How I Built This with Guy Raz - Simple Mills: Katlin Smith

Episode Date: February 15, 2021

In 2012, 22-year-old Katlin Smith was growing restless at her consulting job, so she started experimenting with grain-free, paleo-friendly muffin recipes in her Atlanta kitchen. A buyer at a nearby Whole Foods agreed to sell Katlin's muffin mixes and placed an order for twelve bags. She then hustled to expand the business: hand-mixing almond flour and coconut sugar in food-grade barrels, slinging wardrobe boxes of muffin mix into a rental car, and standing by helplessly while shoppers scarfed down more samples than anticipated. 8 years after launch, Simple Mills has expanded to include cookies and crackers and other treats; it's available in 28,000 stores and does roughly $100M in annual revenue.HIBT Virtual Event with Jay Shetty - information and tickets at: https://nprpresents.orgSee 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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and tickets, head to nprpresents.org. And I hope to see you there. The weekends where I wasn't going to production runs, I was doing demos in the stores. And so my rule of thumb was if it was a three-hour demo, I needed to bake for three hours in order to make enough muffins for the demo. How many muffins would that be for three hours?

I would guess somewhere around like 600. 600? Oh, my God. Right, because somebody would come up and say, let me just take one for my husband. He's over in the dairy aisle. Or the best is the kids that are unsupervised. And they would just eat them. Steal them off the table.

Like you're not supposed to give them to a child who's unsupervised, but sometimes the child ticks it and runs. From NPR, it's 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 Caitlin Smith took almond, coconut, and cassava flour and built the largest paleo-friendly baking brand.

Simple Mills. If you were going to tell the story of consumer technology over the last decade, you'd probably start with smartphones. I mean, think about the consumer categories that smartphones have enabled or supercharged. Things like One-click shopping or social media apps or mobile games or ride sharing or even podcasts. Now, if you think about the story of food over the past decade, that story could be told with two words, organic and natural. It's why Whole Foods market exploded in growth and why huge corporations have snapped up brands like earthbound farms and honest tea. Organic and natural is where consumers are willing to pay more and where the margins are higher. But there's another part to this story. He might call it the natural and organic adjacent category. And that category might include diets like Whole 30 or ketogenic or raw foods or perhaps the biggest trends of the last decade, paleo and gluten-free. Now, before anyone tears my head off and says gluten-free is not a diet trend, that is true for people who have gluten allergies or sensitivities. But the reality is lots of people who go gluten-free do it for other reasons.

And the main reason is they say they feel better. which is sort of where the story of simple mills begins. Because back in 2012, when Caitlin Smith started a muffin mix brand, it wasn't easy to find grain-free baking mixes. And Caitlin loved baked goods. It's just that she felt better when she avoided gluten. So she started to wonder, could she build a baking brand that was totally grain-free and without refined sugars?

Was there room in the baking? for a paleo version of Betty Crocker or Duncan Hines. And the answer is yes, because today, Simple Mills does about $100 million in revenue. In addition to muffin and cake mixes, it makes crackers and cookies, all with grain-free ingredients like almond and coconut and cassava flour. Their products are in more than 28,000 stores in the U.S. But back in 2012, Caitlin Smith was not someone you would necessarily have bet on. She was barely out of college.

And the other thing, she had almost no money herself and very little access to outside capital. At the time, Caitlin was living in Atlanta working as a management consultant for Deloitte. It was her first job out of college. And the life of a very junior management consultant is a life of hotel rooms and airports, you are always on the road, which means the food you end up eating is usually an afterthought. Yeah, so I was eating a lot of pasta, a lot of bread, a lot of dairy. I remember having like barata for lunch. There was a point actually on one of the client projects where I just literally had baked brie for dinner. Yum. It was delicious. I will tell you, it was delicious. But too much

of a good thing is also a bad thing too. So you were basically living off bread and pasta and cheese while you were a consulting. Yeah. Yeah. And I also loved, of course, like your processed foods, your cereals, your chips, what have you. All right. So you're basically working at Deloitte and you're on the road a lot and you're living at hotels and eating a lot of this like not so great kind of food. And just tell me about how you were feeling physically. Yeah. It, it really wasn't great. I mean, I was, I was exhausted. I didn't feel like I was 22 years old. And I just really looked at it and thought 22 year olds shouldn't feel this way. Yeah. And I had another friend who just told me, you know, maybe you should take a look at your diet and see what happens if you change your diet.

This was something that I'd never really been exposed to before, this idea that the food that we eat, like growing up, I was taught that food affects. your waistline and it affects diabetes, but we didn't talk about so many other things that it could affect. And back in 2012, which is when I really had this realization, paleo was just like in a very nascent form. There were just like these fringe bloggers out there. And so I just decided I was going to go paleo for a couple weeks and just to see if that would change things. So you were fully paleo, which meant no grains, no legumes, no dairy, no refined sugar, just lean meat, vegetables, and like nuts and dates, basically. Yeah, basically.

And eggs, yeah. And eggs, yeah. It was actually pretty difficult in those days to figure out what you could eat. Like, I actually have this memory of I went out to town at one point. I was trying to figure out what I could eat in the grocery store. And I wandered up and down the aisles for, I think, probably 30 minutes. and all I walked out of the store with was just an avocado. And then I sat down at a table and I ate an avocado with a spoon.

But I mean, over time I figured out what I could eat. And so I would develop these recipes. Like I came up with this crepes recipe where I would use coconut flour and eggs. Or I would just try to get a lot more vegetables and meat than I'd historically eat in and definitely more cooking for myself than I'd historically eat in. And definitely more cooking for myself than I'd have. historically done. So when you went paleo, kind of like as an experiment, what happened? Yeah. So to my shock and awe, everything changed. All of these kind of things that I'd

struggled with for years, I no longer had to deal with. Like I at one point looked up and my Zyrtec had expired, which had never happened before. Zyrtec is like Claritin, right? It is, yeah. And I felt like I had so much more energy. And if I would go back and I would put the sugar back in or put the processed food back in, I could tell the difference. And I just, I couldn't believe that food could have that kind of impact. So you're working at Delight. And in the meantime, are you, I mean, what was your plan at Delight? I mean, was your, when you, when you got there, were you thinking, I'm going to do. this for a couple years and then start my own thing. Was that how you were thinking about it from the very beginning? No, not at all. I think I was a little bit bored. And then around the same time was when I decided to try cleaning up my diet. And so I started thinking about going and getting my master's in public health. I simultaneously started thinking about how I could help change what people

are eating from a business perspective. So in your mind, you knew you had to change something. thing. And what were some of the ideas you started to come up with in your head? Yeah. So I remember coming home from the client one day and just sitting on my patio that afternoon and just brainstorming different ways that I could help change what people are eating. Because part of the problem is it's figuring out how to eat better. It's something it's not necessarily convenient and easy and it's hard to make it taste good. And so I just wanted to figure out how to make it easier for people. How did you, I mean, how many ideas did you have before you landed on, on what would become Simple Mills? I probably had 10 different ideas on that list. And Simple Mills partly came out

of this idea of almost like a meal kit company that would make it easier to eat real food. And so one of the meal kits could be like a sauce that goes on salmon. So then it's a lot easier to buy salmon and figure out how to cook it. Another one of the meal kits would be maybe like a ficcacha bread. So that got me playing in the baking space. I'm playing with breads and muffins. And I realized that that was a space where it would be, I guess, a lower barrier to start. Like when you're working with sauces, that's pretty hard to make them shelf stable. Right.

And so it was a place where I felt like I could start. I should also add that at the same time, I was applying for business school. But how did you end up landing on baking mixes that didn't use any? grain-based flowers that only used almond flour and coconut flour and things like that. So I figured that people needed breads to go with their food. Like people love bread, right? Yeah. It's still to this day one of my favorite foods.

And so part of the question was how do you just make it out of things that people should be eating more of? So less of tons of carbohydrates, more of things that have nutrition like almonds or coconut flour, which has a lot of fiber. And so I started playing with those flowers. Now, this is 2012. Those flowers are just beginning to hit the market. Right.

And so I was playing with these ingredients that were kind of new and different. Were you going to like the supermarket into the Bob's Redmill section and just buying bags of almond flour and coconut flour and stuff? Yeah, I was just going to the grocery store and buying bags of those flowers. But some of these ingredients weren't even readily available. So you talk about like coconut sugar. Like, I'm having to buy that off the internet. So because gluten-free also had lots of sugar, but you were thinking, hey, maybe there's an alternative. But I wonder whether you were looking at this as an opportunity because paleo in 2012 was just starting to kind of become more popular.

Like with CrossFit, did you research this category and discover that there was an opportunity there? You would think as a management consultant that I would have done more research that I did. I would have thought you would have done that. Like in hindsight, it was shocking to me what little market research I did. I think the one piece of market research that I did do is I watched the turns of almond flour at my local Whole Food store. So I watched that it was almost always sold out. And so I could tell people were buying it. But part of my theory was that I was building something for an audience that,

wasn't there yet. Right. And so it didn't really matter to me that much what the data said. And by the way, were you always like a baker? Is that something that you were always into? Yeah, no, I was not a baker by any means. My sister, in fact, was ironically the baker, the family. Actually, it played to my advantage because I came in with just a complete, naive view on how you bake something. And so I would just put these things together and see if they worked. versus saying you can't make a baked good out of almonds. So where were you experimenting with your recipes in your apartment? Yeah, this is in my apartment in Atlanta.

And you were doing this on the weekends and nights where you were actually in Atlanta not traveling for your consulting job? Yeah, this is basically primarily weekends and Friday nights. I stopped traveling quite as much on the weekends during that time because I just wanted to be at home working on this. And how are you, where were you going to get inspiration on how to even mix these flowers and try to turn them into what breads initially? Yeah, there were some bloggers out there who had started working on some recipes in this space where I would go out and try the recipes and then I'd just kind of play around and modify and figure out different ways of or use different ingredients. I mean, there were at least a couple bloggers out there that I could draw inspiration from.

And what were you trying to make anything in particular? So I started out by trying to make bread mixes, which then quickly morphed into making muffin mixes. So our first three muffin mixes that I worked on were chocolate muffin mix, actually blueberry muffin mix and our banana muffin mix. So you start out by making muffins because I'm assuming muffins are probably a little bit easier to. to make in a paleo form. Like making paleo bread is really hard. Like it's super hard to make it good. So is that right?

Like I'm assuming that muffins, like grain-free muffins, you can actually, it's relatively easy to make them pretty great. I tried to start in the easiest way possible. And I thought that muffins were a good place for that because it was easier to create delicious food in that space. I really thought about like simple meals is like this equation. of making it convenient, but also it needs to taste really good. So it couldn't just be this product that tasted good for fill in the blank,

good for paleo, good for gluten-free. And it needed to be something that tasted good, full stop. What was the lag time between when you came upon this idea to try and make a grain-free baking company to when you actually chose the name and got a website and filed, an LLC. Was it like within days or did that happen later on? When I thought of this idea, I think I actually first worked on the products. The products came before the brand name. At first, I wanted to name it Simple Foods. And I went out and searched the domain name for that and it was $3,000

and I couldn't afford that. So I was like, okay, what's better than Simple Foods and came up with Simple Mills? And the domain name for that was $12.99. So I decided that was my winter, yeah, which is such a, I mean, so much better than simple foods. Yeah. So you're experimenting, but how would you know when it was right? What was your, like, what metric were you up against? It was just you in your kitchen and, like, how did you know when you got it right? I, I never knew when I got it right. It was a complete accident that I actually took the product into stores. I was more trying to investigate what the timeline was and how you actually got into Whole Foods. And I called up my local Whole Food store and asked them.

I said, okay, how do you get into Whole Foods? And he said, well, you come down here and talk to me. What product are you developing? And I told him I was developing an almond flour baking mix. And he said, well, just come down here and show it to me. Are you available on Wednesday? Wait, how long? I mean, this was what, a few months in?

This was at this point about a year in. About a year in. Okay. And presumably you didn't have like a plan on how to package it or anything. It was just you just had something that you thought was probably good enough to sell. But is that right? Did you have anything more than just like a recipe in your mind at that point? I had actually developed the packaging. It was basically this label that you could print off with a printer.

And it was laser cut. and you could then take it off and put it on a clear package. Right. So I had sourced the packaging, and so all I needed to do was printed off my printer. And these are going to be bags of muffin mix. Muffin mix, yeah. And by the way, what was required of the person who bought it, just to add water? Yeah, so you'd have to add water, oil, and eggs.

Got it. Okay. So pretty standard with muffin mixes. And, like, how did you go pitch Whole Foods? I mean, you just showed up and met with the manager and what happened? Yeah, so I baked up some muffins for him. I brought him a bag of mix. It was just five minutes from my house, went in there.

And I remember being so nervous to show him the muffins and see what he thought of them. And to my, I don't know why I was surprised, but to my surprise, he said, this mix made these muffins. I was like, yeah. It's like, they're really good. And we sell a lot of almond flour. Let's do this. And that means what? He was like, I want 5,000 bags.

Like, what did he say? So when he says, let's do this, it means I have to fill out the paperwork to get into Whole Foods. And then they placed their first PO three months later. And that PO is something like two cases of muffin mix, which would be 12 units. So 12 bags of muffin mix. Exactly. So you were not, at this point, you're not quitting your job. At that point, I had gotten into, I'd gotten into business school.

Okay. So I was still at Deloitte, but I was leaving in a couple months. And how are you making it? Because I'm assuming in Whole Foods, it's probably not legal, right? And probably violates health department codes to make your product in your kitchen. Usually you have to do it in like a health inspected kitchen. So where were you making the powdered mix? Yeah.

Yeah, so I had gotten this commercial kitchen right outside of Atlanta. I rented space. It was by far the cheapest option. I researched all these different commercial kitchens, and this was really, really cheap. I mean, I think across the first six months of manufacturing the product, I probably only spent $200 on the kitchen. Wow. So, because you were working, like, overnight? It would typically be, like, a Friday afternoon.

I'd drive out there and then work until, like, two or three in the morning making product. And I would source the ingredients from either online, like I'd buy like 50 pounds of almond flour. Or I would go to my local, no joke, Trader Joe's, and buy like 30 bags of almond flour, which was always perplexing to the cashier. And then, yeah, I would make product there. I couldn't afford a mixer, which costs $2,000. So I had divined this idea to put all of the powders into these food grade barrels. and then I would roll them back and forth across the countertop to mix them together.

Oh, to mix the flowers. Yeah. And you're, so you're really focused on the proportions. Like, you got the proportions down, and you just had to mix it all together. Exactly, which is, it sounds easier than it is. Mixing together a ton of powder is not the easiest thing. But, I mean, why is that so hard? You kind of have this vision of it of like, oh, yeah, it'll take me 30 seconds to measure it out, right? Yeah, you just scoop it up and scoop it.

put it in. No, but then you put it in and then it's like off by, you know, 10 grams. And so then you take a little bit out and then all of a sudden it's off by 10 grams in the other direction. Great, because it has to be exact weight that you're advertising. It would probably take me five minutes to make every single mix. Every single bag. Yeah. And what about like compliance and all that weird stuff that you have to do as a business? Like I'm assuming there's like rules for how you label things and how you put ingredients on. Like did you go online just to find out how to do all that stuff? Yeah, I mean, it's not the easiest thing to do. But yeah, I mean, the FDA rules are publicly available on the internet. You can figure it out. And presumably you are funding this through your salary from Deloitte and any money you'd saved up, basically, because you weren't spending money, right? You were always eating on an expense account because you were doing work for clients and you were staying in hotels. So you probably were just saving most of the money you were earning. Yeah, I was trying to save every dime. I actually moved into a smaller place in Atlanta. around that time. It was like this basement apartment that had a lot of issues, $400 a month so that I could, again, put all the money toward the business. Right. So this is 2013

where you start to, like now you're starting to sell your product. Did you start to sell through your own website at that point or not quite yet? Yeah. I actually started selling through the Simple Mills website and also Amazon before I got the product into Whole Foods. Right. So I put it on Amazon back before I was ready just to get some feedback on it and see how it would sell. I had these visions that if I put the product on Amazon and all these people were searching for almond flour, the people would just find it. Right. And that was not at all the case.

I mean, I put it on there and we'd sell, gosh, maybe like one or two a month. Wow. And those people usually knew me. Like I could see the address and see that person knows me. And how does it work? I mean, presumably there's search terms. and words that you put in there when you put your product up on Amazon, right? Yeah, Amazon ranks things based on what sells.

And so without us selling history on Amazon, it's hard to get your product picked up. Like you're going to be on like the 12th page. Yeah. And so no one was seeing the product. So how are you going to create awareness for it? It honestly wasn't crossing my mind back then. I don't think. I think it was more focused on the retail path.

But a few months later, a. influencer, what's now called an influencer, discovered the product and wrote about it on her Facebook page, which just kind of astounded me. And we sold out of the product in probably an hour. Wow. Who was the influencer? So Daniel Walker of Against the grain. Yeah. It's an incredible cookbook. She blogged about it or wrote about it, about your products? She wrote about our muffins and said how great they were. And so it was really that that helped us take off on on Amazon. Because at that point, Amazon had a sales history and said, wow, this product actually does sell. And so then they started putting us higher up in the search results.

And pretty quickly, we became the best-selling muffin mixes on Amazon. The best-selling muffin mixes full stop? More than, like, Duncan Hines and Betty Crocker, whoever makes muffin mixes? Or the best-selling, like, gluten-free muffin mixes? Full stop. Wow. It was probably something like 50 to 100 units a day. and Martha White was number two.

Wow. And so you were still able to make them yourself at the commercial kitchen? At that time, it started transitioning to a contract manufacturer. They're classically difficult to find if you Google search contract manufacturer for, I don't know, crackers or baking mixes. The one that you end up working with is typically on like the 12th page of Google. And it's it kind of, I remember it looking almost like a phone book list. of contract manufacturers, and you have to call every one of them and figure out what they do and figure out what their minimum run sizes are. And we were running pretty small run sizes,

and we were using nuts, and we were gluten-free, which made us very unattractive to work with. Did you, I mean, I'm thinking at this point you've put in, I don't know, maybe $10,000, or am I overestimating it? That's about right, yeah. Yeah, I'd say, yeah, 10 or 20,000. And this is all your own savings at this point. Yeah. I mean, before it was all said and done, I put all my savings, which was about $70,000 in it.

I sold my car. Yeah. So I guess you eventually, you find this place in Vermont that's like, we can do this gluten-free and you can have nuts in it? I do. So at that point, I plan our first production. run. I ship all the ingredients there. I was still so working in consulting. So I flew there from the client site. I did a production run on a Friday and it needed to get all of the product back to

Atlanta. Now, because I was in consulting and flew a lot, I actually got upgraded on the way back, which on the flight, which I really loved because it meant that I got three check bags. And the check bags could be up to 70 or 75 pounds. And so I decided to get these U-Haul boxes and put all of the product in there from the production run and check it into the flight. It was free shipping, right? How'd you get those from the factory to the airport? Did you have to rent a U-Haul truck? I had a rental car, but I do recall packing those boxes as it's about to thunderstorm outside. And so I'm throwing all of the cases into the U-Haul boxes in the parking lot of the residents in. Yeah, as somebody who's moved many times, I know those U-Haul wardrobe boxes pretty well.

So you're throwing all their stuff in there and then driving to the airport and then flying back to Atlanta. Because I'm assuming when you got an order in from Amazon or your website, they were in your apartment. You were like shipping them out yourself? Yeah. So for Amazon, I actually had them store the inventory. And they would fulfill both Amazon and our website's sales. But for Whole Foods, I'd actually drive to the stores and give them the product myself or I would ship it using USPS if I couldn't drive to the store.

But most of the time I was driving to the store to save the money. And how is it doing in that Whole Foods in Atlanta? Yeah. So the weekends where I wasn't going to production runs, I was doing demos in the stores. There's like that old adage that it's easier to get the product. on the shelf than it is to get the product off the shelf. And it's getting the product off the shelf that's really important. Yeah.

And so I would do demos every weekend. And each demo is supposed to be about three hours, but I could fit in one, they were like two hours and 45 minutes to allow for time for me to transit between stores. But because this is a baked product, I actually had to bake all of these thousands of mini muffins ahead of time. Yeah. People eat a lot of samples at those demos. They do. They do. Like, more than trade shows. They do. It's shameless. People are shameless.

Shameless. And so my like rule of thumb was if it was a three-hour demo, I needed to bake for three hours in order to make enough muffins for the demo. How many muffins would that be for three hours? I would guess somewhere around like 600. 600. Oh, my God. Right. Because somebody would come up and say, oh, let me just take one for my son. Let me just take another one for my husband. He's over in the dairy aisle. Or the best is the kids that are unsupervised. And they would just eat them. They'd just shove them in their mouth. Steal them off the table. Like you're not supposed to give them to a child who's unsupervised,

but sometimes the child takes it and runs. And when you were demoing it was it clear where you were like, hey, come try these gluten-free, grain-free, refined sugar-free muffins. Was that your pitch to people? Or was it just like, hey, come try some great muffins? It was more focused on like the gluten-free, grain-free, paleo-friendly, which I later realized that that wasn't serving us as well because part of my mission with this is to change what people are eating, right?

Right. And when you talk about all those things, it scares people off. Like people think it's not going to taste good. Right, because you're thinking, hey, I'm going to market this towards people who are already interested in this. But actually, really what you should have been doing was focusing on just getting people to try something that you thought was delicious. And honestly, almond flour is not scary to people. People like almond flour because it sounds like it's going to taste good too. Right.

And so focusing on the things that really differentiate the product without scaring people off. When you were doing these demos, presumably, I don't know, you had friends in Atlanta and people you knew. Was there any part of you that was just like, because being doing demos, you're on stage. You're performing, right? You're putting yourself out there and your product out there. Was any part of you ever nervous that somebody would come in and be like, Kayla, what are you doing here? Or at that point, did pretty much everyone you knew knew what you were doing? Everyone I knew knew what I was doing. But I mean, I think the part that did make me nervous about demos was, first of all, I'm an introvert. Like, I don't love talking to people that I don't know. And so it was overall just something that I was not the most comfortable with. And I was always terrified that someone would tell me that they didn't like the product. I bet. I mean, that's just like heartbreaking. Did that ever happen?

I did have, so you're making so many samples, right? So sometimes I would burn some of the batches of muffins, but you're just so far behind on the number of batches that you need to make and you're like, I don't want to lose 30 minutes. And so I brought some burned muffins to a demo. And I still recall this older woman coming up and trying it and she tries it and she looks at me and just kind of smacks her lips. I didn't care for that. Wow. Because, She's thinking you're just like a rep for a huge multinational conglomerate. She doesn't know that you're the person. Yeah.

And it was heartbreaking. I mean, I just remember thinking in my head, I'm trying. I'm trying so hard. But, you know, in retrospect, she was right. I had a lot to learn in general about brand management, which like packaging, what have you. But one of the one of the things that I did need to learn too, though, is. that every single interaction with the brand matters. And every one of those impressions matter.

I shouldn't be bringing burn muffins to a demo. When we come back in just a moment, Caitlin learns a few more hard lessons about running a business, including how not to manage your new employees and why a muffin company should not give away bottled water at a trade show. 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.

So it's early 2014, just a few months after Caitlin has launched Simple Mills. And already, her muffin mix is doing pretty well on Amazon. And it's even expanded into about 20 whole food stores in the south. But Caitlin doesn't want to stop there. She wants to get her muffins into other grocery chains, too. So it was a lot of cold calling, so I'd call them up one by one and say, hey, you want to try this almond flower baking mix? I'll send you a sample. And I had a couple entrepreneur friends by that point, and we would share the names of the grocery buyers. So we had like these little spreadsheets that we'd pass around. But it was also partly you just call them up and ask and say, hey, who is the buyer? And you'd write down their name. And so then the next time you'd call back, you asked for, Susie or whomever. Right. So where was the next place you got into?

So the next place was natural groceries by vitamin cottage, which also you can sell into store by store like Whole Foods. And that's a chain, is it a chain? It is, yeah. It's a chain of probably 70-ish stores. So we would sell into them store by store as well. And there aren't that many grocery stores that let you sell in store by store. Other chains, like if you think about like Walmart or Target or Kroger, you're selling into large numbers of stores at one time.

And meantime, like while you're running around trying to get your products in all these stores, you've also, I guess, started business school. I did. Why did you feel like you had to go to business school? Things changed really quickly. When I, the day that I started at booth, but you're still unproven. This is the business school at the University of Chicago. That's correct, yeah.

I didn't know if we were going to succeed. Back when I applied for business school, I don't think we even had a name yet. Yeah. I also have to assume you're not profitable yet. But I have to imagine at this point the savings that you have are not enough to fund the company. I mean, did you go out? Did you try to raise money from people? Did you do like a friends and family around?

Yeah. So around this point, I had totally underestimated the impacts of, of working capital. I kept needing to make more product. We kept selling more than we made in the run before. A lot of times when you're working with grocery stores, it's like 30 or 60 days after you sell the product to them that you actually get paid.

And really like the second that I get paid from Whole Foods, I would immediately call up the contract manufacturer and say, we got to make more product. And I would immediately place an order for more ingredients. but it was just like this constant nail-biting cycle of, we need more product, and I don't have money in my bank account. Right. So I had put in all that I possibly could,

and I had modeled out my little Excel model, that we needed probably $200,000 as a business to fund the business, period, ever, into sentence. That once you got $200,000, the cash flow would just fund the rest of the needs. That was the theory. It was pretty nice. And so I worked out a deal with a family friend to give us $200,000. And the day that we're supposed to close, he emails me and wants to renegotiate our deal.

And we'd met earlier that week, and I'd kind of told him how well the business was doing. Yeah. And so he was excited. He wants more equity. He wants more equity. So this is like a shark tank deal. Oh, yeah. I mean, if we had done that deal,

I wouldn't own the business today. Wow. It was very fortunate that it fell through. Why did it fall through? So he wanted to renegotiate, and so I came home to my parents, and I told them what had happened, and I was really upset. I was in tears. I was really frustrated, but I was backed into a corner because I needed the money.

Yeah. And my parents mortgaged the house to give me that money. They pulled $200,000. And they're not wealthy. They don't come from wealthy families. And this was so far from proven at the time. Like I just think back on how risky that was for them to do that. Wow.

What was the $200,000 spent on? What did you need it for? Almost exclusively, the product itself. I wasn't spending money on marketing. I wasn't spending money on team. Most certainly no one was earning any money from this business. It was just on keeping the product in stock. Was it still just you and just working with contract manufacturers or did you have anybody helping you at this point?

At this point, I had the contract manufacturers I was working with. And I had one woman, Jenna in Atlanta, who was helping me with demos and running deliveries to the stores. And then another woman, Jesse, who was at booth with me, who was helping me build the business at the time. Right. And it was pretty soon into after I started at Booth that we became the best-selling muffin mixes on Amazon. And I around that time just kind of realized I was really onto something. And it was taking off. And I needed to focus on it really full-time.

And so I made the decision to take courses that let me work on the business while earning course credit. So that that way I could stay in school. But you know, presumably there are. things you're learning at business school that are useful and practical, right? That, I mean, because you already had a business. So you knew, like, which classes you wanted to take that would help you run your business better. Yeah, I was most focused on which classes were going to, this sounds bad, but involved the least amount of work with me spending the most amount of time working on my company.

So I took classes like cases in entrepreneurship or honestly accounting. was great because I could sit there in class because I was doing all of our QuickBooks at the time, right? Yeah. So I would raise my hand and say like, let's say theoretically you have a transaction like XYZ. How exactly would you recognize said transaction? And so I got very real world experience there. Yeah. In fact, one of the classes that I took while I was in business school was called entrepreneurial selling. So part of the assignment was actually doing even more cold calling than I already was. So on a weekly basis, I would devote Wednesdays to cold calling. I had this quote that I hung above my desk that said,

the difference between success and failure is a few small disciplines practiced every day. And I had to read that every Wednesday to remind myself that, like, the discipline that I needed to practice was cold calling, which I hated. So while you were at business school, were you able to get into any other stores? Yeah. The next ones we got into were Earth Bear and Wegmans. And Wagmans we got into because I figured out who the buyer was and I just shipped him a package of our product. I hadn't even written him in an email yet.

The largest trade show of the year, which is Natural Products Expo West, was coming up in a few weeks. And so I wanted to ask him for a meeting at the show. And so I had preemptively sent him a sample. And before I could email him, he emailed me and said, hey, I want to meet you at the show. Wow. That's amazing because he probably gets it. That's hundreds of packages a week. Yeah.

So almond flour was one of their best-selling items, and so he saw a lot of potential in the product. But, I mean, going back to the small disciplines point, I mailed that package in the middle of a polar vortex. Like I walked down to the USPS, the middle of a polar vortex. And so there's like these little tiny decisions that you make on a daily basis where you're like, that's really inconvenient, but I'm going to do it anyways. And, I mean, Wegman's, I think it's like a mainly mid-Atlantic supermarket chain, right?

Yeah, they have probably 90 stores. Yeah, but super influential, a super influential chain. And so, I mean, at this time, I guess you're like, you're about to go to the big Expo and like really trying to get in front of new customers and I guess new retail customers who might sell your brand. Yes. Expo West is, it's a huge show. I mean, there's 70,000 people. I don't know how many exhibitors. It's easy to get just like.

Lost. And hard to stand. stand out. And probably some of the big companies like Hain Celestial or, you know, these huge natural foods companies have massive booths. Massive. Whereas you probably had like a little card table. I did. We had like a little card table. And so yeah, I mean, I think for the most part, like it was hard to stand out. But you do like the little things that you can. And so we had come up with this idea that in hindsight is terrible that we would give away water at our booth that

everyone is thirsty at trade shows. So we put simple mills labels on the water and put gluten-free on there. Oh, God. And everybody thought you were a water company. Everyone thought we were a water company. Oh, I love your water, simple mills. So good. And let's just talk about how heavy water is to transport into a trade show. You know, I'm listening to all this and I'm wondering, Caitlin, like, how are you doing all these things? And going to business school. Like, how How are you juggling everything? I think it came down to the clarity of what comes first. I watch a lot of other students who try to start companies while they're in business school

not succeed. And I think part of it is they try to do everything well. And you just kind of have to choose at some point and say, this is going to be my number one. And it's perfectly fine to say my number one is I want to build social relationships with people during business school or I want to become really good at finance. But for me, it was I want my business to succeed. And so anytime there was a conflict between a course or a social function and the business, the business won.

I mean, I didn't even date. Yeah. Like, I did nothing. But I guess the one thing that did happen at business school was a class you took was it was like a startup challenge, like a competition. and that, I guess, led to your first investment? What's the story? What happened?

Yeah, it's really neat. They teach you how to fundraise. And so you develop fundraising decks. And at the end of it, there's like this big competition with probably 200 investors that are based in Chicago. And so we did end up co-winning that year. So we won $35,000. But the biggest deal was that a Chicago-based investor group, got to know us through the New Venture Challenge.

And so maybe a month or two later is when we closed our first round of funding. And this happened after your first year of business school, right? Is that right? Yeah. So I started in the fall of 2013. We won the New Venture Challenge, the spring of 2014. And, I mean, the investors want to know, are you really going to continue business school? Yeah.

We want you running this business full time. And they weren't wrong. I mean, I knew what was coming. I dropped out after the first year of business school and went on to focus exclusively on the business. Wow. And I read that. I think you raised like $2 million from those investors. Yes. And what, like, what was your plan? What were you going to do with that money? So after we raised our first round, we got like a 700 square foot office and hired five people. So Jesse, who'd been working with me on the new venture challenge, took over our finance. role. I hired a ex-tern, a Bain Extern, to oversee our operations.

What's an extern for people who don't know? It's someone who works for a consulting firm, but gets sponsored by the consulting firm to leave for six months. Got it. And so it's a really affordable way to get great talent. Okay. And that person was in charge of what? He was in charge of operations, which means just about anything. Logistics, right, everything. Like supply chain. He actually developed our frosting. Wow. Yeah. I mean, at a small company, you can do anything. All right. So you got to see the operations guy, he's also your frosting guru.

And then you get roles for what else? Marketing. And then a head of sales. Got it. All right. And you are the CEO. Yes. And how was it with this team? It was a hard year. I mean, you're just trying to figure things out. you're still operating in a very, very lean environment. I remember I would get to work before it was light outside and I would leave work when it was

dark outside. So it was working really long hours and it was a lot of just trying really hard to get into stores while simultaneously running a very junior team. And honestly, I wasn't great at hiring. Hiring is really difficult and it takes a long time to perfect that skill. Because you basically are looking at resumes and then you do a couple of interviews and you just have to hope that your intuition is right. And intuition is something that almost nobody can rely on. No.

It, I also just inherently believe that people are good. I just kind of assume that people are going to be great at what they say they're great at. Yeah. Which in interviewing, it's not the best place to believe that. So I became a lot better at hiring over time. But I had to make some tough people decisions. that first year. Like who to basically cut loose?

Yeah, who to keep on the team, who to cut loose, and how to do it in a graceful way is also not the easiest thing. Because at the point where you've hired the wrong person, that sucks for both you and them. Yeah, it sucks, right. And by the way, Caitlin, I think at the time that you got that initial investment of $2 million, I think you guys were still only making muffins, right? It was just muffins.

It was still muffins for probably the first four to five years of the business. But presumably you had other plans to expand out and to make lots of other things, right? Since I started the company, I did always see expanding into other areas. But the investment thesis was largely based around being the next Betty Crocker. It's interesting that the investors saw you as like the grain-free Betty Crocker brand, right? initially. Betty Crocker, I think, is mainly mixes. I don't think they make like crackers and cookies, but eventually you guys went into cookies and crackers, you know, things that were not mixes, things that were already made. Was that part of the vision back then, too?

Back when they first invested in us, we hadn't built out a longer term pipeline. So we didn't know where we were going to go from there. I knew that I always wanted to get into things. things that were more convenient because that makes it easier for people to eat better. But I didn't know where we were going to go yet. And so we were like thinking about all these different categories. We thought about cereal. But we ended up going into crackers actually after I took our cake mix home and for whatever reason decided to make crackers out of it and put it in my oven.

And I brought them in the next day and all of us sat around and said, hmm, that's really good. maybe we should go into crackers. Yeah. And so with that, we went into crackers. With the early teams, I mean, what were they doing? I mean, I'm assuming the goal now is to expand and to get into more and more retail, or was it to focus more on direct-to-consumer or was it both? It was focusing on more and more retail.

But the natural food stores, the next thing we needed to do was expand more nationally into Whole Foods. So that was tough because all of those regions get so many emails for new products every day. And you're not selling in store by store. So you're not calling in a local store. You're trying to reach the person who's in charge of like 40 Whole Food stores. And so they never answer your email. And so I had to figure out a way to get through to them. So I came up with this plan where we would go to every Whole Foods region.

And we would email them the day before and say, I'm going to be in your regional office. I'm going to bring you baked muffins. Please, please, please meet with me for five minutes. I can do any time during the day. And I would. I'd go out there whether or not they would answer my email and I would show up in their office with baked muffins.

And to do this, even though we've raised money, I'm staying in like these hostels that had like, I remember this like crazy water stain on the ceiling and I was on the top bunk. I'm taking public transportation everywhere. And most of the buyers still wouldn't meet with us. But three of them did. For what regions?

It was the Pacific Northwest, Southern California, and Denver. It was those three regions that were our first Whole Foods regions. So I read that there was a point where as you were kind of expanding, right, and bringing on more people onto your team, you kind of had to work through your own leadership skills because let's face it, very few people, I don't know anybody who's born a leader and knows how to do it, right?

Most everybody who's been on this show learns how to do it and it requires making a lot of mistakes and not knowing how to have difficult conversations and kind of feeling overwhelmed at times. And I read that you went through a period of time where you were not connecting with your leadership team and it costs quite a bit of friction.

Yeah. I think there's this fallacy out there that people are natural-born leaders. And I hate that we tell people that because it makes people feel really inadequate when they're not good at it. Leadership skills are something it's learned and usually learned through a lot of pain too. For me, I think one of the first places where I really saw this was after I had started hiring some more senior leaders, as I got that team on board, I pretty much immediately started demotivating them. I had been running this business and I had set ideas about the way that things operate. And so I would get in their shorts, tell them the way that things needed to be done when really they were the experts in a lot of these places.

And so one of the big things I had to learn early on was how to defer to them and where to defer to them and how to hand over the decision. vision-making reigns. It's one of many leadership lessons that I've learned over the years. I think every year the business teaches me a different aspect of leadership. So how did you kind of come to the realization that you needed to kind of figure that out? I had really fortunately hired a leadership coach. And it was really because I found that she who's really smart with the people stuff, I'll call it. And I realized that I wasn't really smart with the people's stuff. And so I thought I needed her help. And so I had her working with me and also with our key leaders. And so I think she started to hear some of the sprinklings of this

and both worked with those leaders to figure out how to have the crucial conversation with me, but also set the groundwork in me to be able to hear that conversation. And so that was, it was, I believe it was our head of marketing who's still with us today, who sat down with me and like basically told me like, you've got to trust me on these things. You got to let me run these things. Like this is what I'm good at. I've got 20 years of experience here. Let me use it.

Yeah. I think you're, today you're in like, how many, how many stores are you in today? I read 13,000. Does that sound about right? Actually, probably about 28,000. Wow. Oh, my God. Yeah.

So you're in pretty much every major grocery chain now? Yeah, so we're in everything from Walmart to Kroger to Safeway, Whole Foods, Costco. So by now, I mean, you've gone through several rounds of fundraising. And obviously, I mean, you've raised lots of money, millions of dollars. And by the way, are your parents still, like, equity owners or, or, you know, Did you pay them back for the loan? I paid them half of it back. They wanted to keep some in the business, so they continue to be equity holders in the company.

That was smart. Yeah, they actually wished that I would have let them keep the whole thing in the business, but I couldn't have slept at night if I did that. Right. I'm curious. I mean, why this is a category that is growing so fast, right, the grain-free category. presumably a company like General Mills, which owns Betty Crocker, could enter the space in a big way. Does that ever worry you? They certainly could in the very early days of our business.

Funny enough, the Betty Crocker kitchens actually placed in order for our product. I got a kick out of that. Because they want to see the competition, sure. Yeah. I mean, they absolutely could. It really doesn't have me lose sleep at night, though, because I don't think that they'd execute it in the same way. that we would. We make a lot of decisions that large food companies wouldn't. Like you take, for example, natural flavors. Like, we don't use natural flavors. And it kills our margins in

places. That's a decision that it's hard to make for a large food company because they don't see the ROI in that decision. And natural flavors are misleading because it's not, it's just usually like extracts. So like when you see like natural vanilla extract, the one thing you can be sure of is that is not vanilla. It is typically chemical extractives. And we have, actually, it's our sourcing manager used to work at a flavor house. And that's part of where we develop that perspective is we just know how they're made and we don't agree with it and we don't want it in our products. And I know your growth has been huge. I think you're like the number one natural baking products company in the country in the U.S. right now. And I imagine COVID has had an impact,

right? Because people are basically baking and cooking more at home. Yeah, people are baking and cooking a lot more, which is something that's really exciting if you think about it. Like McCormick, I think they said that the number one phone call that they've gotten during this time is what is a teaspoon. There's a lot of people learning to cook for the first time. So we have seen, I mean, at times this year, we've seen our baking mix up 50% over prior year numbers. And this is probably the most established of all of our product lines. Yeah. By the way, I use almond flour when I do like grain-free chicken cutlets when I like, you know, fry them. Oh, lovely. Yeah. Great use. You know what you can also use? Well, I don't mean to sell this as a selling point, but I also love using our

crackers for that. Yeah. Yeah. Yeah, I could do that. Add some, I had a little bit of arrow root starch and there you go. Easy enough. When you think about your, you know, the journey you've been on, you started this in 2012 and where the business is now, just eight years later, how much of your success do you attribute to how hard you worked and how smart you are and how much do you think is because you got lucky? You have to have both. I don't think we'd be anywhere near where we are without luck. I mean, we've talked about a number of the things that I did wrong.

But you also have to work crazy hard. So I think it takes both. By the way, can I ask you about your frosting? Yeah. Because to me, frosting is like butter and powdered sugar and food coloring, right? It may be eating cheese. So how did you guys make it without all that stuff? Yeah, so we make it out of a combination of coconut oil and palm shortening.

And then we use a combination of powdered sugar and monk fruit to sweeten it. So we use probably, like we use a lot less sugar than you would ordinarily need. I mean, we look at frosting as something that people don't consume every day. People don't eat buckets of frosting every day? I'm sure there are people who do. I have done that before. I have taken a spoon into a Betty Crocker frosting jar and just shoved it in my mouth before. Maybe more than once.

I've done that too. That's Caitlin Smith, founder of Simple Mills. And thanks so much for listening to the show this week. If you are not a subscriber, please do subscribe to our podcast wherever you listen to podcasts. If you want to send us an email, you can write to us that's hibt at npr.org. If you want to follow us on Twitter or at How I Built This or my account at Guy Raz. And on Instagram, you can follow me at guy.org. This episode was produced by Casey Herman with music composed by Ramtin Arablui.

Thanks also to Liz Metzker, Farah Safari, Daryth Gales, J.C. Howard, Julia Carney, Neva Grant, and Jeff Rogers. Our intern is Janet Ujong Lee. I'm Guy Raz, and even listening to How I Built This. This is NPR.