Nick Saltarelli - One Foot in Front of the Other - [Founder’s Field Guide, EP. 54]

My guest today is Nick Saltarelli, co-founder of the functional chocolate bar business, Mid-Day Squares. Nick started the company with his wife and brother-in-law a few years ago to build on a simple idea: if the big chocolate bar brands were to start today, what would they look like? In our conversation, we discuss the importance of Mid-Day Squares’ $100 million revenue target, what’s wrong with the CPG industry today, and how to keep a long-term mindset while making the most of every day. Please enjoy this unique conversation with Nick Saltarelli. For the full show notes, transcript, and links to mentioned content, check out the episode page here. ----- This episode is brought to you by Pilot. Pilot handles your startup’s finance, accounting, and tax prep needs, so you can focus on what matters most—building your business. Join over 1,000 startups that rely on Pilot to help them scale. Founder’s Field Guide listeners get 20% off their first six months. Get in touch with Pilot at https://pilot.com/founders. ----- Founder's Field Guide is a property of Colossus, LLC. For more episodes of Founder's Field Guide, visit joincolossus.com/episodes. Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here. Follow us on Twitter: @patrick_oshag | @JoinColossus Show Notes [00:02:01] - [First question] - What Mid-Day Squares is and how he started the business [00:04:48] - Why they’re so publicly open about their company’s goals [00:09:05] - Major lessons he learned from his father’s early passing and being around very successful entrepreneurs at a young age [00:16:51] - What long term thinking unlocks for him in short term progress [00:21:05] - Becoming unexpectedly close and learning from Rory Olson [00:25:44] - What Rory taught him about deal-making [00:28:35] - Lessons from Rory about raising capital [00:33:25] - Opportunities in a seemingly oversaturated market like chocolate [00:42:46] - An example of doing something contrarian that worked out [00:47:11] - Their unique approach to marketing Mid-Day Squares [00:57:33] - Lessons learned about building a manufacturing operation after years in China [01:02:35] - What we can expect from Mid-Day Squares in the near future [01:06:59] - The kindest thing anyone has ever done for him [01:08:05] - Mid-Day Squares Uncensored Podcast

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

• 0:00Patrick O'Shaughnessy?

  I know firsthand how complex the tech stack is for asset management firms. And seemingly every new tool and data source makes the problem even worse, adding more complexity, more headcount and more risk. RidgeLine offers a better way forward. One unified platform that automates away the complexity across portfolio accounting, reconciliation, reporting, trading, compliance and more, all at scale. RidgeLine is revolutionizing investment management, helping ambitious firms scale faster, operate smarter and stay ahead of the curve. See what RidgeLine can unlock for your firm. Schedule a demo at ridgeline.ai. This episode of Founder's Field Guide is sponsored by Pilot.com. Pilot handles your startup's finance, accounting and tax prep needs so you can focus on what matters most, building your business.

• 0:42Patrick O'Shaughnessy?

  My team at Colossus started using Pilot earlier this year and saw immediate benefits. Pilot provides a team of US branded accounting experts and fractional CFOs, ready to support you at every stage of your hypergrowth company. In addition to working with us at Colossus, they've run the financial back office for over 1,000 startups, including Airtable, Scale.ai and Lattice. Founder's Field Guide listeners get 20% off their first six months, so please learn more at pilot.com/founders.

• 1:09Patrick O'Shaughnessy?

  Hello and welcome, everyone. I'm Patrick O'Neal and this is Founder's Field Guide. Founder's Field Guide is a series of conversations with founders, CEOs and operators building great businesses. I believe we are all builders in our own way and this series is dedicated to stories and lessons from builders of all types. Founder's Field Guide is part of the Colossus family of podcasts and you can access all of our podcasts, including edited transcripts, show notes and resources to keep learning at joincolossus.com.

• 1:39Speaker 01

  Patrick O'Neal is the CEO of O'Neal Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Neal Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Neal Asset Management may maintain positions in the securities discussed in this podcast.

• 2:04Patrick O'Shaughnessy?

  My guest today is Nick Saltarelli, co-founder of the functional chocolate bar business, Midday Squares. Nick started the company with his wife and brother-in-law a few years ago to build on a simple idea. If the big chocolate bar brands were to start today, what would they look like? In our conversation, we discuss the importance of Midday Squares' $100 million revenue target, what's wrong with the CPG industry today, and how to keep a long-term mindset while making the most of every day. Please enjoy this unique conversation with Nick Saltarelli.

• 2:34Patrick O'Shaughnessy?

  So Nick, we met yesterday. I meet so many interesting people just chatting about your business over Twitter. Maybe just begin by telling us what Midday Squares is, like literally what is the product and how did you think to start the business?

• 2:47Speaker 02

  Yeah, so I like to say a lot of people like to put us in the bar category, but we're really trying to reinvent what a chocolate bar is. So Midday Squares, we call it a functional chocolate bar. The number one question I always get after is, well, what's a functional chocolate bar? It's meant to give you a little bit more than just that sweetness and that kick. So the whole bar was designed to curb cravings, give you hunger coverage until your next meal. We called it Midday Squares because you're supposed to be hitting it in the afternoon. But more importantly than anything, the hypothesis of the company has been simple. If Hershey's, Nestle, Mars started today, what would those companies look like? In our opinion, they definitely would be bringing to market the chocolate bars that you know them so well for. My wife came up with the

• 3:29Speaker 02

  recipe for it. She was making the product for a while. It was not obvious at all that this was going to be a business. And then what made it the business was I got a piece of data, I can't name it publicly, but from someone in M&A. I love reports, any type of reports, I love reading them. And I was just reading it and what was so fascinating, I had heard through so much reading that plant-based proteins were on a tear. But the real chocolate report was really interesting. And so real chocolate is chocolate that can't use palm kernel oil, has to be above 50% in cocoa mass, and can only use a regular sugar. So no sugar, alcohol, none of that stuff. The report from 2009 to 2017,

• 4:14Speaker 02

  this type of chocolate was just seeing unprecedented numbers. And it was led by companies like Lindt, Hugh Chocolate. And what was so fascinating to me when I was reading the report was everybody that was in the real chocolate category, and I think this is why largely big titans in the industry missed it per se, is if you went to go look at the plant-based category, it looked like chocolate bars had existed, but all of the bars in the plant-based category that had function and used chocolate were not using real chocolate. They were using chocolate cuvée, which is palm kernel oil-based chocolate. And it's really shitty. It's like a thin little one millimeter chocolate. On the real chocolate report, what was fascinating

• 4:55Speaker 02

  is every single bar that was there was rectangular in nature and really thick. And that's where that moment was. And Les, who's now my wife, wasn't my wife at the time, was making this product for me. We were roommates. And it was just like, this is the thing that we got to bring to market. And that was 2017. We went, we went and made that product happen because I felt that there was just a huge opportunity in chocolate.

• 5:21Patrick O'Shaughnessy?

  We certainly will talk a lot about market selection and some of the things we were chatting about yesterday. But maybe begin by telling us why you're so publicly open about what you're doing. The reason I found you was I saw something about you're on a quest to build a hundred million dollar revenue business. You're about a tenth of the way there, which is no small feat in a product category like this, just a couple of years in. What's your motivation? You seem to have a unique set of motivations for doing this, whether or not it was chocolate or something else.

• 5:48Speaker 02

  My whole life, man, I've been misunderstood. I think my other two partners have been misunderstood a lot, too. I've always been a massive dreamer. At every single point in time, one of those things were put down by people. And so I think why I'm so public about it is that I really believe people need to stop having these constraints on what they can do and why they can do it. I've been speaking about trying to build a business like Midday Squares for as long as I could remember. And it was always like, that's just not obtainable for you. That's not possible. And then when I grew up, though, I had this really unique experience of being able to see something. And you know, this is where privilege comes into play. I think my dad was an immigrant from Italy. He came over at the same time as this other

• 6:33Speaker 02

  family roughly called the Saputos. And he became very close with one of these gentlemen. And I had the good fortune of my dad passed away when I was 10, but up until then, I would go every Saturday, we would go for haircuts. And I would get to be a fly on the wall of listening to these two gentlemen speak. And I saw literally a business go from Saputo family started a cheese manufacturing plant in their garage in Montreal. And they are today the second largest dairy conglomerate in the world. They trade, they have about a 13.5 billion market cap. And I kind of witnessed this all unfold. And this is where people chastise me a lot. When I say like, it seemed simple. It seemed like it was a

• 7:17Speaker 02

  simple thing with a lot of hard work, a lot of grit, a lot of that. But it didn't seem unobtainable to build a massive company like that. And I just had this bug that I was like hooked on that. Especially when you're under 10, you don't really know exactly what that bug is, but you know that you're really excited about things. And that kind of spun a journey of life that took me in so many different directions to finally getting to Midday Squares. And when we got to Midday Squares, I think why we're doing it publicly is you don't realize how many good people there are in the world. And my brother in law, who's my partner Jake, really introduced me to the idea of, I guess, we call it on

• 8:01Speaker 02

  Twitter, building in public. But I don't like per se the word building in public, just really sharing everything you're going through and ambition. When you share ambition, so why that hundred million dollar marker is there? I like to say is not because it's some dream, it's actually a concrete game plan that we have, a concrete market size, and it keeps us accountable, it keeps me accountable, by continuously saying where we're at on the journey, how we're getting there. And so there's accountability built into it. But two, it brings on a tremendous amount of people that want to help. And Midday Squares has literally gotten into every retailer because of people I've met on Twitter, Instagram, LinkedIn, you name it.

• 8:44Speaker 02

  But then finally, the most important piece on that whole thing is that building something and saying those things makes people feel uncomfortable around you. And my goal in life is to show that you could just do it. And we've been videotaping everything from the beginning. We possess nothing special as individuals, us three as founders, that suggest that we have a better shot at making a hundred million dollar company over the next person. And it's worked tremendously along the way. I can't tell you how many messages we get of people like, okay, this motivated me to do this, or this motivated me to do that. Because at the end of the day, we have nothing special. There's really only two things that we have.

• 9:28Speaker 02

  Hard work, determination, and the ability to tell great stories and connect with an audience. If you have those two things, I think you can literally go as far as you want in the world, or not.

• 9:38Patrick O'Shaughnessy?

  Going back to the experience watching the cheese business scale, I'd be really curious to hear what major lessons you took away, or continue to take away from your relationship with that business. And also just what that hard formative time was. You mentioned your dad passed away when you were ten. How that changed your trajectory and impacts all of this? Those two early formative experiences would be interesting to go a little bit deeper on.

• 10:00Speaker 02

  Lino Saputo Senior was always relentless. In all the conversations I would hear him have with my dad, it was always extreme focus. I can't explain it, there was just like relentless focus of every year, if you put a few bricks in front of the next brick, you build an incredible house. And so when they were, let's call it a non-public company, they were this really large family business. And when they were this really large family business, I think they had a lot of things going for them and a lot of things not going for them. And Lino was always super in touch with what wasn't going for them. And for instance, I remember him early on in ninety four, ninety five, talking about taking

• 10:45Speaker 02

  the company public. You have to understand, this is a non-high school graduated human being, who's an immigrant from Italy, who never had any business doing anything in the public markets. And I remember just that, I'm making this happen, and this is what's happening. And all he started to do was surround himself with the right people. And I even remember, he took my dad, they were doing a course on public markets, and he took my dad to one of the courses with him, like a general, like they would have, you know what I'm trying to say? Like, Not Goldman Sachs, a course, a seminar. Yeah, literally a seminar that was being hosted, I think, by one of the banks. And

• 11:23Speaker 02

  everything he said, he did. And my takeaway from watching that happen was, oh, this gentleman makes everything he says happen in a really basic way, by just putting one foot in front of the other. Two, everybody around them would always say, I remember when he did the big cleanup. So he reorganized the entire business from a family business to get ready to be this massive growth trajectory. Oh, they can't do it. They have no business growing outside of the Quebec market, not even out of Canada. Then they went and they bought a company that was bigger than them. And they were scrutinized for that. And everybody just kept on throwing rocks at them. But here, he just kept on putting one foot in

• 12:06Speaker 02

  front of the other. I think he's like the third richest person in Canada. He's always on those lists. And that's not part of the reason of why I look up to them. Why I look up to them is they made really unachievable tasks seem so simple. And I think the smartest people in the world do that a lot. Because it's not complicated. It's literally one foot in front of the other, long-term vision. I'd really love to speak about long-term vision at some point versus short-term vision, because I think my generation's plagued with short-term thinking. And that long-term vision, there was one thing he always said in every decision he made, Lino Spudosini here, was, we're building the biggest cheese company in the world. This is a legacy business, and I hope it's

• 12:48Speaker 02

  Going to be here after I die. Every decision he made was always optimized for that. I don't think it's luck or even a mistake that they're the second biggest cheese conglomerate in the world, dairy conglomerate, not even cheese anymore, just cheese. My dad was a huge piece. He was a great entrepreneur, my father. He was a food distributor. So I grew up in the food business. I literally lived in warehouses or manufacturing plants. And as you know, my dad died when I was ten. And so I only got ten years with him and people always ask that so young or so short. Here's the thing I'll say on that subject matter that's really, really important. I look around at some of the people I know in my life that still have their parents in their lives. And they don't have relationships with them or they have negative relationships.

• 13:33Speaker 02

  And so I think time is really irrelevant for how long we get to spend with humans. It's like what type of quality we have. And so the ten years I got with my father were incredible. I spent every single Saturday with him in a deep way. He was a hard worker, so we didn't get much time in the week. But every single Saturday I would go and spend a full day with him. And the one thing I always loved about my dad is he treated me like an adult when I was a kid. He never spoke to me like a kid, ever. Even though I may have not been able to process the emotions of what he was going through. Maybe I didn't have the intelligence yet, but he always spoke to me like he was speaking to somebody his age.

• 14:13Speaker 02

  Which really helped me, I feel, develop earlier and just have a different view of the world. And then two was this larger than life figure of enjoying life. And that's why for me, I think the way he died was really tragic and I speak about this pretty openly because it really taught me moments in life and I know it's cheesy, but he died, we were in a car together, driving. Didn't feel well, said he had to pull over and had a massive heart attack and died. And we were literally in a conversation while it happened. That experience of death and that you can experience death in so many different ways. But seeing it happen like in a regular moment, the way this conversation is happening

• 14:57Speaker 02

  really warps your entire vision of like what time and space and energy actually means because from one moment to the next, it was over. There's some serious learnings from his passing. One was that your plans in life don't mean anything. My dad had plans and even to the best that he tried to protect what would happen after he passed away, it all went to shit anyways. His partner was misgiving to us. I won't name his name because I've made peace with that. But he put our family into a really stressful position. So plans don't mean as much as we do. And I think he spent probably too much energy

• 15:40Speaker 02

  on a life that he was going to live versus the life that he could have lived. And so although we had an extreme amount of great times together, we didn't spend enough time together. That really changed my life completely. I know today we call it work-life balance. I don't know how I feel about that expression. But what I feel is presence. I've always felt extreme presence. I always feel this rush because he died at forty-two years old. So people are always like, Nick, what are you in the rush for? I'm not in a rush. I just know that I'm not promised tomorrow, so I act accordingly, like I really, really do. And so I think the best thing you can do is act as if you're not going to live forever and plan as if you're going to live forever to the best of that balance.

• 16:24Speaker 02

  And I think a lot of people put too much value on future moments versus the current. After he died, I completely just changed. I was horrible at school. Before he passed away, I was horrible at sports. And after he passed away, I excelled at everything. And I think that was largely because I realized that the only person that's going to get shit done for me is me. It was very lonely ten to twenty, even though I had a great family and a great mom. It was a very lonely time because everybody was suffering in silence. It was a tragic ending, but it changed my whole game. I mean, I went from being a kid to an adult quickly and realized that the only person that's going to pave the path is myself.

• 17:07Speaker 02

  I had the good fortune of having a father that taught me both through his learnings, but also what he didn't know he was going to teach me, which was dying and having to have all of life unfold after that. It was, that was it, man. It made me who I am today.

• 17:24Patrick O'Shaughnessy?

  Can you square all that a little bit with this? You touched on it, the long-term versus maybe the short-term focus that our younger generation tends to have. I like the idea of the balance of planning as if you're going to live forever, but focusing and acting as if you're not. It's kind of an interesting weird thing to hold in your head at the same time. What does it mean to have a long-term plan to you? And what does it allow for that wouldn't be allowed for if you didn't have that plan? Like, what does it unlock? If you're coaching other entrepreneurs on using this tool to become more effective, how would you coach them?

• 17:54Speaker 02

  Let's take sports, for example. I started off really, really bad and became really, really good. I remember, again, there was a gentleman that came into my life, Rory Olson, that we could speak about as well, too, that saw potential in me, took me under his wing. And the reason I want to say this to the audience is, don't think that I came up with any of this stuff on my own. There was a lot of people coaching me through. And so Rory put me with one of the top sports psychologists. His name's Howard Schwartz. He's out of Montreal. He does all MLB pitchers. Howard really brought the idea of, A, stopping to focus on where were we going to be specifically this season? He asked me what my goal was. I said, I want to make the NHL. So my goal is a point in the future that is very far.

• 18:39Speaker 02

  So we have to stop optimizing per se for what's going to happen in September at training camp, because I might not get the results I want in six months. But if we keep chipping away today, we're going to get somewhere in a long time. And that pressure of saying, hey, I may not be the best next season, but if we have a game plan and we stick to the game plan, time will do its thing. At a young age, that alleviates a lot of pressure for me. And so when I was showing up every season and getting a little bit better, to my peers, maybe I wasn't succeeding, but to myself, I was succeeding in a major way because I was one step closer to this far vision of the NHL. And I remember as I was really starting to hit top tier,

• 19:23Speaker 02

  where I started going into like the top five goalies in Canada. That's when people started to take notice. And I remember somebody asked me one training camp when I came back one summer and I was really at the top of my game. What did you do this season? I said, well, it's not what I did this season. We started this game plan five years ago. It's not a last six month thing. And so I think entrepreneurs think that when you read like the headlines in the media and everything, that results always need to be within 12 months. And that's true to a certain extent, based on where you are in the trajectory and what the narrative is and how you're raising funds. But ultimately, the longer the vision, the more you're going to optimize for things

• 20:07Speaker 02

  that your peers are most probably not optimizing for in decision making. That will allow you to actually have a competitive edge over the long term. And that's where it's a mindfuck for a lot of people. Is that it's not instant gratification. And so humans tend to avoid things that are not instant gratification. To bring it back to Midday Squares, to make the correlation to how even it was similar to what we were doing in hockey. When we started this, the goal was to build the next Hershey's. And in order to do that, we needed a product that was 10x better than what was on the market. And in order to do that, we most probably had to build a manufacturing plant. And we get into the reasons why we had to build that manufacturing plant.

• 20:50Speaker 02

  But nobody in the game was building manufacturing plants. Like all my peers in CPG think we're mental for having taken that route. And that route makes sense because when you're building a plant, forget it. If you think you can build a manufacturing plant and get the profitability in under five years, you have a serious thing coming for you in terms of realization. Everybody was not wanting to make that decision. But for us, we weren't trying to get anywhere quickly in five years. So it didn't matter to invest in a manufacturing plan and take that really long-term vision. And I think in a decade from when we started, people will ask us, wow, how did Midday Squares get here? Well, I'll say exactly like in training camp.

• 21:33Speaker 02

  It didn't happen this summer. We made a decision six years ago that's now only paying off.

• 21:38Patrick O'Shaughnessy?

  I'd love to go to Rory Olson, who I think, as you said, took you under his wing and taught you a lot. And I'm gonna ask you what he taught you about a couple of things. So what did he teach you about the art of deal making?

• 21:47Speaker 02

  Rory Olson is this incredible Montreal entrepreneur. He was the first person to start 56K modem when the internet was pumping out in Canada. So he was the largest internet provider in the 90s, sold that company. Again, everything he did was, came from nothing, poor as hell, grew his way, only started making success in his mid 30s, largely would, people would say he was unsuccessful up until then, and just kept his thing in the pocket and getting involved in businesses. What Rory's skillset was, and I'll say even to this day, is he would get intertwined with big companies. At the time, it was Bell, BCE in Canada,

• 22:29Speaker 02

  and multiple of these different types of companies. And these conglomerates had assets within them that they had no idea what to do with, a lot of the time. And they would end up getting stuck in the belly of the beast, let's call it. Rory was really good picking them out, convincing the boards to spin them off to him, or sell them the assets, and then turn those assets into really successful businesses. And it started in the 90s, they were in selling long distance minutes. So he was with Bell, he was a reseller of long distance minutes. And then they had this little division that was growing pretty quickly, which was their internet division. But they didn't know what to do with it. And so he bought out their entire division and they started what ended up becoming Canada's largest

• 23:12Speaker 02

  internet provider. And he sold that. Then after that, the world knows, his biggest success, the world knows it today, is PaySafe. They're the third largest payment wallet in the world, I'm pretty sure. So he founded PaySafe, and it was out of Montreal. Again, went back to Bell. Bell, at this point in time, had this division that they didn't know what to do with, which was a credit card processing division. It wasn't set up for the internet era, took the asset from them, and became really, I would say, the largest payment processor in 2000, 2001, 2002.

• 23:47Speaker 02

  Fund that company off, took it public. It was valued at two and a half billion when they took it public. And he just kept on doing this. So at this point, I had really come into his life when he was hitting it big. He had just took the company public. That time, Paysafe was not called Paysafe. I forget the name of it. We'll get back to it. But he took that company public and removed himself from that. And we were starting to get really, really close. I was friends with his daughter. I ended up dating his daughter. He only had three girls, never had a boy. So we became really, really tight. And he just started taking me everywhere, literally everywhere. And then that led to one more monster company, which was Airborne Entertainment. And I worked for each one of his companies up until from the age of thirteen to twenty, every single summer in real jobs with him.

• 24:33Speaker 02

  So for instance, like Airborne Entertainment, I'll never forget. We were sitting on a couch one day. iPhone didn't even exist yet. All had flip phones. And he's always looking for deals. He was always looking for businesses that needed some type of turning point to take off. So there was these two gentlemen that he knew in Montreal that had a deal for ringtones, music ringtones. They were doing some good capital with it. They were bringing in some good revenue, but they didn't really know where to take it further after than that. And we were sitting in the room one night and he saw all of us on our flip phones text messaging. And at that point, he was like, wow, this is going to be huge. And they actually created the first app store. So they were before the app store on the iPhone called Airborne Entertainment.

• 25:18Speaker 02

  And I saw that company go from a startup with three people to a hundred million dollar exit in two and a half years, three years. Literally just bringing the team together, getting it done. And to the point where like, just to show you the relationship is when we sold the company to the Japanese firm. Throughout the entire due diligence, Rory brought me to every single meeting in the due diligence process, brought me to the first opening meeting with the Japanese firm. And when we sold. And you're like a kid. I gotta be fifteen years old at most. Wow, cool. And when we sold the company, I was the first person in the room to hold a check. And a lot of people say there was a check. Yep, there was actually a check that came through. It was like ninety five million and change. And I just looked at this and I was just like, wow, we did this in two and a half years. Well, you did this in two and a half years.

• 26:01Speaker 02

  I put a very, very insignificant part in it. And that just changes your perspective on everything, you know? So Rory is a legend in Montreal. Every entrepreneur here knows it from the biggest to the smallest. And this was the man that put me in the game.

• 26:17Patrick O'Shaughnessy?

  All right, so now we can go back to specific lessons. I love the story. What did he teach you about the art of deal making?

• 26:23Speaker 02

  Every single deal is literally one phone call away. Even if you do not know at all any person on the other side of the table. It's literally as simple as if you see value creation. It doesn't need to be more complicated than the next step is to pick up the phone and get in touch with a person on the other side at all means. And a lot of people will say, well, that's easy because Rory had a network. No, that's not true. He didn't have any network in a lot of the areas that he would end up selling the business to or end up bringing investors in. It was the grind for him to find who he was going to put the deals together with and bring the right people to the table to get it done.

• 27:07Speaker 02

  Two is you do not have to conduct yourself as an asshole. And that was one thing that he would constantly drill into my head was even when he was dealing with sharks, people call it, I think sharks is this fancy word to tell people that are assholes that they're sharks. They're not apples, they're sharks. Is that you don't yourself have to ever move like an asshole in the world. And if you treat people well, those deals will go further. Even if they don't go through, those deals will come through somewhere in the future. That is so true to the point where I want to say Midday Squares' first investment was from a person I met six years before Midday Squares existed.

• 27:50Speaker 02

  At a rooftop cocktail event for a startup. And even though we both knew we were trying to get something done for years together, it never got anywhere, but that love that we always treated with each other came through. And I remember when we did our first raise, everybody was like, well, that was so easy. How did you pull that off? So no, six years of relationship building in these things. And then lastly, I know I said two is every bloated company has incredible assets. Every bloated company, go fishing all the time. Till this day, he still goes fishing in there. He just bought over a company called Voty. They do all high speed X-ray technology outside of airports. So their clients are Amazon packages going through.

• 28:31Speaker 02

  So there's so many packages being moved that there was this fledgling manufacturing operation in Montreal that was trying to go after military operations. But he saw e-commerce exploding and that the need for high speed X-ray machines were going to continuously increase. And so like, again, bought himself into a distressed asset and has really turned it around. And I think they're pretty much almost one of the leaders. Almost all Amazon centers use their product. But every bloated company has dead assets. Dead assets are just two moves away from being billion dollar businesses.

• 29:08Patrick O'Shaughnessy?

  You alluded to a little bit maybe, but about capital raising specifically. So you've had to raise investor capital a few times. And I'm sure Will, in the future, given your capital intensive way of building this business, what lessons did he teach you there or have you learned there?

• 29:21Speaker 02

  So always be fundraising, even when you don't have a business. No joke, Trevor from Alliance Consumer Capital. So he was the VC that funded Barkthens, had really huge success with it. Has now created another firm called Aria VC. He could go to record status. I called him, I tried calling him and I tried messaging and tried emailing him in 2016 and said, hey, I don't have an idea yet. I'm an entrepreneur. I really think that because of my background in technology and software engineering. Bringing an outsider mentality into CPG that we can have some success. I know I don't have an idea yet, but we should probably get to know each other.

• 30:04Speaker 02

  And so I've been doing that for a long time of where I cold call venture capitalists when I don't have ideas to build the relationships before fundraising actually starts. And it's funny because a lot of people will think you're absolutely out of your mind. And like Trevor had told me, you know, at the time, he didn't take it seriously. That's fine. I don't take it negatively when people say that. Why would you take me seriously? I haven't proven to you why you should take me seriously yet. But with a hundred of those types of messages, two, three will get back to you. And you start building this network to build an incredible army of capital. And so Rory was always doing that. Second was do events and do them a lot. One thing is don't network, network on steroids.

• 30:47Speaker 02

  I mean, that's one thing he would always do is network on steroids. And what that means is if you're showing up to a networking event and you're not on the speaking list or you're not putting it together, you're probably doing networking wrong. Now, that doesn't mean that going to a networking event is bad. It just means you haven't elevated yet to how hard you can unlock networking. It means you're just going in the right direction. I remember I had no name in technology in Montreal, nobody. But I was really into TechCrunch in 2014 and all that. And I was following all the editors. And one of the editors, John Biggs, ended up doing a Kickstarter for a children's book that he was writing. I ended up, for $500, I would get a dinner with him in Brooklyn.

• 31:33Speaker 02

  And all I had to do was give 500 bucks to support his children's book. Had nothing to do with anything. I bought that package. I ended up getting a dinner with John in Brooklyn, went there. And again, this is again, like the opposite approach to everything. Don't ask, stop give, just be a steward of value and life will treat you well. Showed up to the dinner, didn't ask for anything, just listened to John's story. Just kept on asking him like, here's my skill sets, here's where I can help you. He was marketing his book. I was really good at that stuff. And at the end of the dinner, he's like, it's so weird. Like you don't want anything. I said, man, I'm just pumped to be here. He's like, well, I got something for you. TechCrunch had never been to Canada at that point. You know, they do TechCrunch live events.

• 32:17Speaker 02

  He's like, would you like to host TechCrunch in Canada for the first time? I'm like, what? Like, you're gonna trust me to do that? He's like, yeah. He's like, you seem like you can pull this off. I'm like, hell, yeah. So get back to Montreal. All of a sudden, everybody starts answering my phone. I knew I didn't have the capacity to fill up an event. But I knew two guys in the scene that did have it. So I just started calling them. There was this guy LP who owns busbud.com, which is like the Expedia for buses. And he was huge in the scene, knew everybody and everybody. I'm like, LP, I got TechCrunch. They've never been here. This is gonna be a huge event. Could you help me put it together? We did so well in Montreal, TechCrunch gave us Toronto too.

• 32:58Speaker 02

  Just by being out there with good vibes, not really demanding anything in return, just really being a steward of adding value. I was able to really turbocharge my network really quickly because when you host TechCrunch and you get to put your name with that and and the people around it, everybody's like, well, who the hell is this kid? Like, who is Nick? And that was my moment of building what ended up being this incredible community of entrepreneurs, VCs, which actually led to the investment in Midday Squares. And I say this story because there's no reason why I should have been the person to host TechCrunch. The only reason why I got that was simply by asking, what could I do for people that I see online? How could I help them? And in return, shit happens. And that was something, again, what are mentors?

• 33:43Speaker 02

  Mentors aren't necessarily people that give you playbooks. I just watched Rory. We literally just had a conversation a week ago. I tried to tell him, dude, just watching you operate taught me how to operate. In and of itself was the advantage.

• 33:58Patrick O'Shaughnessy?

  Let's go back to midday squares now, which is what I was so fascinated about was obviously the product is very good. I think I originally discovered it because I was just looking for like stuff to snack on that wasn't like too unhealthy during the day. And several people recommended it and I tried it. It was excellent. And it got me fascinated with some of the strategic thinking around the category of CPG. Everything that's sexiest these days is pure technology. And here we are with a low SKU, high manufacturing, heavy operationally intensive type business, very different. And I'd love to hear your view on this idea we were talking about yesterday of like low SKU count, global distribution, what's wrong with CPG and why such huge categories like chocolate, even though it seems like obviously picked over can be huge opportunities.

• 34:43Speaker 02

  So I went to University of Ottawa and I had this one teacher that really, really changed the entire thinking of everything for me. And I think this is so important for the audience. Literally the beginning of the year, put on Y-axis, X-axis on the board and started plopping all these dots. It was computer science or physics class. I can't even remember, but it was one of those two that we did at University of Ottawa. And basically, he put all these dots on the graph and then he drew the median line through it. And then he circled the outlier on top, the outlier on the bottom. He said, I don't really give a shit what you guys take away from this semester, as long as you take away this one thing. And this one thing could be applied to everything.

• 35:23Speaker 02

  And this is the beauty of math is that it is physically impossible to feed a data set with average inputs and have an unaverage outcome. And I know that sounds so simple, but it was like, oh my God, that's so true. If you give a data set average inputs, whether you know it or not, you revert to the average. If you need to have an unaverage outcome, you must, by definition, make above-average bets or below-average bets, but be out of the average. It doesn't guarantee that you're going to have a positive success or a negative success, but it guarantees for sure that you will have an outlier outcome if you really feed the data set with unaverage data inputs. And so that changed my

• 36:07Speaker 02

  Entire process of thinking, everything, literally, if you come to my condo on a whiteboard, it says, when you find yourself on the side of the majority, stop and reflect. I was in software. Now, the thing, though, is I think you know this better than anything. Investing, the only way to beat it, you've got to have contrarian bets at some point in the place. You have to be against the herd on thought in some way, shape or form. And for me, it was increasingly obvious that people were rushing into technology and I think people were rushing into it. Because the business models made a lot of sense, but people a lot are forcing products, and that's just my opinion, into what could we build in software?

• 36:47Speaker 02

  Not everything has this exponential growth, great SaaS products, there's great this, great that, but not everybody has the ability to go and take them. And in my viewpoint, I had nothing there, but I kept on looking at what was happening in CPG. And I was like, oh, my God, there is really massive opportunity over there. So I started researching a little bit more and what you realize is that CPG one is not a winner take all market. And when we were doing more research in it, you start to realize that all of the founders that were coming into the CPG market were looking for easy wins. So I think the media created this warped vision of CPG that you can go to a manufacturer,

• 37:30Speaker 02

  put on a fancy label and become a multimillionaire pretty quickly. And so all these people started to rush into it. Here's the fun thing, though, about this whole thing and and market cycles exist everywhere, by the way. You see it in public markets, cycles happen everywhere. So somewhere in the late eighties and nineties, divestiture started happening at big CPG amongst Procter and Gamble. People had this idea that they were now at critical scale, that they can offload their heavy capex assets. And their brand was good enough to say, hey, we're going to be the marketing arm. And we're going to allow other people to manufacture this product.

• 38:11Speaker 02

  And that set this entire new precedent for CPG to the point where investors started to actually shy away from any type of CPG founders that wanted to pursue manufacturing. Now, why is this piece important? This piece is important because if you go into a grocery store. If I give you any aisle, I blindfold you and we take five random products in a category, you will probably not be able to taste the difference between those five companies. And the reason is, is the consolidation from the nineties to now has happened in a massive way that there's very few manufacturers at scale making product.

• 38:51Speaker 02

  So what's happened is that CPG companies and manufacturing companies are no longer aligned on product development. And so I would say R and D has completely just been shat on in CPG. Founders coming into it usually have great ideas that are squashed and they happen at midday squares by contract manufacturers. And the reason is, a contract manufacturer is incentivized to basically make everything on their line as homogeneous as possible. So let's say you're using wheat flour and I'm using regular flour and the contract manufacturing is processing for you and I come to them with my product. They pressure a lot of people into trying to change their ingredient decks.

• 39:36Speaker 02

  They'll say, hey, why don't you use wheat? We're already carrying it in our distribution center. Why don't you do this? Why don't you do that? And what you notice quickly is they're trying to push you into the mold so that they can have the highest possible efficiency on their machines with the lowest possible turnover. Lots of founders, I believe, are scared of an opposite choice, which is not to go the co-packing route. And they end up succumbing to the pressures of contract manufacturers. And so you consistently have these products that are being churned out that taste the same. They literally use the same flavor houses, the same supply chain and raw materials. And so that for me was just like, holy crap.

• 40:19Speaker 02

  The bar in CPG is so low that if we actually create a product that tastes delicious, I think we can do massive damage. So that was hypothesis number one. Hypothesis number two is... Let's not go into a super niche market. At this point, when I was doing a lot of reading on food, we launched this in 2017. I became super interested with my wife in developing a food company in 2015. We had no idea it was going to be Midday Squares. And so when I was doing a lot of reading, I realized that a lot's changed. If you look at all the revenue from publicly traded CPG companies, this is where it becomes fascinating. Eighty percent of revenue is usually derived from like three core SKUs.

• 41:04Speaker 02

  And we're talking massive portfolios, like Hershey's portfolio is so big, but yet 3.4 billion or 2.4 billion, don't quote me on that, comes from Reese's, only Reese's. Right there, it's so obvious that you don't need large SKU count in order to make monster revenue. We started focusing on what are the areas of business in CPG that are huge? And ready to drink beverage is huge, snacking on the go is huge, and chocolate. This was crazy. When we started looking at the data on chocolate, I think it's up to 140 billions traded annually. And I'm not even sure that calculates what's happening outside of Europe and North America.

• 41:48Speaker 02

  It's the fastest growing snacking item in emerging countries like China. China just surpassed the US in per capita consumption of chocolate. It requires no education. Almost anywhere you are in the world, if you give somebody chocolate, they know exactly what you're doing. It's a form of endearment, it's a form of happiness, it's a form of, you just know, you don't even need to speak the language. It is monster. And that was like, hey, if we do, all our peer founders or even big companies are so focused on this monster diversification.

• 42:25Speaker 02

  That if we stay really, really core and focus on global distribution, we could probably build a really monster company. That's contrarian. I know you're probably sitting here and being like, that makes a lot of sense, but we are scrutinized for that all the time amongst investors and the industry. But literally, the number one algorithm that we use in decision making at Midday Squares, every single person uses it here is, what do we believe the herd would decide on in a decision we are going to make? And let's explore a completely opposite decision to the herd. That doesn't mean that every single decision you make has to be contrarian. It means you should probably take a pretty good fucking look at every decision and ask yourself, are we making this decision because this is what people are telling us?

• 43:10Speaker 02

  Or because we've derived this decision from our own data? And that, I think, has been something that's been very powerful for us at Midday Squares and the decisions we've made.

• 43:19Patrick O'Shaughnessy?

  I get the point on manufacturing where to have a better product, you need to control it and so you don't get jammed in this weird perverted incentive system of global co-packers. But give me another example of how you made a different decision. And it could be one that worked out or didn't. Like you said, you want to be non-average. It doesn't always mean right.

• 43:37Speaker 02

  Yeah, exactly.

• 43:39Patrick O'Shaughnessy?

  Kind of a key point. But yeah, give me another example of doing something just totally differently than would be typically in the playbook.

• 43:45Speaker 02

  Going into the fridge was something that everybody was telling us, you cannot build a big business in the fridge. How are you going to build a big business with having a refrigerated supply chain? That question kept on coming up. And when you speak with investors or people in the industry, the answer is not ever an educated answer. That's always a telling sign for me when it's time to scratch really deep. It's, oh, refrigerated is very hard. What the hell does that mean? Like, what does that mean? Why is that bad? Just because it's hard? I mean, and so when we were looking at it, there was two things here that was really interesting to go into the fridge was one, A, we believe that you can actually develop a product that tastes incredible in the fridge

• 44:30Speaker 02

  because you don't have to optimize for two-year shelf lives that I think are going away. And B, it allowed us to stay away from Hershey's Mars contracts in every other store. So like when we were going into the stores, especially early on, we were never competing with them. And we still don't to this day on shelf space because they're in the shelf stable section. And they usually have contracts in those areas. Number two, produce has been around for as long as we can exist. Produce has six day shelf lives, six days. We have a hundred day shelf life. I think going into the fridge was a huge contrarian move at the time. And the reason why it was exciting, I'll give her a shout out.

• 45:13Speaker 02

  Mayoko is a woman that has been helping us. She worked at Mars for a long time. And Mayoko told us, I really believe in what you guys are doing. And I can assure you that if you go after the big guys playing their game, you will get destroyed. They understand two year shelf stable better than you will ever understand it. But if you invite them onto your territory to play your game, you really have a shot at beating them because they actually have no idea how to handle short shelf life. It goes back to this ideology of where you start to say, okay, what are they doing? What could we do that's opposite and give us a competitive advantage? That was one of those decisions. How we made chocolate was another decision.

• 45:57Speaker 02

  Everybody in the industry said it's not worth making your own chocolate. You should probably use Barry Calibut, Cargill, pre-made chocolates. Like, I don't know if you know this, but Hershey's doesn't even make their own chocolate anymore. They outsource it to Barry Calibut, does all their chocolate. That made semi-sense, but the problem is, is that when we're looking at chocolate suppliers, we had to use their specs on chocolate. We had to always conform to what they wanted out of us. And at the end of the day, and this is something I like to talk about a little bit too, is for entrepreneurs that are going to take on big capex ventures, have to take those many steps to get there and get conviction. When we were looking at the chocolate that we were going to make, they would always tell us

• 46:41Speaker 02

  when we're speaking with them, hey, if you guys want custom chocolate, you gotta start buying by truckloads. We don't have to. Money to buy by truckloads. So now we're put into a corner of where we have to choose to make a chocolate that everybody else on the market's using. And I remember my wife really pushing us to say, screw this, we're going to learn how to make chocolate from scratch. We're going to control the supply chain. That's going to allow us to control fat ratios. That's going to allow us to control how it hits the mouth and really make a chocolate that's unique to us. And again, early on, everybody said that's a waste of time. It's a waste of energy. You shouldn't be chocolate making. You should be focused on branding and putting the manufacturing together of the whole product, not on the actual chocolate. And we doubled down on that process as well, too. And that, to this day,

• 47:25Speaker 02

  when everybody was crunched in the supply chain, I think we were we were in a really good place because we didn't have to rely on the end of the supply chain. We were just figuring out how to get cocoa in. We would get to make our own chocolate. And to this day, I really believe if you put our product in your mouth and close your eyes, you would know it's midday squares no matter what.

• 47:43Patrick O'Shaughnessy?

  I love it, especially on the cold chain thing. I'd pinged a few friends just in preparation for today, like, what should we explore? And like you said, a lot of people said, talk about cold supply chain because it's much harder, sort of implying like all things equal, it's a bit of a knock on the business just because there's a higher hurdle. We all tend to think like harder is worse. But if you can do it, it's actually definitively better because there's less competition. Just such an interesting insight. How have you handled all this on the marketing side? So I heard about you a certain way, which is through this open building thing that you've been doing. But what other orthogonal approaches have you taken to marketing? Because it sounds like the CPG business at its core is a marketing business, like it's a branding, marketing,

• 48:27Patrick O'Shaughnessy?

  asset light business, if anything, but then outsources everything else, even if it's Hershey's outsourcing chocolate making. So what have you learned on the marketing side that's differentiated or unique?

• 48:36Speaker 02

  Two really interesting insights here. Two of the biggest CPG companies in the world own their media houses. Ferrero Rocher, in the book Making Nutella World, fascinating book by the way, is, they talk about, at one point, the owner says, screw this, we're not outsourcing our marketing anymore. We are buying an agency, we're integrating it, we are controlling our own media house, and Red Bull. Red Bull does not outsource any of their media, it's completely vertically integrated. And so when we're getting ready to start the company, I'll be very honest, I'm an introverted extrovert, so I spent all my weekends, pretty much me and my wife were like alone in a forest up north, but my brother-in-law, who's our third partner,

• 49:17Speaker 02

  is like the most extroverted person ever. I was watching him for a year prior to starting Midday Squares, he had this company called Chase and Hunter. And that company was fascinating because he didn't really know what he was doing operationally, there was no real business, he just knew that if he went to colleges and got people excited, that there would be some type of widget that could be sold into that community. And tried so many different things, and nothing was really sticking except for this sweatshirt that said Chase and Hunter on it. What was so fascinating to me was the community that he was building, like literally every university student in Canada at one point was rocking these sweatshirts over their actual alma mater.

• 49:57Speaker 02

  Then it got out of hand, he was flown out to two NFL camps to do pre-game speeches, like, it was crazy, just, I saw this happening, and I'm just like, what the hell is going on over here? And we would speak all the time. And he said, man, I don't know, I just show everything and stuff happens. So we started playing with this idea where we want to work together really badly, because I feel very strong operationally, he was really strong on storytelling. When we started putting together the pitch of how we were going to really get Midday Squares out there, it was his big day. And number one, it took us three months to even convince him to join this company. But on his opening day, he put together this presentation.

• 50:37Speaker 02

  It was actually brilliant. At the time, I wasn't sold on it right away, but it was literally Elon Musk plus Kardashians plus Shark Tank equals Midday Squares. Showed us Shark Tank's numbers, they were on a tear, number one viewership for their time slot. And so he's like, I believe this next decade is going to be, for the entrepreneur, what the last decade was for celebrity chefs. Our job is to tell a great story of entrepreneurship without the hustle porn and do it in a way where we record everything and act like a band. And this was another fascinating, he had like all the nineties bands. He said, let's take the playbook of nineties of music bands like the Spice Girls, Backstreet Boys.

• 51:21Speaker 02

  And let's act like a musical band and instead of selling records, we sell chocolate. That was the big pitch. And I was like, okay, I see this. Not sure if it's gonna work. How does this help us sell chocolate? He said, because at the end of the day, if people become emotionally connected to us, they'll become emotionally connected to the chocolate because the chocolate, it does its job. We've created a great product. Now we have to get the emotional connection in. So literally two months before we got to market with midday squares, again, important for the listeners, because a lot of people use this as an excuse. Nobody had followers. We didn't have followings. Not one of us had followings. I think my Instagram had like 500 people. Of all people I know, we just started recording what we were doing in development for the product.

• 52:04Speaker 02

  And we would post it every day on our individual saying something coming soon, something coming soon. People were excited about locally in Montreal, what we were gonna do. Oh, that's another contrarian piece that we'll get into. And then as the excitement let up, people literally started messaging us saying, what are you guys doing? And so the day that it happened, we announced midday squares. We started a chocolate company. Everybody was like, what? And what we did that day was we put each product on our site for 50 cents. And we only did it in Montreal because we couldn't pay to ship it out. So we knew that, okay, let's get a 50 cent credit card transaction coming through. Gets rid of all people that want free product.

• 52:45Speaker 02

  And people went nuts buying the product and we were on the gram all day as it was going on. And then what that ended up happening was all these orders came through. That allowed us to have more content to speak to our audience. And then every time we would make a delivery in person, we put this Polaroid at the time. Again, Jake came up with this idea, content driving always back to our storytelling capabilities. We had this Polaroid that we would dress up every morning for like two hours. We put on all sorts of different costumes just to make people laugh. And we would find something a little personal about them that we would write and say, thank you for the purchase. Those 50 cent orders turned into a viral campaign because people were getting the orders,

• 53:27Speaker 02

  reposting our Polaroid picture that had our at handle at Instagram. Then they would come to our Instagram and we would be showing everything that we were doing, building the business. We would show the pictures and it just, I tell you to this day, man, it hasn't stopped. And the production quality had just kept them getting crazier and crazier and crazier. I would say we've built the entire business off of telling a reality television show style episodes on our social media. And then Jake had the brilliant idea of bringing that storytelling to LinkedIn. And LinkedIn is typically a boring platform for content. So we were doing Instagram storytelling on LinkedIn and that exploded. That's how we started getting every retailer in the country was through that aspect.

• 54:12Speaker 02

  And our first hire ever, Contrarian, boom, another Contrarian move. We hired a videographer, not a salesperson. We had no budget and we went out there and hired literally a person to videotape everything we were doing all day and turn it into mini episodes. When we were pitching out for our first round, that was a big concern for investors. They're like, I'm not understanding here. You're telling us you're building a manufacturing plant. You have three people, your first hire is a videographer, you're spending this money on this. This is the classic, you should be spending your money here, always you should spend your money here. Okay, great.

• 54:49Speaker 02

  And it really just exploded to now we have our media team's five people. We had a producer that we stole from television channel. She was doing stuff on TLC in the US. So it really works like a newsroom, you know, we have storylines going at all times in midday squares. The production and editorial team comes together in the morning. They kind of figure out where the week's going, what challenges we have ahead. And then they try to capture the story in a meaningful way. To the point where this is how powerful storytelling is. And I tell the story all the time. Last summer, there was a mass shortage of powdered coconut sugar. You could not get it in North America. And we bring it in from the Philippines usually. At that point, we couldn't even get one coming in.

• 55:32Speaker 02

  So they had sent us a batch that for whatever reason was declined by our quality assurance team. And so now we had a gap of where we weren't going to be able to get coconut sugar for two months. If we didn't get coconut sugar for two months, that means we were screwed because we didn't have labeling. We it's not like you can just put any other sugar because you don't have labels. If your labels don't meet the requirement, I mean, you can't ship. We were jonesing like we were about to go into a period of where I really believed we were going to end up in a situation of shutdown production for two months. So we were hustling, trying to get shit done. Call after call, we just couldn't get a solution going. And then we were in a room and we were like, why don't we just go to the ground? Why don't we go ask our audience to help us?

• 56:14Speaker 02

  So we put out, we broadcast this message being like, this is what's going to happen if this doesn't happen. Could you guys help? I shit you not, in 24 hours, this woman from New York State gets in touch with us. Her father had a plant that basically had all this machinery in it. And at this point, we realized we were able to get granular coconut sugar. So our problem solving had shifted. Instead of looking for powdered coconut sugar, let's figure out how we turn granulated coconut sugar into powdered coconut sugar because we could get granulated coconut sugar. And this woman had a machine in her father's warehouse of machinery and said, hey, I'm gonna send it to you, it's free of charge. All you guys gotta do is pay for shipping,

• 56:55Speaker 02

  we're rooting for you. And like 24 hours later, a machine shows up and we solve our problem. And ever since that day, we go to the gram for everything, all of our problem solving. We were laughed at for a large part, like for instance, we would go do dancing. Every meeting we make, whoever we're in front of, we make them dance. And we get up and we loosen it up, we put on some good music and we dance. A lot of people ridiculed us for being children at the beginning and acting unprofessional. That good vibe started to spread to the point where to this day, we've been brought in from Google's offices, Facebook's offices to pump people up. And it became a huge part of our marketing effort of getting in there and selling good vibes.

• 57:38Speaker 02

  Because what's better than a moment where you're sharing that good vibes? And I think a lot of the midday squares growth trajectory is showing to people that you don't have to take yourself too seriously and you could still build a billion dollar business. Like you don't have to sell your soul in the making. And you don't have to act the way you believe society wants you to act. And I think that's catching on big time with our fanbase.

• 58:06Patrick O'Shaughnessy?

  I absolutely love it. What a cool story. Maybe one of the most interesting parts of the whole story, and the story filled with interesting parts. One thing we haven't talked about is like the literal manufacturing. I'd be really curious here, like what you learned from your time in China? Obviously, supply chain, the control of it, the politicization of it. It's become a topic nobody thought about ever, three years ago, to something that everyone is talking about for every business. So give us the same sets of lessons that you've learned here about what it means to build a good manufacturing operation, what lessons you learned from China, and kind of where you see this all going in the future.

• 58:39Speaker 02

  So my friend's father gave us this great opportunity to go work in China and do quality assurance for everything that they were manufacturing over there, that huge lighting company. We lived in Hong Kong, but we would spend Monday to Friday in all of manufacturing districts in China. And so I got to really live in those plants, feel them. I think one of the main things that you learn in manufacturing is that the process of how you set up everything is more important than when anything is running. What I mean by that is, in China, they are so regimented to the setup process. Meaning, you get all of your efficiencies in how you set up your day, your plant,

• 59:24Speaker 02

  where things are located, how movement structures are gonna happen. If you don't get the start right, the flow doesn't happen the way you want it to happen. Making things doesn't need to be more complicated than, it could be as complicated as you make it, or as non-complicated as you make it. I think the mentality here in North America is you have to start really massive in manufacturing all the time, which is not true. In China, you see mom and pop manufacturing shops being set up every day that start with shit infrastructure and grow into incredible infrastructure. Midday Square's case in point, started, we got to a million dollars of revenue manufacturing in our condo. Literally.

• 1:00:04Speaker 02

  We moved all of the materials out of the condo, we got it certified by Health Canada, we had to build a second kitchen, it wasn't a polished kitchen, we just weren't allowed using our core kitchen. You start building process in line, and that is what launched us into manufacturing. I've heard so many stories of processors setting up super big plants, like fifty million dollar plants at the get-go before revenue came in, and then they go bankrupt. And so what I would say is, I'm working really hard with our government in Canada and RBCs in Scotias to help people that wanna get into manufacturing, build momentum, and fund manufacturing while their margins suck.

• 1:00:47Speaker 02

  If you start with shitty manufacturing operations, your margins are gonna be low. But this allows you to build momentum. To build revenue to show to banks, to show to investors that we have demand. And now we can actually start automating. So let me take that to midday squares. When we started, we were at a dollar forty of manufacturing cost. So every pack cost us a buck forty. We have that down to, I want to say nineteen cents now or eighteen cents. We've gotten it all the way down on there. Our product cost has decreased. The actual raw materials and purchasing power has decreased by another forty percent from where we were in the condo to now.

• 1:01:27Speaker 02

  And the reason why is we were out there at the beginning trying to get funding. We wanted to build a plant. Nobody, nobody, nobody would fund us. Not our government, not our banks, not investors, nobody wanted to fund it. So what do you do if you want to build a manufacturing plant? Well, you either have to have money from somebody and/or you start building demand with shitty gross margins. We've always been scrutinized for our shit gross margins early on, but we had a plan of where we got to. And I would say Boulder Food Group, shout out Dayton Miller, Boulder Food Group took a huge risk on us, gave us that first check into the business.

• 1:02:05Speaker 02

  That allowed us to stay in the pocket and build more momentum until we finally convinced our government to help fund our manufacturing process. And so what I would say is what I learned from watching the Chinese is that they have all types of different grades of manufacturers. In North America, for some reason, we don't champion that. We only champion really sophisticated manufacturing plants. We don't allow for mom and pop manufacturing. And that's a mentality that needs to change in order to build a really rich manufacturing ecosystem. You need to get people excited about that type of building where you start slow, build momentum, get funding.

• 1:02:49Speaker 02

  Invest in automation, invest in plant and go. Also, on the manufacturing piece, I just want to give a huge shout out to Leslie, who's my partner, also my wife. She built the whole thing with her team from start to finish and just made it happen when nobody said she could. So shout out to Les.

• 1:03:08Patrick O'Shaughnessy?

  I mean, it goes back to your whole philosophy that we've talked a lot about, like one foot in front of the other is the path to a lot of really interesting big outcomes that weren't pre-planned. The steps are what's important. Love the mentality. What should we expect from you and from Midday Squares? Today, you've got three products. I highly recommend people try the peanut butter one. That's the one I'm partial to. So try that if you wanted to see what the story is all about. But what should we expect next?

• 1:03:30Speaker 02

  We just raised $10 million to continue our growth trajectory. We're launching distribution in the US and Canada every day. So in Canada, we're in almost every grocery store except for Costco and Walmart. And in the US, we have Sprouts, we have Whole Foods, we have Target coming online. Hopefully Trader Joe's soon. Midday Squares is really get to $100 million of revenue within the next three years in the North American market. We're finishing out the full build out of version one of the plant here. So it's 90% automated. We're getting it to 100% automation. And then right away, we're flipping the switch of how do we expand our manufacturing footprint? And so we're going to release two to three more flavors.

• 1:04:13Speaker 02

  To your point, what we've learned, we've learned a lot. We're going away from two squares down to one square packages. We're shifting the next products that you see come out are going to be super mainstream flavors like the peanut butter flavor. So we're going to do two more ultra mainstream flavors. And then we're trying to grow as fast globally as possible. What we've been working really, really hard on is we finally got the blueprint of the manufacturing down-packed. And all of the manufacturing plant is built from items that don't come from Canada, sadly, supply chain going back to that. So it doesn't really matter where we build these plants. But it's about making sure we're servicing North America in an incredible way. And Mexico's our next stop. I mean, we have huge demand building in Mexico.

• 1:04:56Speaker 02

  The question is, how are we going to service Mexico? And it will probably have to be in a plant. And then we need a plant in the EU because UK has one of the largest plant-based communities globally. And so Whole Foods has already started getting the ball rolling with us to distribute there, but we can't do it because of the shelf life component. So I think this is an interesting case for a lot of the listeners will love this too. And, and this is where history is so fucking important for entrepreneurs to read. Everybody says, well, why don't you outsource your manufacturing in those countries? I answer that question is go read Coca-Cola's disaster and Pepsi's disasters with selling franchising rights to manufacturing. There's also a huge company called Bariatrix in the protein bar space that sold their franchising rights to Europe.

• 1:05:41Speaker 02

  The European entity is now bigger than the North American entity and is trying to hostile takeover on the North American entity. The problem with selling franchising rights is you put yourself in a really, really peculiar situation of incentives not being aligned. It's almost impossible to get those incentives aligned on contracts. I would argue that, and this is what I say to our investors a lot too. It's crazy, I understand, to have to run manufacturing globally. But if you go look at what Coca-Cola is having to spend now to buy back the rights for manufacturers that they sold their manufacturing rights. I mean, it's pretty obvious for me that manufacturing is a core competency is something we should hold very close to our chest.

• 1:06:26Speaker 02

  And so going back to the beginning of our conversation, I am a huge believer, Leslie is a huge believer, Jake's a huge believer, my partners in tight SKU count, global distribution. And so 90% of our energy goes in every day. I know you asked me that the other day, like, where do you spend most of your time? It's fundraising to continue to grow our footprint from a manufacturing. Perspective and two, getting the operations down packed because once you have the ops down packed, you will create a competitive moat that very few are able to compete with. If I was sitting here with Peter Rahal, who started RXBAR, who I'm the biggest fan of, I would say, I wish

• 1:07:07Speaker 02

  he didn't sell RXBAR because he had more left in the tank to bring that distribution globally and really push forward and own that supply chain. And I think founders shy away from it because it is very hard to do it and you get tired. But when you get tired, I say, just take a one month vacation and come back. It's better than selling to the conglomerate. That's my opinion.

• 1:07:32Patrick O'Shaughnessy?

  Love it. Well, Nick, this is so cool that I love the internet in the sense that we could meet randomly yesterday and have this great conversation today. I really appreciate the time today. I ask everybody the same closing question. What is the kindest thing that anyone's ever done for you? My suspicion is your answer to this one's going to be interesting.

• 1:07:47Speaker 02

  I know exactly what it is. I've had so many kind things, but I'm going to give a shout out to my cousin Frank. My dad passed away and my cousin Frank moved into my house for nine months to just be with me because he knew I was having a really rough time. He stopped everything in his life. He was 34 years old in the prime of his life, stopped his whole life, got out of his apartment and just moved into our house and just stayed there for nine months and didn't leave until the house was ready to mourn the death properly. And I think about that all the time. I don't think he understands how big of an impact, I think he downplays it when you say that. It's the nicest thing anybody's ever done for me.

• 1:08:23Patrick O'Shaughnessy?

  What an awesome, incredible way to close the conversation. I suspect like me, most listening are going to be rooting hard for you and your partners in midday squares. Such a fun, interesting conversation, totally different than typical.

• 1:08:34Speaker 02

  Do you mind if I plug the podcast for everybody that's listening?

• 1:08:37Patrick O'Shaughnessy?

  Of course.

• 1:08:38Speaker 02

  We go deep. Our podcast is a roundtable between us three founders. It's called Midday Squares Uncensored. We roundtable the trials and tribulations of growing the business. So

• 1:08:48Patrick O'Shaughnessy?

  I love it.

• 1:08:49Speaker 02

  It's pretty deep. And if you want to go deeper on midday squares, we go deep on there.

• 1:08:53Patrick O'Shaughnessy?

  I'm going to be a listener. Again, Nick, this has been a total pleasure. Thanks so much for your time.

• 1:08:57Speaker 02

  Thank you, brother.

• 1:09:00Patrick O'Shaughnessy?

  If you enjoyed this episode, check out joincolossus.com. There you'll find every episode of this podcast, complete with transcripts, show notes, and resources to keep learning. You can also sign up for our newsletter, Colossus Weekly, where we condense episodes to the big ideas, quotations, and more, as well as share the best content we find on the internet every week. [Music]