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.
On the Dealmakers Show, Sewitz talked about balancing supply and demand, when to exit your business, reaching critical mass faster, building a direct-to-consumer business, product-market fit, and finding the right business idea to run with.
Listen to the full podcast episode and review the transcript here.
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When To Sell Your Company
Gregory Sewitz grew up in sunny Los Angeles, before relocating to the East Coast, and launching two companies out of New York. A place where he sees the best opportunities for startups and CPG in general.
His mother was a therapist. Which may have had some influence on his choice to study English and neuroscience in college. Initially, he thought he would just continue in academia. At least until he met his roommate and co-founder.
His co-founder was studying economics, though always interested in the entrepreneurial, and very involved in local startup groups. His passion for fitness led him to explore creating his own protein bar. He began going out to sell at gyms and farmers’ markets.
Attending a science conference, Gregory took in a panel about edible insects. Which was a part of the United Nations research initiative. It was a lightbulb moment.
Together they decided to launch Exo. A protein bar recipe using crickets. A source of protein that required far fewer resources to raise and farm than chickens, pigs, or cows.
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They raised some money based on their samples and threw themselves into their first company. After several years Sewitz said that they continued to battle with the supply and demand balance.
It wasn’t easy convincing consumers in the US to become comfortable eating insects. When they did generate demand, they had to begin looking overseas for ways to scale their production.
Eventually, they realized that not only was what they were doing hard, but it would take much longer to hit critical mass than they had anticipated.
They decided it was best to put the business in the hands of others, and ended up selling the company to a large cricket farming operation. It is still in operation today, and its product is still showing up on shelves.
Picking The Right Business Idea To Run With
From that first venture, Gregory learned that no matter how great ideas are, finding one that really works as a business requires the right balance of innovation and familiarity for consumers.
Trying to educate and convince people to eat insects was slow going. It meant tiny, incremental steps in acquiring customers.
So, they began thinking about what mainstream product with a really big market they could tackle next. Even if it meant being a little less innovative with their product.
They began considering what food products the majority of consumers already had in their pantries at home. Large categories in which they could scale fast.
The breakfast cereal market really resonated with Sewitz and his confounder. It was a space with many iconic brands. Yet, which hadn’t seen any major innovation for decades.
They decided on the idea of formulating a new product in this space. One that would leverage the love people have for cereal while making it meaningfully different from the existing options on the market.
Gregory’s Answer To New Diets and Eating Trends
At the same time trends in new diets and healthier eating were emerging. While a new type of sugar also emerged, enabling them to create a traditional-tasting cereal, with a different nutritional profile than had been possible before.
This was the birth of Magic Spoon. What Gregory calls a “modern 2.0 cereal brand.” His vision is that one day their cereal boxes will be next to every box of cinnamon toast crunch in the world.
Today, his advice for others considering launching their own business is to choose something that can go really big, really fast.
If everything goes according to plan, and you hit product market fit, then he says momentum and scale will help you overcome just about every other issue. Any problems arising out of going big fast are also good problems to have.
What you don’t want is to be just stuck continuously banging your head against a wall because you don’t have enough demand or interest in the product you are trying to sell.
Testing, Proving, And Scaling Your Product
They started out with Magic Spoon by emailing a few investors they knew. That landed them their first check, in the form of a convertible note.
Finding product market fit right out of the gate helped them to keep attracting funding to keep on growing. They raised a seed round of around $6M from Lightspeed. Then thanks to several more rounds of growth capital they have now raised around $100M.
Storytelling is everything which is something that Gregory Sewitz was able to master. Being able to capture the essence of what you are doing in 15 to 20 slides is the key. For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) where the most critical slides are highlighted.
Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.
However, they started out by using a variety of landing pages and ads to test different pitches and value propositions. As well as to hone in on their ideal target market.
While it has become much harder and more expensive to do that today with all the changes that Google and Facebook have made, that type of quick split testing is still possible.
Their cereal is now on the shelves of some 8,000 national retailers. Including Walmart, Target, Kroger, and Albertsons.
Listen in to the full podcast episode to find out more, including:
- What’s inside Magic Spoon cereal
- Amazon versus omnichannel marketing
- Direct-to-consumer businesses