Welcome to our live show!

We're live, raw, and real at Drink Up Rain, Shine, Snow. Uh, Adam and I will be here every week. I guess Adam's played hooky a couple of times, so I forgive him. But, uh, you should tell your, your beautiful wife or spouse that, uh, you need to arrive at these things. Very important. I want to welcome— I want to welcome a special guest, Roger Lee. No relation to Bruce Lee. We talked about that yesterday, uh, but, uh, I think Roger has a little bit of story to share. But, uh, Roger's, uh, an attorney, uh, in a law firm out in Los Angeles, and he specializes in, um— and I'll let you tell your story, Roger— but specializes in, um, uh, CPG, uh, uh, apparel, food, and beverages. And, you know, Adam and I always talk. Adam's been giving me a bunch of attorneys lately, but— I, you know, Roger and I found each other, so I have my counsel right here today to walk us through. But welcome, Roger, to Drink Up. Tell us a little bit about— introduce yourself to everybody.

Yeah, so again, Roger Lee with Stubbs Alderton and Mark Lee, the 45-ish person law firm in Los Angeles. And as Sam mentioned, I do work with a lot of CBG founders and also middle market companies that's been operating for a little while. And maybe don't have enough resources to sort of hire their own attorney in-house. So we become that attorney just outside of the company, and we, you know, we help handle the daily grind stuff that comes up— NDAs, distribution agreements, employment issues that they come up, and litigation, which hopefully doesn't come up, but unfortunately does sometimes.

Wow, that's a scary word, litigation. What does litigation mean?

Litigation means somebody's very mad at you. Or maybe you're very mad at somebody else.

Got it. Got it. I talked to my partner, Alicia Vargo, all the time. I'm like, hey, we got to make sure that we protect ourselves, you know, and have certain things in place. Well, tell us a little bit about your— before we get started, you know, you know how I roll, right? So we— I'm kind of thinking of me as like the pitcher. So actually, someone told me that I'm like a pitcher. So I'm going to be, you know, asking a lot of questions. And then Adam Adam is the thinker of the team. He's probably going to come across the screen and say, stop calling me the thinker, but you are a thinker.

No, I, I love this compliment, but I— the analogy of you as a pitcher for this podcast is fantastic. Whoever said it was spot on.

Yeah, it was, uh, it was, uh, funny. It was on the— with Firebelly, um, uh, marketing with my friend Duncan Alney. Oh, I'd love to get you on that podcast as well, Roger. I'm sure Duncan's watching this morning. He'll probably want to talk to you as well. But tell us a little bit about your journey, you know, other than— I know you're not related to Bruce Lee, which I was very disappointed, by the way, about that, but that's okay.

See, now you're telling me that I should have named my son Bruce Lee just so I can say I am related to Bruce Lee. Exactly.

We talked about that yesterday, actually. So you could always like throw in change of name or whatever.

Yeah, right. Uh, so yeah, I work with a lot of CBG I have a lot of fun doing it. You know, the thing that drew me to CPG companies is the founders, really, and the fact that I can hold and understand the product very easily and understand why it's good for me or why it's good for the planet.

Yeah.

You know, my career as an attorney started off actually working with renewable energy, and I like renewable energy sort of for the same reason. I felt like I was saving the world, and I can drive out to the desert or, you You know, in California, it's to the desert to go see the wind farms we're building or to see the solar farms we're building, right? But you didn't quite get that interaction you get with CPG founders who really have a passion for what they're doing and have a really— oftentimes have a really great story behind it, right?

Mm-hmm.

And it's that that is just very addictive. And that enthusiasm, you build off of it. You can't help but feel passionate for their project when you're working on it. on it. And that's just kept me going. And so now I've grown into my own practice. As you said, we work on a lot of apparel. Apparel, food, and beverage are sort of the main items that we do, but we also work with pet products, which is a very hot item right now, and cosmetics as well.

Yeah, I have my 2 Aussies. They join me on the podcast every week, and we herd ourselves into the office, and they're laying here. So I would imagine that pet food Uh, a very big— actually have a friend Barbara out of, I think it's Barbara out of New Jersey or New York, but she has a little pet food, uh, Lick You Silly dog treats. Actually, I have to connect you up with her. And she's, believe it or not, she's in the apparel business as well, which is kind of— maybe there's a parallel there to your point. Well, tell us, so your journey began at birth. Well, actually, your journey began with entrepreneur parents, right? So talk about a little bit about that. So you have an option, I think, to be an attorney and have your own practice. You have to be— you are, you're an Maybe talk about how you kind of— how they shaped you to get to that point.

Yeah, so I mean, growing up, my parents have always owned hotels. I mean, nothing big and fancy. Think of sort of like a Best Western maybe, right? We're not the Hiltons, all right? Um, and a single Best Western, by the way, not the whole chain, right? Um, but you know, I saw how hard they work and I saw how much they loved it, right? If I have to be honest, my father loved it more than my mother, but I saw how much they loved it, right? And but also very important, I saw the security that it gave us, right? And that's all its ability to have have allow us family vacations and things like that. But I also saw how much work it was. I mean, you know, you're running a hotel; it's 24/7, 365. It doesn't close, right? And your employees. they want holidays off, but the hotel stays open. And I saw, you know, that amount of work. And even though it was a lot of work, you know, it was very rewarding for them too. And as a kid, I, I would go in and help change sheets and move furniture and, you know, and so I pitched in also, right? Um, you know, child labor is okay when it's family. Okay, so I'll just put that out there. But that also sort of, I think that instilled that work ethic that's required for entrepreneurship, right? And quite frankly, also required if you want to build your own practice as a lawyer. So that really stuck with me. And, you know, I was telling you this, Stam, earlier, when I was younger, I really had no idea what I wanted to do, but I knew that I wanted, I needed to do something, and getting, becoming a lawyer was sort of the jack of all trades, right? You can become a lawyer and sort of do anything after that you wanted to. And so I thought maybe one day I would do business or something, but at the end of the day, I love doing law. I love helping people, and law seems to be the way that I can help people the best.

So you start— you started at Berkeley in poli sci, right? And then somehow you went from Berkeley to Boston. Was there a reason why you went clear across the US from your home roots to to Boston? Was that like a particular program that you wanted to be part of? Or, hey, that was the only university that accepted you, which I'm just joking. But hey, that was real, real, real, real fact here, everybody. My— I get into college, I was actually had to go to summer school to get in. And then literally the professor lined us up and said, look to the left and look to the right. Y'all will be gone. And I think there was like 30 of us. And I think only 2 of us survived summer and kept on going.

So Wow.

Yeah, that's my roommate. He may watch this one day, but he went to the rock quarry every day and he never moved his books. And he goes, man, I don't know why I flunked out and got a 0.0. I said, because you never went to class. Anyway, I digressed. So, so you went, you arrived at Boston. Why was— why Boston? Or how did you— how did it take you out there for your beginning of your journey as a corporate attorney?

Yeah, so Lawyers, if you want to stereotype us, we are a bit risk-averse, and I actually do kind of fall into that bucket. I am a bit risk-averse as well, and that actually shows up in my decision to go to Boston, and here's the reasoning. I spent— up until I graduated Berkeley, I spent my entire life in California, born and raised in Los Angeles, right? And even today I'm practicing in Los Angeles. Well, law school I saw as my last chance to move out of California with a clear path back to California. If I hated it, 3 years out of law school, I'm done, I'll move back. If I love it, I'll find a job and stay out there, right? What ended up happening was that I came back, and then the firm I was with asked me to move to New York. And at the time, I was still single, so I was like, yeah, I'll move to New York, that's an adventure, right? I already have a job lined up, you know, there's nothing I need to do other than find an apartment. So I moved to New York for a few years. I always tell people, I loved working in New York because the work is interesting, but I hated living in New York because being born and raised in LA, I was at 16— at 15 and a half I had a permit, and at 16 I had a car. In New York, subways are great and they get you everywhere except for getting you out of the city. And so I, I felt sort of imprisoned in the city in a way. Um, so after a few years in New York, I had to come back to LA again.

So the journey— so you got back to LA. So this isn't your first, um, firm that you were with. Tell us a little bit about how you arrived where you're at today and what you're— so you're a full-on partner in the firm that you're in now?

That's correct, yes.

Yeah, yeah.

So I started off— many people in my firm start off in sort of what we call the, uh, big law, which is the big multinational law firms. If you're a lawyer, you know the names. If you're not a lawyer, all the names kind of sound right.

Yeah.

And, and so a lot of these law firms, they're, you know, 1,000, 2,000 attorneys scattered across the world. And so one of these firms I was at was like a 3,000-person law firm, top 5 by numbers, right? Um, and they had a very large New York presence, as all these firms do. Um, and they had told me essentially at the time, like, look, you're, you know, you're— I forget how old I was at that time, but I was, you know, a 9th or 10th year attorney. And they told me, if you if you want to make partner, you have to get in a lot of client, client time, you know, client-facing time. All the clients are banks and they're all in— or private equity firms— and they're all based in New York. You're sitting in Los Angeles, you have no clients down the street, right? And so they say, you want to make partner, move to New York. And that's, that's sort of the genesis of my moving to New York. Um, but that also sort of, sort of pinged in my head, well, if I want to make partner, I need to get to know private equity firms, the Blackstones, the KKR, and, and you get to know the banks, right? The banks that are investing in financing these huge projects. I didn't think I was ever going to be that guy, but I could be that guy that knew people like my parents, you know, entrepreneurs, family businesses, whether it's tech startups, whether it's hospitality, whether it's CPG, right? And find that network and build a practice out of that. The problem though is if you're a tech startup or if you're a CPG startup, you're cash-strapped. You're trying to get your products out there. You're trying to market yourself. You don't want to pay $1,000 for an attorney or $1,500 for an attorney, right? But these big law firms, because of the overhead they have and because of how much they're paying their lawyers, they can't sort of be nimble and flexible like that with the startups. And so, which is interesting because that's actually how my firm started with the founders. Our founders came from Akin Gump, another one of these 3,000-person law firms that just couldn't, didn't have the space for a startup practice. No fault of Akin, Akin's a really great firm, but they just didn't have the space for a startup practice with more flexible fee arrangements. And so, you know, that's what drew me to Stubbs Ollerton was that, hey, these guys, they're entrepreneurs and they want entrepreneurs as clients.

Interesting. So that's how you arrive where you're at currently.

That's right.

So we've got a question. Maybe, Adam, you take the question from the audience. Can you see it? Can you see the question? Why don't you take that and walk what this particular person, which we know is asking about Alicia.

Yeah, shout out to Alicia. Good morning. So she asked— make sure I capture this right without too much or too little— what might the unexpected pitfalls be that small to mid-sized businesses need to be mindful of? From a, which I assume she means from just a, you know, you talk about your Swiss Army knife legal multiple angles perspective, right? What have you seen?

Yeah, so there are 2 things immediately come to mind that have been issues that I've seen. I see all the time, quite frankly. One is your partners, right? Most of the time, sometimes you're a solo entrepreneur, but a lot of times you have partners. And when things are going good, things are great. But when things are going bad, oh boy, it could get messy, right?

Uh-oh, this is my partner talking. She's gonna be calling you. Okay, I got this partner named Sam Anderson, but keep on going, sir.

Well, and that's when you're gonna wish that you had talked to an attorney before to get your partnership agreement in place so that everything's agreed to, right? And yeah, the other issue is You know, you start a company with your partner, the company's not worth anything yet, but then you hit it big and suddenly you can't decide how to split the company. And it's a little late to split the company after it's worth $5, $10, $20, $30 million, because then you're trying to figure out, okay, well, no, I did, you know, XYZ, but they did A, B, and C, which one's worth more? And whoever did XYZ is gonna say XYZ is worth more. Whoever did ABC is gonna say ABC is worth more, right?

Right.

And the other thing to be very careful about, especially with CPG companies, is brand protection, right? The name of the game is building brand equity, right? No matter what product you're pushing, you want to build brand equity. One of the ways you build brand equity is by, well, first of all, you have to have a brand. And secondly, you have to protect that brand from other people, right? Filing for a trademark or a service mark isn't that difficult. You can find all the instructions on the USPTO website. The issue is when you do it wrong, USPTO is not going to tell you. So you make all your filings by yourself and you think that you have the protection you want, but you actually don't. And that's unfortunately an issue that we've run into in the past where a founder trying to save money, they've done the filings themselves, but they done it incorrectly, they filed it for the wrong category, and so it doesn't give them any— they have a trademark, but it doesn't give them any protection for what they're actually doing. You know, in my most recent case, luckily it was no harm, no foul. We refiled and sort of corrected everything and it was fine. But worst case scenario, somebody comes in and takes your trademark, and it doesn't have to be nefarious. It can just be somebody who happens to think that, oh, you know, Bev Assets is a great name, I'm going to use that name.

And not— so Bev Assets, so we should trademark that?

Absolutely, yes.

All right, can you get—

can you get on?

Can you get— okay, I'm employing your services live right now, but I don't know if I can afford the fees you've told me, so we got to work out some type of, uh, trading agreement. I got some really good stuff here, like even, you know, products or whatever. So, but, uh, all serious, we probably should talk.

And the trademark work actually is a flat fee because it's, you know, we know how much filing trademarks cost. We know how much the filing fees are with the USPTO. So it's a flat fee arrangement. I don't know the cost offhand, but it's a few hundred dollars and you've got to do a search that's also a few hundred dollars, but that's really about it.

All right, we'll do it. I've employed your services for real, so just get at it today, you know, so, and let Alicia know you can see our Bev Assets logo on LinkedIn and We bought the URL. I thought if you got the domain, I don't need to do anything else, right? It's all good. I got the domain.

Well, you do have— and let me sort of preface this by saying I am not a trademark attorney, although I do have trademark partners. Um, you do have a certain level of protection because you are the first one to use it commercially. Um, but that also means that, you know, and, and what's interesting is I'm sure there's a settled case law. I just don't know what it is. You have the website, so you have a national, maybe even international reach. You certainly have the protection of a common law trademark in Minnesota. I am not certain that you have that same protection in California or New York.

Got it. We are incorporated, or our business is set up in Minnesota. Uh, Jeff, uh, Jeff, I'm gonna butcher your name, but Jeff has a, uh, question. Um, he said also, well, he makes a comment, also a thorough search needs to be done by a company like Thompson and Thompson, not just Googling? I'm not sure. Jeff, maybe explain what you're asking, or maybe Roger understands.

I think what he's talking about is what we call a knockout search. And that's just to make sure that before we file for your trademark, Bev Assets, that nobody in Seattle or Miami or somewhere else has already used that name. Because if that name is already on file with the USPTO, Then you can't, you can't file for that name. You can fight them for the name, right? But you can't file for the name. You'll just get rejected.

Here's— I know Adam's thinking, so you can come in and ask a question in a second. I just have one more question. Um, so I have these friends, I'm not going to name them, but you probably should meet them. They're in LA, Tiffany and Juan. Um, they have a tea, Herba Monte, and, uh, it's really cool tea. Maybe I kind of gave them up just now. But anyway, I think there was a rather large company actually started using that, but they have a trademark on it. And I know they talked to trademark attorneys or whatever, but it seems like sometimes people— what I heard is you could have this name, but people could actually use it. And if you don't like file like a grievance or like to stop them from doing it, they can actually steal it from you. Is that true?

Well, the, um, and again, not a trademark attorney, um, but with a term like yerba mate, if that's what their trademark, that may be difficult to enforce because I, I believe yerba mate is, is just a leaf, right?

Yeah, it's a leaf.

Right. So it, it is hard to say I have a trademark on oak tree because there's oak trees everywhere and, right, you can use The term oak tea for anything. Same thing with yerba mate. Um, but you know, if they have the trademark on it, I think that's great. Um, and that's a great first step. But you're right, you do have to defend it when you find out somebody's using it, right?

If you don't defend it, it basically could just go through, and then they're like, well, a year later, like, well, you didn't say anything, I've been building this, or whatever, and they, they can take it over. So there's a lot of, uh, I don't know what the word is, but bad people out there that will take advantage of Okay, Adam, I see that. See, you notice it, Adam, when he starts to like squint and look up. This is a signal.

Uh, Sam, Sam, ever the astute observer. Uh, so I'm curious, you talked about trademarking the brand. I talk to a lot of people that will say comments like, oh, you know, or you'll hear things even just, you know, because we all become nerds and, you know, we end up reading the backs of labels much to our partner's chagrin when we're grocery shopping, right? You see Proprietary blend, right? Or, you know, unique formulations. And don't get me wrong, sometimes they are.

Mm-hmm.

Sometimes, but most of the time it's all common components that we're all familiar with. They're just put together in whatever the order happens to be for that particular brand. So I guess what's the question been like, um, or, or what questions have you gotten from brand owners related to stuff like that? And how do you advise them on the best way to manage that without, I guess, overdoing it, if that makes sense?

Yeah, so a lot of the question, it comes out to, well, what does make your blend special? Which I think, Adam, you're sort of mentioning as well, right? How does this— how is it different from other people? Is it the blend itself? Is it maybe how you're blending it, right? That might be something special too. Um, but then if the blend is proprietary and it's The other question is, okay, well, do you want to file for the blend? Because once you file for the blend, there's some information out there. So, right, you may not want to— you want— you can still say you have a proprietary blend, but you may not want to file anything to protect it because the best protection is keeping it secret.

Sure.

Yeah.

Okay. Nope, that's part of the reason I asked. Um, and how does that play in with And I get a— it happens less now, but I used to get a lot of questions about, or brand owners would be very— I don't know, the term intellectual property would come up constantly, right? Oh, this is the IP of my brand. And I always had to chuckle very politely because again, it was every now and again I would catch one that I'm like, okay, this is truly unique. I've not seen this before, which doesn't mean nobody else has, but I've not.

Right.

But a lot of times it was very— it was just their own way. You know, it was household in the commercial sense materials, but just combined in certain volumes and dosages that led to their product that was unique and was doing well and people enjoyed. So when is the suggestion you make for brands around intellectual property kind of that same as what you just said, or is there anything else you'd add given that verbiage?

I think it's still the same that I said, you know, you have to think about how much of your, your blend, the information about your blend you want out there.

Sure.

It's different from the IP of a trademark where, you know, the name Bev Assets, you don't want anybody using that as a business name.

Sure, sure.

Yeah.

Interesting.

And everybody knows that. Everybody knows, and you want everybody to know Bev Assets. You don't want everybody to know what's in your proprietary blend or the ratios. Sure.

We do have a proprietary blend, by the way, in Bev Assets that I'll share with you offline, Roger, but you got to sign an NDA, and you could probably just draw it up and at least be neutral. There you go. All right, so I'm just trying to impress you. I'm not an attorney, full disclosure. Um, let's— so one of the things I think you specialize is in M&A work, mergers and acquisitions. Is that true?

Yes, sir, that's right.

So what— so from taking the beverage business, because obviously that's what Adam and I are in, that's what Bev Assets is about, and Drink Up, obviously the word Drink Up. So what is like— okay, I'm— everybody I talk to, they're like, hey, I want to test it. I simplify this, but they say, I want to test it, I want to build it, I want to scale it, and I want to sell it. And everybody wants to 10x it, right? Everybody's like, I'm going to 10x it in 2 years, I'm going to 10x it here. I'm gonna be the next Tito's and the whole bit. So how does one— what is the journey like, you know, uh, from your point of view? And when do they need to enlist your services to actually make those things happen?

Yeah, so, you know, one thing I like to say is that, um, we are your cradle-to-the-grave attorneys, meaning, you know, we will help you form your company as early as that. And we will help you sell your company, right? And it's sort of everything in between. So when do you call the lawyer? Before you form the company.

Ah.

And you, you can form the company yourself, that's fine. And, you know, if there's anything we need to fix in your organization documents, we can do that. That doesn't— that, that's not a whole lot of work anyway. Um, but you want to talk to attorneys and you want to talk to accountants early. Accountants are also very, very important because you want to make sure you get all the tax benefits possibly can. And there are a lot of tax benefits that I have an inkling of, but I can't fully explain to you, which is why you need an accountant. And they'll help, though. We can talk with them and figure out what's the best way to set up your company. And that's important because that affects, you know, years down the line when you're selling the company, that affects your taxes when you're selling the company. So you have to keep all that in mind, plus you want to get all the tax credits and whatnot that you might be able to apply for. So we come in, we help form the company. You have an idea, we'll talk to you about what you want to do, how you want to do it. You know, are you going to raise funds from friends and family? Are you going to raise funds from venture capital? Do you know people in the food industry that are interested in your idea that might partner with you? at least be a financial partner, not an operating partner. You know, how, what, how do you see this company running, right? When do you need the money? Do you need the money right off the bat because you already have your idea, you're ready to go to go and go into production, or are you still testing your product? So, you know, you're just in your home lab, in your home kitchen, you're working on your formulation. That's not going to take a lot of capital, but you know, or you think you know, that in 6 to 12 months You'll be ready for production.

And then what you're describing is— sorry to interrupt, but that's how I roll, by the way. What you're describing is you keep people away from the landmines.

We try to, we try to. But quite frankly, a lot of the entrepreneurs are very headstrong. And they just want to go, go, go. And I don't blame them.

They love landmines. They search them out.

Well, everything I got on LinkedIn this morning for 2— I usually get on LinkedIn. Hey, Alicia, I hope you're listening. I'm only on LinkedIn in the morning and at night. During the day, I'm actually doing my job as your partner. I want to make sure you know that. But when I was on LinkedIn this morning, everybody's like, hit go, hit go, hit go, just go get on the high dive, jump in the deep end. That seems to be a theme for sure.

Well, you know, you've probably heard the term, you know, break things and apologize later. Right?

Sure.

Yeah.

And that works most of the time, right? Um, you know, we come in and clean up messes, but sometimes you make such a mess that it can't be cleaned up, and that's gonna be a problem. Yeah. At the same time, you don't want fear of legal ramifications to kill your business, right? So there's a bit of a balancing act there.

Yeah, well, I love it that basically you, you actually do it from A to Z. Super nice. I never thought about the way— we were talking about this yesterday, actually. You were walking me through that. That's why I I, uh, I pose a question oftentimes. I mean, how I've created a couple companies. I have Health and Life Shield of Minnesota, you know, Stream of Thought. It was just like, hey, I just, you know, I figured out somehow through legal.zoom you can go get your, you know, set up your company. And then with Alicia, she taught me about going, you know, we had— we have an accountant. We do have an accountant, and I think she has a couple attorneys on speed dial. Now have one. We have you for sure. Because I can call you anytime now. You said that, right? You won't bill me if I have a quick question?

Like you said, right, Sam? Pick up the phone. Just pick up the phone.

Oh, that's funny. Yeah, he is a fan. Just pick up the phone. He is indeed a fan.

Roger, I got that from my friend Michael. He's like, you know, you need to put that in the tagline. So Michael, if you ever watch this— I don't know if you give me your time of day, Michael, but if you do, he's my sensei and the master of what he does, and I call him sensei. But, uh, Yeah. So mergers and acquisitions. So, so I interrupted you. So anything else like that people need to really know in that area? I'm a brand, you've walked me through every step to think about it. And you're gonna get me to— we said cradle to grave. Is that what you said?

Yes. Cradle to grave.

Cradle to grave.

Okay. The thing to think about for, for selling the company is while you're running the company, even if I'm by your side the entire time, while you're running the company, there are gonna be skeletons that you're gonna brush under the rug, right? Whether it's a partner issue, whether it's employment issues, whether it's inventory issues, it can be anything, right? All of those skeletons are coming out when you're selling the company, right? The buyer is gonna dig into your company with a fine-tooth comb and figure out what's— they're gonna, they're gonna— First of all, let me, let me say this. They're gonna come to you and say, hey Sam, I wanna buy your beverage company for $50 million. That's how much it's worth. And you're gonna be like, oh, that's terrific. Let me sign on the dotted line. And then they're gonna say, okay, open up your books and let me see what you got.

Is that called the cap table?

The cap table is who owns what.

Okay.

So the cap table will say, Sam, you own 99% of the company. Adam, you own 1%.

Okay.

Did you know that, Adam? You only own 1% of the company.

It's more than I owned before we got on this call, so I'm good with it.

Congratulations, Adam.

1% owner.

Um, but, you know, um, the buyer will look for everything wrong and they'll, they'll tell you, hey Sam, we see this issue back from 2016, we're gonna have to knock you down to $40 million. Oh Sam, there's this other issue we see from 2015 with these employees, you know, this is some liability we don't want, we're gonna knock you down to, you know, $32 million.

Holy cow.

But that's also why you need accountants and lawyers on your side to say, no, no, no, this issue, we took care of it back in 2018. There's, there's no liability here. You don't have to worry about this. We should— we need to keep the price at $50 million.

Yeah.

Um, the other thing to think about also is when you're getting ready to sell, what's your story? The buyers want to hear your story, and the buyers want to hear not only why you're leaving but also why they should buy it. And they should buy it because this company is a $50 million Today, but if you look around you, you'll know that in the next 2 years this company could very easily be $80 million. It just needs a little more money from, you know, a bigger buyer, a bigger company to sort of inject more capital into it or do more marketing, something that maybe, maybe Sam doesn't have resources for, but we know that a bigger company can do.

When that stuff goes down though, so when you're in the room and having that negotiation, is it attorney to attorney having these discussions with the founders kind of sitting back and listening, kind of like in the movies? Like you're speaking for me.

Um, well, so we will talk about liability, and that will be the attorney's talking. When we're talking about sort of growth and, you know, commercial viability, um, sometimes that's the accountant, or sometimes if you have an investment banker. So we often use investment bankers to help market your company because you may not know who wants to buy your company, or you may think that you— there's— you may think off the top of your head, oh, PepsiCo would be interested, We should just approach PepsiCo. There's a whole bunch of other companies that might also be interested in your company that you don't even realize are interested, right? These investment bankers will go out and try to find the right buyer, whether it's a PE firm or it's a strategic, right? And, and sort of connect you together, and that way they maximize the, the value of your company. Wow.

How does— so, you know, part of the journey is raising funds, and you talked about friends and family, and I'm I'm associated with a couple brands that we're in that journey right now. And this particular brand, I think they're going to be able to raise, you know, a couple hundred thousand dollars to get going through a— I don't know what you call it, maybe a venture capitalist or what. I don't know who they are. But anyway, they've, you know, my, my, my, the company I'm involved with, they've made the presentation. Next Wednesday is kind of the final presentation to get it going. And then once they get that funding, they're going to go back to friends and family because they feel like they have a better story to go back to friends and family to say, hey, look, we've raised $200,000. Now we're gonna, you know, give equity in the company for you to participate as well. Is that a strategy? Or like, it seems like I talked to some people, they raised millions of dollars, and I'm like, I'm on this journey with this particular brand, it's a great brand, ex-corporate executives, but they're struggling a little bit to get the money raised. It just seems—

Well, so let me start off by saying raising money for a tech startup is very different from raising money from a CPG startup. And part of that is because tech startups, they're typically asset light. You have a couple of computers, maybe you probably work remotely now, right?

Okay.

But with a, with a, with a CPG beverage company or food company, lots of assets, lots of capital. You've got kitchens, you've got equipment, you've got bottles, right? You got liquid.

So that's value, you're saying assets are value?

Assets could be value, but it could also be liabilities. Exactly, exactly. I mean, you, you can have spoiled assets very— spoiled inventory very quickly, right? Especially with beverages. So that's an issue. And the scalability is also an issue. As CPG companies, you can scale, but let's face it, it's much easier to scale a couple of lines of code than it is bottles of Ah, hence what you were talking to me a couple weeks ago, Adam, to remain nameless, about scaling a particular brand.

You got it, bingo. Yep.

So once you have a lead investor, it's always easier to get more funding because you can say, oh, you know, XYZ company, venture capital firm believes in us, so you should too, right? I know they're smart people. Um, but it's what I, I think it's interesting about your your company here that they're going to VC first, then going back to friends and family. What we typically see is that you go to friends and family first because your first round is probably the most risky round for an investor because you don't have a proven product. You're not— you're maybe barely on market or you're trying to get on market and you don't know where you're going to go. You don't know how high-flying you can be, right? So you go to friends and family first. First, then you go to venture capital or, you know, strategic investors or angel investors. I also wonder what is the form of investment that they're going to get from the VCs. Typically, the first sort of early, early round, you see either what we call a SAFE, which is— SAFE is Simple Agreement for Future Equity, or a convertible note. Which really is just a promissory note that can convert into equity upon a certain event. In both those cases, a SAFE and a convertible note, it's just borrowed money until— and no equity until you do another raise. So, you know, for vocabulary's sake, we'll call the first raise the friends and family round, we'll call the second raise your seed round. So at the friends and family round, you, Sam, will own 100% of the company. company, and you'll continue to own 100% of the company after you've finished your round. But once you've raised your, you know, $500K on the friends and family round, you spent that money or you nearly spent that money, you're ready for your seed round. You go to this, you go, you can go back to your friends and family and you can go to venture capital at that point, um, and tell them, look, I have a proven product, I'm on market, you know, there's a growth trajectory here, this is why you should invest in me. And then they invest in you With, with money, but you give them actual equity at that point. And when you give them equity on the seed round, that triggers the SAFE or the convertible note to become equity as well, along with the seed round people, right?

Wow.

That's typically how we see it. So the fact that you're going first to VC, then back to friends and family, you know, make sure you're getting the the best terms with the VC. Because in general, I'm speaking in broad generalities here, SAFEs are better for the company and convertible notes are better for the investor. So interesting how you're—

Wow, that's, that's really interesting. Let me ask you this. So I talked to a lot of founders, I'm sure Adam does too, that they bootstrap things. Is it better to bootstrap or is it better to raise money? Or is there somewhere in between? Yeah, bootstrapping is a long journey. I know some brands like, yeah, I've been doing this for 10 years. Sorry, but is that like— it's like at some point you got to get investors to get this scale, right? Or no?

Yeah, I mean, there's no simple answer for that, right? Um, you know, there, there have been companies that bootstrap their entire time and then they get— they can, you know, scale slowly and then sell, right? And if that works Awesome, because what that means is that you keep 100% equity, you keep 100% of the control, and you keep 100% of the profits, right? But oftentimes that's not really doable because you do need more cash to scale, to fund distributors. You know, you're going from, let's say, 1,000 pallets to 10,000 pallets to 100,000 pallets, right? How do you do that without being paid until You know, 6 days after you delivered the goods, right? Yeah, later than that.

But no, that's a real problem. I was on a brand Adam knows about where they had nationwide distribution in 38 states, you know, and BevMo, Total Wine and More, they had like 15 wholesalers. But when the wholesaler arrived to go pick up the goods, the goods weren't available. You know why? Because they didn't have enough money to produce it. And they're like, well, we'll be ready in 4 weeks. And that seems to be a problem in our category. A lot of brands, they're not— the production schedule is when the distributor is ready to buy, or the customer, they can't fill the order. And that is death to a brand.

Absolutely.

Because that shelf space that sits out in the marketplace, there's 18 brands waiting behind them to get on that shelf space. So it goes out of stock, it's literally the old Procter& Gamble saying, or Progressive grocer is out of stock, out of business. And it really— that— I've been, I've been doing this for 40 years, and I think that still rings true. So yeah, if you're not well capitalized, that's a problem.

Yeah, there's a, there's a— I want to use this because I have a quick story, and I won't name names because he hasn't told me I could. But there's a brand I'm working with who, uh, he's got a few hundred thousand dollars of investment, but And even for me, even as, even as the guy who's introduced him to a few places, helped him, you know, I've been working with him for a little bit, um, even knowing that he had that investment, he said, hey, I'm not sure how much I can pay you. Now typically, right, you might look at that and go, oh, I'm offended. You're like, you just told me you have money coming in and then you're telling me you're not sure how much you can pay me. And in fact, I felt quite the opposite. I was like, good, pretend you're broke. pretend you have $5 in the bank because otherwise, like, you might pay me for 3 months and then you'll be out of business and I'd rather not, right?

Yeah.

So I like, that's my ethos for any brand that's out there listening. Have money, but pretend you don't, right? So to that end, Roger, I'm curious and I know this is a difficult question in the way I'm gonna frame it, but to Sam's point, when we talk to like The dreamers, the very early on. I mean, if it's friends and family money, they're actually a step beyond who I'm talking about. It's like, hey, I've been, I've been a good little saver and I've got $20 grand and I want to do something, right? Like, that's who I'm referring to with this question. So money's super tight, they're very conscious of it. But I still, I agree with you, and I think Sam does too, obviously. There's still obviously a need for all the reasons you mentioned to get a lawyer involved in the early day setup, right? Lest things go well and get big and then you have a problem because things weren't structured right. So if you had to— this is the parameter, it's gonna be difficult— for a brand like that, if you had to put a list of like 5 things or 3 or whatever the number you think is effective is—

He went to Boston, man. He can answer this. It's gonna be—

Right, right. That they would pay a lawyer for. And I'm thinking about stuff like, you know, okay, clearly an NDA, Clearly, a, um, you know, if they have multiple owners, obviously there's a partnership agreement, clearly, you know. But like, what's the short list of things like, hey, if you do nothing else, do this to start, and then we can do review co-packer contracts and stuff, we do all that down the road, but do at least these X number of things? Like, what would those be?

So let me start off the answer by saying, um, our firm Stubbs Allerton, we we realize a lot of entrepreneurs, whether it's CPG or tech, have the same issue, right?

Yeah.

So that's why we have actually something we call the startup package. It's a flat fee package. Lawyers do charge by the hour, and we charge by the hour as well, but we have a flat fee package. The idea behind this package is for $7,500, which is still real money, but for $7,500, we're going to set you up with a company that once we put these packages of documents together, you're ready to just go and operate your business.

Wow, that's like the best $7,500 anybody could spend. Can we make sure, Roger, that we provide— you provide that information so we can share with everybody?

Yes.

Um, you guys are picking up why I asked this question.

I was gonna put that in the text, but also send it to me too. If you could type in how they get a hold of you or whatever, it'd be really good if you're open to that.

Absolutely, absolutely. Yeah. Um, just briefly on the startup package, it includes formation, includes your operating A partnership agreement, it includes NDAs, it includes your employment contract that, you know, you sort of fill in the blanks when you're ready to hire somebody, right? An independent contractor agreement, because, you know, sometimes you don't need an employee, you just need a contractor. So we have that form ready for you. So you just fill in the blanks and you're ready to go.

Adam has— she may be calling you after this, setting up some appointments.

Yeah, this is exactly why I asked, I swear.

Yeah, yeah, the startup package also includes a stock option agreement, which typically the tech companies really use. CPG companies might want to use also, but it's helpful when you want to fill in a CMO or COO position, right? You give them some stock options. And very importantly, a PIIA, which is a Proprietary Information Invention Agreement. And what that basically says is when you're working for the company, whether you are Sam the founder or Adam employee number 2, when you're working for the company, anything you invent or anything that you discover—

Oh, sure.

The company's property, not your personal property. Yeah.

Right.

Yeah. And so this whole package is, you know, we set it up so that, you know, and we do all the state filings that you need to do. Um, also the— I don't think there's any federal filings Generally, but the state filing you need to do so that you're just ready to just go. You can go with these documents, you can go open your bank account and go run your business. But so the items that are very important to start off with, brand protection, IP protection, you know, that's where you build it. You're going back to brand equity. That's where you build your brand equity, right? And so that PIIA, super important. That trademark work, super important. You know, get that stuff done. Because without that, you can build your business and then find out you can't use your name and you have to rebrand. That, that's terrible.

So that's like— this is called the pacifier, by the way. So you're in the cradle, you're gonna give them the pacifier.

Roger, to that end, and Sam's right, like, I'm absolutely gonna— please share the info. But even if you don't, I'm gonna start You know, nudging folks your way for that because you're right, $7,500 is not nothing. But in the grand scheme of things, you know, if— and this is again conversations I know we all have, right? Brand owners look and go, oh, $7,500. Like, didn't you tell me you want to sell this business in 5 or 10 years? Yeah. I'm assuming you want to sell it for millions.

Well, ideally.

Okay, so is $7,500 really that much money? Like, figure it out or don't, but like, let's— you know what I mean? Um, so my, my final question to that point for now is, is there any in the CPG, specifically beverage space, is there any product category that you don't work with? Meaning like, I talk to everybody from functional non-alchs to alcoholic seltzers to THC to mushroom, functional mushrooms to psychedelic mushrooms. Is there any type of those that you don't work with, just so I know who not to send your way?

No, we work with everybody. I really enjoy working with non-alch right now because that's obviously a very hot area. We've done ready-to-drink beverages as well. You know, in fact, I have a— I'm drinking right now Adaptogen coffee because I got hooked on it, you know, last year, and now they're hitting it really big. And so, you know, when I can find it, I love it.

Yeah.

Yeah, so we do everything under the sun. You know, there's, there's, we can, we can take cannabis or, you know, THC products also. Um, there's some issues with federal and state laws there, but it doesn't really affect us too much.

Right.

Funny, funny story about that, actually, not in the beverage category, but we did have a, um, a medical marijuana client. And those were sort of earlier on. I don't know if this still happens today. But when they pay us, the founder would actually come into our office with a suitcase full of money because they don't use banks.

Oh my God, no.

Can you repeat that again, Roger? I missed that.

Oh my God. The client, when they, when they needed to pay their invoices, they come to pay our, pay our fees, they come into the office once a month with a suitcase of money.

Wow. That reminds me of, uh, the show— I'm sure you've heard of it, if nothing else— the show Lincoln Lawyer. Right. Uh, there's a, there's a scene where they get paid in, uh, gold bars.

Oh wow.

And they're looking at them going, cool, but what the hell do I do with this? Right. I've gotta go. Right.

I doubt my uncle will watch this, but I was talking to a couple of my friends that are producers. They do stuff on Netflix and stuff. And, uh, great friends, by the way, I've gotten to know over the last few couple weeks. But, uh, my Uncle Lawton moved marijuana across the You know, from like freaking Florida to Ohio. He went to prison for 10 years, did 10 10-year sentences, by the way. You know, he only got out in 10. But anyway, he would have like a briefcase full of $20 million, and they were moving semis of marijuana. Right now it's legal, which is amazing. So that surprised me. So it's going to be—

So—

future Netflix show coming soon to you. But, uh, Anyway, just to kind of wrap up. So, you know, with the last few minutes we have remaining, we, you know, have about 10 minutes or so, Roger. Is there anything that you just want to share? You know, any thoughts you want to share with everybody out there that is watching this that's a founder or, you know, running a company, that they— things that they need to know that you do as a firm and you individually that where you can help them?

Yeah, so I think we've sort of touched upon the main issues, which is again brand protection, IP protection, and, you know, knowing with your— agreeing with your partners what your partnership looks like from day one, right? The other thing is, so going back to the startup package, $7,500 is real money, but it's not a whole lot of money. I will also say that For the amount of work that we put into a starter package, it's at least $10,000 or $15,000 worth of work. But the reason we do it for $7,500 is obviously because entrepreneurs can use the break, but also because even if we didn't do it on a flat fee and we charge you $15,000 or $17,000 for it, we're really not making that much money off of this. You know, we're— what we're trying to do is we're trying to grow the relationship with you. So that we can grow together, right? The more you go raise $1 million, $2 million, $3 million, you know, we're gonna get a little piece of that because that, that's more hours for us and we bill by the hour for that.

So you want long-term relationships from cradle to grave. You want to have them on their journey all the way through the journey and help them on that journey.

Yeah, and that's what you want in any lawyer, in any accountant, in any service provider that, that you use, including your distributor. Right? You want somebody who's— who has an interest in you and wants you to succeed. And that's how we see our clients.

You know, that's really powerful what you just said, by the way, with your distributors that have interest in you and want to see you succeed. That— I just wanted to repeat that because that's really powerful to a brand. So often they'll get a distributor— sorry, Roger, I'll let you finish your thoughts— but, you know, brand will be excited, I got a distributor to accept me. That might not be the A good distributor, you're interviewing them as much as they're interviewing you. So what does that mean to be accepted? I'm sure as an attorney you can help them with that journey as well, but go ahead and finish.

I'm sorry. No, I mean, that's the exact same point. I mean, any— that, that point is applicable to distributors, but also to any service provider that you're using, whether it's a lawyer or an accountant, right? Because we're all busy people, um, but you want to feel like you are the most important client to that person. Right. And so that's what, you know, we as a smaller firm are able to do because we're not, we're not trying to make, you know, $1 million every month off of KKR or Blackstone. We want to see our small clients succeed to become big clients.

Yeah, I mean, I think to, you know, Sam, before you even kick it over to me, I'll just piggyback on that. It's something I try and tell— I use, I use flavor houses a lot there, or formulators, uh, anybody that's doing the base level commercial formulations work in this example. But it applies to everybody. It applies to co-packagers, it applies to legal partners, it applies to distributors. Um, and the comment to brand owners, I guess what I'll end on to piggyback off what you said, is $5,000, $10,000, $20,000, whatever the number is, as a brand owner, like, that's your money going out the door. So obviously it feels like Oh, this person's making a ton of money on me. Because from your, from your end, they are, right? But what you have to realize in any whatever relationship it is, if you're an early stage brand owner, they're not making money. Like, they're collecting a check, sure, right? Transactionally. But profit-wise, there's almost no meat on that bone, right? So they're not doing it to try and strong-arm you or to try and like, oh my God, I made my 5 grand, now I can go home. No. They're doing it to try and develop a partnership so that in 3 years when you're still with them and you've 10x'd your production volume, now everybody's making money and we're keeping the lights on and so on and so forth. And so, and it's not, it's not to paint brand owners as, as, you know, inept or as, as confused about the way things work. It's just to give them a sense of like, hey, don't come to the table feeling like people are taking advantage of you. come to the table understanding that partnerships in this industry require a financial investment, and that's what you're doing, right?

Absolutely, right on.

That is so powerful what you said. We talk about this all the time, and constantly I have a great appreciation for founders and the guts they have to crawl up on that high dive.

Absolutely.

Jump in the deep end. But, you know, and look, we, we— that's why we founded Bev Assets, Roger, and Adam knows this— is we want to do right by brands. We don't make a lot of money. from the people that come to us. But we always tell people that we want to be with you for the long term. So I like your startup package and how you go. So we kind of have that sort of. And they're like, well, how do you do this? Because they have talked to another broker and they're like, that broker is like 20 times more than what you charge. Because we do it because we want to be your partner. We, we do it because we want to actually see you succeed. You know, we do it because we want to put people to work. So when you said that to me, because you told me the numbers, by the way, what the hourly fee is for attorneys. I don't know if you remember that the first time we talked. And so that is a bargain based on what you told me. So I won't, I won't pretend to say what your fees are. It really is. So I want to get that out to the masses. I would just, a couple things. One, I gotta, I gotta call Jeff one more time. He said having a strong brand story is essential for building community and being in the place. That you can approach investors and distributors. There are so many businesses that don't have the brand identity and strategy worked out. Roger, do you advise clients to get their house in order with their branding? That's the question.

Oh, absolutely. I think, I think branding is hugely important, and I agree with him, you know, having that story, whether it's the brand story or even the founder story, especially for, you know, you're first starting off, you have a founder story, it can be very powerful, you know. Um, in the functional space, right, you have a lot of people who, who, who founded their company because of health issues, right? And that's, you know, a good story. We've had people— I have one client who started an all-organic vegetable-based protein, a protein powder protein, and he founded it because he was looking for a solution for his mom who had cancer. cancer, right? I mean, these are great stories to have to say, look, this is why I'm passionate about it. This is why it's going to work, because there's so many more people like me. Like, maybe their mom don't have cancer, but there's health issues that aren't being addressed by the Pepsicos and Coca-Colas of the world, or the P&Gs. Wow.

Well, I need to connect you up with Jeff, and you can see in the comments, because Jeff has this called Building Unforgettable Brands. I was on a podcast with him yesterday Through Far Belly Marketing, which I'll connect you up with Duncan as well. I think there's a lot of people that you can help, Roger, in your space and, and what you do. And it was really, really appreciative that you're here. I know that you have— you're going to go on an adventure with my friend Adam because you asked me if I was going. I couldn't get into Expo West, but I know you're going to be there. So you're going to be back in April. We're going to pick a date in April, right?

Definitely.

And, uh, and, uh, both you and Adam can report on your key findings. So Definitely exchange information so you two meet and connect while you're out there. I think it's in Anaheim this year.

That's right. It's down the street for me. It's easy for me.

Yeah.

Not so much on my side.

Yeah, I think Jeff might be out there too. But I have a lot of friends. Do you know who Jay Williams is? I guess I have to call Jay Williams out. So you should follow him on LinkedIn. But Jay has a product called Freebird. I get nothing for this, by the way, but I just love Jay. But it's a Freebird water. But I don't know if he'll be out there. But Eric Martindale, Duncan, Jay, I'll connect up with you guys, sing Kumbaya together, smoke some cigars. And I'll be here in cold Minnesota just pouting because I can't get out. But thank you so much for joining. Any closing thoughts, Adam or Roger? Are we all good? to close, wrap up?

Yeah, from my side, no, I'm good. I think we talked about a lot of really useful stuff. And yeah, Roger, I just connected with you on LinkedIn. I'd love to meet up out at Expo and tell folks about the bundle you guys offer and all the other ways you can help. So thanks.

Yeah, perfect. Thank you so much, guys. I really enjoyed the conversation. Can't wait to be back.

All right, thank you. All right, so here's a, here's a