How I Built This with Guy Raz - Health-Ade Kombucha: Daina Trout (2020)

Episode Date: January 9, 2023

In 2012, Daina Trout, her husband Justin, and her best friend Vanessa Dew were sitting around a kitchen table spit-balling possible business ideas. Their biggest contender seemed to be a natural product to treat hair loss. Turns out, it's harder than they thought to make one, so they landed on something completely different: a brand of homemade kombucha they called Health-Ade. After nine months of brewing kombucha in their kitchen and selling it at local farmer's markets, the three co-founders quit their jobs to pursue Health-Ade full time. In just seven years, Health-Ade brewed 120,000 bottles of Kombucha every day, and did close to $200 million in retail sales.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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made it feel less like a visit and more like we were actually living there. Plus, taking a trip is the perfect time to host your space on Airbnb. your place with all of its personal touches and its amazing location could make someone else's vacation even better. Your home might be worth more than you think. Find out how much at Airbnb.ca.ca. Hello, everyone, and happy new year. I just want to let you know that we'll be back next week with a brand new episode of how I built this, but until then, we want to bring you this really inspiring episode from our archive. It's my conversation with Dinah, a Trout, the co-founder of Health Aid kombucha.

Dinah was a biochemist who partnered with a pharmaceutical rep and an inspiring musician to start brewing kombucha in a closet. And then they grew the brand into a $250 million business. This episode first ran in the fall of 2020. Hope you enjoy. There were days in the summer that we were making $1,500 in a market. Wow. It surprised us and it surprised the farmers market people.

But first of all, you couldn't walk through the market and not taste our kombucha. We would make sure that everybody who walked by our booth got a sample. How'd you do that? Hey, you! You want to try some probiotic tea? Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on today's show, how an unlikely idea for a product to fight hair loss

led to today's fastest growing brand of kombucha called HealthAid. One of the questions we get all the time from aspiring entrepreneurs is, how do I turn my promising side hustle into my main gig? Because for everyone out there who's making something in their garage or kitchen and maybe selling it on eBay or at a local flea market, or really anyone who's working on a business idea part-time, that moment where you decide to make the same, side hustle, your full-time job, can be daunting and scary, especially if you're walking away

from a stable career with a salary and benefits. Now, of course, there's no one simple answer to the question of when to do this. It often comes down to an overwhelming feeling that what you've started to build is actually the thing you want to do with the rest of your life. The feeling Nancy Twine had when after three years of working on her side hustle, she quit her job on Wall Street to go full time with her hair care products company, Briojillo, and the feeling Sal Khan had when, after years of making YouTube tutorials, he realized Khan Academy was what he wanted to pursue full time. And today's story follows a similar pattern. In 2012, Dina Trout, her husband, Justin, and her best friend Vanessa, launched a

side hustle selling homemade kombucha at a farmer's market in Los Angeles. They had very little experience and almost no money. But less than a year after that, as you'll hear, they were facing that transition moment. And Dinah decided to go all in on kombucha. Now, over the past 25 years, kombucha has become a huge category in the beverage sector. In fact, in 2020, the market for kombucha in the U.S. expected to be close to $2 billion. But at the beginning, Dinah Trout really had no idea where kombucha was headed. She started making it for fun as a graduate student. At the time, Dinah was living in Boston and working toward a Ph.D. in biochemistry.

And she says that if you ask any of her roommates in graduate school what they remember about living with her, they would probably all agree it was the food. Oh, man. I made the best. Best dinners. I mean, I got into some serious credit card debt in grad school. Let me tell you, because I would invite everybody over. Neighbors, friends, friends of friends, would come over and I would make something spectacular. Paiaaia, like 24-hour paella and, you know, every kind of fish under the sun we would find and, you know, build salt rocks and then put that in the smoker for, I mean, it was just really beautiful, real whole food cooking and lots of wine. Yeah. Yeah. It was a lot of fun. And I got into, you know, I wasn't really afraid to get advanced. So that's how I started getting into like sprouting things and fermenting things.

So yeah, kombucha, kimchi, sauerkra, these were all things I played with. So you end up earning a master's degree in nutritional biochemistry and also a master's in public health. But I guess like you eventually decided not to pursue a PhD. Yeah. So you've got these degrees. It's 2007 and you're living in Boston or the Boston area. And I guess at the time you were dating somebody who's now your husband, Justin, is that right? Yeah. And tell me about what you guys, I guess, decide to relocate to the West Coast. Yeah.

Why did you want to leave the East Coast and go to – I mean, I can understand that. I live in California. But why would you – why did you decide to do that? Yeah. I mean, three reasons. The weather, the produce, and the meat. music. So Justin was a musician. So the decision for us as a couple was, are we going to go to New York or L.A.? It was a tough call, but we just, I think it had been a particularly brutal winter, too. It was like, we just wanted to move to California. And I didn't know what I was going to do yet, but I figured I could figure it out when I got there. So you're in L.A. You moved to L.A. And I'm assuming you start to look for a job or you start to look for a job before you moved? Well, I was looking, I was very open-minded and also practical in the sense that I understood I had, you know, an undergraduate degree to pay for and two graduate degrees to pay for. So I was really looking for what would pay me and what could use my skill sets. And I got recruited actually by a pharmaceutical company, which is pretty funny because if you knew me back then, you know,

you couldn't even convince me to take an Advil then. So it was pretty funny that I ended up taking a job with the second larger pharmaceutical company in the world, which is Glaxo Smith-Kline. And based in L.A. Based in L.A. And that's where I found myself for five years. That really was my only job. I mean, that was my only real job besides the stuff I did extra just to, you know, buy my beers in college. Yeah.

So you become like an employee of Glaxo-SmithKline. And I guess on like the first day or the first week, you get paired up with somebody who would factor into your life later. and this is Vanessa do. Vanessa do. And both of you were like young sales agents at that point, sales reps. That's right. Yeah. And how were you guys paired up? So first day, not first week, first day.

So they make you do a ride along your first day. So they paired us together and we became fast friends. And funny thing happened, I just have to share with you that day because she had broken up with her boyfriend the night before. And so it wasn't a great day for her. And so when she picked me up, I could see she had. like mascara under her eyes from tears. And I'm particularly good with people, you know, that have just been through something. And so we had just a really good day. And I think it wouldn't have been such a great day had that not happened. So a little bit serendipitous on many

fronts. So when you, when you started working there, was it, did you enjoy it? Was it, I mean, what did you like about sales? I don't know if I really enjoyed it. I loved being with people and connecting with people. So yeah, I did really well. I think the first year I was like probably one of the top, I think me and Vanessa, we won the, the team won the top award for the year. And it was like that the whole time we were there. What was your ambition at that point? Did you think, you know, I'm kind of kicking butt here at Glaxo Smith-Kline. Maybe I'll be an executive here one day. Yeah, for sure. I always had that grandiose fantasy, I guess you could call it. And it was, it's only a fantasy because, you know, there were 100,000 employees at GSK. But that's absolutely where

I was focused at that point on being a manager next and then moving from management up to, you know, more executive leadership and so on and so forth. So it was like I had my vision to get to the top. I guess a few years in, you are exceeding expectations on sales goals. And they give you this, this chance, I guess, for a year to sort of step away from the sales side and be what they call a change agent. What? What? What is it? What do they let you do? So the context of that time is important here. Pharmaceutical companies were all in a transition state because generic medicines were

starting to really come out. Yeah. Yeah. And there was just a lot of change, a lot of attrition, layoffs every three, four months, productivity went down, engagement went down, morale went down. It was like a real turning point. And one of the things they came up with was get your, 10, 20 best people and get them to help you bring productivity back and engagement back. And so they called them change agents. And I was fortunate to be one of them. And I accepted because

I really didn't know what was ahead, but I felt that it was an opportunity for me to continue to move up. So what would you do? You would travel around? Yes, it was really, really cool and also unstructured. And this is why it was an important moment for me. And what I chose to do with that was, I went and met with every single team for a week. And I spent time riding along with each individual. I spent time with the manager. I spent time with each team. And I just talked to them.

You were an internal consultant, basically. A little bit, yeah. And then what happens? It ends, and they're like, okay, go back to your job in sales. Basically. And you were like, this is what I'm assuming. You get back to your sales job and you're like, I'm back to what I was doing before that. Yeah.

I had all this autonomy and no structure and I could just do whatever I wanted. And I was good at that. Like I loved that. And then pharma sales is so much rules, so much structure. Yeah. Yeah. No, I was not happy. So you get back and you are feeling uninspired and unfulfilled.

Did a part of you think maybe I should find another job? No. It was, I want to say it was clear, but it wasn't really. clear. Maybe a better word is it was loud. There was definitely a calling, I guess you could say, that I needed to start something. And where did that come from? I mean, you hadn't done any entrepreneurial stuff up until that. I mean, you hadn't been on that track, right? You hadn't been thinking about that. So was it to come from someone else? It came from that change agent experience, I think. It may not sound very entrepreneurial, but in fact, it was. I had no, just a very big goal. And so that

that sort of built my confidence too, where I said, hey, I'm really good at this sort of like lack of structure thing and taking charge. And I'm also good at getting people on board and like inspiring them. And I loved that. Yeah. I really loved that. I felt a lot of fulfillment from getting people to sort of combine forces and, and go. And by the way, what was, what was Justin? at this point because he came to L.A. to be a musician. So what was he doing while you were a Glaxo? Yeah, yeah. Good question. Because I think that's another part of what drove the entrepreneurial thing. So Justin was writing songs. We had turned our second bedroom into a songwriter room. He played for a band. And on the side, he worked for an entrepreneur, a very,

very successful entrepreneur. What did he do for him? Justin sort of, I guess you could say his job was in marketing, but he really was a little bit of like an assistant. Yeah. And he would talk about this entrepreneur and just how successful he was in the life that he lived. So that also, I think, drove my desires because I think we started to say, well, imagine what we could do. So did you, I mean, so you're still at Glaxo and you're still working there. But did you, did you start to kind of brainstorm with Justin? And I guess also with Vanessa, your closest friend at Glaxo, did you guys sort of start to talk about, Hey, what could we do?

Yeah. You just sit around and kind of throw ideas out? Well, it was more structured than that. The beginning was more of an emotional journey. Like, I think the three of us had to accept that this is what we wanted first. And then we were like, what are we going to do? As soon as we got to the place of knowing we wanted to do this, immediately every Saturday we were having entrepreneur club meetings. So it wasn't just sitting around.

They were structured. Like, you had to all come with ideas? Yes. Yes. So the idea was in the week, you were supposed to have a notebook with you. And at any point during the week, if you had a pain, a struggle at all, you had to write it down. That was what we gathered around. So we had all kinds of ideas.

Like what? Okay, so they ran the gamut. So parking was a pain in the ass. So the idea for an app that would, you know, solve for looking around for parking in downtown L.A. Vanessa would come in and say, I remember one of the ideas she brought up was her high boots. She has these knee high boots and they would slouch. They would fall when she would walk. What could we create that would hold those boots up?

Oh. Yeah, I mean, really, all over the place. So if we liked the idea, like the three of us would look at it and brainstorm solutions. And we thought that there was one that had legs. We would move it to the next phase. Right. Which would mean somebody would take it on and do a little research. What does the competition look like out there?

How much would it cost to, you know, just sort of initial broad stroke stuff? Yeah. And most of the stuff would get crossed off the list because we just didn't have any significant money. And we had gone through several weeks of this process in the Entrepreneur Club, maybe even a couple months. And by the way, Vanessa and I did start one in there. You started a business? We did. We did.

What did you started? I wouldn't say we actually started a business. We made business cards. We felt that parties could be better if they had like a theme. And that we have themes for birthday parties as kids. Why don't we have theme parties more and easy theme parties for adults? And then eventually this could turn into a really great business where we would sell kits. Like that was sort of the thought.

And so we called it thematics. So like if the party, if it was like the theme was the Flintstones, you would go decorate a house like the Flintstones. Yeah. Okay. So we made business cards. We even went and sold a party to a record studio in Hollywood. Wow. And it was a, it was Halloween and I don't remember, which is really sad. We never ended up doing it.

Oh. That's why I don't remember. We sold it in and they were excited to do it. And then like it just sort of puttered out. They ended up canceling the party for a reason unrelated to the theme. It was like they were cutting budgets or something and they decided not to do a Halloween party this year. Right. So there was a bit of frustration, you know, in the group.

And we were going to get another party going. And Justin basically came into one of the meetings and said, guys, I feel like what you're talking about is just is going to be a lot of work. I'm not particularly interested in that. I mean, the three of us really were broke. By the way, and you're still both of you are still working at Glaxo Smith-Kline at this point. You're still good because you need the income. Oh, yes. All right. So you guys are having these entrepreneurial meetings. And I guess that the problem you decide to settle on was because Justin raised this problem. What was the problem he had and what was the idea?

The problem was hair loss. Okay. So his entrepreneur, the one that he was working for, he became successful by selling a product that basically solved for hair loss. And so Justin would see how far people would go, consumers would go, to protect the hair on their head. And so he came in saying, guys, we could make something here. I think he had recently gone to represent that company at a trade show or something. And he just saw the incredible opportunity. So he brought that to the table. So he's thinking, we got to get into hair loss because this is a big deal.

It's a huge industry. And there's room to kind of enter that market. Yeah. And so what did you guys? I mean, where did you start? So, Jess and Vanessa and I started researching what would regrow hair. And yeah, the idea was we create some kind of product that worked, though. That was the goal.

This is a bold swing. This is like a big swing for the fences because for at least 2,000 years, humans have tried to answer that question. And it's pretty bold that the three of you are like, we can figure this out. I mean, I love that. Yeah. So I was particularly interested in finding a natural substance. Got it. And so I was sort of researching, what could you?

eat, what vitamins would you need? And it just started researching that. That was my angle. And when I came back the following week, I had reported that basically I found all this anecdotal, like all these people all over the world just talking about using a kombucha scobie on their head to regrow hair. Well, just pause for a sec. Okay. I make kombuchas. I know what you're talking about. But in kombucha, there is a large, galoppy sort of pale mushroom kind of thing that sits on top of the called a scobie. It's an acronym, yeah. What does it stand for?

Symbiotic culture of bacteria and yeast. Scobi. It is a like a mushroom kind of thing that just eats up the sugar. It's a fungus. And that's what makes the kombucha. That's what ferments the kombucha and helps make it sour. So you read that the kombucha scobie, what, if you stick it on your head, it promotes hair growth? That's right.

Wow. And I wasn't just seeing that once. I was seeing that in a lot of places. What? Yeah. People talking about taking that scobie, mixing it with something or just putting it straight on the head as a mask. But what I really thought was, I know how to make kombucha. And therefore, I know how to make scobie so we could try this thing. Yeah. So you thought, all right, let's try this out. Because you couldn't, I mean, you knew this from working at a big pharmaceutical company that there's something called the FDA. Yeah. I mean, you couldn't just put out. a product and say, this will stimulate your hair growth made out of a scobie? So, yes, and I did know all of that. And for this to work, I knew we would have to prove it. Right. So because Justin was thinning, we're like, okay, here's our guinea pig. Let's start with a sample of one and see if this stuff really works. So I just had to make kombucha and I just had to make a lot of it. Because each time you make a kombucha, as you know, guy, you make a scoby, right? And you were going to test this out? And what were you going to do?

Are you going to just directly put it on his head or were you going to mix it with stuff? So we were going to just put it straight on his head first. But I think our sort of line of sight was that we would eventually mash this up into a really beautiful mask that had like beautiful smells and would have other things in it that would probably be good for hair. Like avocado, coconut oil, something like that. That was sort of the goal. But at first we wanted to see the, you know, with the active ingredient work, aka the scobie. So, yeah. But we never actually put one on his head because there was an intervening happening.

What happened? I mean, you've got this idea. You're going to try a remedy, a mask for hair loss. Oh, yeah. But Vanessa's friend of a friend. I don't know if she actually ran the farmer's market, but she was one of the leading positions at a farmer's market organization in L.A., one of the biggest. And she had called us to say, listen, one of the farmers is dipping out for the summer. I'll give you the spot to sell your hair loss product. Wow. If you want it. So we didn't have the hair loss product yet, but that didn't matter. We said yes. Yes.

We said, we'll do it. Yeah. And this is in 2012. This is 2012. This has got to be like January of 2012. Got it. Okay. And so you were thinking, we'll take it.

And when was the spot going to open up? In March. March 26th was the first market. And it was going to be for the summer. So you've got two months or less than two months to get this into the market. Yeah. Are you scrambling to try and make this work? Yeah.

So I've got like 60 scobes gathered. So I've also got like 60 cases of kombucha in my apartment, which is just like useless to me. It's like a byproduct. Even though I made really good kombucha, the goal was to make really good scobie. So like I was just sort of handing that kombucha off to friends. You were just bottling it up and leaving it. We were bottling it up in cheap bottles that we got from general bottle supply in L.A. And just every time a friend would come over, I would just give them a case.

And I remember the week after the lady, we said yes. the following weekend was when we got together and we're like, okay, let's bring all the ingredients together that we've seen online make a difference and everything was very natural. So we had like avocados, coconut oil, vitamin C, different kinds of food products that had anecdotal evidence around hair growth. And we started messing around, you know. And the goal was to, you know, get to a place where we would be able to create a really smooth, beautifully smelling mask that someone would want to put on their head, right? And you would sell that for like 50 bucks a pop at the farmer's market. Like that was kind of what we were we were envisioning. And I think

the three of us all thought that was going to be pretty easy. And, you know, it took an afternoon for us to realize like this was way formulating a product. It was going to be way harder. It was so complicated. And the scobie did not blend well. And it was. it was really smelly. You know, like it. And Justin kept saying, I just don't know how anybody's going to put this on their head. So once you realize that this is not going to, you're not going to be ready in time, what did you decide to do? Well, what was originally a byproduct suddenly became the main show.

You know, we saw 60 cases of unlabeled kombucha. And we were like, okay, wait, check. We know this is really good kombucha. Everybody tells us that. check, we already have it. Check, you know, a lot of checks. And so we said, okay, we're going to sell that. And what did you call it? Did you have a name for it? Yeah, it was called HealthAid. How did that happen so quickly? It happened in about a two-hour meeting around a circular table, the same table we started the entrepreneur club at. And, you know, there wasn't a lot of pressure for this

drink. I want to just say, when we decided to sell the kombucha, we hadn't given up yet on the hair loss idea. We just kind of realized it was going to be harder to make than we could make in the time that we needed to make it by. So it was like we still thought the big idea was hair loss. And so there wasn't a lot of pressure to make all the right moves with this kombucha. We each had different things we were working on. For me, it was create an awesome package. I had stayed at a friend's house in New York City and I loved. She had this like apothecary setup of like old medicine bottles and stuff just like decoration.

And I just loved that. look and feel. And so I took a picture and I drew something on a piece of paper that said, you know, bubbly probiotic tea and kombucha. And then I took that sketch and sent it to a friend who was Justin's musician friend, but also happened to be a graphic designer and, you know, gave him 50 bucks in a case of kombucha. Wow. And he came up with a really awesome label for us that we printed on our jet printer and scotch tape on the bottle. So you've got the labels and you label them on. You guys just pack that up in a car and you drive to the farmer's market.

Did you get like one of those like white tents? Yep. What'd you do? You had like a sign? Oh, it's way more than that. I mean, I took this very seriously. It was like everything had to match. It was I felt that the whole theme of the booth had to be apothecary.

So our sort of thought was it was going to be a little bit like, come one, come all, experience the elixir of life. You know, like that was sort of going to be the theme. And it would draw people in the market. It would almost be, we thought maybe we could make our farmer's market like a show. And so what happened? Did you start like getting customers buying it right away? Oh, yeah. Wow.

I remember the first purchase, the first guy who came. Who was it? Just some dude. I think his name was Mark. But he showed up and we like asked a couple questions, took a sample. And me and Justin were like sitting there, you know, looking at this guy like, is he going to buy one? And he asked for two. Two bottles.

Two bottles. $10, baby. A $5 a bottle. That's a lot. Yeah. Yeah. Well, at the time, actually, that was sort of what they were going at in the store too. They were like $4.50 or something at the store.

And how many bottles did you sell that day? All of them. Wow. You sold them out. We sold them out in like a couple hours. Wow. It surprised us and it surprised the farmers market people. They were like, what the, where'd this team come from?

And what frustrated us is we sold out, I want to say, by like, 11 a. am and the market didn't close till two. So we could have made a lot more. So the following week, you know, we could only do so much because kombucha takes a good week to make. But, you know, two weeks after that, we showed up with a lot more. And there were days in the summer that we were making 1,500 bucks in a market. Wow. And by the way, where were you living? Where were you and Justin living at this point? So we had this great apartment off Sierra Benita Boulevard in L.A. right near the grove. And where were you brewing the kombucha?

In our closet. Wait. So because you, so you. Well, that's where it was fermenting. But of course, we used our kitchen for, you know, making the tea and. Yeah. Were you making it in gallon jars? We were making it in the same jars we make it today.

Two and a half gallon cookie jars from bedbath and beyond. And that apartment just happened to have a huge closet with a bunch of shelves. And we put in stainless steel shelves to add to that. You know, you could fit 10 jars per shelf. and we probably had a good 20 or 30 shelves. Wow. So we could make a lot of kombucha. And then we bought, I mean, I'm not sure if this was electrically safe, but we bought one of those space heaters and just sort of put it in the closet.

So it warmed up the room to make the fermentation go a bit faster. All right. So you got all this kombucha going and then you spend the summer just slinging kombucha. Basically slinging kombucha. But during the week, you were still working. You were still selling pharmaceutical. Yeah. It was hard, man. So, yes, in the week I was working and at night be just working so hard at making the kombucha, making more kombucha. At the height of the summer, we were in seven markets and there were only three of us. So we- You were in seven farmers markets. Yeah. And by the way, how are you, I mean, this is not just on the weekends, right? You had to do weekday markets, but you and Vanessa had a weekday job. So what did you do? And so did Justin. Yeah. I mean, we didn't.

do the weekday markets at first. We did weekend markets, but then we did pick up a Thursday market, but we hired somebody to do that. So he would do it for 100 bucks and a percentage of sales. And so that's how we were doing the seven, of course. Three of us, each of us would do a market, and then we had four people. All right. So you are, it sounds like I'm assuming you're getting repeat customers, people coming back to your stall at the farmer's market and saying, I bought this stuff last week because it's great. I want a few more bottles. Yes. At least half of our customers were repeat. And then the other half were new, which was so cool. We were really driving people to the category, people who were new to kombucha. And we would, first of all, you couldn't walk through

the market and not taste our kombucha. We would make sure that everybody who walked by our booth got a sample. It was just... How'd you do that? Hey, you. You with the kid. You want to try some probiotic tea? And who were your customers? Were they like yoga, people, Were they like, was it just L.A.? It's just L.A. People are kind of health conscious. It's kind of just L.A. I mean, for sure, the ones that knew kombucha were probably more like the yoga customer. But I would say a lot of customers that came to us and bought really had never heard of kombucha before, you know, had heard something about probiotics.

Yeah. And we're just like, well, my doctor told me I should have probiotics. I'll give this a try. Yeah. Let me buy one. Yeah. And another thing we were doing at that time pretty quickly. customers who loved it would say, will you just bring this to my house? Like, I don't want to

carry a case around the farmer's market. Will you just deliver? If I buy a whole case, will you deliver it to my house? And we're like, yeah. So then this whole other business started, which was us distributing cases to homes all throughout L.A. after the market. So like Saturdays and Sundays became extremely busy for us. Now, here's a question. So this is very promising. You know, you're selling a lot of kombucha at farmers markets, but it's a, it's a farmer's market business. Did you, you know, did you think, hey, we should take this beyond the farmer's market? Did you think this is going great? This is going to be a great farmer's market business.

No, no. We quickly saw. I want to say it was like June or July when we had. 2012. When we, yeah, when we had realized this was the business. Wow. To be honest, it was about the consumer to us. Like, there was a response.

They, like, loved our kombucha. We were getting, they would say things like, I drove 100 miles to buy this kombucha. You know, it was like that. And we were like, okay. We have something here. It felt wrong to go back to hair loss after that. There was something here. It was alive and, like, growing.

When we come back in just a moment, how Dina, Justin, and Vanessa started to ramp up production while burning through cash and how one single week would determine whether health aid would survive or die. Stay with us. I'm Guy Raz, and you're listening to How I Built This from NPR. Hey, welcome back to how I built this from NPR. I'm Guy Raz.

So it's toward the end of 2012, and in less than one year, Dina and our co-founders have pivoted from selling a hair loss treatment to a business selling kombucha at farmers markets around L.A. And at this point, they can tell that health aid has the potential to become much, much bigger. The problem, though, is time. All three co-founders are still working. working their day jobs. And they had to decide whether it was time to jump into this side hustle full time. Well, everybody in our families was telling us not to do it. Everyone said you're nuts. Don't leave that job. Don't leave that job. Don't leave that job. Don't sensible advice. Yes. But I mean, but for you, the decision to quit, I mean, was it just obvious that it was time and this, this new thing with kombucha was going to take off?

No, it was so scary. It was so scary. I was so afraid. I was so afraid to. I was so afraid to to call my father and tell him. Oh, my goodness. I remember that. I was like shaking. Would you tell him? You know, I've made the decision to quit my job and give health aid a full time go. He was sort of like, come on, you don't have to do that. I mean, listen, I'm supportive of health aid. It's going well. You should keep doing it. But like, don't quit your job. You should be making some money first, you know. Yeah. Because it wasn't at that time. I think Justin and I had scrounged together enough money to have a couple months of rent saved up. So at the the end of the year, we found ourselves in this place of being like, it was like our dream. All three of us had the dream to give this thing a go. So we made a sort of pact at November, I want to say, it was around Thanksgiving where we said, okay, let's put in our notice, end of the year. Boom, we're done. January 3rd, we come back. It's game time, baby. That was sort of the, that was the thought. And it really was. As soon as we showed up, I call that one of the most important marquee moments because it was when we came back.

that we could put our full mine share to this business and growing it. And that's when we moved away from farmers markets. All right. So you quit. By the way, you're making all the kombucha in your apartment. You guys are making it in your apartment. Oh, yeah. No, I had like our apartment literally turned into a factory of a kombucha factory.

Did it smell, by the way, of kombucha? Oh, yeah. Yeah, yeah, yeah. We were like definitely, I mean, neighbors who lived at Sierra Benito with us, thank you, because we really, yeah. their lives were worse off because of us. Not only did it smell like kombucha all the time, but we had people coming in to help us make it. I mean, any friend that needed, you know, some cash. Sure. But there was a point where our kombucha, you know, just could not fit anymore. And we needed some space.

Plus, we started to sell in stores. Like, stores would come to our markets and say, hey, can I sell this in my really awesome, you know, craft cocktail store? Can I sell this in my like high end market? And so we would deliver not just to individuals, but also to small wholesale accounts. And when we did that, that was when legally, you know, they would say things like, hey, you know, where's your nutrition label? Where's your nutrition label? And like, where's your like business location? And we're like, yeah, we can't be like Sierra Benita apartment A, you know. Right.

So we found a, it was called Cake Bake Shop in Manhattan Beach. And the owner's name was Laura. and she was closed on Sundays and Mondays. And in exchange for us opening on Sundays and Mondays and manning her shop, she let us use all the extra space she had for free. I mean, there's so many, like, really cool strategies here because you didn't really need a lot of money to start up. You didn't have an office, so you just kind of barter to use a space.

Uh-huh. It was a barter. But did you get to buy jars, you had to buy bottles. Did you at any point go out to people that you knew and say, hey, can we take a loan? Can you help us out? Did you like do anything like that? Yeah, no, we were so busy guy. And we were the type of people that in the walk-in fridge at the bakery shop, when the light was out, we didn't like fix the light. We would just like work in the dark. So yeah, no, I mean, we probably should have been thinking ahead because there's no question that as we got bigger, cash was coming back to us at a later time. and that was starting to really infringe upon our cash situation.

But we weren't really thinking about that. So, no, when we needed money, the first time we really needed money, we needed money to buy our first filling line, which already we were past the cake bake shop stage. It was the next stage, but we asked both of our parents for that. Vanessa asked her dad and I asked my dad, and they gave us money at like a, you know, I don't even think there was an interest rate. It was like pay us back in a year.

And how much money did you need to get a filling? machine or whatever. 60 grand, so 30 grand each. Right. And that was just for a filling line. That was like gone. It was literally the price of that. And so we were, yeah, we were out of cash fast.

And what was the sort of the division of labor between you and Vanessa and Justin? I mean, you were the chief kombucha brewer, right? Well, yes and no. I mean, I was also the marketer. Okay. In the beginning, it was like anybody who has arms and legs and has like, we all shared the chores and the responsibilities in. Brewing was the most physically difficult. I mean, it's a lot of lifting cases of liquid, moving cases around, filling bottles.

So it was like no one person could do that all week. So we would switch. There was no clear kind of job responsibility yet. But once we quit our job, what we did is we put jobs, individual jobs and responsibilities onto postcards. So we had like 100 postcards each with a job. from making deliveries to brewing the kombucha to opening accounts. And we put those on a wall. And we sat at the back and we just said, okay, go pick up the postcards, the three of us, go pick up the postcards that you, you know, are most drawn to and you think you're the best at. Wow. And naturally, Vanessa picked up the sales ones. I picked up the marketing and leading people ones. And then Justin picked up a lot of the operational manufacturing ones. So we very naturally

fell into our roles of CEO for me, Chief of Sales for Vanessa, and C.O. for Justin. And when it came time to having that difficult conversation, sometimes difficult, about how to divide up the business, was it difficult or not? Was it just like, yep, a third, a third, a third? How did you figure that out? It was not difficult. Yeah, we all, very grateful that the three of us landed with each other, because I know a lot of people have founder issues. It's natural, right? You've got a thing of value. But For us, it just really hasn't ever been. The three of us were equally devoted, dedicated, put the same amount of work into health aid.

So we were, yeah, a third, a third, a third, all the way and always have been. All right. So you guys start. So you decide, all right, let's get this in stores, right? And how do you, where do you start? Because I guess, did you approach stores with your kombucha? Did you like, yeah, oh, yeah. And were they instantly like, yes, we're in.

Or did you get more pushback? You know, some. You know, we had a sales. that like I had, you know, used my, as inspiration for my sales, pharmaceutical sales days. Sometimes you'd get somebody that was super stoked about it. One of the biggest early on challenges was refrigeration. And this is, we've done this before in the show with like, you know, honest tea and other products that some need refrigeration, some don't. It's very hard to get onto refrigerated shelves in stores.

Yes. Yes. Because there's limited space and everybody wants. at space. Yes, it's totally cutthroat. And you're just some three friends making kombucha. Yeah, we're kind of a joke. Yeah. And what would you do? You would go to these stores and say, hey, can I talk to the manager and you would have like samples with you? Yeah. A six pack of kombucha is usually what we show up with. And we just, we'd say, you know, try it. And, you know, sometimes we'd be able to put it right in the fridge, right then and there. And we created a whole self-distribution model for a good two years. We ended up buying a van or, you know, leasing a van, a big white

man. It wasn't refrigerated, but we put a bunch of coolers in there. But yeah, I mean, it wasn't as easy to make a wholesale sale as it was to make like a customer sale in a farmer's market. But it was worth the squeeze because usually the bigger the store, the more cases they would order at a time. But there was a period of time where Vanessa, Justin and I, we would each take a day to deliver during the week, a couple days a week. So we delivered every single day. And our days were full and we would just drive around LA and drop off product to restaurants, cafes, small grocery stores. And they were buying like, what, a couple cases here and there?

Yeah, like probably the average delivery was somewhere between two and ten cases. So I guess you eventually, in 2013, you land a deal with Airwain, which is a larger market, like an upscale market in L.A. Yeah, it's like a proper grocery store, but they only have three of them at that time. Actually, at the time they only had two. So it was still not a huge chain. Like we could make the deliveries. And with all of the beverage options at a place like Airwant, already by 2013, that was a pretty crowded space.

Not just kombucha, but just beverages, fruit juices, natural juices, cold press, this press, that press, everything. How are you getting people to notice health-aid kombucha in the refrigerated case? We just wouldn't let it lose. We would show up and do samples. Justin Vanessa and I were doing samples. at least once a day. And then, you know, we did a good job of creating a bit of buzz around the product, too. Yeah, and I think people liked that we were like a trio, you know, of entrepreneurs that were just

getting started. And we had a really good kombucha. So, you know, hopefully people would tell their friends. I don't know. It just, it really did grow, but we pushed it very hard. I mean, we were always, always selling this thing. I was always demoing it felt like. And did you have any employees at this point?

It was just kind of volunteers or friends or interns or what? We had some people that worked hourly for us in the brewery to help us. And then we also had some independent sales reps that got paid a commission. So let's say we had about 20 of those individuals that were working like some five, six hours a week. So not a lot. That was how we ran our sales. That was how we were able to grow in accounts. And then on the brewery side, we probably had two or three individuals.

And were you also using credit cards to pay your bills? Yes. And maxing out on your cards? Every month. All right. So you need to scale up, right? You're getting more demand. So, and clearly you've got a winning thing here.

Could you go to a bank and get a loan? Did you try? Well, I always gave my middle finger at the Wells Fargo, you know, billboard on the 405 because it would be like, helping small businesses grow. And I'm like, you didn't help us. Oh, you actually went and asked them for a loan. I mean, everybody said no. Because you had no collateral? No collateral.

No, yeah, no assets as individuals, but also no profitability. It was just like a complete, you know, without this business. You met and met with a loan officer or loan officers? Yes, yes. And you showed them your business model and everything? Yes. We didn't get good loans from banks until like a couple years ago. Because our business was a bit like a rocket ship that, you know, it was growing like crazy,

but we didn't have any sense of where our next dime was going to come from, except from, you know, selling the kombucha. But, like, we were going way faster than we could keep up with for sure. So I think from a conservative bank perspective, it just was not a safe move until recently. So what do you do? I mean, you know, either this is a point where, you know, this can be like the trough of sorrow, right? Where you need a bridge loan or you need some money or you're going to fizzle out, right? Yeah, 100%.

And I remember the moment. We were at the brewery and we had a $50,000 credit limit. And we just assumed that Amex would extend our credit because we were good about paying it in full every month. So we were like, oh, it's not going to be a problem. I mean, we've been great customers. And then, yeah, we got a flat no. A flat no to extend your $50,000? Yes.

Like, it was like you're maxed out and you're not getting any more credit from us. When we come back in just a moment. moment, Dinah and her co-founders struggle to find funding until their funding finds them. Stay with us. I'm Guy Raz, and you're listening to How I Built This. Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2013, and Dinah, Justin, and Vanessa have maxed out their credit cards and can't get an extension. So they scramble to make a list of people who they can ask for money. We were starting to gather those people, and we got a cold call from a guy by the name of J.C. He was a manager at an investment company called First

Beverage. And he found out about your product maybe by going to Airwain or Farmers Markets. Yeah. And he called you to what, too? Say he tried our kombucha and he thought it was the best he's ever had. And they really want to talk about an investment. Wow. Now, they had just gone through a very long diligence process with another kombucha company that was bigger than us at the time. And they didn't end up doing the deal for whatever reason. I'm not sure why. But they were convinced about the category. So it's like they entered our world already sold that they needed to get into a kombucha and fast. And it was like, could this be any more perfect? Like, where do we sign? And they, they were able to cut a deal pretty quickly within six weeks. We had cash. And they allowed us to

include some friends and family as well. So we did like a series A slash friends and family round together. And that was in 2014, and that was our first investment. So you get this investment. What does it mean? By the way, how much do they invest? Over $2 million. Wow. But this enabled you presumably to hire people.

Yes. So that was exactly what we did with the money. So we did two things with the money. We moved into the next brewery, which was really, really important because we were in way too small space and couldn't keep up. like we were maxed out. So we used half the capital probably to build out our next brewery, which we had already found the space and identified the equipment we needed. We just needed, you know, to write the checks. And then the other half to hire four or five key people.

And I mean, that was like game-changing guy because like, yeah, it was game-changing. And as you kind of did this, get this investment, you also land a deal, a distribution deal to get into Gelsons, which is a chain in L.A., mainly around L.A., and then also other places in the West Coast. And we have a sense

of how important distribution is, right? Because you need to get in with a distributor. Otherwise, you yourself have to go door to door to door to door, and it's impossible, really, to scale your product. You need it everywhere, and only a distributor can kind of help you do that, right? Yeah. But then the catch-22

is the distributor won't usually take you on unless you have some stores. Right. Like they don't want to build you from scratch. Right. So they want to know, oh, you've got Gelson's on board. Okay, we'll take you on. Got it. So this distributor is called Nature's Best that you signed.

Yeah. And was that just a huge turning point for you? Oh, yeah. I mean, it was a huge, it was the next phase, right? So now we're like moving away from the majority of our business being from farmers markets and home deliveries to, okay, now we're talking about huge orders. Yeah. So more stores are willing to accept us and we're very focused on growth aligned with our

investors at this time on just like, let's grow. Let's grow this. Was it hard for you to, I mean, I can't even imagine how hard it would be to all of a sudden go from just you and your husband, your best friend to a company of even 10, 15, 20 people and you got to be the leader and the boss and there's HR issues and like it's got to be overwhelming. Yeah. And then there's the capital piece. Like we got that money. We thought that money was going to last us. I remember when we got the two million bucks, it was like, oh my gosh, we're good. Like, let's build this now, baby. And then it was like gone a year later. And it's not that we were reckless at all. It's just the capital for growth is really intense and immense. And so we were already having discussions a year later of doing this again. And that's that's a lot of pressure and responsibility when I'm also the one that's still picking up the broom. I mean, so many pressures and responsibilities and growth. It's almost hard to pinpoint why you're building something. So proving it, proving that you can do it, I mean, so many times,

I think the biggest fear was not living up to that. So, I mean, almost everything requires discomfort and push. In times of growth, like, it's probably the hardest times. I can ask you about having a business with your husband? I mean, it's you, your husband, your best friend. And, God, that could spell recipe for disaster in many instances, right? Because it could be two people are in a family and one person isn't and that could be tension and also the tension with the two partners who are married.

How do you guys manage that? There's no way there isn't tension between at least you and Justin or you and Vanessa or just. Oh, yeah. And that's really where the tension is, me and Justin. It's not, it doesn't really sit for me and Vanessa. I don't know exactly how to explain why. Part of it is that Vanessa and I are wired very similarly. So I think we just really operate from the same space. I think that's a part of it. I think another part of it is we don't live together. So I think that's separation time. And then also, the other thing that makes it challenging for Justin I is we're very different. Like he and I are in some ways opposite. You know, he's the operations guy. He's the one that, you know, wants to dot the

eyes, cross the T's, make sure everything is operationally sound and, like, structured and processed and system-oriented, which obviously we need. But I am a very different type of force. I am, I am the dreamer. I'm the one that, like, you know, doesn't think about that stuff. And so it calls for quite a bit of conflict between the two of us at work. And I actually invite that. I'm very comfortable with that level of conflict. In the end, we end up having a very solid dream, I guess you could say, or executable dream. But you just don't really want to have sex to that person that night. I might cut that part out. I got you. I hear you. You know what I'm saying, though. I mean, it's tough to come home. And then you have this other relationship to tend to,

which is a much more personal one. And it's just, it's hard to transition, especially with children. There's no break. It's not like you can go to your yoga class and then come back and be like, okay, now our husband-wife. So, you know, we just have had to work through that. And we have. So, so, Diana, I mean, this brand, right, healthy, that, I mean, that you started by fermenting kombucha in your closet. I mean, today, I mean, you're looking at hundreds of millions of dollars in annual retail sales.

I think you guys have raised almost $50 million total or something like that. Is that about right? Yeah. And last July of 2019, you got $20 million from Coke, which isn't just $20 million investment. That's like the backing of Coca-Cola, the biggest beverage company in the world. Huge milestone. Do you feel now like you can take a breather? Like you're like, okay, we're going to be fine.

Like, I've been grinding away since, you know, 2012 on this. And now I'm like, okay. I kind of got to say no. Okay. All right, fine. Yeah. Yeah, no, it feels, I will say, for sure it was a huge milestone. I was extremely proud and I'm extremely proud that we've been able to build something literally from nothing from that table to something that the biggest beverage company in the world would want to invest at this level.

Like, yeah, I mean, it's awesome. But the keep going part didn't die down. Now, I will say over the journey, regardless of that investment, over the journey, I've been able to, you know, pay myself more than $10 an hour like we did at the beginning. And sort of, I feel now I'm at a point where I feel fairly paid. And that's allowed for me to at least go on vacations and do things. Because you have a board that approves your pay. Yeah. Yeah, exactly.

I still have to fight for it, though. Yeah. And this is the thing. I remember we talked to Andy Don of Bonobos about this. Because a lot of people assume you get all this investment and all of a sudden you're loaded. Oh. You're just swimming in cash. But actually, the more outside investment you get, the less equity you have in the business.

And really, most entrepreneurs until or if they sell their shares in the business or equity, they're dependent on a salary that is determined by a board. And that could be a perfectly fair salary, but it's not going to make you filthy rich. Dude, one of the funniest emails we got was after we got that first money. I just, I got an email and it was like, you know, for your, for your charter flight needs, you know, think of executive charter. Oh, from a company that was like, oh, this person's rich. Now they're going to need charter flights. Flying, like, private, Justin and I were like, oh, and I wrote back. I was like, we're still flying coach.

You know, like this is, and still we are. Here's a tricky question for you. We've had people like Gary Erickson of Cliff Barr, who. own his, he owns his company. He was almost going to sell to investors and sell to a big, then a big company and he didn't. We've had, you know, Sarah Couss of Swell. She owns 100% of her company. Some people say they couldn't have done what they did without outside capital, that it would be, it would have been impossible to scale their business. And some people say, I wish I didn't do it. And other people say, had I done it, we would have grown

faster earlier. There are all kinds of different views on this. But there's, no question that when you bring an outside capital, you do lose control, right? There are going to be people who have opinions and they're going to assert those opinions. If you would have done it again, would you have avoided outside investors? No. No. So much of the choice you have is, yes, there's experience, but it's also, what's the context of the situation? I mean, we couldn't get a loan if we needed it. We were totally out of cash. It really felt like we had no choice. So I know if I was back in that position, I really still would have no choice. But to be honest, they helped us a lot in the beginning. They helped us build forecasts and get into the right

distribution. And so honestly, I think we did it exactly right. Yeah. And I would say that to all those people. If you have access to capital outside of private equity, great, go for it. But there's not only one way to do it. When you, when you think about where you, you're, you, you know, where you you are right now and where you've come from, how far you've come in pretty short time. I mean, it's, I'm sure it seems like a long time. I'm sure it seems like forever and ever. But in the grand scheme of things, it's pretty quick, right? I mean, you've become a pretty big company quickly. How much do you think that has to do with just the grind and your hard work and how much, because you got lucky? Okay. It's definitely not zero luck. The initial number that came up was 20% luck. That's what I

wanted to say. I would say it's 80% grit. There's definitely moments of blessings, you know, that ride along with Vanessa. Health aid would not be where it is without Vanessa. That is a blessing. You know, the phone call from the farmer's market, just when we need an investment, the guy that chose to buy a health aid and called us and said we wanted investment. I mean, those types of things are hard to explain and there's more of that. But even in all those examples, you get a card dealt to you. It's not the whole deck. You get a card.

You still have to do something with that card. You have to take it and run with it. And without that grit, that card's just a card and it flies away. So, yeah, I would say it's 80% hard work, 80% pushing through and just, like, doing it when no one else would. That's Diana Trout, co-founder of HealthAid kombucha. Since we last spoke, the firm that was HealthAid's initial investor, First beverage? Well, they acquired a controlling stake in the brand.

Over the next few months, Dinah and Vanessa planned a step away from the company. And after a short break, Dinah wants to get back in the game and start building yet another business. Hey, thanks so much for listening to the show this week. If you enjoyed it, please spread the word. Tell someone about how I built this or post about it on social media. And if you want to contact the team, our email address is hibt at ID.wondery.com. If you want to follow us on Twitter, our account is at How I Built This and mine is at Guy Raz. And on Instagram, we're at How I Built This and I'm at guy. dot Raz.

This episode was produced by Casey Herman with music composed by Routin Arablewe. It was edited by Sarah Saracen with research help from Dareth Gales. Our production staff also includes Neva Grant, J.C. Howard, Elaine Coates, John Isabella, Liz Metzker, Carrie Thompson, Alex Chung, Chris Messini, Carla Estevez, and Sam Paulson. Our intern is Susanna Brown. I'm Guy Raz, and you've been listening to How I Built This.