Magic Spoon: How Gabi Lewis Built The Fastest Growing New Cereal Company

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Welcome to the podcast. This is one of my favorite interviews, at least on the topic of business than I have ever done. I'm going to be interviewing Gabby Lewis. He's the founder of Magic Spoon, which is a cereal company that's gone from zero to like a gabillion dollars in like four seconds or something like that. You may have heard the ads on the Tim Ferriss podcast or Joe Rogan or a bunch of the other influencers where they advertise, but I wanted to hear a different part of the story. It's one thing to talk about how a business or company or an entrepreneur went from nothing to having a nine figure business in two years, which is what Magic Spoon has done. But there's a different side of this story. And the other side of this story is that Gabby had another project prior to this one that went okay, but it was a slog. He called it a zombie business in this interview and it's not fair to call it a failure. It wasn't a failure at all, but it was not the stunning success that his current project is. And I wanted to know how someone goes from struggling as an entrepreneur in a project that they weren't sure was ever going to work out where they have a duty to investors and a duty to the marketplace and they're looking at themselves in the mirror saying are we the right people for this? Going from that to starting a business that goes from nothing to a hundred million dollars in a very short period of time. I wanted to know what he learned in the first project that set him up for success in the second project. I wanted to know why he raised money for both of these projects. I wanted to know how he acquired customers in both of these projects. I wanted to know what he wish he would have known in first project. This is an absolutely fascinating case story of what happens when you get the product market fit right. It's also a warning sign around being.

Unwilling to fail quickly.

So this was my first meeting with Gabby and it was a fascinating time. And if you're an entrepreneur who has big aspirations and is still in the grind, this is a must. Listen, please enjoy this chat with Gabby from Magic Spoon.

I believe very strongly that the role of the entrepreneur is to stay in vision mode. It's not to get into the weeds and the details of every piece of the business. The job of the founder is to cast the overall vision and then to bring in the right people to be able to execute upon that vision and and make sure that the company has.

Enough money to be able to ensure.

That you can continue to operate. This is what we call the owner's model.

The owner's model is our process for.

Keeping the entrepreneur in the owner's seat. You cast a vision, you recruit the right people, and you ensure that the company has enough money to execute. And this is what we help people do inside of the capitalism incubator.

We help them get clear on their.

Vision, help them launch profitably, connect them with the people that they need to know. And we have an investment fund to invest in the businesses that are coming from our little incubator. So if you're an entrepreneur that wants to build something great, wants to build something that you can scale and even sell, you can find out more about what we do and who we've helped@capitalism.com Inc. That's capitalism.com Inc. Well, Gabby, it.

Is great to meet you. I was first introduced to you by our mutual friend, friend John Durant back when you were running XO and building that Cricket protein business. And I have a thousand questions for you about that experience and how it led you to the success of Magic Spoon. But for context, I want to go to the end. The end meaning. Now, could you give us some context for where Magic Spoon is at in terms of whatever numbers you're comfortable sharing or just in terms of how you viewed the success of it? And I want to contrast that to the previous experience, but could we start there?

Sure. So Magic Spoon is a breakfast cereal company. We make high protein, low carb versions of all your favorite classic breakfast cereals. And we launched in April of 2019. So we're just over two years into our business. And in those two years we've sold millions of boxes of cereal. We have 23 full time employees right now based in New York. That's up from six people a year ago. And it's been an absolute wild ride. We've been featured in Forbes multiple times. We were named in Time magazine's best inventions in 2019, the year we launched. And it's been a lot of fun past couple of years.

Yeah, and it's been fun as a consumer too. I am one. And watching the company evolve and do things differently has been really interesting to me. So I want to ask you though, about your previous project because you to contrast these two businesses is fascinating to me because Magic Spoon just got set on fire and exploded. And I don't mean to put words in anybody's mouth, but I'm assuming you've done nine figures in serial sales or have a nine figure valuation which is insane in two years. Compare that to you going into a market where you were developing something new, where you're bringing cricket protein, cricket flour to the marketplace. And I would never dare call that a failure of a project, but it didn't have this rocket ship growth that Magic Spoon did. So I was hoping that you could first comment about the difference, like the difference between running those two businesses and just comment on the fact of.

Was it harder running XO than what you're doing right now?

Yes, it was perfect. I think a very key learning. This is going to sound so silly and obvious, but I didn't understand the importance of product market fit until very recently. And I think there's this idea, especially in Silicon Valley, in the startup world, that if you're a good enough founder with vision and hustle, you can just make anything work, regardless of the product, regardless of the market. And so we worked really hard for five years to convince Americans to eat crickets for their health and for the health of the environment. And it was really hard. Americans didn't want to eat crickets and there was no supply chain. So we not only had to build the demand side from scratch, meaning we had to convince people that this thing they think is gross is actually desirable or even aspirational. And we did that by partnering with Michelin starred chefs on the recipes. We got celebrity investors, lots of hype and pr, A lot of podcast adverts we did with the Joe Rogans, the Tim Ferriss of the world.

I remember those.

Yeah, yeah, yeah. And so I think we did quite a good job actually getting the early adopters on board faster than anybody ever thought we would. So we sold our first million dollars of cricket protein bars quite quickly. But then it got really hard to convince the mainstream audience to actually do this thing. Whereas with Magic Spoon, and this was very deliberate, we're taking a product that has as mass appeal as you can possibly imagine. You talk to anybody in the street, they not only have memories of eating cereal and loving it as children growing up, they probably have dozens of boxes in their pantry right now. Yet everyone also acknowledges that cereal and sugar specifically, not very good for you and they want to eat less sugar. And so it's a massively appealing product. And we're just making a very subtle twist on it, basically. And the effect of that is that it's grown much, much quicker than our last business.

Now, Gabby, what was the gap between those two businesses? I know you sold xo and everybody assumes that when you have an exit, when you sell Something, it means that you made a kabillion dollars.

You know, I know you didn't ride off into the sunset after selling xo. It sure seems like you're dancing in the sun in the sunset right now at Magic Spoon. But what was the gap between those two projects?

It was actually quite short. We. So my co founder from exo, Greg is my co founder today at Magic Spoon. And we knew we wanted to start a business together again. We knew we wanted to stay in the food industry, and we knew we wanted to do something less niche than crickets. And so we spent a few months really just wandering the aisles of grocery stores thinking through what categories might make sense and might be ripe for disruption. And when you're looking at giant categories in the grocery store, the top three are soda, milk and cereal. And you look at soda, there's obviously endless companies doing kombuchas and probiotic sodas and non alcoholic aperitifs and just endless seltzer brands. You look at dairy and milk, again, you've got not only the Oatley's of the world, you've got companies now developing lab grown real dairy and all kinds of dairy substitutes. You look at cereal and the aisle looks the same today as it did 20 years ago. And for a number of reasons that we didn't think were very good reasons, nobody had tried to reinvent cereal. And so that was the sort of aha moment where he thought, all right, there's this enormous category of mass appeal, right? For somebody to come in and reimagine it in a way that's for modern consumers that care about nutrition, care about ingredients. And whenever we ask people, why has nobody done this before? We got some really unsatisfying answers. And so we thought, all right, let's just do ourselves.

So I get all of that. Gabby, here's what I don't understand. After exiting.

After departing XO and having however many years of grunt and grind and just not getting the ball to move as fast as you wanted, didn't you have a period after that where you were just like, this sucks? Was it What? Wasn't there a. But now, from the outside, what I, what I saw happen is they go from pushing this boulder uphill of kind of trying to get Americans to eat crickets to, oh, we just start the fastest growing cereal company maybe in history. That's just like, next thing. But psychologically, how do you not come out of a business that you were trying to force uphill and not take a minute and say, like.

Does life suck? Am I am I not cut out for this? Like, how did did you doubt yourself? And if not how not?

Great question. I think every entrepreneur has to be like a little bit irrationally self confident. So should I have doubted myself more than I did? Maybe. I think we had that moment during exo, so when we were pushing the boulder up the hill, we had those moments. We asked ourselves, is this us? Could a better entrepreneur build this business faster and more successfully than we are? And so the later years of running that business, so years, four, years, five, those years were filled with those sorts of questions and wondering, could we be doing better? But when we then sold the business and then decided to start the next one, we were ready. We'd gone that, gone through that period of reflection already. And thankfully we had a lot of amazing investors who backed us in xo, including John Durant, who you mentioned, who introduced us, who made it really clear to us. And this was something that was amazing to hear, that they believed we sold more cricket protein bars than anybody could. And nobody could have made that billion dollar business. And for that reason, they were really excited to back us in whatever we did next. And we had several investors who told us that as we exited xo, we didn't make them millionaires. They could have said this didn't turn out as we wanted, we're not backing you again. But instead their response was, even though this wasn't the billion dollar outcome we all wanted, we trust you. We see that you did the best that anybody could have done in this business. And what's your next idea? Let's go and do it again together. The first million dollars in financing we raised from Magic Spoon was all investors who had backed us at exo. Wow. Those were investors that we did not make rich through their first time backing us.

Yeah. So this is fascinating to me. That was going to be one of my questions, because I know you did do a raise for Magic Spoon and I did know some personal friends who invested in both of those. And oftentimes as an entrepreneur, you carry the responsibility to your investors as a weight. You want to do well by those people who entrusted their capital to you. And when it doesn't go exactly how you wanted it to, there can be a little bit of.

Self doubt that comes out. But what you experienced was people said you went for it and you did well, what's the next project? And so you actually found that they were more willing to back you as a result of your hard work in xo, even though it didn't have a billion dollar exit. Is that correct?

That is largely true.

Not every investor is so kind, but for the most part, that's how our investors behaved. And my philosophy on investors has typically been to have a lot of investors. And so magic spin. We've probably got over 100 investors. Exo, we had a lot of investors as well.

You're not going to get 100 out of 100 that are going to just say, don't worry about it, great job, let's give you more money for your next idea. Most of them had an incredibly positive and encouraging reaction and response. We did have some investors that were more challenging, and those can make a founder's life really difficult. Even one challenging investor texting you every couple of days, being like, why are the numbers not what you said they were going to be? That can really affect someone's founder's mood and really make it harder. But thankfully, the one or two investors we've had in the past that have been a little bit challenging have been outweighed by dozens and dozens of incredible investors.

From what I can tell from Crunchbase and public sources, it doesn't look like you raised a ton of capital for either project. I think I heard you say on a podcast that xo raised like $400,000 pre seed and one to one and a half in a subsequent round. You can correct me if I'm wrong, but I was curious, in both of those projects, since you didn't go raise a ton of cash, what was your plan for deployment with that? Because in both cases you were going into brand new markets or you were at least spearheading projects that no one had ever accomplished before, which from the outside would seem like you're going to need a lot of cash for something like that. But that doesn't seem to have been the case for you. Could you comment on that?

Yeah, for XO, we did those rounds you mentioned there was another $4 million round. It was a Series A, let's call it. We should have raised a lot more. I think for us to actually have succeeded in our mission of making insect protein mainstream, that required hundreds of millions of dollars. We decided five years into that business we did not want to raise hundreds of millions and become cricket farmers the rest of our lives. But if we had gone all in on that business, that is an idea that needed serious, serious money, both to set up the infrastructure and the supply chain, to wade through the sort of non existent regulations and then of course, to have some really serious marketing campaigns to get people to eat bucks. So that was a business that did need serious capital. Magic Spoon doesn't necessarily. We've raised probably 12 million, maybe a little more, maybe $15 million for Magic Spoon in the past couple of years.

Not all at once, Correct?

Correct. We raised a million dollars before we launched for mostly investors from our last business. Then two months after launch, we raised 5 million. And then about a year.

Two months after launch.

Correct. We had quite a nice launch, and so we were able to raise a $5 million seed round.

We'll come back to that one, but please continue.

Yeah, yeah. And then maybe a year ago, so a year into the business, we raised another 8 to 10 million. So we've raised some money. With food companies, you can't really raise too much or it's dangerous if you raise too much, because.

Valuations in food, unlike tech, have fairly narrow bands. If you're going to exit a food business, you're going to exit it at three to six times revenue, probably. And so I think it's tempting for food founders, especially given all the tech money coming into the food world, to decide to raise 20, 40, 60 million at an insane valuation, like a tech valuation at a food valuation. But that's going to hurt you in the long run because you cannot sustain those ridiculous valuations in the food industry or selling real products with real infrastructure behind them. And so we've always wanted to be pretty reasonable in the amounts we raise in what we do with the capital and in our valuations as well.

That makes a lot of sense. I have a different question than I had previously when you told me you raised $5 million two months after launch. So I'm going to blend this into one question, which is your plan for deployment with that million dollars that you raised obviously went well.

Because you had a great launch and your valuation skyrocketed. Could you tell me about the plan and if it went according to plan and what broke in your favor?

Yeah, it went way better than plan, our plan. I mean, you never know, right? When you're starting a business. You have no idea. All you know is that the plan is not going to come true and it's going to veer one way or the other from plan.

I think we thought going in we'd raise a million dollars pre launch. That felt like a healthy amount. We knew we had the investors willing to give us that without much of a plan behind it. And so we raised that to finish product development, to build the brand, just launch the products, and we thought that would carry us through the first year or so. I think our goal going into it was, let's get to six figures a month in sales within our first year. That was sort of the goal. And for a food D2C company, that's pretty good. If you can get 100 grand a month in sales in your first year, that's impressive.

We did that probably in our first week or two weeks.

And so then we knew, okay, this is just a completely different paradigm of a business compared to xo. We should really raise some serious money, pour some gasoline on the fire, and build this thing as fast as we possibly can.

Was that because your Facebook ads converted like crazy or because Tim Ferriss talked about you? Or because Oprah gave a free box to everybody in the audience? What was the reason why you hit that run rate so quickly?

I think it's really as simple as product market fit.

I'd love to say that we had these dozen amazing rare tactics or hacks.

But I would love that too.

Yeah, I mean, we did the same things we did at exo. We worked with similar influencers, we had similar strategies behind our ads, and it just worked so much better. You could take a single influencer, for example, where if they'd spoken about an XO cricket bar, maybe we would get $2,000 sales from that Instagram feed post. And the same influencer spoke about Magic Spoon cereal. And rather than being $2,000, we'd get $20,000 in sales. And so we're doing similar things to what we'd done previously, but they were having massively outsized results. And that was just true across the board.

That makes sense. So personally, I've. I've only raised money one time. It was a million dollar raise. I bootstrapped. All my successful businesses I've bootstrapped. So I'm always curious for those who raise money at the beginning about their plan to bring a return to that. And it sounds like what you're saying is that your plan was to put most of it into after product development, into acquisition, and acquisition being what sounds like sponsorships with influencers and podcasts. So my question is, how comfortable were you or to what extent were you comfortable going into it? Losing money on the acquisition side in order to get a customer base that would take you to $100,000 a month in sales. I know everything exceeded your expectations. I want to know what your expectations were. What were you willing to lose? Or how did you expect to be acquiring those customers?

It's a tough question to answer because I think everybody's answer changes based on the reality they find themselves in. So we were probably willing to lose money for the first couple of months, and we probably had some very conservative assumptions around repurchase rates. And so extrapolating from there, believing that maybe conservatively, one in five people would come back and buy again, and they do that in month three, based on that lifetime value, we could afford to lose a little bit on the first purchase acquisition. What we found is that we were profitable on the first purchase acquisition.

Then we changed our philosophy and we were only acquiring customers if we were profitable on the first purchase. That puts you in an incredibly strong position, and you can just keep on pouring money on it if you're in that position.

As companies grow, they then have to sort of relax that philosophy. You can't acquire customers forever being profitable on the first purchase. And so now we're having to sort of like, redefine exactly what we're comfortable with as we're now at a much, much, much greater scale. And so, you know, early days, we were acquiring customers just so, so cheaply. It just didn't seem right, honestly, the numbers that we saw in the early days. And a lot of our investors just hadn't seen that before either. Now we're sort of back to reality and having to get much smarter and acquisition tactics and having to, in some cases, be willing to lose a little bit on that first purchase, knowing. Now back to the data, not assumptions that it's okay to lose a little bit upfront, because we'll make it up in months 2, 3, 4, 5.

So let's talk about that since it's more realistic today. I know you do a lot of YouTube sponsorships and influencer sponsorship, podcast sponsorships. It seems like a lot of the acquisition strategy is heavy on advertising to audiences that are a fit for the brand. Those can sometimes be hard to track, and sometimes they require a decent amount of investment before you've even tested it, depending on the size of the audience. So what gives you the confidence in that strategy and what's your approach in terms of what you're willing to lose or risk in order to get that strategy to pay off?

Yeah, so we always try to minimize risk. And so whenever we're approaching any podcast, any YouTuber, usually when you talk to them with our manager, their first thing they'll say to you is that you will not see results from one sponsorship. You've got to do three. With us, that's the minimum. We say, no, we will do one. Because of course you can see directional results from one sponsorship. And so if we're looking to sponsor A podcast that costs five grand an episode with a three episode minimum buy. Sometimes we'll even offer to pay a little bit more just to do one episode. And so if it's five grand for three, maybe we'll even say we'll give you six grand for one, but we're only doing one, and that way we minimize risk. And even if, yes, it's true, you don't really know if it's going to work until you've seen the blended results across three. You can get directional information, and then you can make a sort of smarter bet on whether to keep doing it. So we'll take that kind of approach to testing whatever endorsement partner we're talking with at the particular time. And then in general moving forward, we will have always a majority of winners being rebooked that happen in a given month. So when we find a YouTuber or a podcaster or an Instagrammer that works for us, we'll rebook them over a long period of time. And in any given month, the majority of our partnerships will be rebookings. And with a minority being new tests. And, you know, we work it out such that it's okay if the minority tests all fall flat because we know that a certain number are going to perform. Obviously, if the all the tests fall flat for three months in a row, then you're a little bit screwed because you've got nothing new to keep on rebooking. Yeah, but you know, we look into all sorts of data upfront to minimize the chance that a test is going to fail as well.

That makes sense now that you're two years into the process. My goodness, I can't believe you're only two years old, Gabby. But being two years into the process, looking back at those early stages again, I know you didn't raise a ton of capital out of the gate, but I'm assuming those investors are happy with their return. So, looking back, do you have any regrets about raising money at the valuation that you did or in the way that you did? Obviously, you don't know that it's going to be a smashing success, so I know it's hard to play that game, but would you have done anything different?

No, I don't think I would have.

I want our investors to be really happy and I want to share our success. So, yeah, I mean, could we have raised our very first round at a higher valuation? Yes. And would the investors still have been happy? Yes. But right now they're ecstatic, and that makes me feel ecstatic, and it makes for Amazing relationships that are going to last for a very long time. So I don't have any regrets. I don't think I would have done it differently at all.

Yeah. And also because they're ecstatic. Whatever you decide to do next, I'm sure now you have an even better track record for whatever.

Exactly. And I view these things as somewhat binary. Right. If. If I start a business and it's a huge success and it one day sells for hundreds of millions, everyone's going to be happy. It doesn't matter whether a certain fundraising round was raised at a 10 or a $15 million valuation and someone owns a few percent more, a few percent less, it's going to be okay. It's going to be a great outcome, and so it's fine.

Gabby, would you tell us a little bit about the fundraising process? You mentioned that at XO you did three rounds. And. And again, I've only raised money once and it was one round, so I've never gone through the process of. Of additional rounds. Do you have teams or groups that help with that process, or is it always internal to people that you know? Would you share a little bit about that process with us?

Yeah. So there are, like, external teams and companies that do help with fundraisers, I guess. I've never worked with anyone externally, so it's always been me, my co founder, and I would say over the course of several years, it's gone from us having cold meetings with people we've never met to now being usually people we know and have relationships with. So the first fundraising round for exo, we had just graduated college. I'm from Scotland, my co founder is from California. We didn't know any investors in New York. And it actually started again with John Durant, where I sent him a cold email telling him about my idea for exo, and he loved it. We had coffee in New York. He came on board as our first ever advisor in that business. And then he emailed a couple of people he knew and said, you should meet. These young guys just graduated from college, they got a cool idea, and so we met a few people through him. We got our first $50,000 check through an investor that he introduced us to, and then I think they introduced us to some other people, and it just snowballed and we raised the first few hundred thousand that way. And now it's mostly people we've known for a few years. And our philosophy now with investors is very much to optimize for trust and optimize for good people.

A bad investor can ruin everything. And so, given that we now have so many relationships, we generally try and raise some people that we've known for a while and to really just maximize the relationship above all else.

Beautiful. Now, Gabby, I know coming into this space you were, as far as I know, first to market with a high protein cereal. And I'm reminded of one time I was chatting with Tom Bilyeu who was saying that when you come to the marketplace with a new idea, you've got about 18 months before people start copying you. And in your case, I think you were first to market. But now there's Schoolyard snacks, which is similar type of product, even High key has some low, low carb, high protein cereals. There's other people now playing in this space and I'm curious if you think about that, how you think about that and if you've seen that competition be hurtful or helpful to your overall success.

Yeah, there's a lot now. So there's the ones you mentioned, there's probably a dozen others. Even the big cereal companies have actually copied us at this point. And so there's like a General Mills version, there's a Kellogg's version, which is kind of cool. You know, they don't usually copy two year old startups, so that's flattering. I don't think about it very much. None of the startups that are doing similar things have much scale.

And we have a better product, better team, more financial backing. So it doesn't factor into our decision making very often. I could see that changing. If someone raised $50 million to then knock us off, then I'd probably start to pay attention and care about what they're doing. But so far, even though there's been lots of copycats, none of them are doing much that concerns us that much. And I think to your point about it helping, I think it probably does a little bit.

It's not a crazy idea. So it's not like we need lots of other companies doing the same thing to validate the idea and make it seem normal.

But the price point is higher than traditional cereal. And so it definitely helps having a few other brands that are selling very expensive cereal as well, just to make it seem slightly more normal. I was chatting to the founder of one of the first cold pressed juice companies recently and they were telling the story about how when they were the only cold pressed juice on the shelf, nobody bought it because they were like, why would I buy this $9 green juice when Tropicana is $2 for a giant carton? I don't know. And then as soon as he had two or three competitors, suddenly people started buying it. And I think there's the old adage about the first bread maker was the same thing. Nobody knew what a bread maker was until there was four of them. And then people started buying them. There's a little bit of that. Most of the brands doing what we're doing are DTC as well, so it's not like the shelf effect. But there's the same thing in the Facebook feed or whatever, I guess. So I'm sure it helps a little bit. But the short answer is we don't pay a ton of attention to it.

Makes sense. I'm an advisor to a blue blocker sunglasses company called Swanic, and he was talking about our mutual acquaintance Dave Asprey, coming out with some blue blocker glasses. And the founder, James, says, I love it. Every time Dave Asprey talks about his blue blocker glasses, more people discover why they need that.

Yeah. And I think it applies even more for a product like that, where there needs to be education. Right. So your average person in the street doesn't know what blue blocker glasses are or why they would need to buy them. And so for that, I think it really, really helps. Just the more education, the better. And with our last business, that was also true. Right. Nobody knew what cricket protein was or why they should eat crickets. And so with that business, we wanted there to be as much competition as possible because they're all sharing the educational burden. This time around, though, we're selling healthy cereal. Nobody needs help understanding what that is. And so we don't need 20 other companies talking about it.

Makes sense. Now, you mentioned that you would be a little bit concerned if someone raised $50 million to knock you off. What theoretically could someone do just with more capital? I mean, you have the brand, you have the distribution, you have the customers. You're way ahead on flavor and product. So why would or could money.

Take you from the top seat?

Yeah, just to be clear, I wouldn't be that concerned. I'd be a little bit concerned. And I'd be concerned because with money, they can make things harder for us. So I would not be concerned that they're going to beat us or overtake us, but I would be concerned that, for example.

They would use all that money to subsidize losing money. On bidding for our search terms on Google, for example, someone came in and they just said, all right, we're going to commit a million dollars to bidding $100 on anybody who searches for Magic Spoon on Google. And so they go to that brand, not to us. That would make our life harder. And they could do the same thing on other advertising channels. They could just overpay for all kinds of things that we pay the right price for and that would probably make our life harder. I don't think anybody would do that. They'd be starting from such a point behind where we are that it wouldn't make sense for somebody to raise $50 million to knock us off. But just a hypothetical if they did, that would be a little more concerning than the existing competition.

There's an interesting theme that's coming up about your mindset around acquisition of customers and even tipping your cap to the fact that it would make your life harder if another person came in and was willing to spend more on advertising or spend more on acquisition than Magic. Spoo.

I'm curious about that mindset because I did hear you say on a podcast once that the reason you raise money for XO is because you wanted to go big. And I interpret that as you wanted to be aggressive in your acquisition and your marketing. So am I hearing you correctly by piecing all of those little breadcrumbs together?

Yes.

We want to be very aggressive here, but we want to be aggressive to a point. And I think there's a danger amongst VC backed companies to be aggressive to the point where it doesn't make business sense anymore.

We're generally willing to be as aggressive as we think is still reasonable, but no more. I could imagine a company that wants to be aggressive to the point where it's unreasonable short term because they believe long term it will make sense. So if you were taking a 10 year view on building a serial business and you had all the money in the world, then you'd probably get even more aggressive than we are right now because you much longer time horizon and you'd be willing to make bad decisions short term. For the long term, we're not quite aggressive to that point. We're still trying to build a business that's a real business right now, not one that's willing to lose money over an extended period because we believe that maybe three years from now it'll pay back.

So let me go a little bit deeper there because you raised $1 million for the launch of Magic Spoon and you said that you had six people pretty close to the beginning. I don't know if they were right at the beginning.

So that one year in we were six at the beginning.

One year in.

Yeah, the beginning it was just me and my co founder.

I see.

Okay.

Okay. Because I was going to ask a million dollars. You could theoretically burn through a million dollars very quickly, giving a little bit to Tim Ferriss to talk about you and running some other sponsorships. All of a sudden, half of that is gone pretty quickly. So that doesn't seem like that much of a cushion. If you've got six employees now that it's just you and your co founder, it makes a little bit more sense. But did you have a plan? Like, do you have like in the back of your mind, we have this much cushion that we're going to need to do another raise or what? What was your thought process going into that?

Yeah, generally you don't want to have less than six months money in the bank, like if that. And the more cushion you have, the better you're going to be at fundraising. So fundraising, it's, you're just, you know, you're doing a dance and it's all about leverage and it's all about power. And the more leverage and power you have, obviously the better the fundraiser is going to go in your favor. And if you have 4 months cash left and the investor knows that you've got no power in that situation. So generally we've always fundraised when we don't need money. And if you make it clear that you don't need the money, the fundraiser is going to be more successful because the power is more on your side there. We didn't do things like Tim Ferriss podcast our first month. We, we were, we were a lot more careful than to spend like that much on a single bet. It wasn't until the first few months of the business and like we were already doing well on most channels that then we decided to make large individual bets like big single podcasts.

That makes sense. Now. We've been spending a little bit of time talking about how awesome it is to be the founder of Magic Spoon.

Right timing, right strategy, right partners, you know, zero to millions of boxes of cereal in like six seconds. But I at least know when you were at xo, there were times you looked yourself in the mirror and said, wtf are we doing here? So the reason I want to go back to this is because.

We, we often publicly celebrate the wins and we privately hide the losses and privately.

Hold those burdens quietly because we don't want to scare off investors or scare employees or scare spouses or what have you. So now that we're ahead of all of those and we're now in the Middle of an amazing home run. Can you tell me about the lowest point you felt in your last business or in your career as an entrepreneur?

Wow. Yeah. I'm trying to. I'm trying to pinpoint a. I don't know if there was a single moment.

If you tell me your life has been all roses, I'm gonna punch you through the zoom. No.

Not in the slightest. Not in the slightest.

I think the. I think the hardest part to be as a founder actually is not necessarily like the low, low point. It's that zombie ing a long period of prolonged things are going not very well, but not badly enough that you want to walk away from it, but not well enough that it feels remotely good. And so with exo, we had sustained periods of that zombie being along where it's like, we're trying really hard here. It's not working as much as anybody would want, but there's these little glimmers of hope that are just enough to keep us going and just enough that all our investors are like, yeah, let's see if we can make this work. But not enough to feel good about.

That lasted a while. We ran that business for five years. And I would say the first year was full of superficial success. That, to me, as a 22 year old or 21 year old at the time, felt amazing, right? We got like Forbes 13 to 30, like New York Times articles, all this stuff, right. Of college that just felt so good. And I think those things that felt good masked some of the underlying business fundamentals a little bit. Right? So we probably that outweighed some of the sales, growing slower than we would have wanted to. But then there was plenty of time at EXO where it was that sort of like just really, really hard days for many, many days and weeks and months at a time. So I would say more that than any one moment that just felt horrible in and of itself.

Did that give you imposter syndrome where all these. Where people are saying, Forbes 30 under 30, meanwhile, the day to day is you're like just slogging through. Did that ever give you an internal complex?

Not really. And maybe this is going back to my point earlier about having to be a little bit irrationally overconfident. I mean, there were definitely moments, right? I'm sure there's always moments for every founder. But I did believe, and I do believe that we did as much or more as anybody could have done with that business. And we also did sell millions of cricket bars.

It was not the success that we or our investors wanted going into it, but it was a meaningful business. And so I think reminding myself of that during those times helped a lot because I think it's easy, especially when you're always reading about companies that are doing tens or hundreds of millions of dollars in sales and raising endless money, it's easy to forget that doing, like 100 or 200 grand a month in sales, selling like crickets, you know, in like, one of our early years, like, that's insane. Like, yeah, like, nobody would have thought anybody could do that. But that, like, success felt to us like, like a failure. And so I think, like, it's hard to have perspective when you're. When you're in it now, coming out of it. Like, I have a lot more perspective on it and feel a lot better about it than I think I did during, like, the final months as well.

So let's go there with the time we have left because.

I know you don't regret anything. When you're running a company that's growing as fast as Magic Spoon, all those lessons come full circle and serve you in some way. But what do you know now that you didn't know when you were running xo?

The single biggest thing is that product market fit matters more than anybody talks about.

It's almost all that matters. I think, like I said earlier, I really didn't appreciate that at xo. I thought if you pick an idea that's within the top 50% of ideas, and if you're smart, it'll be a successful business.

What I now know is that the difference between an idea that's the top 1% and the top 10% is everything. That is whether it's going to be a huge business or not.

I think that it's maybe easy to understand intellectually, but.

It'S hard firstly to figure out whether an idea is a top 1% or a top 10% idea, then when you're in it, it's hard to know whether if it's not working, it's hard to know whether it's not working because the idea and the product market fit isn't quite right or if it's not working because you're not doing what you should be doing. And so I talk to founders all the time who have.

If you look at Magic Spoon is totally mainstream product that can go mass and EXO is far too niche. Never going to be in $100 million brand in a reasonable timeframe. Talk to lots of founders who have ideas that are somewhere in the middle here. You know, maybe there's like a You know, new ingredient they're putting into some kind of product, but it's not as novel as crickets. And they, they're often in some version of that, like zombie limbo mode that I described. Maybe not quite as, quite as bad as it was with crickets, but similar where they're, you know, maybe they're in Whole Foods, but they can't break into like the next level of mainstream store. And a lot of founders end up just staying in that limbo mode for many, many, many years. And I think it's not until you break out of that you realize maybe you could or should have broken out of that earlier. And so with exo, we were in that limbo mode for a while and in hindsight, maybe we could have got there faster and should have got there faster. I think it's hard when you're a young and experienced entrepreneur and you also have all these investor incentives. And so their incentive is that you just keep on going forever. If the business even has a 10% chance of being successful. A purely self interested investor wants you to spend 20 years trying to make that happen rather than pivot out of it after two years and go and do something else.

And so I think that was a learning. Maybe fail fast would be the startup lingo of what that learning was.

Um, and fail fast in terms of finding product market fit.

Correct.

And, and does, does that mean, and forgive me, I just don't have a better word rate of ways to fray this. But like did you get lucky with product market fit with Magic Spoon, or was there a different way that you were thinking about that product that was, that was different with both of these brands or, or said differently? Like did you learn something at XO that gave you different context to launch that top 1% idea? Or did you have two wacky ideas and one of them just happened to be a 1% idea?

Somewhere in between.

Okay.

With Exo, we were 21, we were in college and we came up with the idea and started the business. We didn't know what we were doing. We thought it was a cool idea and it was a cool idea. Then we spoke to some people and they also thought it was a cool idea. And so then we moved to New York City and we did a Kickstarter campaign and we raised maybe $60,000 on Kickstarter, which at the time was a lot. And during that month we were in Forbes, the New York Times, and it felt amazing. And so then we raised some investment and it just gradually became a business. There was no moment at exo, where we sat down and we did market sizing and surveys and focus groups and brought logic and process to coming up with the idea. We just thought it was a cool idea, and then it became a business. Magic Spoon was certainly not like a business school case study in how you come up with a good idea, but there was more process there. We knew that we wanted a large market. We knew that we wanted something that made sense for DTC logistically, meaning we wanted a product that was light and compact and easy to ship and had a long shelf life. There were parameters we had for coming up with the idea this time. And then we spoke to a lot more people we trusted. We spoke to potential consumers. So there was a little more process that went into it, but we certainly did not know that the product market fit was going to be as good as it turned out to be. And so 100%, lots of luck there as well.

If Magic Spoon were to be acquired tomorrow and you got to run off into the sunset, dance in the sunset, or whatever you want to do with your time, when the time came to put your teeth behind your third project, what criteria or what would you be looking for in that project.

To make it interesting enough for you to pursue?

I don't know would be the short answer. I think for my next business, it would probably have to be quite different. EXO and Magic Spoon are very similar businesses just at vastly different scales. And so I think next time around, I'd maybe want to enter a different industry other than the food industry.

Or maybe just not start a singular business. Maybe it's working with a bunch of companies. Maybe it's a portfolio of lots of brands that I'd spin up all at once. But I think it's going to be hard. It would be hard after Magic Spoon to come up with a singular food or beverage idea and launch it, just as I did with Magic Spoon, just as I did with exo, especially knowing that it's probably unlikely to get to the scale that Magic Spoon got to as quickly as Magic Spoon did. And so I think it would need to be a little more complex in other ways to make up for the fact that what we're experiencing right now is very, very unique in the scale and speed.

Well, Gabby, I must say I'm. I enjoyed every minute of this conversation because I'm a fan of both you as an entrepreneur and the business. And I think this is just a fascinating story. I interview so many entrepreneurs after the exit, you know, after, after. Like, I just. I love the story of Moise Ali at native deodorant. 0 to 100 million in 18 months and he's become a friend over the last couple years. But we didn't meet until after the exit and here you are right in the middle of it, you know, living through the scale that will I'm sure be a nine figure exit. So it's really fun to watch what your company is doing and what you are doing and how you're evolving as an entrepreneur along the way. So thanks for hanging out with us. It's great to meet you.

Likewise. Thank you so much.

My friends, if you listen to this episode and you feel fired up, I think you're in good company. I love working with entrepreneurs who have aspirations like Gabby. And if you're an entrepreneur who has those types of goals of finding the ideal product that matches your skillset and your desires, I'd love to help you. Inside of the Capitalism Incubator this is my incubator where my team and our coaches were all running seven figure businesses or have had exits. Work with our members to help them get clear on their idea, launch profitably and build the foundation and the relationships they need to have a seven figure business. You can find out what we do and decide if you're a fit. Over at capitalism.com Inc. That's Inc. This is like an accelerator for you to find the idea that you're really excited about to bring to market that is in alignment with the change you want to create and the success that you want to have. I'd love to serve you over there. One more thing, if you've got that, if you're already in business and you've crossed a million dollars in sales, I serve as the investor and advisor on some of those businesses that I'm excited about. Inside of my fund we create win win scenarios where we join as advisors for free and we have capital ready to deploy if you need to hire agencies or if you need to buy more inventory or to spearhead new projects. And then we advise the business to use that capital to grow to its goals. And then when we grow together, then we unlock an advisory position in the company. So it's risk free for the entrepreneur and it's exciting for us when we're really in alignment with the business. So if you've got a seven figure business that you have dreams of taking to eight or nine and you'd like some help, you can go over to capitalism.com fund and filling out a little form on that page will put it right on my and my partner's desk, and we'll reach out if we think it's a fit. I hope you enjoyed this interview as much as I enjoyed recording it, and I hope to see you on the next episode of the podcast. Thanks for listening and I'll talk to you soon.