How I Built This with Guy Raz - nutpods: Madeline Haydon

Episode Date: May 13, 2024

When Madeline Haydon decided to turn her homemade, plant-based coffee creamer into a business, she didn’t fit the mold of a typical founder. She was a woman of color, pregnant with her second child, and had no experience in the food industry. At first, almost all of her sales were through Amazon, and she struggled to convince investors to take a risk on her. But over 10 years, she grew nutpods from a $30,000 Kickstarter campaign into a leading coffee creamer brand, now available in 15,000 stores across the US. This episode was produced by Alex Cheng with music by Ramtin Arablouei. It was edited by Neva Grant. Our audio engineers were Gilly Moon and Patrick Murray.You can subscribe to Guy’s brand new newsletter at guyraz.com.You can also follow HIBT on Twitter & Instagram, and email us at [e-mail] 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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Airbnb.ca.ca. slash host. Hey, really quick before we start the show, we have an announcement about a really exciting new thing we're launching, a newsletter. And like our show, the newsletter is designed to be interesting, informative, inspiring, and most importantly, fun. It's 100% free. And to sign up, Just visit guyraz.com. That's g-u-y-r-r-z.com. I mean, you have to take a look at me objectively. I am a female founder, person of color, pregnant, never been a CEO before, brand new to the industry. And I was going to anybody.

I was going to angel networks. I was paying money to pitch to angels. And I took it so personally, Guy, that they were really. rejecting me or my business or my team, you know, I hated it when my husband would say, this is just a numbers game. And the more knows you get gets you closer to the yes. Oh, it's such great advice. But it's terrible receiving it because they're not saying no to him. They're saying no to me. 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 the show today, how Madeline Hayden grew nutpods from a $30,000 Kickstarter campaign into a leading national brand, just because she wanted a better plant-based creamer for her coffee. It's a rare occasion when I drink milk, and if I do, it's raw, unpasteurized cows' milk, and if that makes you want to throw your smartphone at the wall or curse me for endangering my life, to you, I say, try it. it. Raw milk is delicious, but make sure you trust the source. Okay, now that we have that out of the way, most of the time I use a nut milk to whiten my coffee or espresso drinks. Why? Well, I don't have a

good answer. I'm not allergic to dairy, and I guess it's just a force of habit. Today, there is a plant-based milk for pretty much every type of human on the planet. Hemp, oat, cashew, hazelnut, which is delicious, macadamia nut, another good one. almond, soy, coconut, pea, rice, pistachio, flaxseed, and on and on and on. It's a pretty crowded category, and its growth has been fueled by people looking for something to put in their cereal or coffee that isn't dairy. Now, as many of you know, dairy milk consumption is way down in the United States, down 50% from 1975.

In fact, in 2023, milk consumption in America hit an all-time low. And in recent years, plant milks have gotten much, much better, creamier and fuller with similar viscosity to dairy milk. But that wasn't always the case. And that's how Madeline Hayden came up with the idea for nut pods a few years before she launched it in 2013. At the time, she was pregnant and used to using your typical coffee creamer in her coffee. the kind that comes in pods that you might find at the holiday end buffet bar. And if you look at

the ingredients of a lot of those creamers, there's a lot of artificial ingredients. So Madeline started to experiment with her own recipes using simple ingredients like coconut cream and almonds. At the time, Madeline's only professional experience with anything in liquid form was blood. I know, gross, right? But at the time, Madeline was literally a recruitment manager for a blood bank. She'd gone to business school in Seattle but never saw herself as an entrepreneur. And as many of these stories on how I built this go, she had no significant money or connections in the food industry. But lots of her friends loved the homebrew coffee creamer she was making.

And that sparked the idea of trying to turn it into a brand. She called her creation nutpods because, Originally, she sold it in pods only. And at first, it was slow going. Madeline had a really hard time attracting investors, and almost all of her sales were through Amazon. But after 11 long years, she managed to turn nut pods into one of the best-selling plant-based coffee creamers.

And in early 2024, the brand was acquired by a private equity group backed by Kroger for an undisclosed amount, but it was likely around nine figures. Madeline was born in Saigon in Vietnam, just as the country was falling to the North Vietnamese communists. Her parents both worked with the U.S. military during the war, and when Saigon fell in 1975, the whole family was whist out by the U.S. government. It's funny because when I think about my mom who passed away when I was in my late 20s, I think about a very cherubic woman who laughed a lot and was an excellent cook.

And I found this old picture of her, and she was 20, and she was felt. And she was holding an oozy gun. And I'm like, Dad, is this mom? And he said, yeah, he said, your mom was actually a very good sharpshooter. So she was, do you know what she did? She was, I think, a commander of sorts. I only know the Vietnamese word for it. Wow.

And they don't, as you can imagine, are very reticent to talk about some of the details of the Vietnam War. It's traumatic for them. But anyways, they had half an hour of notice to get to the airport because Saigon was going to fall. It's 1975 the fall Saigon. They're obviously famous pictures of helicopters being lifted out of the embassy, the U.S. Embassy. Exactly. And my parents had had the foresight and the opportunity with working with the U.S. Embassy to have all the paperwork in place. So go bag, you know, get all the kids from school. scrambled to get to the airport. And we were one of the lucky ones guy because we were all together.

We were on a helicopter. All six children. Five. My mom was actually pregnant. Yes, my mom was pregnant with the six. Wow. So five little kids, because you were a baby, baby. I was one, and my oldest sister was nine.

And popped over to Guam, went over to Camp Pendleton. Jerry Brown was the governor at the time. Of California, yep. And he was very protective about Vietnamese immigrants taking California jobs. And the governor up in Washington was Dan Evans. And he sent his aid down to say, Washington State welcomes you. And through the office of the governor, he heard about my parents, how, you know, it's a family of five kids, six on the way. Both mom and dad worked with the U.S. Embassy.

and they personally sponsored my family up. And so then in September, my mom gave birth to my little brother, named him Evans in honor of governor. Wow. Yes, Dan Evans. And to this day, you don't get a lot of 50-year-old friendships, but we meet with them every year. So it's been a wonderful friendship and it has really shaped me as well. Wow. So when your parents arrive, so when you're,

you arrived to, you were a little kid, an infant, toddler, as far as you know, what did they do for a living? So they had tough jobs. Language was a barrier, even though my dad translated. He still speaks with a heavy accent today. And so my mom sewed curtains. And my dad worked a midnight shift at a cannery. So in high school, my mom ended up in electronic assembly, so circuit board. And I remember I was working my job at Blockbuster Video.

This is your high school job. This is my high school job. And my mom, I remember I was chatting with her and she said she got a raise today. And I said, that's great, mom. She said, yeah, I'm really proud. You know, I'm up to $9 an hour. And I was thinking, that is not that much more than what I was making at Blockbuster Video. And I'm like this 17-year-old kid.

And it made me sad and cognizant of the disparity that she and I was. have. But gosh, it really instilled in me compassion. And I don't know if you can get those qualities without going through hardships. Yeah. I know that when it came to college, you went to the University of Washington, which was, you know, in your area. I think you majored in English. And then a few years after you graduated, you decided to go back to school to Seattle University to get your MBA, right? Exactly. The only reason why I went back, was because my mom was dying of cancer. She was worried because of all of the kids,

I was the only one who had a liberal arts degree. I was the one who was always making the least amount in salary. I was the one who had the most credit card debt. So she really begged me to go back and get a graduate degree. And it took me about two and a half years to earn my MBA at night. All right. So you at night do this MBA. while you're working daytime.

But then you get into, like with your MBA degree, you get into the nonprofit world, right? This is like, this is a, would begin like almost a six or seven year adventure in the world of nonprofits. And you worked for a blood bank. A blood bank, yeah. Exactly.

And I never had a job that I felt so connected to the community. And when you're going around and you're promoting blood drives, working with high school students, working with church groups, working with businesses, and you're driving around your community, I loved all of that. I think I wanted my work to matter. And I saw that, you know, when my mom was in the hospital

and when my mom was going through her radiation, like there were things that mattered and there were things that didn't. And I wanted my work to contribute towards helping other people and making a difference. At this time, this time in your life. Did you have a family? I know you have a family yet, your own family? No, I didn't have a family until 2009. I was married before and I married my ex-husband right out of college. And, you know, a great guy. I think I just didn't really understand the

commitment of a whole lifetime together. And I take a lot of the blame of that first marriage that failed because I got scared that when we started to have the ebbs and flows of a seven-year-old relationship, that this is what it was going to be. So I just retreated. And I have regret about how I left that marriage, even though I love my current husband in the life that I have with my current husband, if that makes sense. Of course. Of course. I mean, this was a, obviously, a lot going on in your life between the time you graduate and sort of early 2010s, which is where your life really begins to change. Yes. And I guess you were on you and maybe I think your husband, Jeffrey, were

on vacation in Lake Tahoe. And basically, this is the beginning of what would become the business. But tell me what the story was. Can I tell you the lead-up to this story? Please. So I think first thing was when Jeff and I were dating, we were watching American Idol. And we were watching all these people that had their dreams. And they would be so emotional because they were so passionate. And I realized, like, I didn't have a dream like that.

Do you have a dream like that? I don't have a dream like that. Like, where is the passion in our lives? Yeah. So I left my job at Puget Sound Blood Center, which has since, rebranded to Bloodworks Northwest. And I followed my husband to California for his career. He was a successful investment banker. And, you know, I got married the second time later, about eight years after my divorce. And so I was a later mom. And we had Emily, my firstborn. And we had

trouble having her. We, I mean, I've had about three miscarriages. We've gone through IUI, IVF, you know, you get in this like roller coaster of just trying to be pregnant. That's when I tried everything, everything from paleo to acupuncture to rakeet. And I remember that I was on a family vacation and we were at this cafe and I wanted a decaf cup of coffee and all the little bowls of little creamers were processed with artificial this and that's and hydrogenated oils. And I said to the waitress, hey, do you happen to have anything else? And she said, sure, I'll be right back. And she comes back and she plunks down that big canister of powdered non-dairy creamer.

And I just looked at Jeff and I said, I am like so sick of, you know, these are the choices of no matter where I go. And he just said, nonchalantly, well, maybe you can do something about that. And in that little chapter in our life, we were in California, we were around people that were paleo and CrossFit and vegan and plant-based was becoming a thing. And just got to thinking about how I'm lactose intolerant, but then a concept like nut pods would actually work for all of these other different groups of people, including diabetic people or pre-diabetic people. And so it just became a concept that was birthed in Berth Cafe in South Lake Tahoe. So you go back home to Orange County, and you have this idea in your head of, let me try and experiment with making non-dairy creamer? I went home to our apartment, and I got out my blender, and I went to Whole Foods, and I went to sprouts, and I got the ingredients that I could make a DIY creamer. What did you buy?

It was Whole Foods 365 almond milk. It was a can of Thai kitchen coconut cream. Yeah. It was, you know, William Sonoma, like Tahitian vanilla extract, and some gray sea salt because it felt fancy and Morton sea salt. Yeah. And so there was a period where I would just pack my own homemade creamer at home When I would go meet with friends for coffee and then that's when my MBA brain kind of kicked in and said, you know, actually this would help a lot of people.

And there's nothing like this. And, oh, look, there's a Chapman University from Recipe to Retail class. And I just wanted to learn a little bit more about like, could this actually be a business? Because Chapman is in Orange County, I think, right? Yeah. Mm-hmm. And so you decided, hey, maybe I'll take that class. It was just a conference.

Oh, it was a conference. Okay. Right. And in three days' time, you could learn about how to commercially develop your brand, how to think about pricing and going to grocery stores and routes and routes. And it was a really good overview. Tell me why did you think that there was something there? I mean, you like this, but did anybody else, like, did friends? friends of yours say, I like this too, or people asking for it, or how did that come about?

Sure. So, you know, my friends were in the different groups that I talked about. We had friends that were paleo, and we had friends that were Whole 30, and we had my family members that were diabetic. So they were bumming the creamer off of me. Because they can eat coconut milk and almond milk and salt. I mean, these are things that pretty much everybody on those diets can consume. Exactly. And I just really felt in my heart of hearts, one day I'm going to go into Whole Foods and I'm going to see a product like Nut Pods and I'm going to have regrets saying like, I wish I had done it. I wish I'd gone for it.

Surely there were, I mean, by 2013, there were plant milks available, like not like now, but there were plant milks available. I mean, was there anything at all like what you were trying to put out into the marketplace? Anything? The only two options was soy. and so delicious all coconut. And was there, I mean, coconut milk is delicious, right? And it's got this very wonderful viscosity.

And then almond milk is thinner because it's basically just water, you know, whizzed with almonds. But when you would combine those two things, you would get that sort of thick, creamy, creamer. I wanted a half and half. That was what my goal was. I wanted something that would allow the coffee to taste like a cup of coffee. And I was using actually so delicious. at the time, which is all coconut. And it was the richest, creamiest thing I could find, but every cup of coffee tasted like a

coconut cup of coffee. Like coconut, right. And you didn't want that overwhelming flavor in the coffee. Exactly. And coconut milk, what you just mentioned, wasn't rich enough for me. So that's why it ended up being coconut cream plus almond milk. And then that gave us the balanced neutral cream. creaminess that I was looking for.

And I think in 2013, you were ready to put your recipe out into the world, right, with a Kickstarter campaign. And initially, these were going to be pods, right? Like, that was the name, not pods. This is going to be like coffee creamer pods that you find in a hotel room or like the buffet at the holiday and breakfast bar. Correct. And so when you put the video out, the Kickstarter video out, first of all, how much were you trying to raise? I was trying to raise 30,000.

because I had Googled how much does it cost to do a commercial formula. And somewhere on some blog, some guy had said, you should be able to do a commercial formula for $10,000. So I'm like, okay, $10,000 commercial formula. Let's double it for Kickstarter backer rewards plus gifts. And let's like just do another 10 for safekeeping. And how did you get the word out about your Kickstarter video? Did you just like send a blitz to your friends with emails and then hope that they

would show up and contribute? Well, they actually, I didn't want family and friends because I didn't want the polite donations. I wanted like stranger people to tell me whether or not this was something that would resonate with them. Yeah. And so I was following a bunch of different paleo people at the time. Like bloggers? Bloggers. And I reached out for a couple just to say, hey, would you amplify this on your social media channels? And I got a couple lucky hits. And you wanted to raise 30. And you did. You slightly exceeded it, right? I think you raised 32,000. Yes. And promptly, like, vastly underestimated the amount of money that it would take to actually commercialize. Yeah. So let's start with that. I mean, you had a formula, right? So what did you need to do now? And now you needed to find, like, a commercial manufacturer, a partner who could make this for you at scale? So I learned about what a food technologist does. And so I ended up just networking through some of the speakers that came to that Chapman University. And I said, oh, Barry, can you introduce me to Tara? Because Tara has worked with a co-manufacturer. I told her about my formula. And she put me in touch with someone who would put together my form.

formula, which took two years. So was the idea to make it a shelf-stable product or to make it like a refrigerated product? I wanted initially in my Kickstarter campaign to have it be a shelf-stable, like a single portion cup. Like little pods? Just like a little coffee mate. Because at that point, I was tired of carrying around the stupid cooler pack with the stupid cooler.

Yeah. And I just wanted something that was shelf-stable and I could pop it. bag and go. What was the challenge in making that happen? I mean, tell me why that proved to be so complicated to figure out. So when I was working with Tara, my very first consultant, she connected me with a food technologist who would help me formulate commercially, you know, my kitchen formula into something that could be commercially scaled and produced. So I started looking in the grocery store and turning around different things. cartons and I saw Pacific foods was, oh, great, they're local. They're just here in Oregon. And they are

making aseptic shelf-stable products that are nut-based. So they should be able to handle my allergens and I called them up. And I said all the wrong things. Hi, my name is Madeline. I'm the CEO of a new startup. As soon as they hear startup, they don't want to work with you. And I'd love to talk to you about my product. And I would never get a response. Yeah. So how did you find a place that initially would agree to work with you and to work on a formulation. So there was a Tetrapak, which is the packaging company, had a pilot plant. Now, you couldn't sell it, but it was just a development pilot plant that you could use to develop new products and test it out. It's not certified or licensed to sell finished products. It was just to help

you kind of figure out your formula. Formula, okay. And how much was it going to cost to, from soup to nuts to do like one formulation and see if it worked? So one pilot trial would be about $25,000 to $30,000. Wow. Why was it so expensive? What did that include? It included packaging. It includes the line time.

It includes all of the ingredients. You think coffee creamer is this easy thing. And I thought that too. It's just almond milk and coconut cream and a little bit of salt, right? Yeah. But it's actually a very, it's a highly variable problem. product, you're taking an alkaline product into an acidic environment like coffee. So if you made almond milk from home, just almonds and coconut, which I do a lot, yep,

you just whizz it and strain it and you got almond milk. And you get almond milk and it's great for drinking. But if you pour it into coffee, it will curdle. Yes. Because it doesn't have anything to emulsify. You're taking that alkaline product and put it in an acidic environment. And like any chemistry, it will have a chemical reaction. Oh, wait.

But some people like their coffee iced. Some people like it standard hot. Some people like it extra hot. The temperature affects your pH. And your roast. Blonde roast is more acidic. Dark roast is less acidic. Other ways, sometimes it would come out gloopy, like pudding.

Sometimes you can taste the French vanilla. And so we were formulating all of these different tweaks of it has to be the right flavor. And you have a product like ours. where we only can use certain ingredients to make sure that we hit all of our certifications of non-GMO project verified, vegan, gluten-free, kosher, whole 30, and glyphosate-free. We couldn't use so many of the standard ingredients that processed creamers used. And I didn't want to. I didn't want to.

Yeah. But you also had to keep it shelf stable, which meant that you had to introduce some kind of preservative into the product. No. No. No, so that's a misnomer. The aseptic processing is what makes it shelf-stable. I see, because it's like high pressure or it's... No, it's steam injection 284 degrees for four seconds.

Got it. And then it's filled in a clean room environment that's not open to open air. So it's like a form of ultra-pasteurization, I guess. Exactly. And shelf-stable, you want it to last for at least six months on the shelves. Ideally, longer. Longer, yeah. Because as a startup, I need a...

much shelf life as I can, so that by the time that I make it, I have time to market, sell it, distribute it, and actually, like, replenish it. So what I'm trying to figure out is you start this process in 2013, right, with the money from the Kickstarter, and it takes you some time to find this, you know, this Tetrapak plant. How many trials would you do at that plant? Oh, well, the Kickstarter money went even before their first trial. It was out. You were out of cash, yeah.

Yeah, we ended up having about 28 different trials. The Kickstarter money was long gone. We had done a promissory note round with family and friends who would loan me money. We had done a convertible note round that said I was going to have a Series A, and then they would have a discount. And it was time because I also felt it was ticking. It would spend like a couple years. And I need to give these Kickstarter backers some product.

When we come back in just a moment, why Madeline decides she needs to put that product into cartons instead of coffee creamer pods, even though the word pod, nut pods is right there in the name. 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 around 2013, and Madeline has launched a successful Kickstarter for Nut Pods, her plant-based creamer. And she finds a copacker in California that's willing to do a first run of the product. But that is just the beginning. It's just so interesting to hear how complex this process was. I mean, because you would think, okay, you got the money from Kickstarter, and there you go. You're good to go.

But actually, this process will eventually take you two years of testing. Two years. It took my 401K money. It took insurance money from when I got hit by a car. It's a crazy story. Wait, when you got hit by a car? When did you get hit by a car? I got hit by a car, ironically, by a Prius in my apartment community.

Wow. And you were okay? I had a concussion. And I went through all the things. And then they said, well, we're just going to run a blood panel just in case. Wow. And they told me I was pregnant and I didn't believe it. That's when I found out I was pregnant with Claire.

Wow. So I guess the accident happened, obviously back when you were pregnant with your second daughter, but presumably it took a while for you to get. the money from the insurance. And by the way, how much was it? It was $12,000. And that helped you, which was sort of like a kind of a hidden blessing because it gave you some cash to help finance these trials. I'm curiously, your husband was an investment banker. I mean, and you described him as a successful investment banker. Did he have any resources to contribute to this venture? You know, he was, his salary was supporting our family and his bonuses were going to nutpods.

And it feels so vulnerable when you're an entrepreneur and you have this idea. And then you ask family and friends, it's difficult because my circle wasn't the circle of angel investors. And we were, you know, in our 30s and we were living paycheck to paycheck. And how much money do you think by that point you'd gone through like over $100,000? Easily, over $100,000. And you wanted to save money and you probably had like. Oh, there was no saving money guy. I mean, we had two young kids.

We had a dog. We were living in an apartment when everyone had a house in Orange County. And we were young professionals, but it kind of felt like college days again when you were really poor. And like your dates were going out to happy hour because that's what you could afford. Yeah. And I'll tell you one thing, Jeff has been by my side through this entire thing. Jeff's your husband, obviously. Jeff is my husband.

Yep. And it was difficult for him to support and give his bonus money towards. It's an idea that he honestly didn't think was a good idea, but he wanted to support his wife. He didn't want to let me down when I really finally found that dream that I would cry over like the American Idol people. He thought this was too narrow, too niche of a product that like even though coffee mate or the coffee creamers in your hotel room seem ubiquitous, he felt like this was too. It's too small of a niche. It's too difficult to produce. and that's why the big food companies didn't bother with it.

Yeah. And I said, not all good ideas come from big food companies. What are the two biggest or the biggest? I mean, I'm assuming like Denon and, I don't know, like Nestle are probably big players in the creamer. Right. So Nestle owns coffee mate and Donone owns silk and so delicious and international delight. All right. I mean, obviously huge multinationals.

And these are probably rounding errors for those companies, these products. They're so big. Exactly. They're so enormous. It's so big. Yeah. But you know what? That's actually our secret weapon was that for them, anything under $10 million, right, is like not worth it.

Not worth your time. Not worth the innovation. Anything under a $50 million is not worth your time if you're that big. But when you're a startup, it's like, woohoo. You know, it all was enough for us. And that's so and, you know, I just didn't have any built-in network of people that were investors or even new. about this. So Jeff, to his credit, he tried to make introductions to different entrepreneurs that he had helped, even exited his business. But we just didn't get any bites. And I took it

so personally, Guy, I felt like they were saying my idea was terrible or I am inadequate. But who were you going to? I was going to anybody. I was going to angel networks. I was paying money to pitch to angels. So I didn't have any money. I needed money, but I still had to come up with thousands of dollars to pitch to angels in the hopes that some of them would invest. I also flew all the way across the country to this one guy that could be an angel investor in the dairy space. And, you know, you learn these really painful costly lessons, which is don't ever take a red eye across the country just for one meeting. You have to have multiple meetings set up. And I came home empty-handed. And I took it so personally that they were rejecting me or my business or my team.

But really, when I look at it back at it now, it could have been as simple as the stage was not appropriate for their investment portfolio or they were more in apparel or hard goods and they didn't know food. And this is an important point because a lot of people, because it's your baby, It's you. It is you. It's your product. But actually, it's really important to separate yourself from it. It is very important. And that's what I would tell, like other people that look for me for advice, is that you have to make sure that you understand. There's a whole host of the reasons why they're saying no. But I hated it when my husband would say, this is just a numbers game. And the more knows you get gets you closer to the yes. Oh, it's such great advice. But it's terrible receiving it because they're not saying no to him. They're saying no to me.

Yeah. When you were pitching this, before you were even on the shelves or you had a product to sell, did you have market data that you were sharing with potential investors to show them the opportunity? I only had what was available on Google. And so, you know, you could sometimes have just a snippet of an industry report like Ibis on coffee and coffee creamers. And I would just try and, like, reach through and see what fuzzy parts, you know, behind the paywall that I could get in cleaning. And so.

Because you don't want to pay for the, you don't want to pay for the subscription, yeah, to get the market data. Yeah, exactly. This happens all the time. You get the fuzzy bits. You're like, how else I can see the fuzzy bits. Exactly. Yeah. I think one more thing that I wanted to just explain about why we were this incredible underdog stories, not only because, I mean, you have to take a look at me objectively.

I am a female founder, person of color, pregnant when I started this company, never been a CEO before, brand new to the industry. And Jeff had a real estate portfolio company that went sideways when the bubble burst. And we actually had a bankruptcy to our name as well. So you couldn't get credit easily? No, I could not get any credit. In fact, we started a company with those prepaid green dot credit cards. You know, the one where you give $500 and then you get a $500 credit line. But I was still going for it and I was still talking and I was still running through the numbers.

Oh, I kept hearing the whole like, you've just got to get your anchor investor. And then the other investors that are on the fence will follow. Right. And Jeff introduced me to one of the entrepreneurs that, you know, had had a successful sale. And so this person initially verbally committed to $100,000, which was like so much money. And I used, you know, his verbal yes to get all of the people off the fence. And within 24 hours, he called me back and he backed out. And I was just utterly crushed.

I cried. And now I just felt like that game of sorry where you fell all the way back down and you had to like start all over again. And I had this ethical dilemma of do I tell the people that got off the fence because of the anchor investor that the anchor investor then backed out? And then I ended up saying like, I just can't start a relationship without disclosing that. And so thankfully, the majority of the people that committed still stayed committed. All right. Let's talk about the other challenge with what you were trying to do because at this time, The concept was pods.

It was like little pods of creamer that were single serve. And so presumably the idea was you would buy a big box, a packaged box of these. 24. 24. And that's it. And that's how it would work. But from what I understand, this is a problem, right? Because you really, to make this work, they have to be in hotel rooms.

They have to be at the breakfast buffet at the Holiday Inn. And that's not a traditional retail channel. That's like working through systems. food service. Cisco or one of these huge distributors that deals with hotels and restaurants. Exactly right. And I think it's important to say I started this company from the lens of a consumer, what kind of product I would have wanted to buy.

Yeah. And what format I wanted. And so when I went to do this, I remember back when Whole Foods had a local forager program. No. So they had local forager. So it would be someone like you. And you would specialize in the San Diego area. and you would see what trends are trending in your area.

You could bring in special items that met that trend for your region. I met the one for Orange County. And the local forger at the time, his name is Dwight. He said, you know, it's an interesting concept. I think I can see it in our stores. But have you thought about making a carton? I said, well, no, our name is nut pods. And we want to make the little pods.

And it's going to be convenient and it's on the go. and it doesn't require refrigeration. And he said, I can see consumers buying it in our store maybe once a month. But if you make a carton, they'll buy it every week. Let me know if you make a carton. A carton. But you were resistant to this idea. It was resistant because our name was nut pods.

Can we be nut pods without the pods? And so I went back to my industry, you know, advisor team. And I said, okay, this is what the Whole Foods forager told me. And the marketing advisor said, starting out as a premium brand, which means you're going to be more expensive and unknown and food service is very difficult. And so the consensus was then maybe we should consider cartons. And so this kicked off the whole like, well, can we be nut pods without the pods? And a little bit of soul searching. And the answer is yes.

Because what do you call a nut that is growing in trees? Oh, my God. Thank God. They're called pods. Coconut pod, yeah. And so we then produce the cartons. You mentioned an advisory board. I want to go back and ask you about that because who were these people?

How did you get them to agree to give you advice and did you pay them or did you give them equity? Like, how did that work? So my advisory board were people that I came across at trade shows or any type of industry events. If it was someone and they were friendly and I could ask them a question. and I said I'd love to keep in touch, you know, I would immediately link with them on LinkedIn. And then I would ask them maybe just one question because I didn't want to annoy them. And then when it came time to do an advisory board, I had heard from someone else about Y Combinator had this fast advisory board template.

And it laid out in terms, and you can download it for free, that, you know, if you are a startup and you need more input, from an advisor, and maybe that means instead of once a month call, maybe once a week call, then the more you ask of them, you give them a little bit more equity. And it could be 0.65. It could be 0.75% in equity. Still a vesting schedule. And that vesting schedule is very important because you don't want to have an advisor that is not being responsive to you or not giving you value. And then you've already given them equity and you can't take it back. All right, so you had this advisory panel, and now you've got this, you're sort of now thinking, all right, really we should focus on making cartons. Presumably, you needed more money to get to a point where you could actually get this manufactured at scale.

So this is around 2015 or before 2015 because you're getting ready to launch. How much money did you need to raise from people to get this made? I needed a couple hundred thousand. And I was still scratching the ground, guy. I mean, like, I entered a business plan competition at Seattle, you, where I got my MBA, because the first prize was $10,000. And so that's how small we were trying to eke together money, and everybody was on consultancy. I couldn't afford anybody.

I was a full-time paid volunteer for Nupods for the first three years. So I was trying to get just enough money to, finish the commercial formula and make one run. Just one run, it was going to be a big run because of the minimum mortar quantities, and then it should last me nine months to a year. So it gave me that time to talk to grocery stores, sell it online. And so at that time, my husband Jeff knew of this company called Circle Up, and they had a platform. Circle Up. Circle Up out of San Francisco. And it would matchmake investors to vetted companies. And then these companies, you know, had a built-in angel network.

And then in return, Circleet made a percentage off of what was raised. And so that really was our Series A round. All right. So in 2015, you guys are finally ready to launch. And how exactly did you do it? Like, where did you first start selling not pods? We launched on Amazon because at that point, I had 510 Kickstarter backers that had waited two years to see product. And I also launched in a small 12-store chain up in Seattle, Washington called PCC Natural Markets.

And a lot of entrepreneurs startups start in the natural channel because the natural channel is a great incubator for small startup brands. How did it do? Wow. The initial reviews came back and they were very positive. And I remember talking to Jeff saying, like, do you think they're just being nice because they're a Kickstarter backers? And he said, no. And he said, if I waited two years and the product was just mediocre, I'd be pissed. And so it ended up being number one new release, number one best selling item. It was just this rocket ship that was amazing. And so we ended up constantly stalking out and getting back in. And I was protecting that 12-store chain PCC, making sure that they didn't run out a product because I didn't want that retailer to kick me out.

So we would short ourselves on the Amazon side to keep the retailer in stock. And actually, you know, it worked to our favor because we just had this like scarcity theory going for us on Amazon where it's like, okay, we stocked back out, and now we're back in stock, and people would order it. And were you, I mean, what was revenue like? I mean, in those first three years, were you making enough to at least keep that reserve in check that you couldn't, didn't have to spend it? So when you sell on Amazon, you're getting paid very quickly. And so the cash flow on Amazon was so much quicker than it was in stores, because in stores, they can take net. 30, which is really net 40. And so the cash flow was really alleviated for us by being able to

sell on Amazon. Yeah. Don't get me wrong. We were still short. We were so short on cash. But I would say, you know, for the nine years that we've been in business, we've been profitable for five of them. Did you start to see competitors come up right away pretty soon after you launched? Pretty soon after we launched. And so, but that's one of the things about designing a product and making sure it's differentiated. You know, were there other French vanilla products out there? Yes. But we were unsweetened, which meant that you could use your own preferred sweetener

and sweetness level, including none at all. And so with nut pods, we were differentiated because it's very difficult formulaically to have an unsweetened product that still has flavor that you can taste without the crutch of sugar. I read a story about how when you decided to really lean into direct-to-consumer initially through Amazon, really through Amazon, you actually have pushback or some warnings from industry veterans who said, you know, you really got to be in retail. That's where the money is. You can't be, you're not going to make money in Amazon. Did that give you pause?

Because I think that was your whole business model, right? It was my whole business model. And it was going to be the quickest way that I could reach people to say. sell en masse. And I remember attending a trade show, and I got introduced to the Silk marketing manager. And I'm like, oh, hot dog. I finally get a chance to talk to someone that's right in my lane. And Silk, of course, is a leading plant milk brand. Yes. And I asked him about what do you think about going to e-com as an initial channel strategy? And he said, e-com is going to be about 20% of your revenues and really where the money is at is at retail. So you really should push for retail.

And I was just ruminating on what he was saying and just thinking, am I building this business wrong? And I'm doing it in the backwards way. And I realized he's talking about it from the perspective of silk. Silk is huge. And yes, for Silk, e-com is probably a very small ancillary channel for them. But it's enough for me at Nutpods and it has benefits. I don't have to wait to get into retail for whenever their reset periods are. I don't have to pay slotting. I'm already paying Amazon for their commission. And now I look back and not only does it make sense, but it was absolutely the right choice for us. It also allowed us to just have a couple years of learning our brand before we made that significant investment in retail. I think the biggest

thing is that you can't scale that retail without significantly increasing your team. But whether or not you sell $1,000 a day on Amazon or $100,000 a day, you can still do it with one person online. When we come back in just a moment, Madeline eventually makes the jump to retail, but then worries that the stores are putting our product in the wrong aisle. 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 2018, and even though Nutpods has been pretty successful on Amazon, Madeline is still having trouble getting the company to the next level. So I was still raising money, still raising money, and having limited success. And I remember there was an investor that I really

wanted to invest in nutbods. And he said something that was crushing to me. You know, Madeline, it seems like you've really been able to prove yourself online, and that's great. But I need to see that you're not just going to be an internet darling, and you might find it will be very difficult when you go into retail. You know, I'd love to see you when you get into more distribution. And I was just incredulous because this particular investor that I really wanted to invest in our company. Just something he said about still doubting us, even when we had built this multi-million dollar business online, past $5 million, and still had doubts about whether or not we'd be able to make it in retail. So in order for me to raise that next round of capital for us to feel

our growth, I'm going to have to prove to these investors that we aren't just an internet brand, but we're going to be able to be successful in retail. And that was the first year. that we were not profitable because I had to invest in a sales team and brokers and pay slotting fees. And it did take me a couple tries. You know, the first try I took getting into a store outside of PCC, they didn't like the fact that we were selling online because online, Amazon then was considered their competitor. And so I ended up reframing it to make it be less about risk for the retailer. We'll be able to say, we're bringing with our brand and installed. base of, you know, a multi-million dollar business online, and we know that our consumers would

like to buy our product in your stores. Did it help at all that your product was shelf-stable? Like, did that make it any easier to get it into stores? Well, it was actually our curse at retail, because when you went into a store like sprouts, you could either be in shelf-stable milks or you could be in the coffee tea aisle or you could be in the chilled creamer set. And we knew psychographically where would you look as a consumer for a non-dairy plant-based creamer. It's going to be in the chilled set with the milks and the other creamers. Yeah. But we couldn't control where we were at because we didn't need to require refrigeration.

So after three years of trying to talk to retailers into putting us psychologically where we should be, which is in the chilled dairy set, we ended up saying, fine, we will make a refrigerated product. And that was the unlock with Kroger. They wouldn't put us into their set that didn't need refrigeration. And so when I committed to the buyer that we will come with a gable top, and he asked me, okay, are you ready to swing for the fences? Because you're going to have to supply us. And can you really supply Kroger? And I said, absolutely.

Then we got to work. I think that was probably around the time where you were also raising another round. And you did in 2019, you announced that you'd raised over $30 million in a Series B. So by that point, I think you'd raised close to $40 million. I mean, given how much traction you had had and that you were in Kroger and Publix and Wagmans by that point, what was the raise going to do for you? I mean, what was the idea at that point? It was the idea to really supercharge this thing so then there could be some kind of exit?

Because, of course, that's what ultimately it has to be about if you have investors. So I would say, first of all, you know, it sounds like a lot of money. But when you compare even our, you know, call it 42 like total raised, that is a fraction of what our competitors had raised. Whether or not it's super creamer or ripple or caliphia. It takes a lot of money to go into the grocery store. This is not an industry where it's easy to bootstrap your way because grocery is just so expensive. And so the purpose of that was to really have growth equity. And so it allowed us to build out our team.

And our team is still very small guy. We are like 36 employees. And we're the number one plant-based creamer in both the natural channel and e-com channel, number two for Milo. So we are competing against those huge multinational companies that we talked about before, the Nestle's, the Danones, now the Starbucks and the Chobonis with like 36. employees. And so, you know, we've always felt like David and Goliath situation. So, and you continue to grow. And through the pandemic, I mean, the pandemic didn't, it seems like it did, I mean, not only didn't affect you, you grew remarkably during that time,

because I guess more and more people were discovering the brand online. So we launched nationwide in 2018. That next year, 2019, was this magical year where we were Amazon small business of the year. We were entrepreneur of the year. We were. We were Inc. 5,000, number 13 nationwide, number two for food and beverage. And then, yes, then the pandemic hit. But because we had built this robust online channel, when the pandemic hit and consumers didn't shop in the stores and turned online, we already had our supply chain and logistics well established.

And yes, we did grow through the pandemic very quickly because we had put that firm foundation down on, you know, e-com. In January of 2024, it was announced that the brand was acquired by... And Perr-R-Wr-Roc. And I think that a private equity group, right? It's a joint venture between Mid-Ocean Capital and Per-Wock. Right. And so they acquired an undisclosed amount, but obviously, I'm sure, was a great exit for everybody.

Tell me about that decision. And what does it mean for you? Are you still involved with the company, or will you be kind of moving out over the company? the next year or so. Sure. First of all, my job is to make sure that I'm doing the best decisions for the brand, including its leadership. So have I ever built a 100 or a $200 million brand before?

No. I mean, well disclosed, this is my first time as a CEO. And am I the right person to lead this brand at this stage? And I realize that my professional goals have shifted a little bit. You know, I want to contribute to helping make it easier for other female founders to access capital, to be able to have board diversity, not just in terms of I'm a female and I'm a person of color, but also I don't come with a traditional financial outlook that a lot of board members tend to be on corporate boards. And so I actually just announced that I have worked with the board for the past few months. and we have handpicked and identified a wonderful CEO successor to me, and I am going to take some time off, and I'm going to find out what I want to lend my time and efforts to in this next chapter.

Madeline, when do you think about where you are today and the journey you took, I mean, how much of it do you attribute to the work you put in, and how much do you think has to do with just getting lucky? It really is a mixture. It's a mixture of product fit at the right time in the marketplace. When we launched, plant base was becoming a thing. Ecom was becoming a thing. And, you know, I also give a lot of credit to the team. When I was maxed out on credit cards, I had an amazing founding team. You know, Michelle, who was one of my first marketing hires, she put our trade shows on her. her credit card, including the travel and hotel. And I really believe in, you know, the culture eats strategy for lunch, as Peter Drucker says. So in addition to that, yes, you have to have a good amount of luck. You can call it luck or you can call it God. And I think that it's really important to have success, have sometimes like people like me, so that other female founders, other people of

color, be able to say, okay, Madeline did it. So maybe, just maybe, I can do it too. That's Madeline Hayden, founder of Nutpods. Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And as always, it's free. This episode was produced by Alex Chung with music composed by Rumtina Arablui. It was edited by Neva Grant with research assistants from Catherine Seifer. Our engineers were Gilly Moon and Patrick Murray. Our production staff also includes J.C. Howard, Casey Herman, Sam Paulson, Carrie Thompson, John Isabella, Chris Messini, Carla Estevez, and Elaine Coates. I'm Guy Raz, and you've been listening to How I Built This.