Health-Ade Kombucha: Daina Trout

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

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Guy Raz?

  We get support from US Bank. A question I love asking founders. What's the one decision you almost didn't make? The one that changed everything? Because it's never the obvious stuff. It's never, I decided to start a company. It's the small, boring, Tuesday afternoon decision you barely remember making until you realize it's the reason everything after it either worked or didn't. Say you're 18 months in. Business is growing. You've got expenses coming from six directions. Gas for the van, office supplies, your phone bill, team lunches that are actually client meetings, and you're putting it all on whatever card you grabbed in year one. You're not thinking about it. Why would you? You've got bigger problems.

• 0:45Guy Raz?

  But here's the thing. Path A, you keep going like that. End of the year, you're sorting through statements, trying to figure out what went where. You've left hundreds, maybe thousands, on the table in rewards you never earned. Money that could have gone back into the business. Path B, you pause and get the US Bank Triple Cash Rewards Visa Business Card. Now, you're earning 3% cash back on gas and EV charging, office supply stores, cellphone service, and restaurants. You pick up an extra $750 cash back as a bonus. And you've got a low APR on purchases and balance transfers for 12 months while you're scaling. Same business, same expenses, two completely different outcomes

• 1:30Guy Raz?

  based on one small decision. Visit usbank.com/business to learn more. The creditor and issuer of this card is US Bank National Association, pursuant to a license from Visa USA, Inc. Some restrictions apply. Our presenting sponsor today is Anthropic, the team behind Claude. Every founder on this show started with a hard question. Not the marketing plan, the 2:00 AM kind. Is this idea any good? Am I the one to build it? Should I quit my job? Anthropic got built the same way. A public benefit corporation founded on one Hard question. How do we make sure AI goes well for people?

• 2:14Guy Raz?

  So they asked over 100,000 people their hopes and their fears and are publishing what they find, even the uncomfortable parts. Me? I've got my own hard question about AI. Here it is. If everyone has access to something that can help them write the business plan, build the prototype, analyze the market, maybe even come up with the idea. What separates the people who actually build something from everyone else? I don't have a clean answer yet, so I've been sitting with it with Claude. There's hope in hard questions. Ask yours at claude.ai/hibt.

• 2:54Guy Raz?

  Does your team want a website that looks and feels handcrafted but is still fast to ship? Well, Framer is built exactly for that. With Framer, you design on a visual canvas with responsive layouts, hosting and a CMS built in, so the work is production ready from day one. And you can get it done with help from Framer's AI agents. Framer is the AI website builder that helps creators, teams and businesses ship production-ready sites faster than ever while getting every detail right. Prompt, inspect, edit and publish in one place at a whole new pace. AI agents and humans work together.

• 3:36Guy Raz?

  The agents bring speed and scale and people bring taste, judgment and control. Learn how you can get more out of your site from a Framer specialist or get started building for free today at framer.com/built for 30% off a Framer Pro annual plan. That's framer.com/built. Rules and restrictions may apply. AI isn't just opening new business opportunities. It's changing the way businesses get work done. The questions they ask, the decisions they make, the routine tasks they can hand off. That's the idea behind NetSuite Next, the next generation of NetSuite with AI woven into the tools your business already relies on.

• 4:21Guy Raz?

  NetSuite Next surfaces insights exactly when you need them, puts agents to work on routine tasks and problems, and lets you ask complex questions in plain language, like talking to a knowledgeable colleague. But technology is only part of the story. AI is also reshaping how people and teams work together, and that shift is already underway. That's why NetSuite wants to put a new, expert-created business guide in your hands today. It's called Aligning for the Agentic Era: How AI is Changing Everyday Work. And right now, it's yours, absolutely free. Inside, you'll discover how AI could reshape work across your entire organization, and how to position your business to prosper from it.

• 5:06Guy Raz?

  If your revenues are at least in the seven figures, get NetSuite's free business guide, Aligning for the Agentic Era: How AI is Changing Everyday Work, at netsuite.com/built. The guide is free to you at netsuite.com/built. netsuite.com/built. Hey, everyone. So I have a request. If you value this show, if you value the stories, the lessons, the wisdom and inspiration we bring to you, if you think of me as your friend, which I am, because even though millions of you are listening, I'm actually talking just to you right now. I need you to be there for me as well. And you can do that by supporting what I do and buying my book, How I Built This.

• 5:51Guy Raz?

  It is just out now and available everywhere. And it doesn't cost more than a few cups of coffee. And it's filled with wisdom and stories and ideas that will have you feeling inspired and fired up to take on the world. So please, if you love this show and what we do for you, do us one back and pick up How I Built This wherever books are sold.

• 6:18Speaker 01

  There were days in the summer that we were making 1,500 bucks in a market.

• 6:23Guy Raz?

  Wow.

• 6:24Speaker 01

  It surprised us and it surprised the farmer's market people. But first of all, you couldn't walk through the market and not taste our kombucha. We would make sure that everybody who walked by our booth got a sample.

• 6:36Guy Raz?

  How'd you do that?

• 6:38Speaker 01

  Hey, you. You want to try some probiotic tea?

• 6:45Guy Raz?

  From NPR, it's How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 6:59Guy Raz?

  I'm Guy Raz, and on today's show, how an unlikely idea for a product to fight hair loss led to today's fastest-growing brand of kombucha called HealthAid.

• 7:16Guy Raz?

  One of the questions we get all the time from aspiring entrepreneurs is, how do I turn my promising side hustle into my main gig? Because for everyone out there who's making something in their garage or kitchen and maybe selling it on eBay or at a local flea market, or really, anyone who's working on a business idea part-time, that moment where you decide to make the side hustle your full-time job can be daunting and scary, especially if you're walking away from a stable career with a salary and benefits. Now, of course, there's no one simple answer to the question of when to do this.

• 7:57Guy Raz?

  It often comes down to an overwhelming feeling that what you've started to build is actually the thing you want to do with the rest of your life. The feeling Nancy Twine had when, after three years of working on her side hustle, she quit her job on Wall Street to go full-time with her hair care products company, Briocheo. And the feeling Sal Khan had when, after years of making YouTube tutorials, he realized Khan Academy was... What he wanted to pursue full time. And today's story follows a similar pattern. In 2012, Daina Trout, her husband, Justin, and her best friend Vanessa,

• 8:37Guy Raz?

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

• 9:20Guy Raz?

  At the time, Dinah was living in Boston and working toward a PhD in biochemistry. And she says that if you ask any of her roommates in graduate school what they remember about living with her, they would probably all agree it was the food.

• 9:36Speaker 01

  Oh, man, I made the best dinners. I mean, I got into some serious credit card debt in grad school. Let me tell you, because I would invite everybody over. Neighbors, friends, friends of friends would come over and I would make something spectacular. Paella, like 24-hour paella. And, you know, every kind of fish under the sun we would find and, you know, build salt rocks and then put that in the smoker for, I mean, it was just really beautiful, real, whole food cooking and lots of wine.

• 10:07Guy Raz?

  Yeah, yeah.

• 10:08Speaker 01

  It was a lot of fun. And, and I got into, you know, I wasn't really afraid to get advanced. So that's how I started getting into like sprouting things and fermenting things. So yeah, kombucha, kimchi, sauerkraut, kefir. These were all things I played with.

• 10:24Guy Raz?

  So you, you end up earning a master's degree in nutritional biochemistry and also a master's in public health. But, but I guess like you eventually decided not to pursue a PhD.

• 10:37Speaker 01

  Yeah.

• 10:38Guy Raz?

  So you've got these degrees, it's 2007, and you're living in Boston, in the Boston area. And I guess at the time, you were dating somebody who's now your husband, Justin, is that right?

• 10:49Speaker 01

  Yeah.

• 10:50Guy Raz?

  And tell me about what, you guys, I guess, decide to relocate to the West Coast?

• 10:56Speaker 01

  Yeah.

• 10:56Guy Raz?

  Why'd you want to leave the East Coast and go to, I mean, I can understand that, I live in California. But why would you, why did you decide to do that?

• 11:03Speaker 01

  Yeah, I mean, three reasons, the weather, the produce, and the music. So Justin was a musician. So the decision for us as a couple was, are we going to go to New York or LA? It was a tough call, but we just, I think it had been a particularly brutal winter, too. It was like, we just wanted to move to California. And I didn't know what I was going to do yet, but I figured, I could figure it out when I got there.

• 11:28Guy Raz?

  So you're in LA, you moved to LA. And I'm assuming you start to look for a job, or you started to look for a job before you moved?

• 11:35Speaker 01

  Well, I was looking, I was very open-minded, and also practical in the sense that I understood I had, you know, an undergraduate degree to pay for, and two graduate degrees to pay for. So I was really looking for what would pay me and what could use my skill sets. And I got recruited, actually, by a pharmaceutical company, which is pretty funny, because if you knew me back then, you couldn't even convince me to take an Advil then. So it was pretty funny that I ended up taking a job with the second-largest pharmaceutical company in the world.

• 12:07Guy Raz?

  Which is?

• 12:08Speaker 01

  GlaxoSmithKline.

• 12:09Guy Raz?

  And based in LA?

• 12:10Speaker 01

  Based in LA. And that's where I found myself for five years. That really was my only job. I mean, that was my only real job, besides the stuff I did extra just to, you know, buy my beers in college.

• 12:21Guy Raz?

  Yeah. So you are, you've become like, an employee of GlaxoSmithKline. And I guess, unlike the first day or the first week, You get paired up with somebody who would factor into your life later. And this is Vanessa Do.

• 12:35Speaker 01

  Vanessa Do.

• 12:36Guy Raz?

  And both of you were like young sales agents at that point, sales reps?

• 12:40Speaker 01

  That's right. Yeah.

• 12:41Guy Raz?

  And, and how were they, how were you guys paired up?

• 12:44Speaker 01

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

• 13:18Guy Raz?

  So when you, um, when you started working there, was it, did you enjoy it? Was it, I mean, what did you like about sales?

• 13:25Speaker 01

  Um, I don't know if I really enjoyed it. I loved being with people and connecting with people. So yeah, I did really well. I, I think the first year I was like probably one of the top, I think me and Vanessa, we won the, the team won the top award for the year. And it was like that the whole time we were there.

• 13:46Guy Raz?

  What was your ambition at that point? Did you think, you know, I'm, I'm kind of kicking butt here at GlaxoSmithKline. Maybe, maybe I'll be an executive here one day.

• 13:55Speaker 01

  Yeah, for sure. I always had that grandiose fantasy, I guess you could call it. And, and it was, it's only a fantasy because, you know, there were a hundred thousand employees at GSK. But that, that's absolutely where I was focused at that point on being a manager next. And then moving from management up to, you know, more executive leadership and so on and so forth. So it was like, I had my vision to get to the top.

• 14:19Guy Raz?

  I guess a few years in, you are exceeding expectations on sales goals. And they give you this, this chance, I guess for a year to sort of step away from the sales side and be what they call a change agent. And what, what is it? What, what did they let you do?

• 14:33Speaker 01

  So the context of that time is important here. Pharmaceutical companies were all in a transition state because generic medicines were starting to really come out.

• 14:43Guy Raz?

  Yeah, yeah.

• 14:44Speaker 01

  And there was just a lot of change, a lot of attrition, layoffs every three, four months. Productivity went down, engagement went down, morale went down. It was like a real turning point. And one of the things they came up with was get your 10, 20 best people and get them to help you bring productivity back and engagement back. And so they called them change agents and I was fortunate to be one of them. And I accepted because I really didn't know what was ahead, but I felt that it was an opportunity for me to continue to move up.

• 15:18Guy Raz?

  So what would you do? You would travel around?

• 15:21Speaker 01

  Yes, it was really, really cool and also unstructured. And this is why it was an important moment for me. And what I chose to do with that was I went and met with every single team for a week. And I spent time riding along with each individual. I spent time with the manager. I spent time with each team and I just talked to them.

• 15:45Guy Raz?

  You were an internal consultant, basically.

• 15:47Speaker 01

  A little bit, yeah.

• 15:49Guy Raz?

  And then what happens? It ends and they're like, okay, go back to your job in sales.

• 15:53Speaker 01

  Basically.

• 15:53Guy Raz?

  And you were like, this is what I'm assuming. You get back to your sales job and you're like, I'm back to what I was doing before that.

• 16:01Speaker 01

  Yeah, I had all this autonomy and no structure and I could just do whatever I wanted. And I was good at that, like I loved that. And then pharma sales is so much rules, so much structure.

• 16:15Guy Raz?

  Yeah.

• 16:15Speaker 01

  Yeah, no, I was not happy.

• 16:17Guy Raz?

  So you get back and you are feeling uninspired and unfulfilled. Did a part of you think maybe I should find another job?

• 16:26Speaker 01

  No, it was, I want to say it was clear, but it wasn't really clear. Maybe a better word is it was loud. There was definitely a calling, I guess you could say, that I needed to start something.

• 16:43Guy Raz?

  And where did that come from? I mean, you hadn't done any entrepreneurial stuff up until that. I mean, you hadn't been on that track, right? You hadn't been thinking about that. So was it, did it come from someone else?

• 16:55Speaker 01

  It came from that change agent experience, I think. It may not sound very entrepreneurial, but in fact, it was. I had no, just a very big goal. And so that sort of built my confidence too, where I said, hey, I'm really good at this sort of like lack of structure thing and taking charge. And I'm also good at getting people on board and like inspiring them. And I loved that. I really loved that. I felt a lot of fulfillment from getting people to sort of combine forces and go.

• 17:28Guy Raz?

  And by the way, what was Justin doing at this point? Because I mean, he came to LA to be a musician. So what was he doing while you were at Glaxo?

• 17:38Speaker 01

  Yeah, yeah. Good question, because I think that's another part of what drove the entrepreneurial thing. So Justin was writing songs. We had turned our second bedroom into a songwriter room. He played for a band and on the side, he worked for an entrepreneur, a very, very successful entrepreneur.

• 17:56Guy Raz?

  What did he do for him?

• 17:57Speaker 01

  Justin sort of, I guess you could say his job was in marketing, but he really was a little bit of like an assistant. And he would talk about this entrepreneur and just how successful he was in the life that he lived. So that also, I think, drove my desires because I think we started to say, well, imagine what we could do.

• 18:14Guy Raz?

  So did you, I mean, so you're still at Glaxo and you're still working there, but did you, did you start to kind of brainstorm with Justin? And I guess also with Vanessa, your closest friend at Glaxo, did you guys sort of start to talk about, hey, what could we do?

• 18:30Speaker 01

  Yeah.

• 18:31Guy Raz?

  You just sit around and kind of throw ideas out?

• 18:33Speaker 01

  Well, it was more structured than that. The beginning was more of an emotional journey. Like, I think the three of us had to accept that this is what we wanted first. And then we were like, what are we gonna do? As soon as we got to the place of knowing we wanted to do this, immediately every Saturday, we were having Entrepreneur Club meetings. So it wasn't just sitting around. They were structured.

• 18:54Guy Raz?

  Like, you had to all come with ideas, or?

• 18:56Speaker 01

  Yes, yes. So the idea was, in the week, you were supposed to have a notebook with you. And at any point during the week, if you had a pain, a struggle, at all, you had to write it down.

• 19:07Guy Raz?

  Yep.

• 19:08Speaker 01

  That was what we gathered around. So we had all kinds of ideas.

• 19:12Guy Raz?

  Like what?

• 19:13Speaker 01

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

• 19:38Guy Raz?

  Oh.

• 19:38Speaker 01

  Yeah, I mean, really, all over the place. So if we liked the idea, like, the three of us would look at it and brainstorm solutions. And we thought that there was one that had legs, we would move it to the next phase.

• 19:50Guy Raz?

  Right.

• 19:50Speaker 01

  Which would mean somebody would take it on and do a little research. What's, what does the competition look like out there? How much would it cost to, you know, just sort of initial broad-stroke stuff?

• 20:00Guy Raz?

  Yeah.

• 20:00Speaker 01

  And most of the stuff would get crossed off the list because we just didn't have any significant money. And we had gone through several weeks of this process in the Entrepreneur Club, maybe even a couple of months. And by the way, Vanessa and I did start one in there.

• 20:15Guy Raz?

  You started a business?

• 20:16Speaker 01

  We did, we did.

• 20:17Guy Raz?

  Oh, what'd you start?

• 20:18Speaker 01

  I wouldn't say we actually started a business. We made business cards.

• 20:23Speaker 01

  We felt that parties could be better if they had like a theme. Uh, and that we have themes for birthday parties as kids.

• 20:32Guy Raz?

  Yep.

• 20:33Speaker 01

  Um, why don't we have theme parties more and easy theme parties for adults? And then eventually this could turn into a really great rip business where we would sell kits. Like that was sort of the thought. And so we called it thematics.

• 20:45Guy Raz?

  So like if the party, if it was like, the, the theme was the Flintstones, you would go decorate a house like the Flintstones.

• 20:51Speaker 01

  Yeah.

• 20:51Guy Raz?

  Okay.

• 20:52Speaker 01

  So we made business cards. We even went and sold a, a party to a record studio in Hollywood.

• 20:59Guy Raz?

  Wow.

• 21:00Speaker 01

  And it was, uh, I, it was Halloween and I don't remember. Um, which is really sad. We never ended up doing it.

• 21:08Guy Raz?

  Oh.

• 21:09Speaker 01

  That's why I don't remember. Um, we sold it in and they were excited to do it. And then like, it just sort of puttered out. They ended up canceling the party for a reason unrelated to the, uh, the theme.

• 21:20Guy Raz?

  Right.

• 21:20Speaker 01

  It was like they, they were cutting budgets or something and they decided not to do a Halloween party this year.

• 21:25Guy Raz?

  Right.

• 21:25Speaker 01

  So there was a bit of frustration, you know, in the group and we were gonna get another party going. And Justin basically came into one of the meetings and said, guys, I feel like what you're talking about is just, is gonna be a lot of work. I'm not particularly interested in that. I mean, the three of us really were broke.

• 21:42Guy Raz?

  Um, by the way, and you're still, both of you are still working at GlaxoSmithKline at this point. You're still, because you need the income.

• 21:48Speaker 01

  Oh, yes.

• 21:49Guy Raz?

  All right. So you guys are having these entrepreneurial meetings. And I guess that the problem you decided to settle on was because Justin raised this problem. What was the problem he had and what, what was the idea?

• 22:03Speaker 01

  The problem was hair loss.

• 22:05Guy Raz?

  Okay.

• 22:06Speaker 01

  So his entrepreneur, the, the one that he was working for, he became successful by selling a product that basically solved for hair loss.

• 22:17Speaker 01

  And so Justin would see how far people would go, consumers would go to protect the hair on their head. And so he came in saying, guys, we could make something here. I think he had recently gone to represent that company at a trade show or something. And he just saw the incredible opportunity. So he brought that to the table.

• 22:35Guy Raz?

  So he's thinking, we got to get into hair loss because this is a big deal. It's a huge industry and there's room to kind of enter that market.

• 22:43Speaker 01

  Yeah.

• 22:43Guy Raz?

  And, and so what did you guys, I mean, where did you start?

• 22:47Speaker 01

  So Justin, Vanessa and I started researching what would regrow hair? And yeah, the idea was we create some kind of product that worked though. That was the goal.

• 22:55Guy Raz?

  This is a bold swing. This is like a big swing for the fences because for at least 2,000 years, humans have tried to answer that question. And it's pretty bold that the three of you were like, we can figure this out. I mean, I love that.

• 23:08Speaker 01

  Yeah. So I was particularly interested in finding a natural substance.

• 23:13Guy Raz?

  Got it.

• 23:14Speaker 01

  And so I was sort of researching, what could you eat? What vitamins would you need? And, and it just started researching that. That was my angle. And when I came back the following week, I had reported that basically I found all this anecdotal event, like all these people all over the world just talking about using a kombucha scoby on their head to regrow hair.

• 23:34Guy Raz?

  Well, just pause a sec. Okay. I make kombuchas. I know what you're talking about. But in kombucha, there is a large gallopy, sort of pale mushroom kind of thing that sits on top of the kombucha called a scoby.

• 23:47Speaker 01

  It's an acronym. Yeah.

• 23:49Guy Raz?

  What does it stand for?

• 23:50Speaker 01

  Symbiotic Culture of Bacteria and Yeast.

• 23:53Guy Raz?

  Scoby. It is a, like a mushroom kind of thing that just eats up the sugar.

• 23:57Speaker 01

  It's a fungus.

• 23:58Guy Raz?

  It's a fungus. And that's what makes the kombucha, that's what ferments the kombucha and helps make it sour. So you read that the, that the kombucha scoby, it what? If you stick it on your head, it promotes hair growth?

• 24:15Speaker 01

  That's right.

• 24:16Guy Raz?

  Wow.

• 24:16Speaker 01

  And I wasn't just seeing that once. I was seeing that in a lot of places.

• 24:20Guy Raz?

  What?

• 24:21Speaker 01

  Yeah. People talking about taking that scoby, mixing it with something or just putting it straight on the head as a mask. But what I really thought was I know how to make kombucha and therefore I know how to make scoby. So we could try this thing.

• 24:35Guy Raz?

  Yeah. So you thought, all right, let's try this out because you couldn't, I mean, you knew this from working at a big pharmaceutical company that. There's something called the FDA.

• 24:44Speaker 01

  Yeah.

• 24:44Guy Raz?

  I mean, you couldn't just put out a product and say, this will stimulate your hair growth made out of a scoby.

• 24:51Speaker 01

  So, yes, and I did know all of that. And for this to work, I knew we would have to prove it.

• 24:55Guy Raz?

  Right.

• 24:56Speaker 01

  So because Justin was thinning, we're like, okay, here's our guinea pig. Let's start with a sample of one and, um, and see if this stuff really works. So I just had to make kombucha and I just had to make a lot of it.

• 25:08Guy Raz?

  Yeah.

• 25:08Speaker 01

  Cause each time you make a kombucha, as you know, Guy, um, you make a scoby, right?

• 25:12Guy Raz?

  And you were gonna test this out? And what were you gonna do? Were you gonna just directly put it on his head? Or were you gonna mix it with stuff?

• 25:19Speaker 01

  So we were gonna just put it straight on his head first. Um, but I think our sort of line of sight was that we would eventually mash this up into a really beautiful mask that had like beautiful smells and would have other things in it that would probably be good for hair, like avocado, coconut oil, something like that. That was sort of the goal. But at first, we wanted to see the, you know, if, would the active ingredient work, AKA the scoby. So, yeah, but we never actually put one on his head because we got in, there was an intervening happening.

• 25:49Guy Raz?

  What happened? I mean, you've got this idea. You're gonna try a remedy, a mask for hair loss?

• 25:54Speaker 01

  Oh, yeah. But Vanessa's friend of a friend, I don't know if she actually ran the farmer's market, but she was one of the leading positions at a farmer's market organization in LA, one of the biggest. And she had called us to say, listen, one of the farmers is dipping out for the summer. I'll give you the spot to sell your hair loss product.

• 26:13Guy Raz?

  Wow.

• 26:13Speaker 01

  If you want it. So we didn't have the hair loss product yet, but that didn't matter. We said yes.

• 26:18Guy Raz?

  Yes, we said we'll do it.

• 26:20Speaker 01

  Yeah.

• 26:21Guy Raz?

  And this is in 2012?

• 26:23Speaker 01

  This is 2012. This has gotta be like January of 2012.

• 26:26Guy Raz?

  Got it. Okay. And so you were thinking, we'll take it. And when, when was the spot gonna open up?

• 26:31Speaker 01

  In March. March 26th was the first market and it was gonna be for the summer.

• 26:34Guy Raz?

  So you've got two months or less than two months to get this into the market.

• 26:38Speaker 01

  Yeah.

• 26:39Guy Raz?

  Are you scrambling to try and make this work?

• 26:41Speaker 01

  Yeah. So, so I've got like 60 scobies gathered. So I've also got like 60 cases of kombucha in my apartment, which is just like useless to me. It's like byproduct. Even though I made really good kombucha, the goal was to make really good scobies. So like, I was just sort of handing that kombucha off to friends.

• 26:58Guy Raz?

  You were just bottling it up and, and leaving it?

• 27:01Speaker 01

  We were bottling it up in cheap bottles that we got from General Bottle Supply in LA. And just every time a friend would come over, I would just give them a case. And I remember the week after the lady, we said yes. The following weekend was when we got together and we're like, okay, let's bring all the ingredients together that we've seen online make a difference. And everything was very natural. So we had like avocados, coconut oil, vitamin C, different kinds of food products that had anecdotal evidence around hair growth. And we started messing around, you know?

• 27:36Speaker 01

  And the goal was to, you know, get to a place where we would be able to create a really smooth, beautifully smelling mask that someone would want to put on their head, right? And you would sell that for like 50 bucks a pop at the farmer's market. Like that was kind of what we were, we were envisioning. And I think the three of us all thought that was going to be pretty easy. And, you know, it took an afternoon for us to realize like this was way, formulating a product was going to be way harder. It was so complicated and the scoby did not blend well. And it was, um, it was really smelly. You know, like it, and Justin kept saying, I just don't know how anybody's going to put this on their head.

• 28:16Guy Raz?

  So, once you realized that this is not gonna, you're not gonna be ready in time, what did you decide to do?

• 28:22Speaker 01

  Well, what was originally a byproduct suddenly became the main show. You know, we saw 60 cases of unlabeled kombucha. And we were like, okay, wait, check, we know this is really good kombucha. Everybody tells us that. Check, we already have it. Check, you know, a lot of checks. And so we said, okay, we're gonna, we're gonna sell that.

• 28:44Guy Raz?

  And what did you call it? Did you have a name for it?

• 28:48Speaker 01

  Yeah, it was called HealthAid.

• 28:49Guy Raz?

  How did that happen so quickly?

• 28:51Speaker 01

  It happened in about a two hour meeting around a circular table, the same table we started the entrepreneur club at. And, um, you know, there wasn't a lot of pressure for this drink. I want to just say, when we decided to sell the kombucha, we hadn't given up yet on the hair loss idea. We just kind of realized it was going to be harder to make than we could make in the time that we Needed to make it by. So it was like, we still thought the big idea was hair loss. And so there wasn't a lot of pressure to make all the right moves with this kombucha. We each had different things we were working on. For me, it was create an awesome package. I had stayed at a friend's house in New York City and I loved, she had this like

• 29:29Speaker 01

  apothecary setup of like old medicine bottles and stuff, just like decoration. And I just loved that look and feel. Um, and so I took a picture and I drew something on a piece of paper that said, you know, bubbly probiotic tea and kombucha. Um, and then I took that sketch and send it to a friend who was Justin's musician friend, but also happened to be a graphic designer and, you know, gave him 50 bucks and a case of kombucha.

• 29:58Guy Raz?

  Wow.

• 29:58Speaker 01

  And he came up with a really awesome label for us that we printed on our jet printer and Scotch taped on the bottle.

• 30:06Guy Raz?

  So you've got the labels and you label them on and you guys just pack that up in a in a car and you drive to the farmer's market. Did you get like a, one of those like white tents?

• 30:15Speaker 01

  Yep.

• 30:15Guy Raz?

  What'd you do? You had like a sign?

• 30:17Speaker 01

  Oh, it was way more than that. I mean, I took this very seriously. It was like, everything had to match. It was, I felt that the whole theme of the booth had to be apothecary. So our sort of thought was it was going to be a little bit like, come one, come all, experience the elixir of life. You know, like that was sort of going to be the theme and it would draw people in the market. It would almost be, we thought maybe we could make our farmer's market like a show.

• 30:41Guy Raz?

  And so what happened? Did you start like getting customers buying it right away?

• 30:45Speaker 01

  Oh, yeah.

• 30:45Guy Raz?

  Wow.

• 30:46Speaker 01

  I remember the first purchase, the first guy who came.

• 30:48Guy Raz?

  Who was it?

• 30:49Speaker 01

  Just some dude. I think his name was Mark, but he showed up and we like asked a couple of questions, took a sample and me and Justin were like sitting there, you know,

• 30:58Guy Raz?

  Yeah.

• 30:58Speaker 01

  You know, looking at this guy like, is he gonna buy one? And he asked for two.

• 31:03Guy Raz?

  Two bottles.

• 31:03Speaker 01

  Two bottles. $10, baby.

• 31:06Guy Raz?

  A $5 a bottle. That's a lot. Yeah.

• 31:08Speaker 01

  Yeah. Well, at the time, actually, that was sort of what they were going at in the store too. They were like $4.50 or something at the store.

• 31:14Guy Raz?

  And, and how many bottles did you sell that day?

• 31:17Speaker 01

  All of them.

• 31:18Guy Raz?

  Wow. You sold them out?

• 31:20Speaker 01

  We sold them out in like a couple hours.

• 31:23Guy Raz?

  Wow.

• 31:24Speaker 01

  It surprised us and it surprised the farmer's market people. They were like, what the, where'd this team come from? And, and what frustrated us is we sold out, I want to say by like 11 a.m. And the market didn't close till two, so we could have made a lot more. So the following week, you know, we could only do so much because kombucha takes a good week to make.

• 31:43Guy Raz?

  Sure.

• 31:43Speaker 01

  But, you know, two weeks after that, we showed up with a lot more. And there were days in the summer that we were making 1,500 bucks in a market.

• 31:52Guy Raz?

  Wow. And, and by the way, where were you living? Where were you and Justin living at this point?

• 31:58Speaker 01

  So we had this great apartment off Sierra Benita Boulevard in LA, right near The Grove.

• 32:04Guy Raz?

  And where were you brewing the kombucha?

• 32:06Speaker 01

  In our closet.

• 32:07Guy Raz?

  Wait, so because you, so you.

• 32:10Speaker 01

  Well, that's where it was fermenting. But of course, we used our kitchen for, you know, making the tea and.

• 32:15Guy Raz?

  Yeah.

• 32:16Speaker 01

  Yeah.

• 32:16Guy Raz?

  Were you making it in gallon jars?

• 32:18Speaker 01

  We were making it in the same jars we make it today. Two and a half gallon cookie jars from Bed Bath & Beyond.

• 32:23Guy Raz?

  Hmm.

• 32:23Speaker 01

  And that apartment just happened to have a huge closet with a bunch of shelves. And we put in stainless steel shelves to add to that. You know, you could fit 10 jars per shelf and we probably had a good 20 or 30 shelves.

• 32:37Guy Raz?

  Wow.

• 32:38Speaker 01

  So we could make a lot of kombucha. And then we bought, I mean, I'm not sure if this is electrically safe, but we bought one of those space heaters.

• 32:46Guy Raz?

  Mm hmm.

• 32:47Speaker 01

  And just sort of put it in the closet. So it warmed up the room to make the fermentation go a bit faster.

• 32:52Guy Raz?

  All right. So you got all this kombucha going and then you spent the summer just.

• 32:55Speaker 01

  Slinging kombucha.

• 32:56Guy Raz?

  Basically slinging kombucha. But during the week, you were still working. You were still selling.

• 33:01Speaker 01

  Yeah.

• 33:01Guy Raz?

  Farmers.

• 33:01Speaker 01

  But it was, it was hard, man. Like, so yes, in the week I was working and at night be just working so hard at making the kombucha, making more kombucha. At the height of the summer, we were in seven markets and there were only three of us. So.

• 33:17Guy Raz?

  You were in seven farmers markets?

• 33:18Speaker 01

  Yeah.

• 33:19Guy Raz?

  And by the way, how are you? I mean, this is not just on the weekends, right? You had to do weekday markets, but you and Vanessa had weekday jobs. So what did you do?

• 33:28Speaker 01

  And so did Justin. Yeah, I mean, we didn't do the weekday markets at first. We did weekend markets, but then we did pick up a Thursday market, but we hired somebody to do that. So he would do it for a hundred bucks and a percentage of sales. And so that's how we were doing the seven, of course. Three of us, each of us would do a market and then we had four people.

• 33:49Guy Raz?

  All right. So you are, it sounds, I'm assuming you're getting repeat customers, people coming back to your stall at the farmer's market and saying, I bought this stuff last week because it's great. I want a few more bottles.

• 33:58Speaker 01

  Yes, at least half of our customers were repeat. And then the other half were new, which was so cool. We were really driving people to the category, people who were new to kombucha. And we would, first of all, you couldn't walk through the market and not taste our kombucha. We would make sure that everybody who walked by our booth got a sample. It was just-

• 34:19Guy Raz?

  How'd you do that?

• 34:21Speaker 01

  Hey, you, you with the kid. You want to try some probiotic tea?

• 34:27Guy Raz?

  And who were your customers? Were they like yoga people? Were they like, was it just LA? It's just LA people are kind of health conscious?

• 34:36Speaker 01

  It's kind of just LA. I mean, for sure, the ones that knew kombucha were probably more like the yoga customer. But I would say a lot of customers that came to us and bought really had never heard of kombucha before. You know, had heard something about probiotics.

• 34:51Guy Raz?

  Yeah.

• 34:51Speaker 01

  And we're just like, well, my doctor told me I should have probiotics. I'll give this a try. Let me buy one.

• 34:57Guy Raz?

  Yep.

• 34:57Speaker 01

  And another thing we were doing at that time, pretty quickly, customers who loved it would say, will you just bring this to my house? Like, I don't want to carry a case around the farmer's market. Will you just deliver? If I buy a whole case, will you deliver it to my house? And we're like, yeah. So then this whole other business started, which was us distributing cases to homes all throughout LA after the market. So like Saturdays and Sundays became extremely busy for us.

• 35:22Guy Raz?

  Now, here's a question. So this is very promising. You know, you're selling a lot of kombucha at farmers markets, but it's a farmer's market business. Did you, you know, did you think, hey, we should take this beyond the farmer's market? Did you think this is going great? This is going to be a great farmer's market business?

• 35:38Speaker 01

  No, no, we quickly saw, I want to say it was like June or July when we had-

• 35:44Guy Raz?

  Of 2012.

• 35:45Speaker 01

  When we, yeah, when we had realized this was the business.

• 35:47Guy Raz?

  Wow.

• 35:48Speaker 01

  To be honest, it was about the consumer to us. Like, there was a response. They like loved our kombucha. We were getting, they would say things like, I drove 100 miles to buy this kombucha. You know, it was like that. And we were like, OK, we have something here. It felt wrong to go back to hair loss after that. There was something here. It was alive and like, growing.

• 36:09Guy Raz?

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

• 36:32Guy Raz?

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• 37:17Guy Raz?

  with Stripe's users processing a combined $1.9 trillion last year. So if you're already thinking about what's next for your business, see what's possible at stripe.com.

• 37:30Speaker 02

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• 38:04Guy Raz?

  And just one more thing. The How I Built This book is now available. It's a great read and a great gift for anyone looking for ideas, inspiration, wisdom, and encouragement to have the courage to put out an idea into the world. It's filled with a ton of stories you haven't heard and how some of the greatest entrepreneurs you know and respect started out at the very bottom. Check out How I Built This, the book, available wherever you buy your books. And please, if you support what I do on this show, you can show that support by picking up How I Built This, the book. And thanks.

• 38:47Guy Raz?

  Hey, welcome back to How I Built This from NPR. I'm Guy Raz. So it's toward the end of 2012, and in less than one year, Dinah and her co-founders have pivoted from selling a hair loss treatment to a business selling kombucha at farmers' markets around LA. And at this point, they can tell that HealthAid has the potential to become much, much bigger. The problem, though, is time. All three co-founders are still working their day jobs, and they had to decide whether it was time to jump into this side hustle full-time.

• 39:25Speaker 01

  Well, everybody in our families was telling us not to do it.

• 39:28Guy Raz?

  Everyone said, you're nuts. Don't leave that job.

• 39:30Speaker 01

  Don't, don't leave that job. Don't.

• 39:32Guy Raz?

  Sensible advice.

• 39:33Speaker 01

  Yes.

• 39:34Guy Raz?

  But, I mean, but for you, the decision to quit, I mean, was it just obvious that it was time and this, this new thing with kombucha was gonna take off?

• 39:42Speaker 01

  No, it was so scary. It was so scary. I was so afraid to call my father and tell him, oh my goodness, I remember that. I was like shaking.

• 39:51Guy Raz?

  What'd you tell him?

• 39:52Speaker 01

  You know, I, I've made the decision to quit my job and give HealthAid a full-time go. He was sort of like, come on, you don't have to do that. I mean, listen, I'm supportive of HealthAid. It's going well. You should keep doing it, but like, don't quit your job. You should be making some money first, you know?

• 40:09Guy Raz?

  Yeah.

• 40:09Speaker 01

  Because it wasn't at that time. I think Justin and I had scrounged together enough money to have a couple months of rent saved up. So at the end of the year, we found ourselves in this place of being like, it was like our dream. All three of us had the dream to give this thing a go. So we made a sort of pact at November, I want to say it was around Thanksgiving, where we said, okay, let's put in our notice, end of the year. Boom, we're done. January 3rd, we come back. It's game time, baby. That was sort of the, that was the thought. And it really was, as soon as we showed up, I call that one of the most important marquee moments, because it was when we came back that we could put our full mind share to this business and growing it. And that's when we moved away from farmer's markets.

• 40:54Guy Raz?

  All right. So you, you quit. By the way, you're making all the kombucha in your apartment. You guys are making it in your apartment.

• 41:01Speaker 01

  Oh, yeah. No, I had like, our apartment literally turned into a factory of.

• 41:06Guy Raz?

  A kombucha factory. Did it smell, by the way, of kombucha?

• 41:09Speaker 01

  Oh, yeah. Yeah, yeah, yeah. We were like, definitely, I mean, neighbors who lived at Sierra Benita with us, thank you, because we, we really, yeah, their lives were worse off because of us. Not only did it smell like kombucha all the time, but we had people coming in to help us make it. I mean, any friend that needed, you know, some cash.

• 41:28Guy Raz?

  Sure.

• 41:29Speaker 01

  But there was a point where our kombucha, you know, just could not fit anymore. And we needed some space. Plus, we started to sell in stores. Like, stores would come to our markets and say, hey, can I sell this in my really awesome, you know, craft cocktail store? Can I sell this in my, like, high-end market? And so we would deliver not just to individuals, but also to small wholesale accounts. And when we did that, that was when legally, you know, they would say things like, hey, you know, where's your-

• 41:57Guy Raz?

  Nutrition label.

• 41:59Speaker 01

  Where's your nutrition label? And like, where's your, like, business location? And we're like, yeah, we can't be like, Sierra Bonita Apartment A, you know?

• 42:07Guy Raz?

  Right.

• 42:08Speaker 01

  So, um, we found a, it was called Cake Bake Shop in Manhattan Beach. And the owner's name was Laura, and she was closed on Sundays and Mondays. And in exchange for us opening on Sundays and Mondays and manning her shop, she let us use all the extra space she had, for free.

• 42:28Guy Raz?

  I mean, there's so many, like, really cool strategies here, because you didn't really need a lot of money to start up. You didn't have an office, so you just kind of bartered to use the space.

• 42:38Speaker 01

  Uh huh, it was a barter.

• 42:39Guy Raz?

  But did you, and you had to buy jars, you had to buy bottles. Did you at any point go out to people that you knew and say, hey, can we take a loan? Can you help us out? Did you, like, do anything like that?

• 42:51Speaker 01

  Yeah, no, we were so busy, Guy. And we were the type of people that, in the walk-in fridge at the bakery shop, when the light was out, we didn't, like, fix the light. We would just, like, work in the dark. So, yeah, no, I mean, we probably should have been thinking ahead, because there's no question that as we got bigger, cash was coming back to us at a later time, and that was starting to really infringe upon our cash, um, situation. But we weren't really thinking about that. So, no, when we needed money, the first time we really needed money, we needed money to buy our first filling line, which already we were past the Cake Bake Shop stage. Um, it was the next stage, but we asked both of our parents for that. Vanessa asked her dad, and I asked my dad, and they, they gave us money at like a, you know,

• 43:36Speaker 01

  um, I don't even think there was an interest rate. It was like, pay us back in a year.

• 43:40Guy Raz?

  And how much money did you need to get a filling machine or whatever?

• 43:43Speaker 01

  Sixty grand, so thirty grand each.

• 43:45Guy Raz?

  Right.

• 43:45Speaker 01

  And that was just for a filling line. That was, like, gone. It was literally the price of that, and- So we were, yeah, we were out of cash fast.

• 43:55Guy Raz?

  And what was the, the sort of the division of labor between you and Vanessa and Justin? I mean, you were the chief kombucha brewer, right?

• 44:04Speaker 01

  Well, yes and no. I mean, I was also the marketer.

• 44:08Guy Raz?

  Okay.

• 44:08Speaker 01

  In the beginning, it was like anybody who has arms and legs and has like, we all shared the chores and the responsibilities and brewing was the most physically difficult. I mean, it's a lot of lifting cases of liquid, moving cases around, filling bottles. So it was like, no one person could do that all week. So we would switch. There was no clear kind of job responsibility yet. But once we quit our job, what we did is we put jobs, individual jobs and responsibilities onto postcards. So we had like a hundred postcards each with a job from, you know, making deliveries to brewing the kombucha, to opening accounts. And we put those on a wall and we sat at the back and we just said, okay,

• 44:51Speaker 01

  go pick up the postcards, the three of us, go pick up the postcards that you, you know, are most drawn to and you think you're the best at.

• 44:58Guy Raz?

  Wow.

• 44:58Speaker 01

  And naturally Vanessa picked up the sales ones. I picked up the marketing and leading people ones. And then Justin picked up a lot of the operational manufacturing ones. So it, so we very naturally fell into our roles of CEO, for me, chief of sales for Vanessa and COO for Justin.

• 45:19Guy Raz?

  And, and when it came time to having that difficult conversation, sometimes difficult, about how to divide up the business, was it difficult or not? Was it just like, yep, a third, a third, a third? How'd you figure that out?

• 45:29Speaker 01

  It was not difficult. Yeah, we, we all are very grateful that the three of us landed with each other because I know a lot of people have founder issues. It's natural, right? You've got a thing of value. But for us, it just really hasn't ever been. The three of us were equally devoted. Dedicated, put the same amount of work into HealthAid. So we were, yeah, third, a third, a third, all the way and always have been.

• 45:54Guy Raz?

  All right. So you guys start. So you decide, all right, let's get this in stores, right? And how do you, where do you start? Because I guess, uh, did you approach stores with your kombucha? Did you like?

• 46:04Speaker 01

  Yeah. Oh, yeah.

• 46:04Guy Raz?

  And, and were they instantly like, yes, we're in? Or, or did you get more pushback?

• 46:08Speaker 01

  You know, some, you know, we had a sales sheet that like I had, you know, used my, as inspiration for my sales, pharmaceutical sales days. Um, sometimes you'd, you'd get somebody that was super stoked about it. Um, one of the biggest early on challenges was refrigeration.

• 46:26Guy Raz?

  And this is, we've done this before on the show with like, you know, Honest Tea and other products that some need refrigeration, some don't. It's very hard to get onto refrigerated shelves.

• 46:37Speaker 01

  Yes.

• 46:38Guy Raz?

  In stores.

• 46:38Speaker 01

  Yes.

• 46:39Guy Raz?

  Cause there's limited space and everybody wants that space.

• 46:41Speaker 01

  Yes, it's totally cutthroat.

• 46:43Guy Raz?

  And you're just some three friends making kombucha.

• 46:46Speaker 01

  Yeah, we're kind of a joke. Yeah.

• 46:48Guy Raz?

  And but you would, what would you do? You would go to these stores and say, hey, can I talk to the manager? And you would have like samples with you?

• 46:53Speaker 01

  Yeah. A six pack of kombucha is usually what we show up with and we just, we'd say, you know, try it. And, you know, sometimes we'd be able to put it right in the fridge, right then and there. And, um, we, we created a whole self-distribution model for a good two years. We ended up buying a van or renting, you know, leasing a van, a big white van. It wasn't refrigerated, but we put a bunch of coolers in there. But yeah, I mean, it wasn't as easy to make a wholesale sale, um, as it was to make like a customer sale on a farmer's market, but it was worth the squeeze because usually the bigger the store, the more cases they would order at a time. But there was a period of time where Vanessa, Justin and I, we would each take a day to deliver during the week, a couple of days a week. Um, so we delivered every single day and our days were full.

• 47:38Speaker 01

  And we would just drive around LA and drop off products to restaurants, cafes, small grocery stores.

• 47:46Guy Raz?

  And they were buying like, what, a couple of cases here and there?

• 47:49Speaker 01

  Yeah, like probably the average delivery was somewhere between two and 10 cases.

• 47:53Guy Raz?

  So I guess you eventually in 2013, you land a deal with Arowan, which is a larger market, like an upscale market in LA.

• 48:00Speaker 01

  Yeah, it's like a proper grocery store, but they only have three of them at that time. Actually, at the time, they only had two, so it was still not a huge chain. Like, we could make the deliveries.

• 48:09Guy Raz?

  And with all of the beverage options at a place like Arowan, already by 2013, that was a pretty crowded space. Not just kombucha, but just beverages, fruit juices, natural juices, cold press, this press, that press, everything, you know. It's all, how are you getting people to notice HealthAid kombucha in the refrigerated case?

• 48:27Speaker 01

  We just wouldn't let it lose. We would show up and do samples.

• 48:32Guy Raz?

  Right.

• 48:32Speaker 01

  Justin, Vanessa and I were doing samplings at least once a day. And then, you know, we did a good job of creating a bit of buzz around the product, too. Yeah, and I think people liked that we were like a trio, you know, of entrepreneurs that were just getting started and we had a really good kombucha. So, you know, hopefully people would tell their friends. I don't know, it just, it really did grow, but, but we pushed it very hard. I mean, we were always, always selling this thing. Oh, I was always demoing, it felt like.

• 49:00Guy Raz?

  And but did you have any employees at this point? It was just kind of volunteers or friends or interns or what?

• 49:07Speaker 01

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

• 49:33Guy Raz?

  And were you also using credit cards to pay your bills?

• 49:36Speaker 01

  Yes.

• 49:37Guy Raz?

  And maxing out on your cards?

• 49:39Speaker 01

  Every month.

• 49:40Guy Raz?

  All right, so you need to scale up, right? You're getting more demand, so, and clearly you've got a winning thing here. Could you go to a bank and get a loan? Did you try?

• 49:49Speaker 01

  Well, I always gave my middle finger at the Wells Fargo, you know, billboard on the 405 because it would be like, helping small businesses grow. And I'm like, you didn't help us.

• 49:59Guy Raz?

  Oh, you actually went and asked them for a loan?

• 50:01Speaker 01

  I mean, everybody said no.

• 50:02Guy Raz?

  Because you had no collateral?

• 50:04Speaker 01

  No collateral, no, yeah, no assets as individuals, but also no profitability. It was just like a complete, you know.

• 50:11Guy Raz?

  So you actually went, you met, went and met with a loan officer or loan officers?

• 50:16Speaker 01

  Yes, yes.

• 50:16Guy Raz?

  And, and you showed them your pure like business model and everything?

• 50:19Speaker 01

  Yes, we didn't get good loans from banks until like a couple of years ago. Because our business was a bit like a rocket ship that, you know, it was growing like crazy, but we didn't have any sense of where our next dime was going to come from. And except from, you know, selling the kombucha, but like we were going way faster than we could keep up with for sure. So I think from a conservative bank perspective, it just was not, it was not a safe move until recently.

• 50:47Guy Raz?

  So what do you do? I mean, if, you know, either, this is a point where, you know, this can be like the trough of sorrow, right? Where you need a bridge loan or you need some money or you're gonna, you're gonna fizzle out, right?

• 50:59Speaker 01

  Yeah, 100%. And I remember the moment we were at the brewery and we had a $50,000 credit limit and we just assumed that Amex would extend our credit because we were good about paying it in full every month, you know, so we were like, oh, it's not going to be a problem. I mean, we've been great customers, you know, and then, yeah, we got a flat no.

• 51:21Guy Raz?

  A flat no to extend your $50,000?

• 51:23Speaker 01

  Yes, like it was like you're maxed out and you're not getting any more credit from us.

• 51:29Guy Raz?

  So what'd you do?

• 51:30Speaker 01

  We were pretty scared. We had enough to make that week of deliveries, but at that point we sat down and said, okay, who do we reach out to that has money and that does investments? And we were starting to gather those people and we got a cold call from a guy by the name of J C. He was a manager at an investment company called First Beverage.

• 51:53Guy Raz?

  So, yeah. And he found out about your product maybe by going to Air One or Farmers Markets?

• 51:58Speaker 01

  Yeah.

• 51:59Guy Raz?

  And he called you to what? To?

• 52:01Speaker 01

  Say he tried our kombucha and he thought it was the best he's ever had. And you know, they really want to talk about an investment.

• 52:07Guy Raz?

  Wow.

• 52:08Speaker 01

  Now, they had just gone through a very long diligence process with another kombucha company that was bigger than us at the time. And they didn't end up doing the deal for whatever reason. I'm not sure why, but they were convinced about the category. So it's like they entered our world already sold that they needed to get into a kombucha and fast. And it was like, could this be any more perfect? Like, where do we sign? And they, they were able to cut a deal pretty quickly. Within six weeks, we had cash and they allowed us to include some friends and family as well. So we did like a series A slash friends and family round together. And that was in 2014 and that was our first investment.

• 52:47Guy Raz?

  So you get this investment. What does it mean? What, what were you, I mean, how, by the way, how much did they invest?

• 52:53Speaker 01

  Over $2 million.

• 52:54Guy Raz?

  Wow. So they, but this enabled you presumably to hire people.

• 52:59Speaker 01

  Yes. So that was exactly what we did with the money.

• 53:01Guy Raz?

  Gotcha.

• 53:01Speaker 01

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

• 53:35Guy Raz?

  And as you kind of did this, got, get this investment, you also land a deal, a distribution deal to get into, uh, into Gelson's and then, which is a chain in, in LA, mainly around LA, and then also other places in the West Coast.

• 53:53Guy Raz?

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

• 54:08Speaker 01

  Yeah. But then the catch 22 is the distributor won't usually take you on unless you have some stores.

• 54:15Guy Raz?

  Right.

• 54:16Speaker 01

  Like, they don't want to build you from scratch.

• 54:17Guy Raz?

  Right.

• 54:18Speaker 01

  So they want to know, oh, you've got Gelson's on board? Okay, we'll take you on.

• 54:21Guy Raz?

  Got it. So this distributor is called Nature's Best that you signed.

• 54:24Speaker 01

  Yeah.

• 54:24Guy Raz?

  And was that was that just a huge turning point for you?

• 54:28Speaker 01

  Oh, yeah. I mean, it was a huge, it was the next phase, right? So now we're like moving away from the majority of our business being from farmers markets and and home deliveries to, okay, now we're talking about huge orders.

• 54:41Guy Raz?

  Yeah.

• 54:42Speaker 01

  So more stores are willing to accept us and and we're very focused on growth, aligned with our investors at this time on just like, let's grow, let's grow this.

• 54:53Guy Raz?

  Was it hard for you to? I mean, I can't even imagine how hard it would be to all of a sudden go from just you and your husband, your best friend, to a company of even 10, 15, 20 people. And you got to be the leader and the boss and there's HR issues and like, it's got to be overwhelming.

• 55:09Speaker 01

  Yeah. And then there's the capital piece. Like, we got that money. We thought that money was going to last us. I remember when we got the 2 million bucks, it was like, oh, my gosh, we're good. Like, let's build this now, baby. And then it was like, gone a year later. And and it's not that we were reckless at all. It's just the capital for growth is really intense and immense. And so we were already having discussions a year later of doing this again. And that's, that's a lot of pressure and responsibility when I'm also the one that's still picking up the broom. I mean, so many pressures and responsibilities in growth. It's almost hard to pinpoint why you're you're building something. So proving it, proving that you can do it. I mean, so many times, I think the biggest fear was

• 55:53Speaker 01

  Not living up to that. So, I mean, almost everything requires discomfort and push. It's in times of growth, like, it's probably the hardest times.

• 56:07Guy Raz?

  Can I ask you about having a business with your husband? I mean,

• 56:11Speaker 01

  Sure.

• 56:12Guy Raz?

  It's you, your husband, your best friend. And God, that could spell recipe for disaster in many instances, right? Because because it could be two of the people are in a family and one person isn't. And that could be tension and also the tension with the two partners who are married. And how do you guys manage that? There's no way there isn't tension between at least you and Justin or you and Vanessa or Justin and Vanessa.

• 56:37Speaker 01

  And that's, that's really where the tension is, me and Justin. It's not, it doesn't really sit for me and Vanessa. I don't know exactly how to explain why. Part of it is that Vanessa and I are wired very similarly. So I think we just really operate from the same space. I, I think that's a part of it. I think another part of it is we don't live together. So I think that's separation time. And then also, the other thing that makes it challenging for Justin and I is we're very different. Like, he and I are in some ways opposite. You know, he's the operations guy. He's the one that, you know, wants to dot the i's, cross the t's, make sure everything is operationally sound and like structured and processed and system oriented, which obviously we need.

• 57:21Speaker 01

  But I am a very different type of force. I am, I am the dreamer. I'm the one that like, you know, doesn't think about that stuff. And so it calls for quite a bit of conflict between the two of us at work. And I actually invite that. I'm very comfortable with that level of conflict. In the end, we end up having a very solid dream. I guess you could say our executable dream. But you just don't really want to have sex with that person that night.

• 57:53Guy Raz?

  I might cut that part out. I got you. I hear you.

• 57:55Speaker 01

  You know what I'm saying, though? I mean, it's, it's tough to come home. And then, and then you have this other relationship to tend to, which is a much more personal one. And it's just, it's hard to transition, especially with children. There's no break. It's not like you can go to your yoga class and then come back and be like, okay, now we're husband, wife. So, you know, we just have had to work through that. And we have.

• 58:18Guy Raz?

  So Diana, I mean, this brand, right, HealthAid, that you started by fermenting kombucha in your closet. I mean, today, I mean, you're looking at hundreds of millions of dollars in annual retail sales. And I think you guys have raised almost $50 million total, or something like that. Is that about right?

• 58:36Speaker 01

  Yeah.

• 58:37Guy Raz?

  And last July of 2019, you got $20 million from Coke, which isn't just 20 million investment. That's like the backing of Coca-Cola, the biggest beverage company in the world.

• 58:48Speaker 01

  Huge milestone.

• 58:50Guy Raz?

  Do you feel now like you can take a breather? Like you're like, ah, OK, we're going to be fine. Like, I've been grinding away since, you know, 2012 on this, and now I'm like, OK.

• 59:01Speaker 01

  Um, I kind of got to say no.

• 59:03Guy Raz?

  OK, all right, fine.

• 59:05Speaker 01

  Yeah, like, yeah, no, it feel, I will, I will say for sure it was a huge milestone. I was extremely proud and am extremely proud that we've been able to build something literally from nothing, from that table, to something that the biggest beverage company in the world would want to invest at this level. Like, yeah, I mean, it's awesome. But the keep going part didn't die down. Now, I will say, over the journey, regardless of that investment, over the journey, I've been able to, you know, pay myself more than $10 an hour, like we did at the beginning, and sort of, I feel now I'm at a point where I feel fairly paid. And that's allowed for me to at least go on vacations and do things.

• 59:49Guy Raz?

  Because you have a board that approves your pay.

• 59:52Speaker 01

  Yeah.

• 59:53Guy Raz?

  Yeah.

• 59:54Speaker 01

  Yeah, exactly. I still have to fight for it, though.

• 59:56Guy Raz?

  Yeah, and this is the thing, I remember we talked to Andy Dunn of Bonobos about this, because a lot of people assume you get all this investment, and all of a sudden, you're loaded.

• 1:00:02Speaker 01

  Oh.

• 1:00:03Guy Raz?

  You're just swimming in cash. But actually, the more outside investment you get, the less equity you have in the business. And really, Most entrepreneurs, until or if they sell their their shares in the business or equity, they're dependent on a salary that is determined by a board and that could be a perfectly fair salary, but it's not going to make you filthy rich.

• 1:00:24Speaker 01

  One of the funniest emails we got was after we got that first money. I just I got an email and it was like, you know, for your for your charter flight needs, you know, think of executive charter.

• 1:00:36Guy Raz?

  Oh, from a company that was like, oh, this person's rich. Now they're going to need charter flights.

• 1:00:39Speaker 01

  Flying, like private, Justin, but I was like, oh, and I wrote back. I was like, we're still flying coach, you know, like this is and still we are.

• 1:00:48Guy Raz?

  Here's here's a tricky question for you. We've had people like Gary Erickson of Cliff Bar, who own his, he owns his company. He was almost going to sell to investors and sell to a big, then a big company and he didn't. We've had, you know, Sarah Kaus of Swell. She owns 100% of her company. Some people say they couldn't have done what they did without outside capital, that it would be, it would have been impossible to scale their business. And some people say, I wish I didn't do it. And other people say, had I done it, we would have grown faster earlier. There are all kinds of different views on this. But there's no question that when you bring in outside capital, you do lose control, right? There are going to be people of opinions and and they're going to assert those opinions.

• 1:01:31Guy Raz?

  If you would have done it again, would you have avoided outside investors?

• 1:01:36Speaker 01

  No.

• 1:01:36Guy Raz?

  No.

• 1:01:37Speaker 01

  So much of the choice you have is, is, yes, there's experience, but it's also, what's the context of the situation? I mean, we couldn't get alone if we needed it. We were totally out of cash. We, it really felt like we had no choice. So I know if I was back in that position, I really still would have no choice. But to be honest, they helped us a lot in the beginning. They helped us build forecasts and get into the right distribution. And so honestly, I think we did exactly right.

• 1:02:05Guy Raz?

  Yeah.

• 1:02:06Speaker 01

  And I would say that to all those people. If you have access to capital outside of private equity, great, go for it. But there's not only one way to do it.

• 1:02:17Guy Raz?

  When you think about where you are right now and where you've come from, how far you've come in a pretty short time, I mean, I'm sure it seems like a long time. I'm sure it seems like forever and ever.

• 1:02:30Speaker 01

  I know.

• 1:02:30Guy Raz?

  But in the grand scheme of things, it's pretty quick, right? I mean, you've become a pretty big company quickly. How much do you think that has to do with just the grind and your hard work? And how much, because you got lucky?

• 1:02:42Speaker 01

  OK, it's definitely not zero luck. The initial number that came up was 20% luck. That's what I wanted to say. I would say it's 80% grit. There's definitely moments of blessings that ride along with Vanessa. HealthAid would not be where it is without Vanessa. That is a blessing. You know, the phone call from the farmer's market, just when we needed investment, the guy that chose to buy a HealthAid and called us and said we wanted investment. I mean, those types of things are hard to explain. And there's more of that. But even in all those examples, you get a card dealt to you. It's not the whole deck. You get a card. You still have to do something with that card. You have to take it and run with it.

• 1:03:26Speaker 01

  And without that grit, that card's just a card and it flies away. So yeah, I would say it's 80% hard work, 80% pushing through and just like doing it when no one else would.

• 1:03:41Guy Raz?

  That's Daina Trout, co-founder and CEO of HealthAid Kombucha. By the way, according to the company, HealthAid is on track to sell $200 million worth of kombucha in retail stores this year. That's the equivalent to selling one bottle every single second.

• 1:04:03Guy Raz?

  Hey, thanks so much for listening to the show this week. You can subscribe wherever you get your podcasts. You can also write to us at [email protected]. And if you want us in a tweet, it's at howibuiltthis or at guy raz. And my Instagram is at guy dot raz. Our show was produced this week by Casey Herman, with music composed by Ramtin Arablouei. Thanks also to Julia Carney, Candace Lim, Neva Grant, Sarah Sarason, and Jeff Rogers. Our intern is Vera Safari. I'm Guy Raz, and you've been listening to How I Built This.