Yesterday, Simple Mills announced that their baking mixes will be available at Target. If you are a person who is sensitive to gluten this is great news. They are already available at a lot of grocery stores and are a hot seller on Amazon. Simple Mills is simply the best gluten free baking mix on the market-and they have crackers now as well.
One of the things that I like about it is the simplicity of its ingredients. You can pronounce them. They are natural. They taste great and they are low/no sugar.
Simple Mills came out of Chicago Booth’s New Venture Challenge. The team is mostly female. They have a great story which you can hear about here. I know Ycombinator and Techstars get most of the press, but the Polsky Center is rapidly becoming one of the best startup accelerators in the US. A person would have made a lot of money investing in companies that won the New Venture Challenge over the past number of years.
One of the really neat things about Simple Mills is when you first saw them pitch, you understood exactly why they were on the mission they were on. Over the short time the company has been alive, they have stayed on course and every new product was core to that mission.
As an investor, I knew what that mission was-and it serves as a guide to where they will go in the future. Good healthy food, with simple ingredients, that taste great.
From muffins, to pancakes, to crackers, every product launch has aligned with their core mission.
To be honest, I don’t really invest in consumer products. What’s interesting is here in the Midwest we are starting to see a lot of really interesting consumer products companies. Tovala won last year’s NVC and it looks like a really great company. Robert Rosenberg and Mark Tebbe gave me a pretty strong nudge to invest in Simple Mills. After seeing their classroom pitch, it was clear they were something different and special.
Here is another interesting thing about Simple Mills. The team values their equity. One time I had lunch with a highly successful entrepreneur. He said, “I find founders undervalue equity. They give too much away too early when they don’t have to.”
The when they don’t have to is the key point. As the company progresses and financing rounds occur, founders will sell off equity. As long as they do it at higher and higher prices, things are usually okay. But, it’s how much they sell at each raise that can mean a huge difference for them. Also, when there are debt instruments involved, do they pay the interest using equity or cash? If you can pay interest using cash, you keep more equity. It’s also a sign of a strong cash flow business.
One principle I follow is I want every entrepreneur that I invest in to buy a massive island when they exit their company. Investors should be on their side. You should want them to be rich at the end. I want to make money but I don’t want to make it at the entrepreneur’s expense. I want the market to take us out of our position.
At the same time, entrepreneurs need to have the right frame of mind and value their equity correctly. Taking cash out of a deal too early will leave you with less equity when the company gets big. It can also be a sign that things aren’t going well, or the founder is tired and not willing to assume the risk.