Building Bone Broth RTD's and an M&A Legal Practice | Nick Foreste, marró and Reed Smith

Speaker 1: 00:00
Welcome to Shelf Help. Today we're speaking with Nick Forrest, founder of Morrow Sparkling Fruit Flavored Bone Both Beverage. Nick's also a partner at uh big law firm Reed Smith, where he co-chairs the firm's U.S. Emerging Companies and Venture Capital Group. So super excited to connect with Nick because he can speak to all things CPG from both really the founder operator side as well as the legal side of things. So we'll touch on a bit of that, a bit of both tracks here as we talk through what's uh going on in Nick's world. But yeah, super excited to dive in. Um Nick from the um from the Moreau side of things, love to just get kind of a quick origin story, why behind the brand, what the core product line looks like, and then uh and then we'll take it from there.

Speaker: 00:40
Yeah, uh thanks for having me on, Adam. Yeah, happy to start with the origin story here. So bone creating a ready-to-drink bone broth uh designed to be enjoyed cold and out of a can is kind of a weird thing, especially when you add carbonation and fruit flavoring. So there's gotta be an there's gotta be a why behind that. Uh we created it because uh it was really out of a state of need. So I got into ultra running a few years ago and uh after sort of a long injury battle, and we was basically told I was never gonna run again. And so I sort of rebuilt my lower half of my body, and bone broth was a big part of that. And I started drinking bone broth as a recovery tool after long runs. And the last thing you want after a long run is hot soup. And maybe the second to last thing you want after that is uh is cold soup out of the fridge. And so I was drinking cold soup out of the fridge. You know, it's a great product, had great health benefits, but just really wasn't what I wanted. At the same time, you know, I was reading research and articles and listening to podcasts about athletes and celebrities, you know, incorporating bone broth into their into their wellness routine. So my wife started drinking it for its collagen. We introduced it to one of our kids for their gut. And the common denominator in all these use cases was that no one really liked it. And and so we we wanted to create a version of bone broth that was actually something you wanted. What does the the product lineup look like today? Yeah, so currently we have three skews, uh basically various versions of a fruit flavored bone broth. So we have a blueberry lemonade, a peach mango, and a blackberry lava. Cool, awesome. And they're all 12 ounces uh with 12 grams of protein, 60 calories. One skew actually has 70 calories, essential amino acids. We added some electrolytes. So yeah, it's basically 99% bone brother.

Speaker 1: 02:27
Why am I gonna buy the bone broth beverage to get my protein in versus I don't know, a fair life protein shake? Like, you know, I know a little bit of it but an ethly on bone broth is a lot more complete, you know, nutrients and a lot of other things that your typical whey protein has. But like what added benefits do you feel like both your bone broth beverages get to compare to the average protein beverage?

Speaker: 02:49
Well, you you nailed it. Uh you we are much more than just protein. And if you focus just on our protein content, you might reach for something else.

Speaker 1: 02:58
Sure.

Speaker: 02:58
What bone broth does is it it delivers protein from collagen and in the broth itself in a very calorie-efficient format. It's also dairy-free, which is a unique differentiator. And then it has all these other properties that are associated with it, where you know, the essential amino acids like the gelatin and the glycine that come naturally occurring in bone broth are actually very good for your intestinal lining. And, you know, the collagen that's naturally occurring is very good for your hair skin and nails. And so it's not, you know, maybe if you're a bodybuilder looking to add, you know, 60 grams of protein after a workout, you're probably not going to grab a marrow. But if you're looking for sort of an all-in-one, you know, daily wellness foundation, it's a great multifunctional beverage for that.

Speaker 1: 03:42
Building a carbonated fruit forward bone both beverage, I feel like there's probably a lot of uh unique processes that went into that in terms of formulation RD in those early days. They're taking something that I feel like is historically more savory, cloudy, full of protein. What were some of the kind of key variables you were playing around with between those first version or two to that final version where you said, okay, I feel great about this. I'm ready to take this to market.

Speaker: 04:07
Yeah. First, it was hard. It still is hard, right? Uh, there's probably a reason that no one's done this before. Working with bone broth and working with collagen is is is tough. A lot of the carbonated protein drinks you see out on the market are, you know, very engineered isolates. Um, and whether that's you know, collagen peptides or or bovine peptides, whatever it might be, they're they're designed to pour clear and look like that. We aren't, right? We're true bone broth. And so if you pour us out, like we look like an IPA. You know, we look like bone broth. And uh so you know, how there are a lot of variables that went into this. First off, like flavor profile has to work. You know, there were there were various uh versions that we tried in our our kitchen that just didn't make a lot of sense um because we just didn't have enough citrus, right? For instance. And so, you know, we we we have to mask the the broth. So not every flavor is gonna work. Um your carbonation levels are important, the pH, uh, the mouthfeel, like all of the things. And and and we're cut we're in a constant state of of of iteration, and we're always looking to improve. And so, you know, we're working with new labs and you know, new folks all the time to continue to improve the product. We're also looking at improving our ingredients as well. So, you know, V1 wasn't non-GMO, V2 was non-GMO, V3 is actually going to be uh grass-fed as well, which is a great improvement. So uh yeah, we're always trying to trying to improve. How does carbonation make things harder or easier? Well, I think it I think it does a couple things. So, you know, one from a regulatory standpoint, it actually helps us, believe it or not. Interesting. Two, carbonation also kind of helps mask flavor a little bit. And and it and it it in people are drinking a ton of carbonated beverages, you know, uh like sparkling water and you name it. So it it does give like a little bit more of a refreshing feel to it. We're lightly carbonated too, so it's not gonna knock your socks off like maybe a LaCroix from a carbonation standpoint. It's much more uh you know mild than that. But uh, but it you know, it it does it it does make canning and everything else is a little bit hard uh or more difficult. You can imagine going to find a copacker for the first time and saying, hey, we're gonna run bone broth into your lines. And you know, we got a lot of weird looks initially.

Speaker 1: 06:20
I could imagine that. Putting your legal hat on for a second for other founders that are maybe building formulating from a similar track. Like, how do you ensure that you will ultimately end up owning the IP, that formulation? You can take it anywhere and then you really make sure that you own it. What and when needs to get papered and kind of how how did you go about this? And how should people think about this in general?

Speaker: 06:39
Yeah, this is a great question. And it's yeah, something that we're you know living in real life, but also you know, I I've helped companies navigate probably a thousand different transactions over my career, both on financing and MA deals. And so, you know, one of the common things that gets messed up is or overlooked, or maybe just underlooked, is IP ownership. And so, you know, what does IP ownership mean? Well, number one is you got to figure it out up front, right? And so while you're when you're getting into a process with a third party to develop something, you have to be crystal clear on, you know, if they own some background material, fine, but you need to own the end product. And it's not just that you need to own the end product, it's you need in the own product in you need to own the end product now, even if it's going to be, you know, even if it's not finally developed. And so there are things like active assignment of of IP ownership that need to be in the contract. It doesn't just say um you will own the product. It's that I hereby assign ownership to you now and automatically upon the creation of the IP. That way you're not chasing people after the fact. You're not selling your company. The worst time to find out whether you own IP is during you know investor or require diligence when they say, yikes, your IP assignment provisions with all your employees or with your, you know, your co-man or your formulator weren't right. And then you got to chase them. And then by the way, those people have holdup value at the end of a transaction that could maybe extract some value from you. I mean, hopefully they're not bad players, but you don't want to ever be in that position.

Speaker 1: 08:10
Totally. On the marrow side of things, from a commercialization standpoint, uh, again, building this bone both beverages, I think, is a pretty unique thing. Was it hard to find a co-packer that was willing to go down that journey and and take the time to get this dialed in?

Speaker: 08:23
Yeah, it was it was actually pretty tough. Um, we actually had to bring in our one of our formulators to help us find one because everybody that we had talked to, you know, sort of said yes. But then then, you know, when it came to actually locking in a date, they got nervous about, well, what's what's the broth going to do to our lines? Or, hey, we're worried about cross-contamination, or we're worried about what this will do to some of our certifications around like anti-allergens or things like that, none of which are applicable, but we're just the first time. And so we're, you know, we were sort of trailblazing a bit. And um, you know, when people have established established businesses that are doing well, it's hard to have them want to jump in and take a risk with you. And and so, yeah, I mean, it it it it's it it's tough, and it it will continue to be tough, I'm sure, until we really prove it at massive scale.

Speaker 1: 09:09
When you're papering up everything with a copacker that you ended up finding what were some of like the most important things that were top of mind for you, and you're putting that contract in place with your co-packer, and in general, what do you feel like is the most important things that founders need to be keep top of mind?

Speaker: 09:22
Yeah, I mean, honestly, I'd say, you know, there are a lot of nice to have. I think and contracts certainly matter, but you know, when it comes down to it, when working with a copacker, you don't really want to have to rely on suing them or contracts, right? Which what you're really, you know, uh what you're really most concerned with is the practicality. Are they gonna treat this like a partnership? How how long is their line there is their lead time to get on the line? What is it's like the practical stuff that that every founder is gonna deal with? You know, what's the what's the lead time? Can they move what when when is the hard date? You know, do you have to put a deposit by you know this time? Will they work with you on some financing on a you know a big PO? Do you have to pay up front? It's those sorts of things, and you you'll probably know right away whether they're willing to sort of you know build a relationship with you or or not. Yeah. But then there are other things that you probably need to be mindful of. Like what happens if they do something wrong? Do you get monetary damages or is it just line time uh credits? And it's probably line time credits. So, you know, again, you need to make sure you're picking the right partner because you might be stuck with them for a bit.

Speaker 1: 10:31
How do you prevent a a copacker from you bring your IP that you own, you bring it to that co-packer, you know, they change one ingredient or one little process along the way, then they decide, hey, we're gonna build our own branded house, or maybe they give it to other clients where it's technically a new formulation, but it was a pretty minor change. Is there a way to prevent that?

Speaker: 10:51
Well, you can try to generatize, I guess, some of your process if you're real uh neurotic, I guess. You know, you could you could you know pre-mix some of your ingredients and basically call it step A, step B, step C type deal as opposed to add, you know, this ingredient, then that ingredient. You know, but but a lot of it's gonna come down to trust. Again, you don't really probably want to be in the position where you're suing somebody. So it's really up to you to build a brand that you know can withstand some challenge. Totally. It's not the not the right like legal answer, but that's that's the practical answer.

Speaker 1: 11:26
From a supply chain standpoint, what does your bone broth supply chain look like? And has that been challenging to build out? How do you kind of out of hedge against that and have multiple sources? Yeah, what what is how would you approach that?

Speaker: 11:38
Yeah, so bone broth's our most expensive cog by by far. Uh like it's it's absurd how how much it it costs relative to all of our other ingredients. I think redundancy is key. Um, you know, early on we had you know some very long lead times and you know, just inconsistency in terms of you know availability. And so that makes it pretty challenging. It honestly prevented us from wanting to press the gas at times because we just weren't sure how things were gonna go. We still haven't advertised, by the way. So we're we're still very early on that front. But you know, building some redundancy in your supply chain is key. We haven't gotten to it yet, but I think building redundancy in your manufacturing is probably also key, like hitting an east coast, west coast because shipping will eat you alive, especially in beverage. Totally. But yeah, so as I mentioned, we're we're actually you know moving to a a uh a different broth supplier in uh in the short term, anyways. And we actually you know get the grass-fed claim from this new move, and we're super excited about that. They also have very short lead time, so I'm very excited. And I would say actually the introduction for that came from somebody else that's building a unique thing with bone broth. And we met them at a trade show, and I just said, hey, I'm having some issues on on broth. You know, would you mind sharing your supplier? And uh they did. And I talked to a few suppliers, so I think we're all set now. But that is just, I mean, this community is so great for that.

Speaker 1: 13:03
Compared to being a way isolate, pretty easy to create a fair amount of consistency there, but I feel like bone broth is more of a I don't know if the best word is more of like a natural product. I imagine there's some level of variability between each batch that you get. And I guess is there that much of it really? Am I overthinking that? And if so, does your formulation amass things enough or that's not much of an issue?

Speaker: 13:24
Yeah, so we basically get a when we get a batch, we have a basically a protein to liquid ratio that we look at, and we sort of have to back into the correct proportions for the for the for the formula based on that, because we're trying to hit our you know, our 12 grams of protein. So that's how we kind of back into it because there is variability, and there's a you know, there's a bit of a variance that's that's always acceptable from your supplier when they ship it to you. So you so you have to be pretty mindful about how you how you go about doing that. So yeah, I mean there's there's it's a natural product, so it's hard to work with at times, and that that's one of the reasons, yeah, for sure.

Speaker 1: 14:03
From a brand identity and packaging design standpoint, thinking back to some of those early days, I think the cans look great. Like what were um what were some of the key things that were top of mind for you when you're building out the brand identity, positioning voice, how you wanted the brand to look and feel in the market?

Speaker: 14:18
Yeah, also a very good question. So I spent a lot of time at in stores just kind of looking over people's shoulder, grabbing cans, uh, you know, for a year when we were sort of still in the form the formulation stage and in the early stages of figuring out what we wanted these cans to look like. Yeah. So I was asking people, why'd you grab that can? What made you, you know, I probably had 200 cans in my office just lined up and uh and and and the the the the probably the the very unique thing about the problem that we're trying to solve and it also makes it so much fun is you know if I was building a water company and I think you had somebody on your your podcast that was that that built like a glass water company and it was it was uh Yeah, Lunin, yeah, it's an interesting brand they're building. Yeah, yeah. Amazing, right? And uh they built, you know, there's obviously an existing water category, and then they're targeting it to people that are very concerned about you know, source and microplastics and all that, right? And that makes total sense. And so it's very easy to target exactly who you want. For us, we're we're creating uh a category that doesn't really exist, right? And so our there's a lot of our can that's intended to appeal to multiple types of audiences. So I I I built it for athletic recovery. So our our skull has a bit of sort of athletic fun vibe, right? The ombre coloring, you know, really resonated very well with with females and like people like my wife, and they thought the can was pretty. And the the the skull also is sort of fun and appealing to kids. That and kids are like probably our most rabid fan base right now. So that that's also all interesting. So what we did was we ABC tested cans. We had a very sleek modern version. We had a so you know, really just the word at Marrow, right? And and sort of just it looked like you know, a premium supplement brand, perhaps. Then we had a very fruit forward version, a couple of those. So, you know, think, you know, like any of your you know, functional beverages or waters or you know, flavored waters out there. And then we had Randy, our skull, we call him Randy. And the interesting part was that a good chunk of people liked it, and then a sizable chunk didn't, but everybody had an opinion. It was 100% memorable. And you know, look, I'd rather have like 20% of the people hate our packaging, but 100% of them remember it very well. Yeah, and that and that's why we landed on it. And we're we're daringly different too, right? We're trying to do something different, and so we're not afraid to have a little fun.

Speaker 1: 16:47
From an IP standpoint, I've gone through this process a number of times, and it it just feels like a fairly like ambiguous kind of gray time or like you know, you're you you can do the you can do the initial initial search and nail down a name, and then you go through the full application process. And if you're sitting there for a while waiting, maybe you'll get a response back that can also be ambiguous. Uh, like yeah, I guess how should brands like think about trademarking and what stage should they feel confident about moving forward since there are all these different stages of waiting. And if you wait to the actual fully approved, that could be like years potentially.

Speaker: 17:20
Yeah. Yeah, I think the average uh filing time, and I'm not an IP lawyer, but now I know enough to be dangerous. Uh I think the average time is like four months or something like that, which in the grand scheme of things is a terribly long time, but you're right. Sometimes you don't know. You know, just practical tips, I would say be mindful about the amount of capital, or you know, don't go buy a zillion cans before you know you can use that name. But sure, but start so so file early, right? The name matters. So so uh land on a name early, do your research beforehand, you know, and and the current AI tools do a good job of searching the USPTO and kind of giving you some general feedback. You can also hire an IP attorney to do some of that for you too. And they'll do searches, you know, pretty inexpensively, a thousand, two thousand bucks or something like that, and you get those back pretty quickly. And then you move to filing, and the filing itself is not all that expensive either. Filing is also super important because you know, especially if you're trying to sell on Amazon or things like that, in order to qualify for their brand registry, you actually need you can you can file with a with a with a provisional um or a pending trademark, but you do need to own your IP. And so uh it's it's it's critical, not just from a I don't want someone to copy me, but yeah, selling on Amazon, right? You want to or own your storefront.

Speaker 1: 18:38
So from a messaging standpoint, how things evolved over time and and how are you thinking about claims?

Speaker: 18:45
Yeah, yeah, it's it's tough because you you want to say all these things, but you don't want to get sued, right? And so I mean you got to be careful on what you put. These supplements are a different ballgame for a food product. You have to be truthful, you can't be misleading. You know, the the claims really um if you're gonna say something, you need to make sure that it's it's backed up by you know it's substantiated by some third party testing or something along those lines. We actually on our uh cans, because we we don't we don't necessarily we we make claims about or we highlight the benefits of bone broth on our can. We also cite to a page on our website with third-party studies that support all of our claims. So it's important, you know, you gotta get it right. You but you're walking this fine line of trying to educate the consumer and message you know how, why, and when to consume your product without trying to tell them, you know, it's gonna you know be this fantastic medicine, right? Yeah, you can't say that kind of stuff.

Speaker 1: 19:42
So you have you have you do have to be very careful. When it comes to pricing, what did your kind of strategy andor process look like for nailing down your go-to-market price? And I know it's still pretty early, but has it already kind of evolved and and changed over time? Have you gotten more market data?

Speaker: 19:59
Yeah, it's a it so the way we initially priced this was basically kind of working backwards from from our cogs. So it we basically took, you know, what does it what does it cost to create a can? And then from there, if you're if you're selling into brick and mortar, uh, what is your distributor's margin requirement? And then what is your retailer's margin requirement? And then what does that mean it has to sit on the shelf for? So that's kind of how we we we walked into our baseline pricing on a per can basis. And frankly, we're probably a little bit more expensive than I want to be right now. Based on that math, we're sitting at $5.99 per can on shelf. I'd prefer to be $5,499. Uh, and you know, the reason for that is think this is a little bit more approachable. We are a premium product. Bone broth is a premium ingredient, and there's not a diff, there's not a similar way to get it. And so, you know, if you're looking at, you know, buying you know good quality bone broth in a 16-ounce Tetra pack, it's more than than what I just described, but its use case is also very different. There's also sachet packets which sell for a good bit less, but you know, they're not that much less unless you buy them in bulk. And so I mean, they of course aren't selling a liquid, and you just have to kind of make it yourself. And so um, yeah, it's challenging because we again we're sort of sitting this new functional category. Um, so yeah, I'm sure it'll evolve over time.

Speaker 1: 21:19
Where does the brand sit from a pricing standpoint compared to RTD protein beverages out there? Whether it's you know the the Fair Life is the first one coming to mind, but there's so many at this point.

Speaker: 21:28
Yeah, yeah. So uh yeah, I think I think the I saw something about the price of whey going up 300% in the last six months and it just because it's in everything, right? And so yeah, fortunately, um in the year and a half we've been doing this, we haven't seen the price of broth really spike at all, which is great. That's good. Yeah. So yeah, so that that's good. At least it's stable. Uh it's still it's still significantly more expensive. So how do we sit on the shelf? So if you were to put us, if you were to put us in a traditional protein set in a grocery store, I don't think we would do that well because if you're looking at a a Per uh per gram of protein per dollar, right? We're just not going to resonate like a you know 24 gram of protein. But where where we do well in talking to our you know independents and natural channels where we're selling currently is sitting next to a kombucha or a turmeric shot or a cold press juice or you know, immunity boost, you know, type products. Those are a lot of those are cold chains, so they're probably more expensive for that reason too. But uh they're they they're sort of tailored for a premium, you know, better for you focused, wellness focused buyer that's a bit more adventurous and willing to try new things and that that prioritizes you know health and wellness over maybe price and you know. So we I mean, we're where we sit in a cooler next to those things, we're just fine. If we sat on a shelf next to you know muscle milk, it'd be just it's different, but we're also a very different product.

Speaker 1: 22:53
Did you initially think that it was gonna be better and more traditional, like RTD protein beverages, and then you and then you learned over time?

Speaker: 22:59
Well, we have been uh trying to learn. We've been approaching this with a very open mind on where where is the customer expecting to find us? Because yeah, or where where does it, well, they're really not expecting to find us, to be clear. But but you know, where does it make the most sense? And actually, as we expand into some some more traditional stores, uh like larger chains later this year and beyond, one of the areas I am going to hopefully explore is actually sitting next to bone broth on the shelf. I think our champion customer is somebody that's already drinking bone broth that has trouble drinking more of it because of the general inconvenience, right? It's too hot, it's you know they don't want to mix it, or you know, there's not a single serve option, there's not a great way to throw it in a bag, you know, they like to drink it cold, all the things. So if we can sit as a ready-to-drink next to this bone broth category, uh somebody that's drinking it daily might look at it and immediately get it. And we don't have to educate that consumer. We don't have to tell them how good bone broth is for them. We're already doing it. So I actually think that's a pretty interesting unlock as we go to you know more traditional retail channels. Totally.

Speaker 1: 24:07
Tell me a bit about how the first few conversations with retailers and buyers went and what was their reaction and where do they kind of initially think that where you should sit in the store?

Speaker: 24:17
Well, some of I mean the one nice thing about doing something totally different is we get to talk to a lot of people. And so, but some of the people just approach it out of curiosity. You know, they they want to know, hey, where are you gonna put this? And and like I mentioned, you know, we don't really approach those conversations with a playbook so much as, hey, here's what we have seen has worked, but we're open to trying whatever you think fits your customers the best. You know your customers. If you're interested in this product, where would this product sell the best? And so, yeah, I mean, some of these conversations have been very exploratory. Some have been, you know, we we love what you're doing. We want to see how you do at other retailers first. We don't want to be the first to jump in. And others are so excited to try to get it in first because they want to bring innovation to their customers. So, you know, different retailers approach things differently.

Speaker 1: 25:02
From a velocity standpoint, what what have you found in the in the uh the doors that you are and what's like having the biggest impact from a trial, repeat purchase, general velocity numbers standpoint?

Speaker: 25:15
So I I will say when we are sampling or demoing, our conversion rates are great because um people try the product and then you know are sort of can listen to you know a 30-second spiel on what we're doing and why, they immediately get it, they try it, and it's almost verbatim. Everybody's first words are that's bone broth. You know, and and then and because a lot of people do know the benefits, they just are too gross out to to drink it on a daily basis. Um, maybe they add it to their rice or something when they're cooking or something like that to try to incorporate it. But when they understand that there's actually a way to get this uh on a day-to-day basis, it it's uh it kind of it kind of clicks. So um, you know, when we sell online, we have some some really good, you know, long-term uh value customers that keep coming back and and and that's that's great to see. Uh the different retail channels are are interesting. I mean, we're in some like chiropractor studios and other health and wellness studios where it actually sells really well there because people are going in, you know, buying all sorts of health things or doing you know better for you actions with their body and and you know, see this. And again, they're probably already bone both broth drinkers and and grab grab a cannon to go. So, you know, we see some great velocities there. So it it, you know, uh we've had we've had some great success, and we've also you know sometimes been disappointed on how it does in certain uh certain environments, and you got to just learn from that and understand why.

Speaker 1: 26:38
Learnings that you've already picked up with some of these early days of retail that maybe others can can learn from.

Speaker: 26:45
Uh well, it's probably I this is a recent lesson. We're learning every day, right? We're making we make mistakes every day and and learn from them. Uh this isn't maybe uh a mistake as much as sort of uh uh something we would have done differently. We we didn't we we didn't go to a single trade show until maybe eight months after after launch, right? And we thought we were too early. I didn't have a booth until Summy Fan Summer Fancy Food Um in New York this past June. And I can't believe I didn't do that earlier. Like you don't it you don't have to have your crap figured out before you know putting it out there. And we we were very nervous that we were too early or you know, we didn't know what we were doing, we were a little overwhelmed by the logistics, and anyways, we pulled it off, it was just fine. And uh I don't know that my hotel loved how many boxes I shipped to them, but it were it worked out. But you know, I I do regret probably not going to shows earlier because that show unlocked our three retailers that we're rolling out to this fall already and unlocked a million conversations that we're having with all sorts of people. So, you know, don't be afraid to put yourself out there earlier than you think. If anything, you're gonna learn some awesome things, even if you aren't ready.

Speaker 1: 27:58
On the fundraising side of things, I know you help raise capital for other operators. You've been bootstrapping Merrill, at least for now. Sounds like you'll you'll raise at some point as you scale. Is there a trigger point that you feel like you're gonna be ready? So, yeah, it's it's time to start raising some money so we can really start scaling this faster.

Speaker: 28:16
Yeah. Yeah. I mean, look, bootstrapping is great. And I would highly encourage anybody that's that's that's building something new to do it, bootstrapped if they can, because you're you're you're focused on your product and your business as opposed to you know building a an investor deck or a board deck or something. So so that's helpful. But you know, the challenge with not having outside capital is you don't have outs outside expertise and and you don't have fuel to throw on the fire, right? So I mean, raising money should be pouring fuel fuel on the fire, not figuring out if there's a fire, right? And so so that's that that's part of it. I don't know that there's a perfect time to do it. You know, for some, you know, it seems like fundraising is really easy. For us, it is a little different. I'm starting to have some of these conversations now, and it's a little different being on the other side of the table. So uh, you know, and and and and your first check's always your hardest check, right? Because you gotta basically cut the deal, and you know, people move in groups and their safety in numbers. And so, yeah, getting getting that getting that first investor in is is certainly the hardest thing to do.

Speaker 1: 29:22
Yeah. From from a legal standpoint, what are some of the most common ways or maybe one or two things that come to mind that operators screw up in the really the earlier days of fundraising wise that can maybe hamstring their company from years to come, other than the obvious one of just once you invite someone onto your cap table, it's hard for them to go away at that point. But other than that one, anything that jumps out?

Speaker: 29:44
Yeah. Well, I mean, that's that you laugh, but you know, early cap table problems become very expensive and difficult to solve. And so, and and I actually think it's probably worth parking there for a moment, right? So, so it's not just inviting somebody on your cap table. It's all right, so if you have a co-founder, you know, what are what are what are what are your expectations for for both of you? You know, everybody remembers that group project in college that you know you did all the work on and no one else helped you, right? You don't want to repeat that in real life. And so trying to attach besting schedules to to uh ownership and uh what that means is basically uh, you know, you have to work and do X, Y, and Z for some period of time to be able to own your shares. And if if you don't, then the company can buy them back, right? At maybe some nominal price. Doing that up front is super important, especially when things are on good terms. You don't want to be having those conversations when when either the the pie has grown huge and the numbers are you know massive, or you're not on good terms and no one's gonna sign anything, right? You don't have a lot of leverage there. So the other other big ones are you know, IP ownership, right? We talked about that a lot. That's that's super, super important. Uh, you know, and and I'd say, I don't know, it just you know, startups are messy and it's okay. Try to, but but try to try to keep your your if you're using a G Suite like most of us probably are, try to keep your stuff organized, you know, in Google Drive because you're eventually gonna get to a fundraising or a sale, or or maybe you're just gonna get audited or something. I don't know. And you're gonna need to know where stuff is if you're just searching your Gmail yikes, right? And so hopefully, hopefully you're creating folders that align to you know, capitalization, investors, you know, marketing. By the way, you're gonna need to reference all those things for everything, right? You're filling out a new item form for a distributor, you're gonna need to attach images. Like you should know where all this stuff is easily. So uh yeah, I mean, those are those are some of the some of the common pitfalls.

Speaker 1: 31:40
From the investor side of things, what's some of the most common things that turn up during the diligence process that almost always turns an investor off, even if they come in pretty damn excited?

Speaker: 31:54
Ooh, well, a lot, a lot of the investors, so a lot of the deals I do as a lawyer relate to a software company. So I do a lot in the technology space. And contract terms, termination provisions, you know, how even how how revenue is being recognized. There's a there's there's a lot of nuance that goes into accounting and you know what contracted ARR means versus you know how they're showing how the company is maybe showing it on a pitch deck. Those sort you you have to really have a handle on your numbers. And so, so so investors may like the product and and like the vision and then get in and see that the numbers are very different. And if you're raising at any sort of scale outside of maybe like a pre-seed check where the numbers don't matter as much, you really have to have a handle on your numbers and and and you know, and of course, all the other things we just talked about as well, around you know, cap table and and IP ownership.

Speaker 1: 32:50
Any under-the-radar trends you might call out in the CBG space that you're seeing that maybe are not super obvious that that are going to become more mainstream here in the next few years?

Speaker: 33:02
Yeah, there's a there's a number of things. Uh, I think you know that the the pet industry is super hot, right? And you know, seeing seeing deals in in that world is pretty wild. I mean, people are spending so much money on their pets, and I think that's just a demographic change or shift, and you know, people are having kids later in life and uh you know spending spending money on their pets. And so, you know, these pet businesses are humongous. I think that's just an interesting CPG you know trend. I I do think you know the sort of the the shift away, uh the macro shift away from alcohol is an interesting trend as well. Yeah, seeing what people are doing. Um, I'm not a huge fan of some of the uh nootropic type drinks that are intended to support uh relaxation. I just don't know that many of them work very well, but uh, but those are interesting and people are reaching for something alternative to alcohol. The THC seltzer type, um, you know, the regulation there, like what happens with that is super interesting because that that section is has so many market entrants and there's a lot of good products, but it'd be interesting to stay to see what happens to that. You know, does it just get regulated? Does it go away? Um, I don't know. Yeah, it's it's it's super interesting.

Speaker 1: 34:13
Well, yeah, Nick, this isn't great. What's what's the best place for people to follow along with with you and journey of building marrow and all your legal expertise? And then what's the best place for people to follow along with with uh marrow these days as you're growing the brand?

Speaker: 34:25
Yeah, no, I I I appreciate you, Adam. Uh, you can find us at drinkmarrow.com. It's just one of drinkmarrow with with one oh.com. We sell on Amazon as well. We sell on our website. Uh we just launched in Rayleigh. So if you're in NorCal, get out there and support us. We need to, we need to we need to get our store metrics up. The my friends, yep, for sure. I'm NorCal. Send them that low. Yeah, yeah. And then uh Instagram, all the socials. We're at drinkmarrow, uh, at drinkmarrow. And then uh yeah, if you hit me up on LinkedIn as well, Nick Forrest with an E at the end, spelled like a group of trees with an E at the end. Happy to happy to touch base there too. Awesome.

Speaker 1: 35:01
Sounds good, Nick. I appreciate the time. I think that's uh I think that's the pod.

‍