Neil Patel

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Sean Grundy’s startup is on a mission to have a big impact on the environment and beverage industry. His venture, Bevi has attracted funding from top-tier investors like Avenir Growth Capital, Deb Gerardi Kemper, Cowen Group, and Bessemer Venture Partners.

In this episode, you will learn:

  • Pricing and finding product market fit
  • How big Bevi is today
  • Why you need to design your startup with the long term and your lifestyle in mind

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For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.

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About Sean Grundy:

Sean Grundy is Co-Founder and CEO of Bevi, one of the fastest-growing beverage companies in the country, which has raised $27M in venture capital. Prior to founding Bevi in 2013, he worked in water conservation at an environmental non-profit organization in the US and China. He has an MBA from MIT and a BA in Philosophy from Princeton University.

Bevi makes internet-connected water coolers for offices that provide still, sparkling, and flavored water on demand. The company aims to eliminate plastic bottles by creating custom drinks straight from the tap.

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Connect with Sean Grundy:

Read the Full Transcription of the Interview:

Alejandro Cremades: Alrighty hello everyone and welcome to the deal maker show. So today. We have a really exciting founder. You know we’re going to be talking about the stuff that we like building scaling financing and all the above and I think that you’re going to be. You know, really? ah finding inspiring. You know how this founder you know win at it. You know I never gave up. You know, even when unsuccessful pilots were you know piling. But I think that you know again, you guys are all going to find this episode super exciting so without further ado. Let’s welcome our guests today Sean welcome to the show. Thanks.

Sean Grundy: Thank you ala Huntra happy to be here.

Alejandro Cremades: I so originally you were born in Manhattan but grew up in New Jersey so give us a little of a walk through memory lane. How was life growing up.

Sean Grundy: Sure I I would say it thanks to my parents I had a very easy life growing up I um, yeah I lived in a small suburb of New York my parents always worked in the city. Um, so they would they would commute in every day while I got to live. Out where it was peaceful and quiet I ended up going to middle school and high school actually in the city. So so I joined them in the hectic and in the hectic commute in and um and. Yeah, it was. It was honestly like a nice, a nice childhood. We. We didn’t really talk about entrepreneurship as a family we didn’t talk about money. We um, we didn’t really talk about business as a family either. So it’s ah it they’re there. Pro there are pros and cons to that.

Alejandro Cremades: And what about your parents I mean what were they? what was their professional careers I mean was there any influence that you got from what they were doing professionally.

Sean Grundy: Um, my parents were both commercial bankers. They actually met working at Chase Manhattan Bank in in the seventy s um I don’t think there was a direct influence of of their work on. On what I did but I would say they always had good advice and whatever situations I ran into early in my career. They had some kind of comparable opportunities or or comparable experiences that they could relate to.

Alejandro Cremades: So you ended up going to Princeton and starting philosophy so out of all things why philosophy.

Sean Grundy: Yeah, it. It was a funny choice and I like that it’s It’s always philosophy is always cited as the example of the most useless degree like whenever you hear. For example, whenever you hear debates about things like student loan forgiveness you hear comments like. Like why should I be paying off the the student loans of some philosophy major like it’s always.. It’s always cited as the most pointless degree. Um I I Really enjoyed it and I I guess in that in in the venture World. You hear this phrase a lot these days.

Sean Grundy: First principles like like vcs want to invest in first principles thinkers who who like to essentially question every assumption and and test the strengths and weaknesses of every argument and think about really like what are our foundations for believing. Everything that we believe and like knowing for sure. What’s a fact versus what is an assumption and like what is that assumption based on and and I just love that whole way of thinking like ah like I love that whole way of of questioning everything and and thinking about like. Why we believe what we believe and whether whether our beliefs are stable or whether they’re they’re actually built on shaky foundations and I think philosophy classes just from the first one I took appealed to me because because of that constant questioning like because of the intellectual honesty. And the the rigor of critical thinking involved in it. Um, yeah I I really enjoyed it and I would say to this day I I definitely see benefits from studying it like there for sure would have been more useful majors. There’s there’s no question about that. But it. It definitely changed the way that I think and and I think for for me in particular it was a good fit.

Alejandro Cremades: Now after school I mean you did trouble quite a bit I mean Brazil China I mean tell us about you know those experiences and I’m sure that that opened up you know your perspective too because I think that getting out of the us. You know it’d say is quite helpful too. Not to see what’s out there. So. So what was that experience for you. You.

Sean Grundy: Absolutely so so I um, yeah I spent nearly a year in Brazil and nearly a year in China in Brazil I was not working I was more like a international hippie just trying to enjoy life post college. And that that was ah that that was a funny experience. I remember my my mom was pretty opposed to it and thought it was a crazy decision to go just live on the beach instead of instead of working and you know paying my dues and building a courier. My dad loved the idea and basically thought it’ll only get harder as you get older. So might as well go when you’re 23 um, when when I was in China I was there for work. So so it was it was a pretty different experience but but overall. Yeah, in in retrospect I’m I’m so glad I’m so glad that I had those life experiences. Um I definitely feel like they they they shaped who I am and and to your point they they may be I think these international experiences may be. Open up your creativity a little by by realizing that there are a lot of different ways. A lot of different ways to live your life and a lot of different ways to organize the society and and to some extent we can choose. What’s a good fit for us.

Alejandro Cremades: So while you were in China and you were a program manager for rare. You know that’s the moment where you think that it’s time to perhaps get back to school and you went to mit. so so what

Sean Grundy: Even.

Alejandro Cremades: Were the triggering events and then what happened there because that was quite a big segue into into your career and and the decisions that you took with now becoming a founder.

Sean Grundy: Um, that’s right? so so I was working for ah environmental ngo called rare conservation. Um, they they’re headquartered in Washington D C where I started with them but they have multiple offices globally and.

Sean Grundy: And I would say there are some things that I loved about the work and then also just some aspects that made me think a for profit job would be a better fit for me personally. Um, what? what? I what I loved about the work was the. That it was genuinely mission-driven like like everyone. Everyone who works for an environmental organization like that really cares about what they’re doing. They’re they’re not typically financially motivated. They’re they’re just very motivated to have a positive impact on the world. And it’s pretty amazing because you see people come from all walks of life and like all backgrounds and go into um into fields like environmental conservation and it’s a community of very smart, very passionate people that. That like genuinely don’t care about money which which I think I think is I think is interesting because because I found in the corporate world that there are often stereotypes about people in the nonprofit world like it’s viewed as maybe a slower pace or like less ambitious culture and in my experience. That’s not really true like in my experience. There were a lot of like. Ah, very smart, very passionate hardworking people. They just had a I’d say a very different motivation. Um I shared their motivation. But as as time went on I’d say 2 things happened 1 is I became a little bit disillusioned by the impact that nonprofits could have.

Sean Grundy: Just in general and I became like like like basically what I was seeing particularly in China was that any time an environmental ngo even like a huge international one anytime an environmental ngo had an interest that clashed with the local business interest the business interest would win. Like every single time. Um you you know if like a local cement company had an interest in in a dredging for sand in some lake where there was an endangered species. They would end up getting to do it regardless of what the the nonprofits wanted so so part. Part of my thought was if you really want to make an impact you have to do it from a business perspective because businesses are just inherently they’re bigger. They’re better funded. They’re more powerful so so I really love the idea of a business with an environmental cause rather than a nonprofit with an environmental cause. Just because I thought it could be like more powerful larger and ultimately more sustainable. Um, so so so that was part of what inspired me to apply to business school and then another part honestly was just that I I didn’t want to be like I didn’t want to be poor forever like I thought it was it was. Cool to be 25 enty five or 26 and have no money and travel the world and get to have these fun experiences but looking ahead I was like I didn’t want to be 36 and and still have no money. Um, so so the the idea of.

Sean Grundy: Business school was basically to find the kind of startup that I ended up co-founding with bevy. Um, the idea was to to basically restructure my career where I would keep the environmental mission of the nonprofit. But. Find? Ah, but but find a career that also essentially what would personally allow me to do better financially and then would also end up creating something with a more lasting like more powerful impact that could they could really compete against major corporate interests.

Alejandro Cremades: Now that’s interesting because typically when you think about you know something that has you know financial I mean a lot of cheese at the end of the tunnel. Especially when you’re in business school and you see all your colleagues you know, like going into big investment banks or private equity firms or consulting gigs and.

Sean Grundy: Um.

Alejandro Cremades: And here you are you know you decide to go into founding a company which you know obviously if you are successful and think God you know that you are now in a Rocket ship. You know you can get you know that cheese at the end of the total but it takes a lot to get there versus getting that you know income you know coming in right Away. So How did you decide to go into. You know, starting your own company versus perhaps you know the other paths that were a little bit read less Risky. So.

Sean Grundy: To to be honest, it. It was a tricky decision. So yeah I was at mit for business school and I love I love mit and and I love the business school in particular like it. It was a wonderful experience. Um, but from. Literally the second month of the program you start getting outreach from corporations that are trying to recruit you and a very common trend both at mit and at many business schools is that at the start of the year you meet a lot of people that say they’re planning at the start of the first year you meet a lot of people that say they’re planning to start a business afterward and planning to be entrepreneurs and by the end of the second year nearly all of them are joining a consulting firm a major investment bank a major tech company. Um, so so there’s a pretty big drop off rate and I would say that there honestly was a constant temptation to do that. Especially when you realize like what? yeah, especially as the second year starts nearing an end and you realize that you’re not going to have any salary coming in. And you could fix that problem very quickly by joining say a top tier consulting firm. Um that that part was a little scary to I would I would I wouldn’t be lying if I said that.

Sean Grundy: I I didn’t consider joining corporations like I did actually at various points do interviews with um with different companies I did get job offers and and consider them pretty heavily. Um, so I I was really constantly flirting with that idea of do I start a business right away or do i. Um, or or do I join a corporation, get a few more years of work experience and then start a business and and I would say that 2 things ultimately compelled me to start a business right away like immediately after graduating one one was just the knowledge of talking to other. Talking to other alumni like talking to alumni from from mit and what I found was that most people if they start working and say they’re going to work for 2 years and save up money and then start a business two years later they’ve adjusted their lifestyle to needing the higher income that if. They’re getting annual raises and that the idea of setting aside that financial opportunity that like near term financial reward for a highly risky startup just seems crazy, especially if by by that point couple years out. They may have families like it like it may be just a really difficult decision. So so so that made me very wary of not starting right away and then the the other reason was just that I met um, Eliza Beckton who became my co-founder and was just really excited to work with her.

Sean Grundy: Um, it’s really Eliza. Not me that had the initial idea to disrupt the bottled water industry and to create point of use machines that um that that offered high quality drinks without single use containers and.

Sean Grundy: I I liked her vision I loved that it was in a gigantic market I really liked working with her as we started exploring doing you know exploring doing this business together and I thought I had I thought I really had this rare opportunity in front of me to. To be matched with a really talented co-founder whose skill set was very different from my own and I I thought that that opportunity might not come up again. So I just didn’t want to let it slip by so when I met Eliza she was working.

Alejandro Cremades: So then what happened next.

Sean Grundy: As a freelance designer um, ah Eliza went to eliza studied mechanical engineering at Yale and then went to design school and became ah became an industrial designer so she was working as ah as a designer helping various startups. Um, we ended up pulling in. Ah, third co-founder who was Mike Frank who is my classmate from business school and we started bevy together officially in the summer after Frank and I graduated which was twenty thirteen right as we were getting started. Eliza left her ah her her various jobs and. Committed full time as well and we had a phase of about six months where we had no funding but were working full time which was very stressful and I would say like in retrospect things moved pretty slowly at that time but but we were very disciplined as a team. I’d say we’re we were all very serious about like wanting to raise capital as early as possible just since like we didn’t have any other source of income and we were very disciplined as a team about documenting exactly what it was going to take to raise money and then going out and doing that so we knew okay, we need. Some traction as demonstrated by a successful pilot. We need a prototype that that will get investors excited about what we’re doing we need um to to file our first patent just to show that we’re really just to demonstrate that we’re serious about protecting our technology and.

Sean Grundy: We we put together this list and just went out and executed and tried to knock every item off the list.

Alejandro Cremades: Because for the people that are listening to get it. What ended up being the business model of baby. How do you guys make money.

Sean Grundy: Bevy makes money by leasing machines and selling Concentrates. So Our our machine leases provide filtered water and sparkling water and then our concentrates provide flavored and enhanced water. Um, like by en enhanced I mean vitamin infused or electrolyte infused.. For example, we go to Market B Two B So We we lease our product to um, offices hotels and more and more these days amenity areas of residential apartment buildings. Um. And we’re currently in well over four thousand. Um, ah B Two B companies right now and any company can have some some companies have 1 bevy machine some companies now have hundreds of bevy machines.

Alejandro Cremades: And in your case I mean it took a few very unsuccessful pilots to really you know, get there to make it happen not at what point do you realize I think we’re into something here.

Sean Grundy: It that that took a while it. It took us about Let’s see it took us over a year to realize that we genuinely had a product market Fit. So I would describe our whole year as trying to find product Market Fit Now. We knew we had a concept that made sense on paper because we were we were trying to disrupt an industry that’s extremely wasteful like in in the bottle beverage industry. Typically if you’re buying a bottle of water or a can of seltzer. Or like or like you know and any of these name Brand bottled beverages that you’d get in ah in a store typically less than ¢10 of of the money you’re spending is actually is actually needed to cover the cost of the beverage you’re drinking um the vast Majority. Of what you’re spending money on is covering the cost of of ah packaging and of distribution and that’s just incredibly wasteful like if you actually look at the beverage supply chain of how a bottled beverage goes from. Goes from the raw ingredients to getting packaged and then ultimately to getting where you consume it. There are a lot of stops from like distribution center to distribution center to warehouse that there there are a lot of inefficiencies in the in the traditional in the traditional beverage industry Model. So I’d say we knew that.

Sean Grundy: By making high-quality drinks at the point of use and essentially filtering tap water like right? where um, where people consume the drinks we knew we had this inherent efficiency that we could capture because we could cut out the cost of the packaging and we could cut out the cost of shipping. So I’d say we knew there was some business model to be Found. We just didn’t know which one and we didn’t know which one would resonate with with users or with consumers and we ended up trying a lot of options like in the beginning we really had it in our minds that that. Users should have to pay for every beverage and that for for every beverage someone should have to swipe a credit card or use a payment act and just because that’s what we were so used to seeing in say a University environment or in a retail environment and as as. Our pilots progressed we we we found that we we found that it it was quite difficult to actually convince people to pay the same amount or even close to the same amount for for a drink without a container as as one you get in. A.

Alejandro Cremades: Um.

Sean Grundy: In a sealed bottle even if the quality of the drink is exactly the same like even if the ingredients are exactly the same as what you’d get in the bottle. Um I think we’re just kind of conditioned to view to to view a single use bottle as like something worth paying for and we’re conditioned to things like water fountains being free. So so so that so that ended up being quite difficult. Um all our early pilots were in consumer locations and we were really thinking about consumers as as being the the our customers like like individual consumers and what ended up happening was. Even though none of our pilots actually generated nearly enough like nearly enough cash to cover the cost of building our our prototypes like of building the machines what ended up happening was users of the prototypes would come to us and say hey. You make a version of this for offices like like when I come to the gym I often just buy ah vitamin water you know, buy like buy my own drink but but in my office we go through thousands of bottles of water and thousands of cans of seltzer and and. It’s really environmentally wasteful and I would love to have some sustainable alternative like what you’re offering so multiple people came to us with that request and after hearing it 2 or 3 times we started asking people hey can I can we come see your office like can I come can I come take a look and.

Sean Grundy: I was honestly blown away to see these like financial services offices and tech company offices because coming from a nonprofit. We Never really got like free beverages at work or like free snacks at work and I walked into these offices and realized that it was a very very common practice for companies to give their employees. Free bottled water free free flavored seltzer um like like free vitamin based drinks all these options and the same companies that had environmental sustainability goals often were also providing a lot of single use plastic for free to their employees and. That’s when we realized we had a a genuine opportunity because we went in and said hey we could offer you all the same beverages but we can do it in a way that’s very sustainable and we can save you money and we can save you the time that you currently spend stocking a refrigerator every day with these with these bottles and cans. And the idea just started resonating like when when we would pitch this concept to companies. Um, they would tell like a phrase we kept hearing was no brainer. We’d pitch the concept and pitch the price and they would say like oh this is a total. No-brainer. And basically all of a sudden the same concept that wasn’t working for us in a consumer environment when we shifted it over to a B Two B corporate environment. It suddenly resonated and I’d say we knew we I think we sensed that product Market fit. But ah I I would say we really knew we had it when we were able to sell.

Sean Grundy: Ten ten prototypes at the same price all to companies in the Boston area and we thought okay like we currently have no brand. Nobody’s ever heard of us if if 10 companies that we didn’t really have strong personal connections with.

Alejandro Cremades: Well.

Sean Grundy: All like this product and all like the sound of it just in the Boston area that means there are going to be a lot more that like it here and beyond and and I’d say that’s when we knew we we ah were onto something big.

Alejandro Cremades: Um, and in terms of Capital racing Efforts How much money have you guys raised today.

Sean Grundy: We’ve raised a $60,000,000 to date and the the vast majority of that in the last couple of years

Alejandro Cremades: And what has been the experience of raising that money over time from from 1 from 1 financing cycle to the next.

Sean Grundy: Um, I would say it gets a little easier but not that much easier like for for us I’d say the seed round was the hardest round. Um, but but it’s always it’s honestly always a challenge. Um over time. The the fundraising process I’d say moves from being maybe 80% vision of like 80% vision in team and 20% actual attraction and like accomplishments I’d say that flips over time. Um, the vision’s always important and the team is always important but as time progresses with each round I’d say the historical financial numbers become much more important like like the unit economics the margins the growth rate and then all of the financial details become a lot more important as each round progresses. Um. But but overall overall surprisingly the process hasn’t changed too much like for us the the process of raising ah a round of venture capital is is still pretty similar and I do like to view it as a process.

Alejandro Cremades: So what? What do you mean with viewing it as a process could you expand on that.

Sean Grundy: Sure I essentially view fundraising like a sales funnel where where there are kind of conversion rates from each stage of the funnel meaning like. In ah in our experience more or less. We. We have to be speaking with um, 2 to 3 investors in a lot of detail about our business like like like 2 to 3 investors have to do real deep dives in order for us to get 1 term sheet. So the way I would think about it is you know say the average is like two point 5 the way I think about it is then okay, if we want to have a competitive fundraise and have two term sheets then we need to get 5 investors who are doing real deep dives into our business and maybe maybe but based on our experience. It’s something like. We need. We need to have initial conversations with 4 Or 5 investors in order to get 1 of them to really take a deep dive and like dig into our financials and study the industry and and seriously consider seriously consider investing in us. Um. So so then working backwards. Maybe we need to to start a process by speaking with 20 to 25 investors and I really I really like view it that way essentially like a sales funnel. Um and and just ah trying to be focused about finding investors who are likely to be good fits.

Sean Grundy: And I think that that’s also just really important for entrepreneurs to know, especially if like us you’re not in a traditional like like not not in the kind of traditional company that a Vc would fund like you know we’re not a saas business. We’re not, we’re not um, consumer software like doing internet connected. And internet connected beverage machines with a recurring revenue business model is like a bit unusual and I think what’s important to note is that you could be a terrible fit for 1 investor and a great fit for another investor and and just because you’re rejected a few times it doesn’t mean. Vcs don’t like you. It just means you’re talking to their own vcs. So so it it is worth noting that like every venture capital firm has its own strategy and they’re seeking their own investments and many of them are so many of them might say. Want to follow like the status quo and want to invest in recurring revenue saas businesses but many others that are out. There are actively trying to diversify and actively trying to invest in highly alternative. Um like like highly alternative types of investments. So a lot of the challenge and I think a lot of the process discipline comes from starting starting out with an initial list of investors that are likely to be a good fit and I think the way to get that list is from just first of all being out there in the market talking to other entrepreneurs and learning about who they’re meeting and.

Sean Grundy: What the investors they’re meeting have been looking for and then the other way is honestly just crunchbase like like crunchbase is great Now you can learn a lot from it.

Alejandro Cremades: Wow, that was that was very very powerful I’m sure that a lot of people listening and that are thinking about doing their own race. You know they’re they’re really going to benefit from that. So thank you Sean Ah yeah I guess for people that are listening to get an idea on their scope and size. Anything that you can share around baby in terms of number of employees or anything that you feel comfortable sharing. Yeah.

Sean Grundy: Sure yeah, we don’t publicly reveal revenue numbers just mainly because we have a few competitors and we don’t want them to to know how many machines we have out there. But um, we have about one hundred thirty employees right? now we’ll probably finish the year with

Sean Grundy: About a hundred forty and um and we’re growing quite quickly right now.

Alejandro Cremades: So if you were to go to sleep tonight Sean and you wake up in a world where the vision of baby is fully realized what does the world look like.

Sean Grundy: Oh Wow that would be Fun. So The vision of bevy is really to entirely eliminate single use bottles and cans so to wake up tomorrow and see that vision realized it would mean like going into my own kitchen and. Seeing a machine installed that’s purifying water at the point of use and has little ah buttons or a touchscreen enabling a wide variety of beverages to be served without without single use containers. It would mean walking downstairs to the coffee shop and seeing Um. Instead of a refrigerator with with ah various bottled drinks and juices in that refrigerator it would mean again, seeing some kind of equipment that lets people dispense really like perfect quality drinks without um without the containers as Well. And it would honestly mean everybody walking around with a reusable bottle as well.

Alejandro Cremades: Wow now if I was to put you into a time machine and I would bring you back in time and I would bring you back to your days in mit you know and having the opportunity there of of sitting that younger Sean and. And giving that younger sean 1 piece of advice before launching a business but would that be and why given what you know now.

Sean Grundy: I I would say the the advice the advice would be to think about first of all like where I wanted to do the business and thinking about um.

Sean Grundy: Thinking about how to structure a lifestyle that’s somewhat sustainable because I think I started bevy really viewing it like a sprint and honestly not really thinking long term. Um, when starting the business I I basically imagined that it would. Either get acquired in a few years or that we would just go bankrupt and honestly I probably thought the odds of going bankrupt were were higher than than then um, the event then the odds of getting acquired and. When I started it I candidly didn’t realize that a decade later I would still be running it and we’re now building a business that we expect to last for decades. So my advice would be to to realize that you could be doing this for a very long time and think about. How to how to view it more like a marathon than a sprint and how to make sure you’re you’re taking care of yourself and just just ah, thinking about your whole life real. and and yeah essentially trying to build the business in a way that um. In a way that also lets you live the life you want.

Alejandro Cremades: I love that so Sean for the people that are listening. What is the best way for them to reach out and say hi.

Sean Grundy: Um, my email is [email protected] I spell my name sean n so you you could always reach out to me there I’m on Linkedin as well I don’t think I I’m not sure if I have any other social media platforms I think that might be it I’m like a Linkedin Super user

Alejandro Cremades: Amazing. Well hey Sean thank you so much for being on the deal maker show. It has been an honor earth to have you with us today.

Sean Grundy: Um, thank you Alajandra I really appreciate the opportunity.

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