Mimi MacLean:
Welcome to The Badass CEO podcast. This is Mimi MacLean. I'm a mom of five, entrepreneur, Columbia Business School grad, CPA, and angel investor. And I'm here to share with you my passion for entrepreneurship. Throughout my career I have met many incredible people who have started businesses, disrupted industries, persevered, and turned opportunity into success. Each episode, we will discuss what it takes to become, and continue to be a Badass CEO, directly from the entrepreneurs who have made it happen. If you're renewing your career, dreaming about starting your own business, or already an entrepreneur, the Badass CEO podcast is for you. I want to give you the drive, and tools needed to succeed in following your dreams

Mimi MacLean:
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Mimi MacLean:
Welcome back to the Badass CEO, this is your host, Mimi MacLean, and today I have one of the co-founders of Health-Ade, Daina Trout. It was founded in 2012, and it's a multimillion dollar success that retails in over 50,000 stores across the country. Known for their bubbly beverages that are good for your gut, Health-Ade is one of the fastest growing refrigerated functional beverage brands in the country, and counts fans like, Kim Kardashian, Jayden Smith, and more. This past year, Health-Ade was acquired by longstanding partner, First Bev. As a woman and leader in the beverage space, which is very uncommon, Diana has a unique perspective on what it takes to grow a brand, with a master's degree in nutrition and public health, Diana is a huge advocate of wellness, and gut health. To get your Top 10 Tips every entrepreneur should know, go to thebadassceo.com/tips.

Mimi MacLean:
Diana, thank you so much for coming on today. I'm so excited because Health-Ade is one of my kids' favorite drinks. Kombucha has been one of staples in our house, so we love your drinks, and my kids were so excited when I told them that I was interviewing you. I think you're the first person that they were super excited about [crosstalk 00:02:56]

Daina Trout:
That's amazing. I love hearing that. Well, we'll keep making the kombucha for them.

Mimi MacLean:
Yes. Perfect. And that's one thing when we were talking about, I just moved out of LA, and we miss Erewhon so much, because you get all the great products there, and so I think that was one of the places we would always buy your product. But I can't wait to hear about your story, and how it's been 10 years since you started, and you just had a sale, and so I would love to just... How did you decide to start a kombucha company?

Daina Trout:
Yeah. Well, thank you for having me on. It was sort of a windy road to kombucha. I only had one job before starting Health-Ade, and that job was basically in sales management, in a huge pharma company. And I would say that job was really important in my entrepreneurial journey. It really was the catalyst. But before I sort of describe why, I think it's important to know what I did before that job, and really my whole life prior to that, I was in school. I went to undergrad, and grad school, and I've always been really passionate about health, and studied health. I was premed in undergrad, and then in graduate school. I went for five years to study different aspects of nutrition, and I ended up with two master's degrees, one in nutritional biochemistry, which is really getting into the nitty-gritties of how the components of food impact your health, and then public health, which is more how population might behave or react to a certain change in your health or health pattern.

Daina Trout:
So, I think health has always been my middle name, I guess you could say. I ended up in sales management in pharma, which is sort of different, but that was really the only job that was going to pay all the school debt, and help us make our way to LA, which is where me and my boyfriend wanted to go after school. Long story short is, I did end up in this first job in pharma, and I got this internship in my fifth year there, that really helped catalyze starting the business. My title in this internship was called change agent, and my actual job was to improve the engagement of the company's employees. I guess engagement and productivity had gone down for a number of reasons. And so they were trying to get creative, and they put some of their top sales people in this job, for a temporary time, and I was one of them.

Daina Trout:
And I could write a whole book on what I learned, but the biggest sort of highlight is that I learned, I did really well in this environment, of sort of big, hairy, unclear goal, a lot of autonomy, not a lot of structure. I just did well in that space, and then I also in the job just learned what made people tick? What made them happy at work? What made them productive? What didn't? And I walked away with this... I felt like a whole business school degree in teams, and performance, and I was just so motivated to start my own team. It was very clear to me after that internship that I had to build a company I could be proud of. So really, that was the driver to starting the business, it wasn't...

Daina Trout:
I learned how to make kombucha back in grad school, and fell in love with it, for sure. But I also loved all fermented food. So, it wasn't like kombucha was the thing. It was more, I've got to lead a company, I've got to start a company that I can be proud of, and what is the business going to be, was the second question. So, I ended up hooking up with my best friend, and my husband, who are sort of feeling the same way, for different reasons. And we decided to take my kombucha, which I had been making for a long time, and I make a really good one. We started selling it in the farmer's markets in LA.

Mimi MacLean:
At that point, were there a lot of other kombucha companies or you were pretty much the first to the market?

Daina Trout:
We were not the first in the market, not even close. It was still a niche product, I would say in general, but it was already for sale in most grocery stores for sure, the Natural Grocery stores. Our main competitor had already been on shelf for 11 years, prior to us. So, one of our biggest challenges in the very beginning with Health-Ade was getting store buyers to pick up another one, when they already have one that's the well, and I think we very much were the beginning of that wave though of kombucha, and then kombucha became a thing, and now it's no longer niche, and there's 98 products of whole foods that are all kombucha-based. So, very much we were at the beginning of that wave, but for sure, not the first on the shelf.

Mimi MacLean:
How did you convince them to put you also so on the shelf or instead of?

Daina Trout:
Oh man. Every account was different, but those first few accounts were the hardest, because we didn't yet have the data that it would work. Once we had data that it worked, it became a lot easier to do, right? Because we would show up with that data and say, look what happened when we showed up in whole foods. First you have to land the meeting. And that I think is the biggest challenge, because these folks are busy, and they've got a hundred people reaching out to them a day, and most they don't respond to. So I would say I sent a hundred emails, and got no response. Not even a no, just nothing. So our first account, Gelson's, well, just give you an example.

Daina Trout:
I mean, I think it really just tenacity, and hard work, and not giving up, but the first account was Gelson's, it's an 18th store chain out here in Southern California. The buyer, his name is Rich. He's still the buyer, we're friends now. I emailed him probably annoyingly like 20, 30 times. Eventually I figured out where he worked, and I showed up with a smile at his office with a coffee, and a kombucha probably 10 times, and eventually he's like, "Okay, I'll meet with you. My meeting got canceled." And so it was out of pity.

Mimi MacLean:
Or the coffee.

Daina Trout:
[crosstalk 00:08:34]

Mimi MacLean:
He wanted the coffee.

Daina Trout:
He wanted a coffee, and we got in, and I think really out of pity he said, "Okay, I'll give you three spots for three months, in three stores." It was sort of like a...

Mimi MacLean:
[inaudible 00:08:45].

Daina Trout:
And then we took that, and we're like, well, we cannot fail. So the three of us were demoing all the time, and making sure that our product did well. And then of course, once it did, we were able to push to get to more. And once we had that taste example of it doing well, we used that to an extreme level when we were selling it to other stores. But it was definitely hard, and I would say, it's all about persistence tenacity, and it's not... You can't just send an email. That's not enough.

Mimi MacLean:
And go back to the farmer's market, because I had started a superfood company, probably about 12 years ago too. And we were selling noni juice, with ginger, and turmeric, and all this crazy stuff. It was called Island Superfoods. And we would-

Daina Trout:
Amazing.

Mimi MacLean:
... go to the farmer's market up in Malibu, and the Palisades, and Santa Monica. And we would do that every weekend. It sounds like you did that too.

Daina Trout:
Yeah. At our peak, we in seven markets, and most markets happen on the weekends. So, oh man. That was a brutal time, because the physical demands of being in a farmer's market are pretty intense. So the day kind of looked like this, let's say when we were in three markets, that was sort of the sweet spot, because each of us, there's three founders. Each of us could do a market. But we would get up at around 3:30 in the morning, and we'd have refrigerated products. So me, Vanessa, and Justin would show up at my apartment, and we'd pack three huge coolers with ice packs, kombucha, get in, in the car, you got to get the tent in there. And nobody has a van at this point. So, you're ratcheting tents on the top of crappy 1980 Honda Civic kind of thing.

Daina Trout:
And you know, you'd truck off to the market at like 6:30 or 7:00 in the morning. You'd have to unpack it yourself. I mean, by the time the market started at 8:00 in the morning, you already felt like you had a whole day of work, but you really were just beginning. Then you got to stand there, and sell your product. And when we sold at the farmer's markets, we were very determined, that this was going to be our business. This was not just a side project. So, it was like our pride depended on it, our livelihood depended on doing well. I mean, there wasn't anybody that could walk to that market without stopping to try our kombucha, because we made sure of it, and we did well as a result. But then you'd have to break it down, and go home, and then we'd still have to brew kombucha. So it's just the time of the sort of first couple years of starting this business, considering we manufacture the product, and everything, just it blows my mind, the amount of work, and intensity, and dedication, and passion it took.

Mimi MacLean:
And you look at it, and you're like, is this really... you're kind of doing it for the brand. You're not doing it for the money at that point, right? You're doing it to get your name out there, to find if the customers want it, if you're tweaking your product. So there's what, two rules I say, don't go into business with your family, and don't go into business with your friends. And you did both of those.

Daina Trout:
I did both.

Mimi MacLean:
How did that work out?

Daina Trout:
You know what, it's worked out great. Happy to report my husband and I are still happily married. In fact, I think it's made us stronger, for sure it's made us stronger. And my best friend and I, I would say that one was a lot easier. Although I do understand the rule, I end up spending a lot of my time now, I don't want to say mentoring, because that almost sounds like I know something, but I talk to a lot of early founders, because I think they need somebody to bounce ideas off of. Sometimes it's been there done that. So I like to be that person, because I kind of wanted that, I needed that when I was there. And I will say one of the top problems I do hear about, are founder issues, like relationship issues with founders and co-founders, and it makes me appreciate what I had.

Daina Trout:
So, maybe what we had was really lucky, because we really did have very few problems, for sure me and my best friend. The husband thing, it is tough because you live together, you eventually maybe you'll have kids together, We did. And so it just all gets mashed up together. It's very hard to separate, and create boundaries with a business, because truly is almost like a child in it and of itself. So you find that your date nights, aren't really date night, you're just talking about the business, and because you both care so much about the business, it can quickly turn to a discussion with some energy, even conflict, right? And you're kind of like, what is this?

Daina Trout:
So, I mean, just like anything else, with care, attention, discipline, commitment to do it better next time. You do find a rhythm, and a balance, and you become stronger. I actually think starting a business is very similar to having your first kid together. So if there's any parents on the call that are thinking about entrepreneurship, you've kind of done it already. But I don't think it should be a hard and fast rule not to do it with your husband or best friends, because I think we trust each other. We know how to communicate. And once you do learn how to create those boundaries, and follow them, it really is something that makes you stronger. So, I don't think Justin and I could never... I can't imagine a world where we can't get through a problem.

Mimi MacLean:
That's great. So I think another big hangup for young founders is financing. I would love to just touch on that. Did you ever need financing or were you able to keep growing with what you were making at the different, I would assume you would once you hit, because you're in so many 50,000 stores now with the inventory, just to upkeep with that.

Daina Trout:
We needed money right away. I mean, the way I think about money to a business, is it's like air to your body, okay? It's not the reason you live, right? You don't live to breathe, but you can't live without it. You can't live without air. Capital is like that for a business. In the beginning for a year and a half, we bootstrapped it. AKA every dollar we made at the market went right back into buying more bottles, tea, sugar. We weren't paying ourselves. And that lasted for about a year and a half until we got to a point where, the way we were making our kombucha just wasn't... There weren't enough hours in a day to meet the demand. And so we had to upgrade to buy a filling machine.

Daina Trout:
So, that really was the catalyst to us raising money, is we needed this $100,000 piece of equipment to help us start filling the bottle, because by hand it wasn't going to work anymore, and we didn't have it. We didn't have any assets, right? We started this pre any sort of success in our lives career wise. So, nobody would lend us money. There was no debt available to us, and really the only option was investment. Well, I wouldn't say unfortunate, because maybe it was the best thing, but we didn't have experience here or knowledge. So, we were suddenly in a place where we need money, and we needed it fast. It was sort of like, oh crap, we're not going to be able to fulfill our next month's orders if we don't have much more money than we thought. It was no longer working that the money coming in was going to pay for the money it would take to build the next round of kombucha.

Daina Trout:
And that's because we were growing so fast, it was a positive thing, but also-

Mimi MacLean:
Exactly.

Daina Trout:
... it's a weirdly detrimental thing too, because it's enough to make your business go splat. So anyway, we were rushed. We ended up hooking up with a private equity group very early on. We were doing about half a million in revenues at the time, which isn't typical, pretty early for private equity to get involved at that stage in beverage. But it just so happened that they were into kombucha. Somebody tried our kombucha at a store nearby, and loved it. Just all the stars randomly aligned that it was going to work. And we were able to get the deal done in a couple months, and there's pros and cons to that getting investment early. So yeah. And then over the years we raised every year. We raised over 60 million in the lifetime of the company, until we sold, and I had to do all six of those rounds myself, right? Lead all of those.

Daina Trout:
I think when you're raising money, you've got to be... I mean, there's just so many lessons I could probably write a book on it, on just my experience with those. But you have to be eyes wide open about so many things you'll be raising more than you thought. It takes way more time to do than you expected. And yes, you're still expected to run the business at the same time, so figure it out.

Mimi MacLean:
Two full time jobs.

Daina Trout:
Yap. It's super stressful, because I don't know how, but no matter how well you plan, it's still last minute, and you can barely make payroll every time, no matter what stage of business we were in, it ended there. And you have to learn pretty quickly that investors are not your friends. And I think that was probably one of my biggest lessons learned at Health-Ade. And that's not to say they're villains, they're not heroes, they're not villains. They're partners in capital. And you have to appropriately sort of categorize them as such. I think so many new founders, maybe especially women, I'm not sure, fall into the trap of thinking they're your friends. And that was also something I had to sort of walk my way out of. They give your company the air it needs, but that's where the partnership probably stops, and it's important you know that. So anyway, so many things about raising capital.

Mimi MacLean:
Yeah. And it's interesting because you didn't do a friends and family round, right? You went right to the private equity round?

Daina Trout:
Well, actually the private equity group was open to us, including some friends and family in that round. So we kind of combined the seeding [crosstalk 00:18:05] to get it.

Mimi MacLean:
Right. But you didn't get your feet wet with the investing. Friends and family they're a little, usually nicer, and more understanding about not keeping them up to date, what's going on. It's just kind of money without strings attached, whereas the private equity money is a little bit more buttoned up, and they want accountability.

Daina Trout:
Yap. We had to professionalize real quick, and pros and cons to that.

Mimi MacLean:
Yeah, exactly. Now having been 10 years past starting the day, is there anything you wish you knew in the beginning that, you know now. I'm sure there's many of things that you've learned, but any lessons learned that you're like, gosh, if I had known this, I would've saved a lot of time, money, or even say another way. What was your hardest thing that you've learned along the way?

Daina Trout:
I mean, it's a hard question to answer because entrepreneurship is essentially just a nonstop series of problem solving, and out of those come lessons. So it's like a thousand trillion lessons a day. To pick the hardest one would be impossible to do, but for sure my lowest moments were during times of fundraising. And I think that's interesting when you sort of start to deconstruct, and dissect why, and usually it's super stressful, you're overworked because you're doing two things at once. There's a conflict with those that are investing, right? Because they want your value to be lower. You want your value to be higher. So, there's this now about your performance. And even if you're tripling the business in a year, you can somehow feel like you're failing. It's a very psychologically interesting time. And I think I learned so much during those times. I think the second time around, I just wouldn't allow myself to be so vulnerable, and allow myself worth to be connected at all to the value of my business, or my self worth at all, to be connected to what others think of our performance, including the investors.

Daina Trout:
So protecting yourself, how to negotiate, how to toughen up during these times was a huge lesson. But what I really wish I would've known then, and what I wish I could share with others that are going through it, is I really do believe the greatest accomplishment you can have is to learn how to be yourself, because as I've become a better and better leader, I feel like I've become more and more who I authentically am. It's not like a building of skills. It's almost a shedding of weight, if that makes sense. And so in the end I'm like, wow, everything I already learned since I was six years old, was just who I needed to be, to be this person. And so I wish I could have known that, and I didn't have to build all this armor up, and then deconstruct it. Now the second time around, I would go in with confidence, and I really think confidence is the best gift we could teach our kids or each other. It's like-

Mimi MacLean:
Very true.

Daina Trout:
... confidence in who you are. Yeah.

Mimi MacLean:
Yeah. It's very true. And it's interesting because what I've asked this question from other CEOs. I think, I wouldn't say number one, but one of the top ones is usually employee-employee really relationships. But you had that nailed from your job before, right? So you came in with an expertise, and knowing how to build this great community, and making sure you meet their needs, and develop them, right? And so I think a lot of women don't come in with that. So, it's interesting that you didn't mention that, because a lot of times that's what people do mention. They didn't realize how hard managing employees, and their team would be.

Daina Trout:
Yeah, you're right. And I appreciate that internship so much. It really was a catalyst. I mean, I would say you have to proactively build the culture you want. Otherwise, the culture will just happen, and by the way, starting a business is extremely chaotic. It's conflict, it's problem solving, you're busy, it's a total little nightmare of a mess, but you get up and you do it anyway. If you're not focusing on the culture, how it is for your employees to work for you, to work for the business. It will suffer, and your employees will leave you. I mean, there's just too much competition out there. And so you'll struggle even more, and make it harder for yourself. I think, and yes you're right that's is a lesson I learned before starting Health-Ade, and thankfully so, but I watched a lot of others sort of realize it halfway, oh crap, It's not a great place to work. It's not healthy, and now I've got to fix it.

Daina Trout:
And it's so much easier to start with the end in mind, and you can build the culture with the values that you believe in, and it's really not that difficult to do, but you have to carve out the time to write down what that is, share what that is, and do activities that prove it to be true. And so without going into what our culture is at Health-Ade, I mean that's always been at the forefront of my mind, is your culture has to be at the very top of your priority list, right up there with sales.

Mimi MacLean:
Right. That's great. So just to end, and I'm sure if you know this statistic, but 1.7% of women reach a million dollars in sales, obviously you're one of those people. And so what would you say would be the reason that made you get there? Because it's hard to do what you did. And so just any insight you have onto that.

Daina Trout:
Yeah. It is so hard to make a business per... everything has got to be right. The brand, the product market fit, the founders, the team, the culture. So it's so hard to pick the one key ingredient. But I mean, when I look back at Health-Ade, I think the biggest thing we did differently, we just would not ever give up. I don't know what to say. There were so many low moments where we thought we'd quit, we thought it would end, we thought it would go splat, and we just pushed through, and that eventually we found a way. So yeah, just that tenacity.

Mimi MacLean:
That's awesome. I thank you so much. This has been amazing. And for anyone listening, if you haven't tried Health-Ade, it's amazing, and it's in 50,000 different grocery stores, and locations that you can grab your kombucha. So, thank you so much. I really appreciate it.

Daina Trout:
Yeah, thank you so much for having me on.

Mimi MacLean:
Thank you for joining us on The Badass CEO, to get your copy of the top 10 Tips Every Entrepreneur Should Know, go to the badassceo.com/tips. Also, please leave a review as it helps others find us. If you have any ideas or suggestions I would love to hear them. So email me at mimi@thebadassceo.com. See you next week, and thank you for listening.