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Where Are They Now? Episode 4

Where Are They Now? Episode 4

Episode 4: Simple Mills

May 6, 2021

Katlin Smith, founder and CEO of Simple Mills, wowed her first buyer with a muffin recipe using almond flour. Now the Chicago-based natural baking brand is the category leader in baking mixes and crackers. Its products are in more than 27,000 stores, from Whole Foods to Walmart.

Smith, who had her products in just four stores when she started at Chicago Booth, was a co-winner of the 2014 Edward L. New Venture Challenge. The NVC helped her understand the importance of spending on marketing for her brand and how to make a case to investors, she said.

Still, the first funding round was tough. Her parents mortgaged their house to give her $200,000 to get her company to a point where it could raise money.

“It’s hard to sleep at night when you know your parents’ retirement hinges on your business doing well,” Smith said.

In this episode, Smith tells the story of her startup journey to Chris McGowan, an adjunct professor of entrepreneurship at Booth, Investor in Residence at the Polsky Center and general partner of the private equity firm CJM Ventures. McGowan is also a former board member of Simple Mills.

They cover why everyone should have a leadership coach, the mistakes Smith made when hiring, and how she is broadening the ambition of Simple Mills to shape how food is grown, through initiatives to help farmers employ regenerative agriculture techniques.

Listen now on Apple, Spotify, Overcast, or wherever you get your podcasts.

Transcript

Katlin Smith:

So the first $200,000, we never got that. That deal ended up falling apart at the last minute. And my parents came through, they ended up mortgaging their house and giving us $200,000 to purchase through to when we could raise money. I had a lot of faith in the business. In retrospect, there were still very, very many places we could have gone wrong or things could have not gone our way. And so it was incredibly risky. It’s hard to sleep at night when you know your parents’ retirement hinges on your business doing well.

Colin Keeley:

Hello and welcome to the Polsky Center’s Where Are They Now Podcast. I’m Colin Keeley, and we catch up with founders from Chicago Booth’s New Venture Challenge on the show. Join us as we dive into their entrepreneurial journeys, get a look at the stories and struggles behind their success. This week we have Katlin Smith interviewed by Chris McGowan. Katlin is the founder and CEO of Simple Mills, a healthy food company that only uses simple whole food ingredients. Shortly after launching her almond flour muffin mix, it became the best-selling muffin mix on Amazon. Now, eight years later, Simple Mills is available in 28,000 stores, does roughly $100 million in annual revenue. Chris McGowan is an early investor and former board member of Simple Mills, and a professor of entrepreneurship at Chicago Booth. Without further ado, here’s Katlin Smith and Chris McGowan.

Chris McGowan:

Good afternoon, everybody. I’m Chris McGowan and it is my great pleasure today to be coming to you with this podcast interviewing Katlin Smith, the founder and CEO and visionary behind Simple Mills.

Katlin Smith:

Thank you. Excited to be here.

Chris McGowan:

All right. Actually, Katlin, I want to do one quick thing for a second. I had such a good time getting to know you, being an observer on your board and Simple Mills was just very good to me. I don’t know if I’ve ever showed you this or not, but I’m sitting here in my home office. No one on the podcast can actually see this, but if I was to zoom out for a second, I have painted my walls Simple Mills yellow.

Katlin Smith:

Oh my goodness. That is incredible. I love that.

Chris McGowan:

I thought you would like that.

Katlin Smith:

Also good to know that we have extra office space for when we need it.

Chris McGowan:

That’s right.

Katlin Smith:

Bet you didn’t know it came with that liability.

Chris McGowan:

That’s right. I’ll be your satellite office on the North Side, in Wrigleyville here.

Katlin Smith:

Excellent. Excellent.

Chris McGowan:

There we go. There we go. Great. So, Katlin, can you tell us a little bit about how Simple Mills came to be?

Katlin Smith:

Yeah. I started Simple Mills probably about nine years ago now after cleaning up my diet, taking out a lot of processed food, a lot of the sugar. And at the time when I cleaned up my diet, really just everything changed. I was really surprised by what a huge difference our food makes on our bodies. Like I’d grown up thinking like, oh, it affects your waistline. It affects diabetes. But I didn’t think it could affect just your entire body and how you feel on a daily basis. I really looked around at our food system and said, “This is not ideal.” There are a lot of people who are really not getting to live their lives to the fullest as a result of the decisions that we’ve made with our food system.

Katlin Smith:

I started brainstorming, how do I change this? How do I help be a part of the solution? I thought about many different things. I even thought about getting my master’s in public health. Ultimately I landed on this idea of starting a natural food company that instead of using a bunch of carbs and sugar, made things out of nutrient-dense, whole-food ingredients, all things that we know we should be eating. So we started out in almond flour baking mixes, just very short, sweet, simple ingredient deck. We later went into almond flour crackers. We now have these organic seed crackers and also crackers made out of vegetables where vegetables is the number one ingredient. So parsnips, celery root, sweet potato. And we make cookies and soft baked bars too. So we’ve really kind of expanded over the past nine years, but it really all went back to this vision of how do we help make it easy and delicious for people to eat real food.

Chris McGowan:

That’s great. You fell back a little bit on some of the things that you studied in undergrad, didn’t you?

Katlin Smith:

Yeah. During undergrad, I was a biology and business double major, which I at the time didn’t know why I was doing that. I just knew that I really loved biology and I really loved business. I had done a couple internships and realized I loved making processes more efficient, which is a weird thing for someone in undergrad to realize. But I didn’t know where it was going and I think hindsight’s always 20/20. But I think the thing that really is great about that background for building this business is it’s both. Like we have to think about how food affects the human body, like my favorite class in undergrad was immunology. So much so that I took it both at UNC and then at the National University of Singapore’s Medical School. And so that informs kind of our approach on food. And then also the business component, equally important as the CEO of a fast-growing company.

Chris McGowan:

Excellent. Excellent. It’s funny I wonder if having these interests and passions that trace back well before the founding of the company had an influence on you?

Katlin Smith:

For sure. I mean, even just to take interest in the first place on how food affects the body, I started reading into this area. Cleaning up my diet was a sort of intellectual experiment more than anything else. Someone said to me that most of the things that we eat are not food and it was just this perplexing idea to me. That makes no sense. So out of an experiment, I cleaned up my diet. I was like, “Well, we’ll see if this makes a difference.”

Chris McGowan:

Yeah. Did you have anyone that was helping you during that journey of discovery, anyone that was influencing you?

Katlin Smith:

Yeah. One of my friends had gone paleo and had just really seen the positive effects that it had made on his diet and his friend’s diet. So I decided to give it a try.

Chris McGowan:

Excellent. That’s great. At some point you decided you’ve done this research, you’ve had a meaningful impact on your own health, and you said, “I should create a company around this.” I mean, what was that decision like? Because it’s a leap from just cleaning up your own three meals a day to saying, “I’m going to do this for others.”

Katlin Smith:

In retrospect, it was something that I couldn’t start fast enough and it really centered on this, “I have to help further what people are eating and what that does for their bodies.” And so weirdly it wasn’t that much of a question once I came up with it. I remember thinking that if I lost all my money working on this idea, it would still be worth the effort.

Chris McGowan:

Wow. Give us the context. So take us from graduating from UNC to actually starting the company. You had some decisions to make and at least one job in between there, didn’t you?

Katlin Smith:

Yeah. Graduating from UNC, I went to work for Deloitte as a management consultant. I worked in a whole bunch of different industries and a bunch of different types of projects, which I really liked. I’m an explorer. I like many different things and I’m curious about many different things. So really I enjoyed trying out different industries. It was while I was at Deloitte that I decided to clean up my diet. I mean, I’d been on the road, I’d been working really long hours and really wasn’t feeling my best. And so it was definitely a part of the decision to clean up my diet. It was also while I was at Deloitte that I started experimenting with different recipes and seeing if I could make this company work. Initially I started thinking about building maybe as a meal kit company or something that really just facilitates healthier eating. Like maybe it’s a sauce that you put on salmon and it’s easier to cook salmon, for example.

Chris McGowan:

Yeah. For some people salmon’s easy. Not for me.

Katlin Smith:

Salmon is not that easy to make and a lot of people don’t know how to cook. The really interesting thing is during COVID one of the most popular phone calls that McCormick has received is, “What is a teaspoon?”

Chris McGowan:

You’re kidding.

Katlin Smith:

Which is awesome by the way because it means a lot of people are learning to cook. But I think that that helps to ground you in understanding where a lot of people start, and that’s a barrier to people eating well. And so how do you enable people eating well? One of the ideas was a sauce, another one was maybe a bread mix. That got me going down this route of, OK, what if I made like a focaccia bread mix or what if I made a muffin mix that made it really easy to make breakfast? I started thinking about what could I make it out of and thought about maybe almond flour. There’s a lot of brands using almond flour in many different types of products today, but no one was using almond flour back then. It was really a new ingredient. I also started thinking about like, OK, how do you find sweeteners that don’t have a huge glycemic impact, which had me investigating coconut sugar, which likewise wasn’t even sold in grocery stores at that point.

Chris McGowan:

So were you going to obscure suppliers then for these early ingredients?

Katlin Smith:

Yeah, exactly. And so I just started making muffin mixes really out of this. I realized that that could be a good place to start and one that was, I think I had the ability to create myself. As I was developing the recipes, I decided to call up my local Whole Foods to understand what the process is to get into stores. I really didn’t know much about this space. I had maybe one friend who was working in another natural food company. And so he had a few ideas for me, but I really didn’t know much of anything at all in this space. So I called up my Whole Foods store and asked them, and to my surprise the buyer answered the phone. So there is a buyer in every Whole Food store who can make local products decisions. He said, “Well, just come down here and talk to me.”

Katlin Smith:

And at the time I was traveling four days a week really for consulting. And so I was on the road a lot. He said, “What about Wednesday?” and I said, “What about Saturday?” He said sure. So I went down there and I met him. I even still remember how nervous I was going into meeting him because I didn’t feel like the recipes were ready yet. I was really just trying to understand the timeline. I was just trying to understand the process and I was really nervous going down and into Whole Foods. I baked the muffins and I was running late.

Chris McGowan:

So you didn’t go in to talk. You actually went with muffins, with samples.

Katlin Smith:

Oh yeah. I brought him some samples. I brought him a package of mix and I brought him some baked muffins. I still remember he looked at the mix, he looked at the muffins and he said, “These are made from that?” I said, “Yes.” He said, “These are really good.” And we sell a lot of almond flour. And so with that, he helped me set up the items in the Whole Food south region.

Chris McGowan:

How big was that?

Katlin Smith:

The south region was probably about 27 doors at the time. It’s not that you’re getting into every store. It’s that your item is available to be sold in those stores. So he was setting it up so that he could sell it in his individual store but we would have to sell into the other stores store by store.

Chris McGowan:

Okay. That’s still a lot of stores for someone who can only squeeze the business into Friday, Saturday and Sundays, isn’t it?

Katlin Smith:

Yes, it probably is but I’ve never been one to-

Chris McGowan:

Shy away. Give us a timeline relative to Booth. How soon was this before you started school with us?

Katlin Smith:

This was probably about two months before starting at Booth. I want to say it was July of 2013.

Chris McGowan:

Oh, wow. Okay. That’s sooner than I realized.

Katlin Smith:

Yeah. So I was getting ready to move up to Chicago at that time.

Chris McGowan:

So did you view Booth as like a vehicle or a vessel within which you could really incubate this?

Katlin Smith:

You’re not going to like the answer to this.

Chris McGowan:

I like it already, let’s hear it.

Katlin Smith:

They were like these two parallel trains. There were these two trains going down parallel tracks that at some point were going to meet. And so they were weirdly very independent decisions of each other.

Chris McGowan:

Oh, interesting. Okay.

Katlin Smith:

I mean, to give you an idea, it was a full year earlier that I had applied to Booth. I had just started working on the idea of Simple Mills when I applied to Booth. We weren’t in any stores, we didn’t have any recipes. I didn’t even know what products we were going to create. And so at the point where I started at Booth, we were in probably four stores. And so as I went into Booth, I really gave a lot of thought to the courses that I chose because it was really important to me that I put everything in the business that I could to make it successful. It was my first priority. I was not dating. I was not going on trips because I knew that I had to run the business and every morning while everyone else was hung over, I would sit there and be working on the business and answering emails.

Katlin Smith:

It was the number one for me. And so as I selected my courses, I thought about which courses are going to either help me the most in my business or let me work on my business while doing the coursework. And so I thought about classes like Cases in Entrepreneurship. I took Accounting my first year too. Really it was a great course at the time because I was doing all of our accounting in QuickBooks. And so I would ask very esoteric questions of, let’s just say theoretically you have a transaction like this, how would you recognize that? I’m sure the professor thought  I was the most engaged accounting student ever.

Chris McGowan:

So did you’ve been going to Random Walk?

Katlin Smith:

I did go on Random Walk. I did really want to meet other classmates, but I knew that I had the constraints of the business so I decided to go on a domestic trip. I did the only domestic trip, which was Alaska. And really when everybody else was like asleep and hung over, I was up answering emails, working on the business, getting all my work done for the day before we even did the activities.

Chris McGowan:

It’s so funny. You’re like, “Wait, I have a good idea. I’m going to do something domestic.” And then they send you not to the lower 48, they sent you to Alaska.

Katlin Smith:

All I cared about was cell phone coverage, which I’m not sure Alaska is the best for that anyway.

Chris McGowan:

Oh, that’s too funny. So at some point you came across the New Venture Challenge. I would love to hear a little bit about the New Venture Challenge from your advantage.

Katlin Smith:

Yeah, I did. And this for me initially was under the title of classes that let you work on your business and for course credit. Luckiest decision ever by the way. But that was the original rationale. I didn’t think we needed to raise any money.

Chris McGowan:

And you were post revenue because you were in four stores, right?

Katlin Smith:

Yeah. We were post revenue and my Excel model told me we didn’t need to raise money, ever. We were good. Which if you know us now, it was a little bit naive. So I was very fortunate to have enrolled in that class.

Chris McGowan:

Great. What do you remember most about the class or the application process or pulling together a team?

Katlin Smith:

Yeah, I think there’s a few things. I think there was that first moment when I thought about raising money. Over the course of NVC, maybe in the first month, I decided, OK, maybe we need $200,000, but that’s all the money we’ll ever need. And so I had started to raise it from a family friend. And while we were going through this process, we as a team and with the NVC advisors, we started taking a look at the long-term P&L of the company. I still remember it is Waverly Deutsch who basically looked at our plan and said, “If you ever seen a large CPGs P&L,” which I had not looked at, which I probably should have. But she in particular pointed at the marketing line item.

Katlin Smith:

And for us, I mean, we were in four stores when we came into Booth. At this point we’re probably in maybe, if I had to guess, 30 stores. So we’re still not a huge brand, but everything that we’re doing directly impacts the bottom line or top line, like we’re not spending extraneous money on anything. Pretty much everything is going into production or packaging or a trade show was really the largest marketing expense we had.

Chris McGowan:

Her point is that these are marketing intensive business models.

Katlin Smith:

Extremely marketing intensive business models. And I didn’t have an appreciation for that. I really just thought the product sells itself. But when you look at the P&L of other CPGs, you really see that even for a brand new product, which they’re projecting out at let’s say it’s going to do $100 million in its first year, they’re going to spend 30 to 50% on marketing for that product of that revenue. So $30 to $50 million. And here I am thinking like, “Oh yeah, we’re just going to spend maybe $5,000 a year on marketing and we’ll be great.”

Chris McGowan:

So essentially you’re missing about four zeros there.

Katlin Smith:

Yes. And there are many things like that. I mean, I think trade spend, the team. It’s hard to imagine all the things that you have to spend money on until you have to spend money on them. But I didn’t have an appreciation for that. And so we really had this realization that, OK, yes, we do need to raise money and it is significantly more than $200,000.

Chris McGowan:

Yeah. Did it also make you think about who you needed to add to your team? Because you’ve got a great marketing team now, so at some point it sunk in.

Katlin Smith:

Yeah. We have a fantastic marketing team. We have a fantastic team in general. I think it was really later in the business that I really started to appreciate how much the team really influences the business results and how to hire well. That’s been a long learning experience, as I’m sure-

Chris McGowan:

Part of your journey.

Katlin Smith:

Yeah, a long learning journey. When I first started hiring people, I liked to believe the best in people. And because of that, I would just see people’s strengths. I didn’t do a great job of comparing that against what the business needed. I also really took people at their word for saying like, “I’m good at this.” And so in my mind, therefore you’re good at it. Versus really testing each of those things throughout the interview process. So we’ve evolved our interview process a lot over the years and I think I’ve gotten a lot better at pulling that apart. I think the other thing too about hiring is realizing that the what someone has done is just as important as the how. So understanding how people operate on a day-to-day basis and how they collaborate with other people really makes a difference inside especially a small organization.

Chris McGowan:

Right. So how they get the best out of others, how they kind of force multiply outside of just themselves perhaps, build a culture.

Katlin Smith:

I think that the what people have done and what people do in their jobs is just as important as how they get it done. And so now as I’m interviewing and considering talent for our team, I look for a number of traits or skills that they’ve learned that are not so much like, oh, I know how to do journal entries, for example, for accounting. But instead it’s things like professional maturity, ability to deal with ambiguity in a high-growth organization, critical thinking, ability to question why we’re doing things the way that we’re doing them or think through what might make sense and how to reprioritize, the ability to have hard conversations and to take feedback well.

Katlin Smith:

I think about curiosity and being interested in investigating other places, other things. Passion for the business. We don’t hire people who aren’t passionate about our mission and the impact that we’re having. So all of those things I didn’t know to look for when I was first hiring. The other big thing that I learned from NVC was how to raise money, how to talk to investors, which seems kind of obvious but it’s a really critical skill. There are many entrepreneurs that don’t know how to do that.

Chris McGowan:

It’s not obvious. I talk to a lot of entrepreneurs throughout the year and it’s amazing the range of styles where people come to the conversation and a lot of them are not effective. So I think you’ve hit on something quite good.

Katlin Smith:

Yeah. This understanding from the investors perspective what they’re thinking about. They’re really just trying to understand, one, is this in fact a large opportunity like you say it is? And two, what are the risks to this business and can you mitigate those for me? And if you can cover those things off, you can be pretty successful.

Chris McGowan:

Yeah. And I’ll add a third, which is, where are you right now in the context of that journey? Are you pre-revenue, are you post revenue? What are the major milestones to hit? You’re right. I mean, those are the three most important things. And yeah, a lot of folks will come in and they’ll tell you a half hour story and they’ll hit on none of those things.

Katlin Smith:

Exactly. The faster and easier you can communicate your points, the easier it is going to be for someone else to make an investment decision in you. I think the other thing that I’ve really learned about fundraising, which is a little less NVC related and a little bit more broad, took me longer to learn this lesson. Fundraising is really a momentum game as many things are in a startup. Building a startup is very much about how fast you can get from point A to point B. And then you point to how fast you did A to B to get from B to C. So you say, “Oh no, no, no. I deserve to be on shelf because we had really high velocities in point A to B.” And if you apply that to the investment realm, it’s really, “Oh, we have these number of people signed on. You should sign on.” And emailing that person a week, a month later and be like, “Oh, we have even more people signed on. And by the way, you’re going to miss out.”

Chris McGowan:

Scarcity value, buy now.

Katlin Smith:

Yes. There’s definitely a very human fear of missing out piece that motivates a lot of investment decisions.

Chris McGowan:

Yes. FOMO is a real powerful emotion when you’re selling something or when you’re thinking about buying something, so I think that you’re right on.

Katlin Smith:

Very true.

Chris McGowan:

Is there any advice you have for someone who’s in NVC right now. Maybe something that you would wish you had done more of or less of during NVC?

Katlin Smith:

I don’t think I would have done anything differently, honestly. I think it happened how it was supposed to. I will say that I’m really grateful for that entire six-month period. Our fundraising story, our first fundraising story was not easy. I mean, it was very hard, as it is for most first time entrepreneurs. No one knows you from Adam. You don’t have a track record. You probably don’t have much of a team yet behind you.

Chris McGowan:

Is this the first $200,000 you’re talking about or post round?

Katlin Smith:

The first $200,000, we never got that. That deal ended up falling apart at the last minute. My parents came through, they ended up mortgaging their house and giving us $200,000 to purchase through to when we could raise money.

Chris McGowan:

Did that make you very nervous?

Katlin Smith:

Oh yes. Oh yes.

Chris McGowan:

Did you almost stop them from doing that?

Katlin Smith:

I didn’t at the time. I had a lot of faith in the business. In retrospect, there were still very, very many places we could have gone wrong or things could have not gone our way. And so it was incredibly risky. I did end up repaying them for part of it. They wanted to keep all of it in and still regret not keeping all of it in. But I don’t regret that. It’s hard to sleep at night when you know your parents’ retirement hinges on your business doing well.

Chris McGowan:

Yeah. Well, probably just if you add the weight of that responsibility to the passion you already had for the business, it was almost like a this is too important to fail, right? You had to succeed.

Katlin Smith:

Yeah, there are levels of healthy stress and unhealthy stress.

Chris McGowan:

Where were you during those parts of those early days, would you say?

Katlin Smith:

I would say there were definitely times when I was down to the unhealthy stress levels. Stress can be motivating to a certain point and then it detracts. Our first fundraising round was, we closed in July of 2014, which was shortly after the New Venture Challenge ended. We met a number of our investors through the New Venture Challenge. But that entire process was constantly, constantly talking to potential investors. So I would talk to, and I’m not joking, probably nine investors in one day. I would get off one phone call and talk to another. Everyone would say, “This isn’t right for me. But I’ve got someone who it might be right for. You should contact this person.” And as an entrepreneur, you say yes and thank you, and you go on to talk to that person.

Katlin Smith:

This really culminated in, I think it was probably May or June when I had talked to so many people that in Charlotte, North Carolina, two people who did not know each other walked into the grocery store, who I had both spoken to. They both went to the Simple Mills shelf at the same time and were looking at the product on the shelf and Lou, who I know you know, turned to the woman next to him and said, “What do you think of this brand?” She said, “I’m thinking of investing in it.”

Chris McGowan:

No way. It could only have been better if they both grabbed the same box at the same time.

Katlin Smith:

It’s like something out of a movie, but that gives you a sense for how many people I had talked to.

Chris McGowan:

Yeah. And for our audience, Lou was the lead of one of your angel investment groups.

Katlin Smith:

He is, yes.

Chris McGowan:

And then a board member.

Katlin Smith:

And at the time, I’d never spoken to him. We had a call scheduled for later that day. Lou calls me up and tells me he wants exclusive rights to take a look at this deal for a week, to which I obliged. And the rest is history.

Chris McGowan:

Wow. I did not know the story of the two investors in the same aisle. That’s incredible.

Katlin Smith:

Yes.

Chris McGowan:

That is incredible. OK, great. At this point you have won NVC, you’ve got that big old poster sized check for $30,000 and you’ve raised some additional capital. So life kind of seems great. But at that point you’re like, “Oh my gosh.” You’re like the dog that has caught the car by the bumper in one’s teeth. What do you do next? I mean, you then have to lead this organization. What were some of those leadership challenges right after then?

Katlin Smith:

That visual is great by the way because I think that’s exactly how it was. I hired some of our first team members, which were kind of junior and scrappy and helping me figure things out at the same time. And so a lot of that first year after raising money was figuring things out for the first time. We were all inexperienced.

Chris McGowan:

What was that first year like post NVC?

Katlin Smith:

That first year was crazy busy. I was still working very long hours. I hired some other kind of junior scrappy team members who were, like me, figuring things out as we went and doing things for the first time. I think one of the biggest realizations was just that I needed more help. I needed people who knew what they were doing. We hired a marketing consultant who basically told me in not so many words that I didn’t know at all what I was doing from a brand marketing perspective.

Chris McGowan:

Wow. Points for being direct, I guess, but zero charm from that person.

Katlin Smith:

Yes. And she was right, honestly. And it was like that in all aspects of the business. We needed more experienced talent on our team. And so I started to look for senior leaders to join our organization. I funny enough ended up hiring our senior leaders, really all of our senior leaders that year, off of LinkedIn. So I personally did the searches. Each search took me probably about a full day, maybe full two days to identify the people I wanted to reach out to. And in each case I would reach out to maybe 10, 15 people who I really liked their profiles and we ended up hiring one of them.

Chris McGowan:

I got to tell you, that sounds really efficient though.

Katlin Smith:

It’s really efficient. You have to have a really clear idea about what you’re looking for. So I had kind of, for each role, a hypothesis of what that person’s background looked like. Of this is what their experience looks like, here’s how many years, here’s maybe some of the companies that they’ve been a part of throughout their history. It’s like, for example, our head of ops that we hired. My theory was that there was someone who was at a consulting firm, went to go get their MBA, went to go work in operations at a CPG company and that that’s what we needed. And so I scoured through LinkedIn for all the people who fit that description.

Chris McGowan:

Got it. I do remember a board meeting once where we were talking about you bringing someone on and one of us threw out the idea of like search firm. You’re like, “No, no, I got this. I’ll just, I’ll stay up all night on LinkedIn.”

Katlin Smith:

And to be honest, I still do that today for select roles.

Chris McGowan:

That’s amazing. I think that’s really amazing. Okay. So through this brilliant LinkedIn method, you put together your first kind of iteration of a post NVC team. How did that go?

Katlin Smith:

I think it had its ups and downs. I learned a lot in that year both on the business end and also on the leadership end. On the business end, we revamped our packaging. So we went from this green and white brand that looked very natural and had the United Nations of claims on the front, which is like gluten-free, dairy-free, soy-free, to this bright, cheery emphasis-on-appetite appeal on the front of the box brand. Which is incredibly important. As a CPG brand, your largest marketing vehicle is the front of your box. It’s one of the cheapest marketing vehicles to have too.

Chris McGowan:

And the product itself, you’re saying, put the product on the box.

Katlin Smith:

Yes, absolutely. I think on the leadership end, it was really learning how to manage people for the first time, especially managing experienced talent.

Chris McGowan:

So older than you, for example. When you say experienced, like that’s these folks were older-

Katlin Smith:

Who know what they’re doing.

Chris McGowan:

Yeah.

Katlin Smith:

They don’t need to be micromanaged and they don’t need me to tell them how to do things. They already have a lot of great ideas on to add. Because I’d been in the business at this point for probably two to three years, I had a lot of opinions about the way that things were run, but they were bringing a lot to the table. And so learning how to defer to them on their areas of expertise even when I might think it should be done differently and really treading that fine line of when do you say something. Like you can’t comment on everything that you disagree with.

Chris McGowan:

So how does one learn to do that, because that is so important, isn’t it? Is it just trial and error? Like did you have outside mentors helping you through this?

Katlin Smith:

I did. I had met our still today leadership coach and she was really helpful in helping me come to this realization that this was even an issue to begin with, much less how you solve it. And I think one of the things that I think about when it comes to micromanagement or deciding when you step in is — it’s kind of an esoteric example, or analog, but Schrödinger’s cat. The cat is in the box with a radioactive isotope. And every time you open the box, you exponentially increase the chances that the cat is dead. And so managing people and managing a team is kind of like you have a box that’s closed, the cat’s inside, there’s a radioactive isotope and you have to be really sure the cat is dead or going to die before you open that box. Maybe the nerds out there we’ll get that the way I do.

Chris McGowan:

That is grim but I love it.

Katlin Smith:

It’s a helpful example because it’s really this idea that something has to be grossly affecting the business for you to step in.

Chris McGowan:

Interesting. Wow. Laura, your coach, who I know and I think is fantastic. How did you even come to the point to say I should get a coach, because that’s a big moment in a CEO’s life?

Katlin Smith:

Like many of the great things that have happened in our history, it happened a little bit by accident and luck and a little bit by a momentary good insight. A moment of wisdom and also good luck. Laura was introduced to me funny enough by the head of HPA at the time, who was her former business partner. He thought that she might want an operations job with us. She was just starting her leadership consulting practice, which is huge, by the way, now, works for many of the natural food companies, large food companies as well. I met her and talked to her about the potential of a role.

Katlin Smith:

I couldn’t shake the conversation. I kept going back to it thinking, “She is really smart at that ‘people stuff'”. I remember sitting on an airplane and thinking, maybe I’ll just try it out and see if she and I can work together and see what that looks like. And thank goodness I did. I was worried about spending the money at the time. But being able to rapidly develop… But it’s really important as an entrepreneur in a fast growing organization to rapidly develop your leadership skills. The company’s growing very fast which means that you need to be able to learn and grow and develop faster than you ordinarily would.

Chris McGowan:

It’s interesting you said you were shy about possibly spending that money, but it sounds like it was a very high return investment because it made you more effective, which could make everyone else more effective.

Katlin Smith:

Huge.

Chris McGowan:

Yeah. Are you still working today with her?

Katlin Smith:

Yeah, we still work together today. She works with our leaders and provides training and leadership development to our team.

Chris McGowan:

That’s amazing. Should every CEO have a coach?

Katlin Smith:

I highly recommend it.

Chris McGowan:

Really. That’s great. That was really great. Okay. So your coach has really helped you and your team be more effective. What other obstacles besides getting the team right have presented themselves?

Katlin Smith:

I think over the years, the business needs different things at different times. The demands of you as the leader when the organization is three people is different from when it’s 10 people, versus when it’s 30 people, versus when it’s 100 people.

Chris McGowan:

Your rule of threes and tens you were saying before, right?

Katlin Smith:

Yeah. It’s really a rule of threes and tens, and we’re currently approaching that hundred one right now. So we’re getting to learn that chapter. But what it needs from you as a leader is different. It was really around that 10-person mark that I was starting to learn about needing to not micromanage our senior leaders. But as we grew, I think some of those lessons turned into, how do our next level of leaders translate things down to the organization so that everyone is aware. Around that 30 to 50 mark, we encountered this question of, how do you ensure things are communicated in the organization?

Katlin Smith:

So we’d gone from this stage where everyone’s sitting in the same room and everyone knows everything. And then everyone feels like, I don’t know anything anymore. And so how do you ensure people are getting the information they need and not feeling like they’re in the dark? And then even now it is really ensuring that people are communicating across the organization. People no longer know everyone in the company. I had a conversation a few weeks ago where it completely blew someone’s mind what one team in the company does. They didn’t even know what that team did.

Chris McGowan:

Oh really? Interesting.

Katlin Smith:

Yes. It’s wild.

Chris McGowan:

I’ve got to give a shout out to you and your culture, the culture you’ve created. I know that in one of the hallways when you walk into the office, you have graphed everyone on the DISC, the DISC. Do you want to talk a little bit about that and how that plays an important role in culture and communication?

Katlin Smith:

We place a really large emphasis on communicating well with people. And so, for example, if you’re going to communicate feedback, thinking through how the other person’s going to receive it and even best receive that information, while not being too soft with the communication either. It is important that you communicate feedback. Another element of that is understanding more about what other people are like and that not every person is exactly like you. And so one of the ways we educate on that or one of the tools we use to educate on that is DISC. So when people join, they take a DISC assessment to learn where they are. But then we also use that framework to do a number of our other trainings, for example, leadership. And so you start to get a really good understanding that you as a D, if I’m going to talk to you about something or try to sell you on something, and Chris, I think I know you’re a D. I’m a D too, you’re among friends.

Chris McGowan:

My college buddies are laughing at that quote, you know I’m a D. Thanks, friend.

Katlin Smith:

So for you as a D, I know that what is going to convince you or what is interesting to you when I talk about selling a business idea is the results. And so I’m going to talk about results.

Chris McGowan:

Yeah. And what’s going to motivate me. What I’m going to respond to well in a business conversation.

Katlin Smith:

Exactly. And then there are other people on our team where they’re going to be most concerned about what are the impacts to other people if I’m going to launch something. And so it’s really tailoring your message.

Chris McGowan:

Can you just round out, again, what those letters stand for, DISC?

Katlin Smith:

Yeah. D is dominance, I is influence, C is compliance, and S is steadiness.

Chris McGowan:

It is such a fantastic way to map out your organization. I can’t recommend it more highly to all of you kind of listening today. So that’s great.

Katlin Smith:

And I should say, by the way, you want all those different types on your team. With all teams, you need diversity to thrive. We actually encountered this part early on where we mapped everyone and there was no one in the steadiness category.

Chris McGowan:

Did you use that then to recruit someone?

Katlin Smith:

We have recruited more people in that category. If you think about it, people who value steadiness value stability, which is typically not the very early stages of a startup.

Chris McGowan:

Got it. Katlin, you guys executed so well on so many fronts. One of them that may not be obvious to our listeners is you built Simple Mills in a really capital efficient manner. One of the ways you did that is that instead of sticking to equity raises only, you decided at one point to raise debts to help fuel your growth. Do you want to talk a little bit about that, because it wasn’t the easiest thing for a non-tech company to raise debt.

Katlin Smith:

No, for sure. I think first and foremost, if you’re going to raise debt, it has to be the right business fit. But if you are the right business fit, it can be a really nice way to avoid dilution. So for us, a group in Chicago is actually starting up a new debt vehicle geared specifically at consumer products companies. And so recognizing the higher risk of their target customer, which we were their target customer. Realizing the higher risk profile of those businesses because they were largely equity backed, high growth. They had higher interest rates but they could lend on a much larger part of your business. So instead of just, for example, receivables, they could lend on inventory or raw material. And so you could have greater availability. For us, this was a great solution because we had a large amount of those things. And also I will tout our finance team for a second. They’re phenomenal and they’ve done a great job of forecasting over the years.

Chris McGowan:

Shout out to Amy.

Katlin Smith:

Yes. Shout out to Amy. And so we had a fair amount of confidence in our forecast. And so it takes both having the things that you can lend against that are worth something. And at the same time, having a good amount of confidence in it because you’re going to have to sign up for covenants to say, this is what we as a business are going to do. And if you violate those covenants, there are repercussions for them unlike in an equity deal or most equity deals.

Chris McGowan:

Right. And look, just to give you full credit. I mean, we kind of skipped past the part where you had gotten turned down by bank after bank after bank. I mean, I remember going up and down LaSalle with you to a number of banks and people saying, “Wait, I’m sorry, are you food tech?” You’re like, “No, no, just food.”

Katlin Smith:

Very true. Yeah. With any of these things, there is a lot of nos before you get a yes.

Chris McGowan:

Right. So finding the right capital provider who has the right fit for your business is like extremely, extremely important. So yeah, couldn’t agree more. The other thing that I just want everybody to be aware of is that Katlin runs an incredibly efficient board meeting. One of the, I guess, pro tip for entrepreneurs out there, Katlin, what’s the best way to kind of get what you need out of every board meeting?

Katlin Smith:

Yeah. I think there’s a few different things. The first, I mean, we were kind of inclined to put together well-organized board meetings because a lot of us were ex-consultants, which teach you how to do really nice decks. But with any meeting, knowing what you want to get out of it is really important. And also thinking about the relationship that a management team has with the board. And so the way that we have historically thought about it is that our job as a leadership team is to present a perspective and to focus the board’s attention on places where we have questions or where we really welcome and need discussion. And so where those things are, we try to really call it out in the deck and otherwise say, this is what we intend on doing if we have a really solid perspective, because that can be really helpful to the board.

Chris McGowan:

Yeah. And just to give people a visual. I use your board decks as the gold standard and just examples for other boards that I’m on is that Katlin and the team would put together a page or two of great data, great analysis. And at the bottom of that would be a very specific question. And Katlin would create the space for board members to make contributions to that question. I think the average board deck might’ve had four or five questions and we deemed the meeting a success if you had helpful input on those four or five and you always did.

Katlin Smith:

Yeah, absolutely. The other thing I think makes for a successful board meeting is making sure that people aren’t surprised in a meeting.

Chris McGowan:

Yes.

Katlin Smith:

And that’s important across the board. I think when I first started running a company, I didn’t have an appreciation for the importance of alignment. But if there are going to be things that rock the boat, whether with your board or with someone on your team, it’s best to talk to them ahead of time and maybe not in a large format situation.

Chris McGowan:

Right. Yeah. And I guess just to respond to that, if someone buries say bad news in the back of a board deck, not only are they surprised but they’re like, “Wait a second. I have to go back and read the whole rest of the board deck to make sure I didn’t miss any other little bombs that are hanging out in there.” So I think you’re so right about trying to build that rapport with your board. That’s great. It’s a great point. Katlin, you are one of the strongest leaders that I know, and I mean that earnestly. So I’m wondering, what do you attribute that to?

Katlin Smith:

Multiple things. I would say first, a willingness to learn and listen. I do not believe that people are born leaders. I think it’s a terrible fallacy. I remember looking around in high school and thinking that the loudest person in the room was a natural born leader and that’s absolutely not the case. Good leadership is learned. It’s a learned skill. I would also attribute it to feedback over the years. All the people who have been willing to give me feedback and tell me harsh truths so that I can modify and adapt.

Chris McGowan:

That’s great. And I guess knowing when to seek counsel for yourself in this lesson you’ve shared with us about getting a coach and using a coach I think is also brilliant.

Katlin Smith:

Yeah, there’s a lot of, I think, vulnerability that goes into good leadership. It’s recognizing when you’re wrong, being willing to admit when you’re wrong, being willing to learn and think that you don’t know everything.

Chris McGowan:

So great. Such great wisdom there. Why don’t we talk a little bit about what’s next for Simple Mills. Do you want to tell us a little bit, kind of like, where you guys have reached just to kind of ground us in maybe some current stats and then tell us what’s next.

Katlin Smith:

Yes. Today we are the largest natural baking mix brand, the largest natural cracker brand, and the third largest natural cookie brand.

Chris McGowan:

Wow, it’s amazing.

Katlin Smith:

We are in I think around 27,000 stores. So everything from Whole Foods to Walmart, to Costco, to Target, Kroger, you name it. And we have about 75 team members.

Chris McGowan:

  1. That’s amazing.

Katlin Smith:

Yes.

Chris McGowan:

What is next for you guys? I mean, having reached these incredible levels.

Katlin Smith:

I have always thought that our purpose in this space is to help elevate the future of food and the future of what people are eating. It brings me so much joy today to see how different these categories are than when I started the business. When I started this company, sugar was the number one ingredient in most baking mixes, which is kind of crazy to think today. You just can’t even imagine that today. But it was less than 10 years ago. And so I love how much we have been able to help influence that conversation. And I think that there is a really exciting next chapter of that as well.

Katlin Smith:

So in addition to all the things that we want to continue to do as a business, like expanding our distribution and growing our product lines, which are huge things as well, we are also thinking about how we influence the way that food is grown as well. And so not only is there this huge opportunity for food to positively impact people’s bodies, but that fits really hand-in-hand with how food impacts our planet. And the way that we grow our food has the opportunity to help sequester carbon, it has the opportunity to improve communities, to improve soil health and improve the nutrition and taste of our food.

Chris McGowan:

This would all be under the heading of regenerative agriculture.

Katlin Smith:

That’s exactly right. So over the past year, as an example, we have partnered with several farmers across the Midwest to take over these conventional fields that have grown conventional crops, changing those fields from the top four crops — which to give you an idea, the top four crops account for more than half of our farmland. So to grow different things in those fields and to employ regenerative agriculture principles in their growing techniques. So we provide them financial incentives. We provide them crop purchase guarantees to make it easier for farmers to switch over the way that they’re growing and the practices that they’re using because that can be a costly endeavor for them.

Chris McGowan:

Wow. So you’re working with your suppliers, you’re going up the supply chain. And are you giving them some sort of like minimum guarantees on buying so that they have the confidence to do that?

Katlin Smith:

Exactly. And also sharing that risk with them so that if their crop doesn’t turn out exactly like we hoped, then they’re not completely out.

Chris McGowan:

Great. Wow. OK. That sounds like that could have… I mean, the larger that you grow, you can have a real impact on that.

Katlin Smith:

Yes.

Chris McGowan:

Do you think you’re influencing other companies by doing this, or is it an opportunity to do that?

Katlin Smith:

Yeah, I think that part of the opportunity here is not just helping these farmers, but it’s also changing the expectations of what people get from their food; of, your food can be healthy for you, it can be something that nourishes your body and it can also be something that positively impacts the planet, which is pretty cool.

Chris McGowan:

Great. Awesome. Katlin, I really miss being in the boardroom with you.

Katlin Smith:

I miss it too, Chris, by the way.

Chris McGowan:

Oh, thank you. One of the things that was just so amazing is that you literally got such superstars in the food sector to join your board at such an early stage for Simple Mills. Do you want to tell us a little bit about the folks that you had as independent board members, how you recruited them?

Katlin Smith:

Absolutely. I don’t think there’s any one way to recruit a board member. I do think it’s really important you think about what your company needs at the time and what information you’re hungry for that you don’t have access to otherwise, what sort of expertise you’re looking for and using that to look for board members. For us, for our independent board members, I’ve met them a bunch of different ways. Through my network, through other board members, through people that I worked with at prior jobs. One of them I met on the floor at a trade show. Another one I actually met through a project called Women on Boards Project that focuses on getting more women and people of color onto boards.

Chris McGowan:

Fantastic.

Katlin Smith:

Yeah. So there’s a lot of different ways and even resources out there.

Chris McGowan:

Yeah. And when you were thinking about the business needs, how did you go about that? Did you think about what different departments or what different areas of the business you wanted to supplement?

Katlin Smith:

I think it really depends on where your blind spots are. Early on, we didn’t know what kind of the leap looked like from being this company in 30 stores to one that’s in 27,000. And so we brought someone onto our board who was the former CEO of Happy Family and had seen this full jump before. Today we have someone on our board who really focuses on driving investments in regenerative agriculture so that she can provide insights. And so it really depends on what your needs are.

Chris McGowan:

Fantastic. So Katlin, do you have any parting advice for founders or potential founders who are listening?

Katlin Smith:

I would say stay hungry, keep listening, keep listening to that feedback and keep adapting.

Chris McGowan:

Great. Great. Well, Katlin, thank you so much for joining us for this special podcast commemorating the 25th anniversary of NVC. It was such an honor for me to be a small part of your journey at Simple Mills and I miss being in the boardroom with you. So I wish you well and good luck to everyone at Simple Mills.

Katlin Smith:

Thanks for having me.

Colin Keeley:

All right. That is it for this episode. If you could do me a huge favor really quick, please go to your favorite podcasting app, often Apple Podcasts, and rate and review our show. This gets the show recommended to more folks and it also helps us get bigger and better guests for you to listen to. Take care.

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