How Kodiak Cakes Sold for $800M After Shark Tank Rejection

Kodiak Cakes. You may recognize them as one of the best-selling pancake mixes in the world. What you might not know is that they tried and failed to get a $5 million valuation on Shark Tank before turning that into an $800 million exit just 7 years later. We feel the value's way beyond what you've said. We really do. We need to decline the offers.

Seriously?

You're turning down $500,000? Yeah, we're gonna— So today we're gonna look at how a struggling low 7-figure business became one of the biggest brands in its industry and turned down an insulting $1.5 million valuation and parlayed that into an $800 million exit. Now, the world has changed quite a bit since Kodiak Cakes became a thing. It took this brand almost 20 years to become a 7-figure business and have any sort of a lucky break. Today, it does not take 20 years to get the same amount of momentum. So we're not just gonna look at how this business went from Struggling to an $800 million payday. We're also going to reverse engineer the playbook and look at what it looks like to run that playbook in today's world. We'll look at a live modern example of a brand that looks a lot like Kodiak Cakes and see how they could get the same type of results that took Kodiak Cakes 20 years and instead do it in more like 2 years. Now Kodiak Cakes was not always the best-selling pancake mix in the world. They started out with just a little bit of distribution in Utah-based ski shops. That's a super niche retail distribution. They didn't start out in Walmart or Target or any big box retailer. And this is before Instagram was a thing or TikTok Shop was ever invented. In fact, there was not even Amazon FBA back then. This is back in the late 1990s when Kodiak Cakes was just 2 brothers who were going door to door trying to sell pancake mixes, and the first sales that they got were in local retail stores. Now this reminds me of kind of a similar brand that you might remember called Cliff Bar. Cliff Bar got their first distribution in almost exactly the same way. They were in very niche local retail stores, and then they were bought for hundreds of millions of dollars many decades later. It's important to note that because those two brands actually followed a very similar playbook. They had retail distribution. Distribution with a very small core group of people. And of course, the world has changed a lot since then, but we can use that little nugget as a way for us to break into saturated markets where we might be able to build a business and have a life-changing exit. It took Kodiak Cakes nearly 10 years to have any sort of major distribution at all. Now think about that for a second. This is before any of the modern marketing opportunities that you and I have available to us. Ever existed. Back then, it was not go internet first and then retail will pick you up. It was the opposite. You had to try to elbow your way into retail stores, and then over time you would get some exposure from this new thing called the internet. Kodiak Cakes was basically retail only. Eventually they got into Walmart and some other local retailers, and they broke into seven figures. But for the first twenty. Years of Kodiak Cakes' existence, they were fledging between $1 and $4 million. Now, my specialty is I help entrepreneurs build their first million-dollar business. And in a lot of cases, not everybody's, but in a lot of cases, it takes about 12 months of hard work. And there are people today who aren't willing to commit to a year of grunt work. After 19 years of pounding the pavement and working really hard, they finally got a big break. They got an appearance Hey Sharks, I'm Joel Clark. And I'm Cameron Smith. Our product is Kodiak Cakes. If you haven't seen the clip of them being on Shark Tank, it is worth watching once you know that the brand has now sold for $800 million because the Sharks absolutely ripped this brand apart. They said it was a commodity product, that no one was going to buy this business for 10 times earnings. Are you kidding me? They sold for way more than 10 times earnings. They basically said that it was never going to be a big business. that had a significant valuation. Food companies, I'm sorry, just don't trade for 10 times cash flow. Now get this, the founders of Kodiak Cakes pitched the Sharks for $500,000 in exchange for 10% of the company, and none of the Sharks bit. In fact, the best offer that the Sharks made to the founders of Kodiak Cake was from Robert Herjavec, and he offered them $500,000 for 35% of the company. Let that sink in. After almost 20 years in business of pounding the pavement, trying to get retail distribution, the founders of Kodiak Cakes' best offer was under $1.5 million. They tried and failed to get a $5 million valuation and ultimately passed on a $1.5 million valuation. But in between that event and their exit in 2021, the company went from turning down a $1.5 million valuation and becoming an $800 million exit. So what did they do differently from 2014 until their 9-figure exit? That's what we'll talk about next. At the time of the Shark Tank airing, Kodiak Cakes was doing about $4 million a year in sales. It was reported that the year after Shark Tank aired that they doubled in sales, so they went to $8 million. That is one really good lucky break. The momentum that they got from Shark Tank allowed them to cross into 8 figures by 2016. And this is when Kodiak Cakes decided to become a real professional company. They did a capital raise. Now take note of this for a second. They were 20 years in business. They had just finally broken into 8 figures in revenue and they got a big break. Then they went and raised capital and decided to put on their big boy pants and be a real business. They were bootstrapped, just trying to make something happen all of this time. Social media is not nearly as big back then as it is today, and TikTok Shop didn't even exist. They had to do it the hard way, and then they raised capital. Once they raised capital, that's when the business really started to boom. They had to have a good product with a good customer base and good distribution before they could justify the capital raise. But then in 2016, they raised capital to do 3 things: build an executive team, launch more products, and expand their distribution. And because of those 3 investments, they became the best-selling pancake mix at Target. I didn't say Amazon. I didn't say Meta ads. Why do I emphasize that point? Because they were still doubling down on their primary one sales channel. Today, it's not really a good idea to try to break into Target first or go retail first. It makes the most sense to go Amazon first or Shopify first or TikTok Shop first. But this is evidence that you can dig really deep roots with one sales channel. And once you dominate that, then you can leverage that success to get into other forms of distribution. From 2018 to 2021, the new executive team focused on additional forms of distribution and new products. And by 2021, the company had gone from 8 figures in revenue to 9 figures in revenue. And that's when private equity came a-knockin'. In 2021, they were written a check at a reported amount of $800 million for a majority stake in Kodiak Cakes. Kodiak Cakes had a good product targeted to one core customer. And notice it's called Kodiak Cakes. Like, there's a bear on it. I don't know if you know this, but bears don't make pancakes. The name Kodiak Cakes is just an homage to where they are from. And who they were targeting in the very early stages of their business. So they had one very small group of customers. That is so important because some people will look at an $800 million exit and they'll try to reverse engineer how they acquired the deal or how they attracted the private equity group. But look at how they started. They started with a very, very small amount of customers and they created a good product that was different enough To garner their attention. From there, they doubled down on what was working. It was working to get niche distribution. Once you've got a good product that is in the hand of a small group of people that really love your stuff, then it makes sense to turn on new forms of distribution. Now, in this case, they got a big break from Shark Tank after 20 years in business. Today, it doesn't make the most sense for you to try to get on a TV show, but you can manufacture the same type of awareness with. A viral ad or by targeting influencers, or in today's short-form world, you can get that type of exposure by having one small content creator who creates the right type of video that just gets seen by millions of people. That kind of stuff does happen, but it can only happen on the back of having a good product that is loved by a small group of passionate fans. Then you are ready to get big distribution from a lucky break or by manufacturing awareness through social media or through advertising. It took Kodiak Cakes 20 years to follow that playbook, but today things happen much faster. In fact, I have a student. Her name is Amanda. Amanda is launching a high-protein pancake mix. Sounds a lot like Kodiak Cakes, and she has to be a premium product in order to make her margins work. Sounds a lot like Kodiak Cakes, and she's worried that she's gonna come off as a commodity and that nobody will pay a premium for it. And she's struggling with her own doubts about whether or not this is gonna work. She's dealing with the same early founder concerns that the founders of Kodiak Cake faced. But Amanda doesn't need to have an $800 million exit. She'd be real happy with a $5 million business that she can scale or sell. And remember, it took Kodiak Cakes 20 years to get to $5 million. This can be a nice little high 6, low 7-figure business if you want it to be, but you could also be Kodiak Cakes.

Mm-hmm.

You can kind of be whatever you want it to be. And I just wanna know where you sit in your expectations. And based on the hesitancy, I'm gonna say if this was a $5 million business, you'd be really happy.

Probably. Yeah.

So let's look at how Amanda could follow the same playbook as Kodiak Cakes to build a nice 7 or 8-figure business. And this way you'll be able to copy the playbook in whatever business you decide to create. Amanda is starting from scratch. She hasn't even taken a sale yet. If Amanda is going to compete with Kodiak Cakes or even just have a nice 7 or 8 figure business, she needs to start with 3 things. She needs to have a clear target audience. She needs to have a product that is different enough to stand out, and she needs to have enough distribution to get her first few hundred customers. Now, notice that I didn't say her first 1,000 customers or even her first million dollars in sales. If we follow the Kodiak playbook, then we just need to target our first few 100 customers. And if you can get a few hundred people to really care about what you're doing, that is enough to sow the seeds of a $10,000 launch. And then over time, your first $100,000 a month, and then we are off to the races. Now, good news for Amanda is that she has something that Kodiak Cakes did not have. She has over 100,000 people that follow her on Instagram. Not all of those 100,000 people are going to convert into pancake mix buyers, but she doesn't need that. Now, you might view this and say, oh, it must be nice. Somebody already has 100,000 followers. Keep in mind, she's been building this audience for several years, and it doesn't take a 100,000-person audience in order to have a really good launch. I work with people who in about 90 days build up a following of a few hundred people and come out of the gate with $5,000, $10,000, $25,000 launches. That happens. In this case, we're gonna leverage what Amanda does have, which is a footprint in her audience, and get a few hundred of them to care enough to come over and follow her launch. We can do a lot of damage with a few hundred people and have a really nice launch and start the growth of the business. Do you have, do you have people wait on a waiting list right now? Yeah, I'm on your waiting list.

Yes, you are. I had you.

How many people are on your customer waiting list right now?

300.

300. Okay. And how did you build that?

Sharing on my current social media and that's pretty much it.

Okay. What does that mean? Sharing on your current social media?

Creating posts, creating stories, sharing reviews. I've, given probably 30 to 40 bags out to people that I know and have gotten them to give reviews. So I've been sharing those as well.

Notice that Amanda only had 300 people on her launch list, even though she had a good amount of awareness and people who are following her on social media. She was sort of hedging with her launch. She wasn't going all in.

Because I don't know how it's gonna go. I don't know if it's going to be successful, so I still want to maintain the brand and I don't want it to just be saturated with just like pancake content.

Okay.

So, and also with partnerships as well. Well, I don't wanna just be talking about one thing.

I totally get it. I'm being very emphatic with you. I think this can be really big.

Mm-hmm.

If you want it to be.

Mm-hmm.

But if you are hedging, it's, it's not gonna go as well.

Okay.

Right. So, sure. You're sort of playing half pregnant.

Mm-hmm.

The market's big enough for this to be as, as big as you want it to be.

Yes. Right.

I think big kind of freaks you out a little bit.

Yes.

I see entrepreneurs do this all the time. They're a little bit afraid that things aren't going to work out. And so they don't go all in when they're launching something new. I think that's a mistake. Amanda should lean in aggressively. And if she did that, she'd have a few thousand people rather than a few hundred people ready and waiting to buy from her on launch day. But we can still do a lot of damage with 300 people. First part of your launch plan is I, I want you to just go more aggressively on building the hotlist.

Mm-hmm.

What about the You're taking presales in a month, right?

I'm taking presales in about 2 and a half weeks. Okay.

So you're gonna start this 1 to 2 week process.

Yeah.

Like as soon as you leave this masterclass.

Mm-hmm. Yep.

Okay, cool.

Uh-huh.

And then on launch day, you're gonna have another 1 to 2 weeks of really hard launch. That means emailing every day, posting about it every day.

Okay.

So the next month is you basically talking about the pancake mix.

Okay.

Regardless of if Amanda has 300 people or 3,000 people ready to buy from her, she's still running into the problem of how she becomes a premium brand in the space. Kodiak Cakes sells their high-protein mixes for $7 and $8. Amanda has to come out of the gate at $30.

It's costing me about $10 with packaging and just ingredients. Kodiak Cakes or anything else in the market is like $6 or $7. I was thinking about charging somewhere from like $27.99 to $29.99, but then there was like some pushback and people were like, you could charge $39.99, which is terrifying because I just feel like that's not gonna sell.

So she has to find a new way to position herself in order to command a premium so that she has any margin to be able to reinvest in the business. If Amanda compares herself to Bisquick, she's going to look like she is insanely expensive. But if she compares her product to other healthy, high-protein breakfasts, all of a sudden her product doesn't seem so expensive. The trick is not to compare yourself to the other competitors who are doing something similar as you. The trick is to change what you're comparing yourself to. So in this case, it's about comparing her product to the end result, another healthy, clean, high-protein breakfast. If we change the comparison, then most of the pricing concerns go out the window. I gave a marketing angle to someone here in the mastermind that they decided not to use. I told her that she should make it $50 and call it the most expensive bread in the world. It's a really good hook for a piece of content.

Yeah.

If you had to make a reel about why these are the most expensive pancakes in the world, what would it sound like?

That we use all organic ingredients. We use grass-fed whey. It's 37 grams of protein in a serving. I mean, how many grams of protein is in 6 eggs? And like, I don't even know how many 12 eggs is, but yeah. Bingo.

Bingo.

Yeah. I just think the comparison to other things Right.

Is—

yeah.

That's because you're comparing it to other pancakes.

Right.

But if you compare it to other protein sources, other breakfasts, now we can get somewhere. So the trick here is to change what you're comparing it to.

Right.

So if you're comparing it to Kodiak Cakes or you're comparing it to Bisquick, it's gonna feel like a really big jump. But if you compare it to 6 organic eggs, it's the same price.

Mm-hmm.

And remember, we do not need to get a million customers out of the gate. In fact, if all that happens within a couple of years is that Amanda has a few thousand people buying from her on auto-ship, she's got a really nice 7-figure business. So we don't need to convince the whole world to buy her pancake mix. We need to have a small group of raving fans that are excited to pay a premium. And that comes from the relationships that you build and the way that you show the difference that your product makes in the lives of your customers. When Kodiak Cakes launched, they had to go retail first, but Amanda can pursue recurring revenue by launching completely direct-to-consumer. Now compare that to Kodiak Cakes, which has to get Target to agree to put their product on their shelves. They have to get Walmart to agree to do distribution. In Amanda's case, and in our case as internet entrepreneurs, we instead can build an audience that we control, and then we can control the monthly recurring revenue by having people buy it on auto-ship. That's where food and supplements and beauty brands and topicals and skin creams and anything consumable have a real strategic advantage. Because if you can get one customer to buy on auto-ship, then you're way further ahead than the people who have to get their product on shelves and get people to go into retail stores and buy it. This is where we've got a strategic advantage of building a business today versus Kodiak Cakes, which launched almost 30 years ago. Now remember that Kodiak Cakes got their big break by being featured on Shark Tank, and that took 2 decades to manufacture. In today's world, we don't have to wait 20 years to start opening up relationships with people who can give us new forms of exposure. Now, Amanda has a little bit of an advantage in the fact that she's been creating content in this vertical for several years now, and that means that she has enough relationships and enough clout to be able to start opening those relationships now. Have you met Chrissa?

Nope.

Okay, so she's my homie.

Okay.

Right? And she's a member of the 1%.

Oh, okay. Amazing.

Looking at her page right now, she has 600,000 followers.

Okay.

When I add up the follower count of just those 3 people, we're looking at over 6 million people between those 3 accounts. So 6 million people, 3 contacts that we are one text away from.

Mm-hmm.

That we have like a good connection with either because you are in the community with them, that's Chrissa, plus your own account with 150,000. We have way more people than we need in order to do damage.

Yeah.

So since I know that, I know that we could, if we want, put together a plan for this to be as big as you want it to be. Okay. So let me just pause there for a second and check in with you. How does all of that feel so far?

Amazing. Yeah, I think this is kind of, this was my vision when I first starting to launch. I think like using the contacts that I have, I've been in this wellness space for many years. There's a lot of contacts that I know that would gladly share. That has been the vision As to how to start, like before running ads or anything.

It is the right time for her to start building those relationships. And you can do that at any stage of your business. When you're in the early phases, if you've got early customers, turn them into raving fans by treating them like gold. And if there are influencers in your space, send them free product. It may not turn into Shark Tank-like attention, but it can be just enough to tip the scales in your favor. Here's how I told Amanda to take advantage of the distribution and the relationships that she Do you have a plan to reach out to some of the people who follow you to just get the product in their hands?

I do.

Tell me what the plan is.

Well, I think I'm waiting until I actually have the product available. And then, yeah, I was just gonna kind of do just outreach and just DM people, text people.

I think you should start now.

Oh, really?

Yes.

Okay.

I think you should reach out to them and just say, hey, I have this product. Hey, saw you followed my work. I'm launching a protein pancakes. Would you like me to send you one when I have it?

Okay. Okay. Amazing.

And take those yeses.

Right.

Get the early yeses, add them to a follow-up list and just message them once in a while. Be like, I'm a week out.

Mm-hmm.

As soon as I have the product, I'm gonna get it into your hands.

Okay.

And just make them part of the process.

Okay.

When you, when you get like 15 to 20 of those people to say yes, You could do a lot of damage with 20 well-connected people. And so get them now and get their buy-in early, keep them involved in the process. And when you launch and have 20 really well-connected people who are trying your product, oh, it's a really good start.

Yeah.

And if I were you, I would do really nice, uh, care packages with handwritten notes to every single one of those 20 people.

Mm-hmm.

With something meaningful in that.

Okay.

Just to make it memorable.

Okay.

Ask for nothing in return. Just give 'em a great interaction.

Okay. That's a great idea.

When Amanda and I sat down, she had zero sales. She had 300 people on a waiting list. She was worried about being too expensive for her market, and she really didn't have much of a plan to get her first few sales, but she left with a plan to launch hard And to bring this product to market. So let's check in and see what happened.

We hit about like $9,000. I can pull up like exact numbers for you.

$9,000 in sales?

About that. 144 orders, almost $9,000. $8,800.

How do you feel about that?

I mean, I'm like, of course I'm like, it's great. It's amazing. I'm like slightly disappointed. Of course I wanted to like have more, but I think it's a good start. And for the amount of like, I didn't do like a ton of posts. So I think for the amount of work I did, I think it's good.

So am I hearing you right that you might've cut a few corners and not gone all the way in, but you still did like $9K in sales?

Yeah.

Okay, cool. Let's call that a win, Amanda. What advice that I gave you did you actually use and what did you ignore?

Well, you told me to send an email every day for the next week until launch, which I did. Well, I sent like 6 emails, I believe. I mean, I think that's like the biggest thing. I think that was like, 'cause I was like, I think I was gonna half-ass that. I was like, I'll send a couple emails. So I definitely sent more emails than I originally intended. And then your advice about just like reaching out to like everybody basically, and like influencers that I know, that is still on my list to do. I haven't done that yet. Um, but I need to get on that because I think I'll have a production date.

I think— Did you have any pushback on charging $30?

Well, you know what's interesting? When I started doing like bundles and like subscriptions, discounts and I'm like, okay, I didn't really factor all of that in. So I actually raised my price.

You went higher?

Yeah, I went to $32 a bag. I think I'm happy with the way the launch went because it was very validating that people wanted to purchase and that they would purchase at that price.

Did anybody push back or?

Nobody has said anything about the price.

How are you feeling overall about the business and the vision now that you've got the first few sales outta the way and you've got a launch under your belt?

I feel really excited and really positive about it. Like I'm ready to like just do this full-time. I just like, I still need to make money, but I'm like, that's pretty much all I've been doing is working on this.

You can make it your full thing if you want to. Crushed it. Didn't hit the $10K in, in sales that I predicted that she would hit, but we'll take $9K and she's gonna have a 7-figure business. No problem. Easy layup. The headline that you will see is that a business sells for hundreds of millions or billions of dollars, but the headline that you rarely see is when the entrepreneur who is starting from nothing gets to their first $10,000 in sales or their first $100,000 in sales. But you always have an entrepreneur in the early phases who is grinding it out to the first million. And some of those businesses will go on to be $100 million or billion-dollar exits, and some of them will be nice 7-figure lifestyle businesses that the founder will hold on to for a long time or scale and sell for a life-changing amount of money. But it all starts with grinding your way to the first million. If you want help with that, that's where I specialize. This is where capitalism.com is best in the world. We specialize in helping entrepreneurs launch their product, get to their first million, and then prepare for a life-changing payday. And if you want help with that, you can download our free resources at capitalism.com/100k. That's where you'll download our playbook, our best trainings, and our AI tool that will help you craft your idea, And create the right steps to bring that to market and get to $100,000 a month. That's at capitalism.com/100k. My name's Ryan Daniel Moran. I help entrepreneurs build their next Kodiak cakes. So if that's the journey that you're on, subscribe to the channel. I'd love to mentor you on your journey. Thanks for watching. I'll see you next time.