college and the paleo diet was really big when we were in college so he was sort of deep in those communities he was working on his own protein bar um that he he just had started making for himself. But then. Actually was taking around to various gyms around providence that he would go work out at in different farmers markets and he sort of thought there might be a business there this was before ah rx bar and a bunch of other bars that kind of also were going after similar groups. But. Um, he he kind of wasn’t convinced that he you know was a really to point interesting enough to commit his life to and pass up a lucrative job in finance and I actually was at a conference somewhat related to neuroscience. Um.
Gregory Sewitz: Just a science conference and somebody there. There was a big panel about edible insects because the United Nations had a large edible insect research initiative going and somebody was presenting on it and I kind of came back. We were sitting. We were roommates we were sitting Around. Um and we. I Don’t know I Honestly remember the exact light bulb. Um, but there really was a kitchen table moment where we thought why don’t we take your protein bar recipe and see if you can basically taste any difference if we were to put crickets which were the sort of most.
Gregory Sewitz: Scaled up farmed version that you could get in the us at least in Canada at the time and they’re super high in protein. They require far fewer resources to raise than equivalent protein from cows or or pigs or chickens. So there was a big movement around at the time lots of excitement and. We moved to New York we had these samples we raised a bit of money and we ran exo was called for 3 4 5 years eventually realized that there was this 2 wo-sided problem. We needed to obviously build demand for americans to get comfortable eating insects but also. As the demand grew we needed to scale up the cricket farming side of it and so it actually took us to Thailand to look at cricket farms there to Canada all over the world. We eventually realized that this was going to be a longer time horizon than we initially wanted just to to fully. Get the cost parity to be competitive and then obviously from a consumer point of view make make the case much stronger and so we added up basically exiting that business to a large cricket farming operation. Um, and then starting Mads soon after that.
Alejandro Cremades: So what? So so you were saying that they you learned you know about some of those challenges about you know adoption, you know education and and and also how you go about Innovation. So I think that what is the biggest lesson that you got from innovating in In. You know with all these different things going on.
Gregory Sewitz: It was interesting to try and you know you you have these for us. We our first business we didn’t quite know what we were doing we were we were 22 23 figuring it out I mean as all first time founders are and we were really motivated by. Sustainability mission and just the marketing challenge and doing something so innovative of really trying to bring this new food group to the us and think about the psychology of how to convince people to do it. Um, there was a actually set my the neuroscience background did come in handy to try and figure out like why. Why insects were discussing to people how you might get around that like what arguments worked and what arguments didn’t work. Um, but in the end it was a really hard challenge and in a lot of ways it was like pushing ah a heavy rock a bit a steep hill and we were still super excited about it and um. When we kind of realized that it was just going to take longer to really get over that critical mass and cross the chasm from sort of innovative and niche the mainstream we started thinking about well we spent a few years now really you know taking something super innovative and trying to convince like. Ah, tiny sliver of people to try it then the next liver then the next liver then the next liver and what would the opposite challenge be and so we sort of hit on this idea of well you know, even if it’s like quote unquote less innovative maybe to take a super mainstream product and make it.
Gregory Sewitz: Make it healthier rethink it. But I Still you know it’s not like putting crickets in it I E Cereal. There actually could be net more innovation just by reaching such a larger audience much faster and so we started thinking about Well what? what are what are products that if you were to stop. Anybody in the street they probably would already have had in their house or you know felt super positively about had had eaten recently and there aren’t that many food products at least out there that that’s true for so we really tried to look at some of the very very large categories and see whether we could actually bring some innovation to those. Um, and just have the challenge to be had. You know we’re scaling something really fast versus having something be so innovative that it could only scale incrementally at a time and so that’s how we we came to Magic spoon.
Alejandro Cremades: So before Magic’s point I mean with exo. Obviously you guys send that up a selling the business. What was that journey like of going through a transaction and now you know seeing the full cycle of ah of a company.
Gregory Sewitz: Kings.
Gregory Sewitz: It was definitely bittersweet. You know you put so much time and energy into building a brand and you know we had a team that um, all moved on afterwards as well and ah actually the brand is still around I was in I was in Texas a couple months ago and happened to just see it. At a grocery store but we’re we’re not involved and I think we were. There’s there’s something about starting a new company that there’s just so much energy and potential and excitement about that I think you quickly it just takes over your life again. Um in one way or another and so. Really kind of dove head firstrs into magic spoon I would say as soon as we hit upon hit upon the kind of brand positioning and the idea and actually managed to formulate a product that we felt was meaningfully different than anything else on the market I think it was um, just. Off to the races for us at that point.
Alejandro Cremades: So Why Magic Spoon Why? Why did you guys think that it made Sense. You know this time around because obviously you know with exo you didn’t achieve the outcome that you had hoped for um, still an outcome. You know I think that an exit is always an exit. But. Why Magic spoon. Why did you guys think that the you know the problem or what you have you what you had seen or what you could bring to market was meaningful enough for you guys to take another swing at the back.
Gregory Sewitz: Gaby and I are both lifelong seral eater so there was just the emotional connection. Um I grew up with a pantry where we had 10 cereals at any given time and I had it every morning for breakfast and I think there’s a real There’s a real soft spot. A lot of consumers have for those iconic brands especially people our age you know I don’t know 20 to 40? Let’s say but but really they touch they touch a kid they touch people who are in their 5060S and a lot of these brands have been iconic since the. Since literally the 1950 s and 1960 s um with the kelloggs and and general mills of the world. So we were really excited about the idea of trying to update you know, take everything that people really feel connected to and love about those original brands the the sort of fun and joyfulness and flavor profiles. But update it for a modern consumer and it create a new sort of a new but iconic brand and that’s sort of how we were thinking about it. It needs to feel like it’s channeling all the original classic cereals but also feel like it’s really a category shift in. Product and how we’re talking about health and ingredients. Um, and for us, we’d seen a lot of um, these sort of niche diets like paleo and keto explode. Um, whole influencer in online communities grow around them and we knew that if we could create a product that.
Gregory Sewitz: Really checked the boxes for a lot of those different groups. We didn’t want to hang our hat on any 1 particular one necessarily but we really tried to make a product that any single person would be excited about eating no matter what diet you followed or no matter what product or sort of food you you couldn’t eat. Um. And and with cereal. Especially I mean obviously you know a lot of kids eat it. But most people eat it for breakfast and you really ideally don’t want a bunch of sugar and carbs first thing in the morning and and they just there hadn’t been any update to the category that kind of channeled a lot of modern nutritional thinking. Ah, into into the aisle and the way you’d seen in other large categories like juice and soda and alternative dairy and yogurts and things like that. Um, and so we set about trying to essentially replace all of the grains the wheats and cornrants with protein. And at the time as well. There was a new um, sugar called allulos that was just being commercialized at very large scales. So our timing was really fortuitous because that allowed us to get pretty close to the taste of classic cereals. But allulose. Because of the shape of the molecule doesn’t get processed in the body like regular sugar so it doesn’t have to be it doesn’t go on the nutritional fact panel as grams of sugar and so that was a big unlock as well towards us getting close to the tastes and texture of class materials but with a vastly different nutritional profile and I think.
Gregory Sewitz: Once we hit on that and we had the positioning of you know it feels and looks like a classic cereal but is healthier than the quote unquote healthier cereals. We knew that we really we were. We were very confident in our product Market fit.
Alejandro Cremades: Child like serial for Grownups. So Very interesting stuff here. What we’re talking about now. How do you guys go about financing the operation because this was the second go around you know with a different company and I’m sure that you also learned a bit you know from dealing with Investors. So. How much capital have you guys raised to date.
Gregory Sewitz: Um, well yeah I I can start at the beginning. So basically we when we when we had the really just the idea for magic spoon. It wasn’t even called magic spon at the time we emailed a couple of our earliest investors from exo. Um, some key advisorors. So like collaborative fun for example and a few others. Ah, we said hey guys we have this new idea. We’re really excited about it here’s all the reasons why we think it’s a really large opportunity. This is the rough product that we are developing and essentially based on that email and based on the relationship with Gavin and i. Collaborative fund wrote us our first check um on a convertible note or save so really easy I think we raised about 500 k or to $1000000 to really get the the product developed and they’re actually that one of the downsides of cerial is that. There’s a lot of investment that is required to to produce it. It. You can’t really produce it at a small scale. So even the formulation trials and things like that actually required quite a bit of cash. So there was some startup costs involved and then we did all the branding we got to launch um and immediately we just like we. We’re selling way more than we’d even planned in our most aggressive stretch forecasts and so we went out and raised a seed round from light speed I think um, it was maybe 5 bar or $6000000 and then um.
Gregory Sewitz: Just over time. We’ve raised a couple more growth grounds. Most recently we raised from high post capital which is a sort of middle market fund based in New York City as well. So to date. We have raised. Um, honestly probably. Close to $100,000,000 for various purposes and we’re fairly late stage. So some of it’s gone out gone to kind of buying out the earliest investors some of it’s gone into new product development some of it goes into a lot of it goes into inventory and as we’ve scaled. We recently launched in. 7 or 8000 national retailers this past year which is obviously also very capital intensive and we really want to make sure we did it right? Um, and so we’ve been very fortunate in our in our ability to fundraise because we’ve just had that product market fit from the very beginning.
Alejandro Cremades: So product Market fit. You know when you’re wondering if you have it or not you probably don’t right? Ah I mean I I I guess for you guys you know is what you were saying where.
Gregory Sewitz: Um, that’s true. Yes.
Alejandro Cremades: You Just you were just selling more than what you had hoped for and that you couldn’t keep up with the with the demand. Ah, now when you went out to market I mean were there any tests or anything I mean you were you were talking about it that you needed some cash there to be able to do the trials and that it took a little bit more money than expected. But. How did you go about doing those tests and everything to make sure that you got it right.
Gregory Sewitz: Um, we launched entirely direct to consumers so we were able to do. We didn’t we didn’t do a ton of fully pre-launched pre idea testing. But once we had the rough parameters of what we thought the product could be just based on. Formulation and what tasted the best um, we kind of put together a lot of different landing pages and at the time at least um it was very easy and pretty cheap to rapidly test a ton of different ad formats and value propositions and audiences on. Facebook and Instagram driving to different landing pages that were kind of highlighting different parts of the product or parts of the brand and see what worked so we were able to really zero in on which which reasons to believe were motivating to people and which consumer groups were. Most likely to be our early adopters and from there we then kind of just leaned in and over time of ah broadened and broadened and broadened essentially to a more mainstream customer I think there have been a lot of changes to the e-commerce and d to c industries the past couple of years and. I would I think it’s much harder today to to be able to do that on a kind of pre-launch budget. Let’s call it but we were lucky in that we were able to get a lot of insights ah early by being direct to consumer.
Alejandro Cremades: And how are he? how were some of those issues that you saw on on finding the right channels because on the direct to consumer. Also there has been some challenges too with the new tracking changes with ios and and things like that. So. How does that Work. You know about adapting you know and and finding the right channels to to to take this to to the right people.
Gregory Sewitz: It was definitely a key strategic question for us of when do we go to brick and mortar retail because from the start we knew that we wanted to be everywhere that ciral is sold one day. So obviously the vast vast vast majority of ceal is sold through grocery stores. And so it was always in our plan to be in those stores I think was an open question for us given our premium pricing. We’re about. We’re about 2 or 3 times as expensive as sort of an iconic classic cereal. Whether. Consumer at like that most mainstream of retailers. Let’s call it like a Walmart or something would would support that price point and and how long and how much marketing we’d have to do to really like build the awareness to do that and so we held off for as long as it could and luckily the business was growing so quickly in the early years just based on our owned web channel that we we were able to get our supply chain in a row we were able to really like work out a lot of kinks to then get ready for retail and then the timing worked out fairly nicely in that when a lot of the ios changes came through and. A lot of that to your point ad tracking got scrambled and all the the rates started going up and there was just kind of chaos in the ecommerce marketplace. We’d already been planning to really diversify the sales channel mix into more of an Omni Channel World essentially
Gregory Sewitz: And so we were able to launch in Target last year and now we’re in Walmart and Kroger and um, Albertson’s and ah and sprout. It’s a bunch of different stores and so luckily our business is very diversified now but we we definitely saw ah a much more talenting environment on the. Direct to consumer side once all those changes start to go through and talking to lots of other brands in the space I think it’s industrywide and just a ah big existential question for for the um, the online ecommerce channels like the Facebooks and Googles of the world like how they’re going to help support. This isn’t work around all these changes because they’re they’re working on it for sure and I think it still has a big role to play I mean quite ah a large part of our business is still online direct to consumer. But um, we now are are very much omnian.
Alejandro Cremades: Now in this case for you guys Magic Spoon for the people that are listening to be able to get an idea on the scope and size I mean anything that you can share on how big you guys are number of employees anything else that you feel comfortable sharing.
Gregory Sewitz: Sure. Unfortunately we don’t disclose revenue size or anything like that we cat’s hereless sold and. Wanted to give people who are customers of those classic cereals which we all know and love a reason to buy magic spoon which is you know hopefully tastes almost as good but we feel has a place to play in their diets. It’s maybe a healthier option and also people that have left the cereal category. Who maybe eat Greek yogurt for breakfast or protein bars or something like that. A reason a reason to come back.
Alejandro Cremades: So and I mean you were talking about the I mean we’ve been talking about the direct to consumer changes how to adopt how you guys have now this distribution on all these different retailers. So. What have you learned you know I’m sure that there’s a lot of people that are listening to that I’m like oh my god you know I’m dealing with those issues too. You know those Facebook ads not working and you know I wonder if there’s a different way a different approach. What have you learned around building that. Network I mean that distribution I mean being in 8000 retailers is is is a lot so how did you go about that.
Gregory Sewitz: It was definitely a challenge. We had to wait to really reorient the whole business I would say because everything was built to be direct to consumer. So our logistics operation was all kind of small parcel pick and pack. Um, we were in many different warehouses around the country. There were these shipping times and we were working primarily with the upss and fedexes of the world. Um, and our you know our demand planning and everything was based around really tight feedback loops of. Being able to make product and then sell it really quickly and and react to changes in demand or limited to different flavors and things like that super quickly whereas with retailers I mean you’re working I don’t know six twelve months in advance a lot of the time to plan around launches and. All the paperwork and you know we have to produce it then it has to go to a staging warehouse and it has to go to a distribution center then it gets the retailers and so it’s just a totally different way about of thinking about operations and finance and production and even you know obviously the sales is a big component too. We were lucky in that we. Have a very well-known brand at this point so we were able to work with the retailers and they were really excited about us coming to retailers to retail and we were super excited about going deep with a few of them and so it it has been relatively knock on wood. Um.
Gregory Sewitz: Smooth so far on execution I Think to your point given how money do you’ve launched into but definitely it took a real reorientation and there were some real learning curs to figure out I would say ah people the people on the team with experience from Prior roles. Companies that were in retail or on me Channel played a really big part in kind of helping to coach everyone and and kind of stay flexible. But um, there is I would say you know it’s There’s no new reinventing of the wheel.. There is a playbook for how you execute working with these with these retailers and so it’s. Think about just finding people who can help you implement that playbook and then just having a really solid team that can can execute and stay flexible to kind of change processes to adapt.
Alejandro Cremades: Got it now Imagine if you were to go to sleep tonight and you wake up in a world where the vision of Magic Spoon is fully realized what does that world look like.
Gregory Sewitz: It’s a great question I think for us again, It’s really,. It’s really trying to tap into that Nostalgian enthusiasm that people have towards syral as a product and um, all the brands that we grew up know and loving so for us a magic spoon could be thought of. In that same group as the cinnamon toast crunches and the captain crunches and the frosted flakes and things like that that you know you mentioned to people and their face just lights up I mean we’re all fans of those brands too. So We’re not. You know we’re not trying to necessarily like put them down or anything for us and we’re trying to build. A modern 2.0 sereal brand that is as large as those iconic serial brands in terms of awareness and also size and scale. So again, we’re trying to be everywhere that cereal is sold and if I were to wake up tomorrow and have our cereal boxes next to every box of cinnamon toast crunch in the world. Ah, would be amazing. That’s what we’re trying to build towards.
Alejandro Cremades: That’s so cool now imagine if you were to have the opportunity of getting into a time machine and you go back in time and you go back in time to that moment where maybe you were still in college you were still in brown. And you were there with your with your cofounder and friend and you have the opportunity of having a chat with both of you guys and being able to give the 2 of you a piece of advice before launching a business. What would that be and why given why you know now.
Gregory Sewitz: Um, I would say I think my advice would be pick something that if all goes according to plan.
Gregory Sewitz: Could get really big, really fast because I think to your point product market fit and momentum and scale really solves most issues in 1 way or another um and and any new issues it creates are good problems to have in a sense. They’re all things that you can work on. I think the hardest thing is continuously trying to you know, bang your head against the wall because you just don’t have the demand or the interest essentially in what you’re selling or what you’re building to justidfy. You know everyone’s time and money and. It’s obviously not black and white I mean there’s been moments that magic spoon at exo where you know you’re on a rocket ship. There’s also been moments where it felt like damn like what you know what? it not totally existential, but like what’s going on here and like how do we fix it because we need to we need to fix it or else. But I think just. Really being aware of the dynamics of the market and how if there’s momentum at yourre back like it really it really can take you very far and so I would I would think about opportunities and and solutions and problems from from that perspective.
Alejandro Cremades: Love it for the people that are listening Gregory what is the best way for them to reach out and say hi.
Gregory Sewitz: Um, I feel free to to Dm us on instagrammagicspoeial.com on Twitter or magic and cereal and Twitter and email us hellomagicspoon.com we we answer every email that we get sent.
Alejandro Cremades: So amazing. Well hey Gregory it has been an honor to have you with us today. Thank you so much for being on the show.
Gregory Sewitz: Um, thank you so much.
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