#103 Get Lost in the AWSM Sauce

Transcript

[pitch clapper]

Elizabeth: pitch number 2

Josh: let’s go

Welcome to The Pitch!

There’s something really exciting about product innovation. Taking something mundane or simple and totally reinventing it from the ground up. Today’s two founders have done just that – with ketchup.

But here’s the catch….. (up).

These founders have not only reinvented your favorite sauces, I’m talking your hot sauces, your bbq sauces, your ketchup... They also have an idea to reinvent how it gets on your plate.

This could make for a massive opportunity for investors – a kind of two-innovations-in-one deal. But it could also make things…messy. And a messy business could be a risky business.

I’m Josh Muccio, and you’re listening to The Pitch. Where real entrepreneurs pitch real investors for real money.

Neal Sáles-Griffin: I’m Neal Sales Griffin, Managing Director here at Techstars Chicago and I’m happy to welcome y'all to my city

Elizabeth Yin: I’m Elizabeth Yin, and I’m a General Partner at Hustle Fund

Phil Nadel: I’m Phil Nadel, I’m the Managing Director of Forefront Venture Partners

Jillian Manus: I’m Jillian Manus, Managing Partner of Structure Capital

Charles Hudson: I’m Charles Hudson, Managing Partner, Precursor Ventures

The Pitch for AWSM Sauce is coming up, after this. Oh and by the way, if you ordered your sample pack of AWSM sauces, now’s the time to shake them up for the taste test.

[break]

The information provided on this show is not intended to be investment advice and should not be relied upon as such. The investors on today’s episode are providing their opinions based on their own assessment of the business presented. Those opinions should not be considered professional investment advice.

Welcome back. Two towering dad bros walk into the pitch room, fully adorned head to toe with company swag which just so happens to be the longest aprons ever made.

Jillian: God, what tiny little men you are.

[laughter]

Jillian: You're all what like six two? Six ten? What are you?

Carl: Six ten.

Jillian: Six ten. Got it. All right.

Paul: Six eleven over here.

Jillian: Six eleven. Got it. Alright.

Paul: My name is Paul Lehmann, the taller cofounder of Awesome Sauce.

Carl: And I'm Carl, the shorter cofounder of Awesome Sauce, the world's first sustainable sauce company. We're on a mission to change the way sauces are made, distributed and consumed. We're coming after Heinz.

Paul: So let me take you back to the winter of 2020. I was the athletic director at West Town School, and I had a passion for barbeque, spice rubs and sauces and I was convinced, and still am convinced that my sauces are better than your sauces, and I was ready to take that to market. So one day, one of my pain in the ass coaches over here, overhears me talking about my new sauce business, and Carl being Carl, he wanted in. And we knew right then and there that we were not going to join the same old sauce game. We were going to disrupt a 130 billion dollar industry. But how? So we quickly got to the question - can you take the water out of sauce? And the answer is powder. Our sauces come to you as a powder that you mix with water to make all of the delicious sauces that you know and love. And that's how AWSM Sauce was born.

Carl: So in the summer of 2021, we incorporated. By November, we were accepted to Techstars, which got us into the Minnesota Twins Stadium. We took the next year to test ecomm, retail, restaurants, really understanding our product feedback and where product market fit was. And what we landed on was: food service. Where for decades the same boring sauces have been given away for free out of the same gross dispensers and there's little to no value given to the concessionaire. But we changed that. With our sauce, we decrease plastic packaging, we have an innovative and customizable solution that, at scale, matches the cost of leading brands. So we're here raising $3 million to change the sauce game forever. Who wants to get lost in the sauce ?

Jillian: Okay.

[laughter]

Paul: I'm gonna put some fries on the plate so...

Jillian: Oh please, that's my vice, pop tarts and fries. Oh, I love fries!

Elizabeth: Same.

Paul: So as you see this, you have ketchup, you have barbeque at the top, and then you have an old Bay style hot sauce.

Jillian: Oh my gosh.

Paul: It’s called our Chesapeake fire.

Charles: The Chesapeake one's good.

Paul: Thank you.

Elizabeth: I really like the sauces.

Paul: Thank you very much.

Carl: Which was your favorite?

Elizabeth: Actually, I - maybe the spicy one.

Charles: The Chesapeake one. Chesapeake fire.

Carl: So we got two votes for Fire. That's where I’m living.

Neal: I'm a Sweet Baby Ray’s guy, and that barbeque sauce right there, I would take that any day.

Elizabeth: I would too. It's way better!

Neal: That's delicious. You got me.

Paul: Thank you very much.

Jillian: What's the sugar content of these? Does the sugar content decrease because of this?

Paul: No. The nutritional facts are about one to one on traditional sauce.

Jillian: Okay, good to know

Paul: It was our priority to match sauces that the consumer was familiar with.

Jillian: Okay.

Paul: And then sort of work backwards to a lower sugar, more healthy organic - and trying to think about how can we now take a product that people have belief in and we've got consumer trust to then work back.

Jillian: Sure.

Phil: So tell us, just a little bit more about the product. How do you reduce the pack - the plastic? Like how are you delivering the product?

Paul: Yeah, so good question. So our packets are a tenth of the weight. So it's a 90% reduction of plastic.

Carl: And then our format decreases the weight, so it's decreasing 66% of scope 3 emissions, so greenhouse gases associated to, to traveling super heavy liquids.

Phil: You're talking about food service distribution, but your sauce requires a little more work for the food service employees, right? They've got to mix it and - tell us about that.

Carl: So what we want to do is we want to develop a machine that has a touch screen that allows somebody to go up to it and they say, I want ketchup, they not only are offered just ketchup, but they have spicy ketchup, jalapeno ketchup, Jillian ketchup, anybody's ketchup, and then it's dispensed. That's where the customization and the innovation comes in.

Phil: Then that wouldn't require anymore work from the employees -

Paul: Exactly.

Phil: - because the machine is doing the work.

Carl: And our model would be to actually lease that machine to the either the university or stadium and then have a service contract where we would add the powders.

Carl and Paul have the sauces down. But now, they want to design a machine that’s kind of like one of those Coke Freestyle machines where you can customize what soda you get - like a cherry lime vanilla coke. But their machine would be for SAUCE. And their plan is to lease these machines to stadiums. They see THAT as the real opportunity here.

But all this machine talk is confusing for the investors, who are not quite sure if AWSM Sauce is a sauce company or a fancy machine company.

Phil: Is your differentiation then, is your real focus on the sustainability to food service or are you selling convenience or taste? Like what's - what's the pitch to them?

Carl: So the highest level is we are selling sustainability. That is why we exist as a company. However, with this product, taste has to be there. And so our one and one is taste and sustainability. And so when we go into like the university and stadium model with food service, our three value propositions are ESG, so we're reducing emissions and we're reducing packaging; innovative experience, and then at the bottom end is cost. So because of the relationship, there are national contracts, and so our goal and with our format, we're able to hit costs really early. And so our value props are ESG, innovative experience and cost.

Phil: It would seem to me, that their priorities would be flipped, whereas cost would be number one over - I mean, I'm sure more and more of them are ESG-focused now. But I would still imagine that cost is number one.

Carl: And I think the interesting piece to note there is we were in the Minnesota Twins Stadium, so we did this pilot, in 10 minutes we sold a Philadelphia-based team and he said that he would pay more because of the ESG. So a lot of these stadiums, because of their stakeholder agreements, have to meet certain requirements and waste is a big one. And so for us, the waste management, and for them, scope 3, which is the emissions associated to the products that they're moving, the transportation, that's their number one focus. So to be clear, part of these, in the initial phase for us is to come in as a partner to the team. However, because they have a contract with the concessionaire, as we come in at cost parity, then now we have a relationship with a Delaware North or an OVG, and if we prove that to be really beneficial, now we partner just with OVG who's in 40 of the 50 largest stadiums.

Jillian: You have the Minnesota Twins, is that - or you you just have the stadium? The whole stadium?

Paul: We did a pilot with the Minnesota Twins for the month of April. And…

Jillian: And how'd that go?

Paul: Fantastic.

Carl: They asked us to stay in the stadium for the year.

Jillian: Okay.

Carl: Which we were like -

Paul: We're not ready. I mean, we just -

Elizabeth: Because you don't have the production levels?

Paul: Right. And we didn't have dispensers ready, I mean, it was - it's just the two of us at this point in time.

Jillian: Okay.

Elizabeth: So talk about that. What does it take to get ready for their stadium? Like what do you need? Minnesota Twins.

Jillian: How many dispensers?

Elizabeth: Yeah. How many dispensers? How much -

Jillian: Cost of the dispensers?

Carl: We got a lot of questions coming. I'm taking them. I'm fielding them. All right. So the Minnesota Twins compared to an MLS team that we're gonna work with, they have let's say 40 dispensing stations. Where we were with the Twins is we removed just ketchup. And we put in ketchup, BBQ and fire. So these three. And what was consumed was all three equally. So we proved that consumers do want the optionality of multiple flavors.

Elizabeth: I just want to understand, going back to this original question of how can you serve this first contract. Like, what does the rough ballpark amount of cash that you need to be able to fulfill it?

Carl: Our costs right now - what was it for our first run? 15 grand?

Paul: It was about 15 grand to service the ballpark.

Carl: Yeah.

Jillian: a week?

Elizabeth: And that covered the whole season?

Carl: No. That covers - we'd have to figure - we don't have like what that would have yielded in sauce.

Paul: It would have been about three -

Phil: I'm getting lost in the sauce here so -

Phil: Can you break it down - like, just on unit economics of what is your margin on this? Do you know?

Carl: So it costs 12 cents an ounce to make. That's where we are.

Phil: The sauce costs 12 cents an ounce.

Carl: 12 cents an ounce to make.

Phil: You're selling it to food service, for how much?

Carl: It would depend. Initially, we would come down to 8 cents an ounce to match the cost that they have. So we would eat 4 cents an ounce.

Phil: So wait, you're paying 12 cents and you're selling it for 8 cents?

Carl: That's right.

Phil: Let me just think about this for a minute.

Carl: So 12 cents an ounce is where we are right now. With our co-man, when we get to 50,000 pounds of powder, we're at 8 cents an ounce, which is what we would sell for, so we'd be at cost parity. And then we would look to bring down from like volumes of vinegar, bring down that to 5 and a half cents an ounce.

Phil: What kind of volume level do you need to be to get to 5 and a-half cents?

Carl: Over 50,000.

Phil: And your thought would be, okay, we get it down to 5 and a-half cents and you're still going to sell it for 8 cents?

Carl: We would - yeah.

Phil: Yeah.

Carl: Well, we'd try and sell it for more.

Phil: Do you think there's appetite for them to pay more?

Carl: Yes. That's what they that’s what they said.

Phil: Because of the ESG?

Carl: Correct.

Elizabeth: Let's say that six stadiums approached you today and said, hey, we want to sign something. Timewise, how quickly could you get that up and running?

Paul: I think we could do it by the spring of 2023. And we would - and what we would do is we'd come in with the manual dispensers that already exist with the manufacturing partner that we have identified -

Carl: We would staff that as well.

Paul: We would staff those stadiums on the front end so that the concessionaire isn't taking on the manual labor of that.

Paul: And that's just to establish ourselves as a fantastic partner with a ton of value to add.

Jillian: But obviously, it's much more cost-effective regardless for you to have those machines, rather than have to staff this manually, which is,

Phil: That’s not going to work.

Jillian: one it's, I think that's expensive, unreliable -

Elizabeth: I guess where I'm going with this is I feel like it's often better to sort of do things piecewise to prove out pieces one part at a time, and derisk pieces one part at a time. So my thought is, you know, just get sauces in people's fries dishes, right. Whatever it takes, manual, etc. Maybe some existing machine that could do the purpose without anything crazy, that is the next iteration.

Paul: Correct.

Elizabeth: And then from there replace out to the ideal machine. I don't know if that's your plan.

Paul: It took us a while as a group to get there, but that's the plan!

Alright, I think Carl, Paul, and the investors are all on the same page, but let’s review. They make sauce from powder, they want to make a Coke Freestyle™ machine for sauce. But that’s way off in the future.

First, they just have to get their sauce into stadiums. And to do that, they plan to make a simpler machine, like a retrofit of an existing machine.

Alright, now we can move on. Here’s Jillian.

Jillian: Don't those concessionaires, don't they have exclusivity contracts with Heinz and some of the others?

Carl: Yes.

Carl: Not exclusive.

Jillian: Well, they're only allowed to carry one ketchup, one type of mustard, one type of -

Carl: Right. However, as we come in as a partner to the team, then we would be a sauce partner like for the Twins.

Phil: What does that mean though? How can they get around the contract with Heinz then?

Carl: Because they don't serve it. We would serve it.

Charles: But you've been live - clearly you must have negotiated -

Carl: We have not had that experience. And so because they don't sell sauces, this isn't something where they're guaranteeing a certain amount of revenue.

Charles: Like a water or a -

Carl: Like a water would say, hey, only sell our product, or a beer would only sell this. We're coming in as a partner to the Twins -

Jillian: That's right. They're not selling it.

Carl: Stadiums spend about $100,000 a year on sauce that they give away for free.

Elizabeth: Yeah.

Carl: With little to no value.

[laughter]

Jillian: No, no, those are important points.

Paul: Well said, Carl.

Whew…are you guys as ready for an ad break as I am? I’m not even sure what just happened! Let’s take a moment savor this pitch over some words from our sponsors.

[break]

We’re back in the pitch-room-turned-tasting-room, and the investors are a little lost in the sauce. There’s machines, there’s powders, there’s exclusive-but-maybe-not-exclusive contracts. It’s a lot. And Charles wants to bring things back to the sauce. Like, the ACTUAL sauce.

Charles: I have kind of a different question.

Carl: Please.

Paul: Bring it.

Charles: You don't see a lot of breakthrough sauce brands. The last one I can think of is Sir Kensington’s.

Carl: Stop it.

[laughter]

Charles: I'm just curious if you have a sense of like - how are they able to be so successful on a relative basis in a category - this isn't like software or some of the other categories where we see many, many successful companies. I mean, they're not the only one, but that's one that I've been thinking about since listening to your story.

Carl: Yeah, my short answer is there's just a lot of room. Like when you think about the category in general, it's $130 billion industry, 60% of which goes towards food service, 40% of which goes through retail. And both of them are hard in general. Heinz is vertically integrated, so they're kind of stuck on pricing, whereas Sir Kensington or Primal Kitchen can kind of come in and move a little bit based on what they're marketing. It doesn't matter if our sauce ultimately is the sauce flowing through those machines. They can take their brand equity and pump that through the machine, and it can be really exciting for the concessionaire, the university or the team. And so what we did is we pioneered something that our powder to pour technology is completely new.

Charles: I have a powdered shampoo company in my portfolio, It's actually very difficult to make powder -

Carl: And for it to yield this way.

Charles: And to yield this consistency, it's very difficult.

Carl: And so, we are understate - we're trying to be as humble as possible, but it's really hard to do it, and we did it.

Phil: Are you the only ones?

Jillian: Do you have a patent?

Carl: We are the only ones and we have a process patent on this. So the process patent on this is the amount of water stays consistent, it's a third of a cup for every packet. And the yielded consistency is very different. But when we get into the machine side, nobody else is doing this at all, and so we can IP that, which builds that moat so much stronger. We built the brand now and we can take that in front of food service where the cash burn is so much shorter to get volume moving.

Elizabeth: Can we hone in on this point that Charles is making - ketchup in particular, there are two brands. Heinz, Hunts, - Heinz has the, you know, dominates, right. I'm sure there are many people who have made ketchup over the years. Why is it that Heinz is so dominant?

Carl: They're vertically integrated. So they own -

Elizabeth: It's just cost?

Carl: It's just cost. They own the farms. But that also - that also pins them. So for them to change on pricing, they'll start to source in different ways.

Elizabeth: But it also shows that everyone is so cost conscious on their ketchup. So how do you compete with that when you are not vertically integrated yet?

Carl: I I think there’s two ways to answer that question. The first one is do you really need to compete with ketchup? So when we think about sauce, it's across all. Like ketchup is a billion dollars, but so is mayo, and so is BBQ. And so you have to have ketchup, but I think where you win is soy-based BBQ, or we win on peanut Thai sauce, or we win on hot sauces where hot sauce is so popular.

Elizabeth: So I think what I'm getting at is because you made three sauces here for us, I don't actually know in the eyes of a buyer how they see you competing. Are you a ketchup and then by the way you get two extra sauces? Or are you a hot sauce or a BBQ sauce and here's some ketchup.

Paul: Actually, ketchup's really interesting, because it's the one thing that you have to match. I mean BBQ and hot sauce are the wild west. And you can have a sweet BBQ, or a vinegar BBQ or a thick BBQ or not. And so we can really sort of play around in those areas and it's really interesting for us to match ketchup which we think we've done really well.

Elizabeth: I think your ketchup's very good. I like it.

Paul: Thank you. And I guess what we've heard from concessionaires, in fact, they don't want to go sourcing their BBQ from them and the hot sauce from here, and the ketchup from there - they're looking for a one stop shop. And the fact that we can do that and, as we think about two years down the road, bring in the machine to really make this an attractive user experience - and I don't know if we've mentioned this but I think what we see is really our first step is universities and stadiums, and the idea behind that is that as we get eyes on the brand through those avenues, that pulls our D2C in a really meaningful way and is effective in ways that we aren't today.

Elizabeth: Tell us a bit about your raise. I think initially you said you were raising 3 million..

Carl: 3 million total, 1 million of it would financing, and 2 million of equity.

Elizabeth: And do you have terms already? Or where are you in that raise?

Carl: So we have convertible note with a $6.5 million cap.

Elizabeth: Is that pre or post?

Carl: That would be - we'd like to - pre?

Paul: Pre? That would be great, but I mean we're not gonna say no to money so if it's a post then...

[laughter]

Paul: I'd rather drink tequila than not drink tequila, so.

Neal: So I'll start since we're in the family.

Carl: I appreciate it.

Neal: Techstars affiliate all day. We got some connections for you guys and all that. Personally, I'm out, though I've never realized how passionate I would be about sauce coming out of this. And the only reason being is that, you know, from a Techstars standpoint I do pre-seed stage, and you guys are already, you know, beyond me.

Neal: But I got a little piece through Techstars.

Paul: I appreciate that.

Phil: What intrigues me about Awesome Sauce, about you guys, number one, it seems like it'll make the work effort at the stadium level lower, right. And those who are focused on ESG are gonna really like what you're doing. What concerns me is where you are on the machine and what it's going to take to you get to the volume levels to support the pricing in a profitable way, so it's early for me at this level to jump in. So I'm going to have to pass.

Carl: I appreciate that.

Phil: But thank you.

Paul: Thanks for that feedback.

Carl: We'll get there.

Phil: I know you will.

Carl: We'll get there.

Elizabeth: What happens if you don't raise the 2 million?

Phil: They'll be eating a lot of hot sauce.

Carl: Not one that - we're not gonna not raise it. We'll raise it. It's hard to envision maintaining -

Elizabeth: So you need - you need to raise it.

Paul: We need to raise it.

Carl: I mean, we're running out of the cash that we started with and so it's hard to envision a path to really go at - because what we're trying to go after is big. And we're - like Phil said, we're in such an early stage right now that it's critical.

Phil: And I do appreciate the big vision that you have.

Carl: And we're trying to be as realistic as possible but it's massive.

Elizabeth: I do understand that you're trying to go after something big. But let me just lay it out for you. You are in a bear market. You have a food product which there are fewer investors for. And the big vision, it's capital intensive. And I think if investors get scared by the hardware component, then it's like, well, what's left to invest on? You have a product that has limited traction and so my question is if a bunch of investors sit out, is there a path where you can get more traction even if you can't fulfill your machine dream quite yet, such that then you can bring in the capital when the market is slightly better next year and you have more traction, you're in a better spot to raise that money for the machine? Or are you completely just sitting ducks, in which case the business is more or less over?

Paul: The vision that you had said early on of sort of step wising the machine process and your growth process is something that we can execute on with the cash we have right now and the product we have right now. And so we can take that first step and that's kind of what I think - what I think you're asking. Can we take that first step even if we don't raise the full 2 mil. And I think the answer is yes.

Carl: But there's no reason not to go for it and then land where we do. So that's why we're raising -

Elizabeth: Oh, I'm not saying you should not try to raise the 2 million. I'm just saying, like, I'm just asking you what happens if it doesn't work?

Jillian: Raise to phase.

Carl: We have a back up plan. We can't not - we're dads. We've got mouths to feed. So it can't not work. We'll make it work.

Charles: I think I'm out. I struggled with this one. I really wanted to say yes. I think the product's great. I just - we've done a couple of things in food and it just - it just ends up being hard relative - I mean, everything's hard. The challenges in food, I feel like in many cases there's less under your control. With the road to distribution than there are in some other businesses that we work on where the distribution challenges are hard but they're largely like under your control. That being said, I think you guys are going to be successful. I think the product is great. This one was tough. I was hanging around for a while to see if I could get over the hump -

Carl: No tequila?

Charles: - but got all the way to the top and couldn't get over. So…

Elizabeth: I'm in the same boat as Charles. I really love the product, I love how you have thought about this innovatively. I think just sort of in trying to understand the numbers and all, it's very capital-intensive and I think for someone like me who doesn't bring a lot of dollars to the table, that, that's really hard and it sounds like if you don't quite hit those numbers you want, it's gonna be suboptimal. So I'm out.

Paul: Thank you.

Phil: Jillian.

Jillian: I know. I know.

Phil: Guess who's turn it is?

Jillian: Okay, I got that Phil. Thank you. I'm out because I know nothing about this space. And by the way, I really appreciated the French fries and all the sauces were just absolutely extraordinary. These were really, really good. Not one did I want to spit out.

[crosstalk & laughter]

Phil: Good endorsement.

Carl: Sauces you don't spit out.

Jillian: No no! But okay. I want to help. If there's anything I can do, I want you to see, because I do think you two are awesome.

Paul: Thank you very much.

Neal: And I'll have my team in Chicago get to work for you guys too.

Carl: That's really kind of you.

Neal: Got a lot of connections we can make.

Carl: Thank you. Naw, we've really appreciated this experience. This has been fun.

Paul: You guys have been fantastic.

Phil: Thanks for coming in.

Paul: We appreciate it.

[Carl and Paul leave the room]

Phil: Good input.

Elizabeth: Likewise. There was just so many - so many things to think about on this.

Jillian: Yeah. There's a lot of spinning plates here. There are a lot of unknowns. The machine to me is definitely the biggest one.

Elizabeth: You know, I also wish they knew their numbers better.

Jillian: Yes.

Elizabeth: That was a - that was something that really got me.

Jillian: That's a little bit of a worry.

Phil: I think it's a hit or miss. I wasn't really satisfied with the answer regarding the stadiums or the concessionaire's ability to go around their Heinz contracts.

Jillian: Yeah, I'm not sure about that either by the way but -

Phil: Cos they didn't seem 100 per cent sure about that.

Jillian: No, but Charles said -

[laughter]

Charles: I mean, I guess they already did it. They were live at the stadium, so -

Jillian: But they did it very small.

Phil: Yeah, for a month.

Jillian: And so it was not meaningful for - but what happens when the concessionaire says, we want to do this in six arenas and -

Phil: All of a sudden…

Jillian: Not so much.

Charles: I think it's different. I mean, again, I think it's different for cost side-

Jillian: But they're still paying Heinz for the product.

Charles: The argument to me made sense. And I would think if you're - my experience with sports teams is you can't do little things without people reading every letter of the contract anyway.

Jillian: Yes.

Charles: So even to have done the little thing, somebody did the work to figure out, can we actually - and they're gonna be at the Philadelphia Union for the whole season next year.

Jillian: Right

Jillian: Why couldn't Heinz or any of the other ketchup companies say, you know what, we're gonna have a powdered form too?

Charles: Doesn't it -

Elizabeth: They're pretty entrenched -

Charles: They're pretty entrenched.

Elizabeth: They could. But I mean -

Jillian: But if they see this and they say -

Elizabeth: - what they're doing is working.

Jillian: - we want to get into sustainability -

Charles: if you think about it If you think it if you're Heinz, like what level would they have to sell before you even pay attention or care? $50 million worth of ketchup? $100 million worth of ketchup. Like - for like Heinz to divert, it's the cost of a big company resource problem.

Jillian: Would it be a diversion or would it be a a need to rebrand their company and say, let's try this out, it's not gonna cost much to us -

Josh: You really think Heinz is really that forward thinking?

Elizabeth: Yeah, I don't think they care.

Jillian: Or maybe not Heinz - well, I don't know.

Elizabeth: I don't think they care, because everything in their supply chain is so locked in for however many decades or whatever that as long as they're selling ketchup who really cares -

Phil: - status quo. That's what they want to -

Charles: I find it's just really hard -

Neal: If Heinz is listening there’s your warning.

Josh: Heinz is sunsetting. They're -

Phil: They're done.

Josh: They're fading out.

Jillian: Or maybe Heinz buys them.

Heinz is certainly sunsetting in my fridge. Not only do I actually like the product, but I really want this business to work. I just wanna go to a baseball game, order some french fries and pour a bunch of mango jalapeno ketchup on them, is that so wrong!?

I followed up with Paul and Carl after The Pitch you just heard. And as it turns out, a lot can change in just a couple months.

Josh: What's your plan going forward and how is that different from what we heard on The Pitch?

Carl: I don't know if Paul's getting excited. So high level, like when we both looked at each other and we were like, it's food service. Like that's still there moving from consumer to food service, is it? I think when you look at food service, there's back of house. and there's front of house. We're gonna focus on back of house.

Paul: And, and Josh, if I may just build off like, what does back of house mean? What it means is, is that so much of, of the sauces when you go to a dining room or a restaurant or a university dining hall, there's a ton of sauces that are being made in the back of house with the chefs, whether you're making the sauce of the day for the burgers or you're braising chicken thighs, or you're creating an aioli, That is meant to go with your truffle fries. Like there's a thousand different ways that you create different sauces and marinades for the back of house, and they're all being done with big, heavy jugs of sauce, 15 different ingredients. And so our sauces, they're step saver, right? So instead of needing 15 ingredients, we say, Why don't you start with our powder, water, and if you want to, why don't you add this apple cider vinegar because it's gonna give that extra kick to make it yours. They're already mixing in big metal bowls.

Josh: Uh huh.

Paul: They're already using immersion blenders. Like our product is actually, I mean, it took us a year and a half to figure this out, but our product is made. For back of house food service as an initial play for us to gain traction, trust, marketability.

Carl: We should, we should say, since The Pitch, we have three customers that we're actively working with already.

Josh: Oh, so people are already using this?

Paul: We are in conversations to get them to use it, but we have three like potential customers. Yes.

Josh: You're close.

Paul: Yeah.

Josh: You’re telling me there’s a chance.

Paul: So we're saying there's a chance.

Carl: You asshole.

Josh: That's great. This is the classic, let's go get some revenue first before we go after the pie in the sky. Big. Perfect version of this business, which includes the machine and…

Paul: and the front of house and, and you know, a brand behind it. And so all of that stays relevant and meaningful and will be part of our plan moving forward. But the first step, and, and we really believe this, the first step is to really capture the back of house and, and to build our business off of that. That then allows for the growth into the other areas that we're super excited about.

Josh: Yeah, first step, make a bunch of sauce’

Paul: make a bunch of sauce baby

Josh: put it on people's plates. let them eat it with fries. You know what I noticed? I don't think we've said the word stadiums in this entire conversation when your whole pitch was all about stadiums.

Carl: That's an interesting thing that you've realized.

Paul: Hmm.

Josh: Tell me more.

Carl: [laughs]

Paul: We have realized over the past couple months that stadiums are not the play, not an initial play, from a sauce dispensing and revenue driving channel.

Josh: Why is that?

Carl: It's huge for awareness. You get a ton of awareness, but we're looking at where are the places that are going through custom operations and our sauce can provide a value there and, and stadiums like, where, what's really exciting is when we get to front of house stadiums are absolutely…

Josh: When there's a machine it makes tons of sense but if you're just mixing sauces in the back it makes no sense.

Carl: That's not the thing to sell. And so when we, when we get to bringing front of house onto the table, then absolutely. We, we design and build and have co-manufactured this sort of optionality machine that’s super exciting and yeah.

Carl and Paul said they haven’t raised any additional funding since The Pitch. They’re focused on nailing down their business plan before they go back out in Q2 to fundraise.

This is what so many founders have had to do in this market, they can’t just pitch their big idea on a napkin. Investors are asking for more, more customers, more revenue, and less risk. This forces founders to think less about the future, and more about what opportunities lie right in front of them.

But Carl and Paul see it differently. Their decision to pivot away from the machine dream is not really a response to the current market, for them the pivot, is more like a way of life. Like it’s in their DNA as founders.

Paul: I mean that, that's how you learn, right? Is you put yourself out there in a way. We, you know, we didn't have a perfect business when we started this business. We didn't have the perfect pitch when we came on to The Pitch. And you, you kind of continually take this feedback and evolve and take this feedback and evolve. And so if you're not meant to do that, then you shouldn't be in the startup game, right? And if you can put yourself in a place and have the mentality where you are gonna put yourself out there and your product out there, and your business out there as much as possible, and you're genuinely gonna learn as much as you can learn from every opportunity, then you're gonna win the game. We may not get that investment during the broadcast. Right.

Josh: yeah

Paul: But we met incredible people. You've been a massive supporter and introduced us to new people. It gave us a, a real opportunity to kind of hear firsthand where our gaps are, and then continue to evolve and improve. And so we're very comfortable in that stage. If it all had to be perfect before we went To the public.

Josh: Yeah.

Paul: There would be no businesses out there.

Josh: and we would have no one on our show.

Paul and Carl and living la vida pivot. Since these founders are so open to pivoting, and I have the microphone, here’s an idea! I think they should pivot back to the machine dream… Because that’s how this business becomes defensible, and then Heinz goes from public enemy #1, to potential acquirer #1. Which could be a massive exit for them.

And I think they can get there quickly by lining up deals with all the Sir Kensingtons of the world, to put their sauces in AWSM sauce dispensers. As soon as Carl and Paul start to get a handful of deals with bougie sauce companies, that’s when investor checks will start rolling in. And then, they can build the machine.

But all that might just be the mango jalapeno ketchup talking.

Hey - Some big news - applications are now open for our next recording event. It’s this June in sunny San Diego CA. If you or someone you know is raising between 500k and four millions dollars for a startup, you can apply to pitch on our show. We like all different types of businesses, software, hardware, and consumer products – it’s all game. As long as the founder has a massive vision, and the skills to pull it off. Pre-revenue is fine, but you do need to have some version of a live product that investors can demo. For more info and to apply to pitch, go to pitch.show/apply and fill out the application.

The Pitch is me, Josh Muccio, Lisa Muccio, Kerrianne Thomas, Anna Ladd, and Enoch Kim.

Special thanks to Kareem Maddox, Al Doan & Eric Jorgenson for their help with this episode.

Music in today’s show is from The Muse Maker, Breakmaster Cylinder, Shaky Faces, 1939 Ensemble, Onders, and Our Many Stars.

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Next week on The Pitch…will the investors see a blue ocean of possibility…or just a sea of red?

Jillian: Are you aware that this is one of the most difficult spaces, with the most failures? What makes you so special that you're going to make this work when so many others, with hundreds of millions of dollars, are unable to?

See you next Wednesday.