Great Founder Who is Self Aware: When looking to make an investment, our team evaluates the founder themselves. We’ve found the most successful founders are ones that are self aware of what he or she does and doesn’t know. A great example of this is Kodiak Cakes’ co-founder, Joel Clark. Over the course of 20 years, Joel grew the business to 15M dollars, but still wanted to be coached and mentored. He still did a majority of the work for the company, but in four years of working with Sunrise Strategic Partners, the business has grown +50% per year and is now over 200M dollars in revenue.
As part of our series about “5 Things I Need To See Before Making A VC Investment”, I had the pleasure of interviewing Steve Hughes, CEO and co-founder of Sunrise Strategic Partners.
Stephen Hughes is a pioneer in the natural and organic food and beverage industry, and a veteran food industry executive with more than 30 years of experience. Most recently Steve was Founder, Chairman and CEO of Boulder Brands, a publicly-traded natural food and beverage company with a portfolio that included well-known brands EVOL, Udi’s Gluten Free, Glutino, and Earth Balance.
Steve has previously worked in leadership positions on brands such as Celestial Seasonings, Silk, Tropicana and Conagra, where he led the team that launched Healthy Choice in 1988. Steve’s network includes relationships with the industry’s founding leaders, key influencers and decision makers, including cutting-edge retailers, sales and marketing organizations, advertising agencies and consultancies. Most importantly, Steve has been fortunate to have a strong partner — and love of his life — in his wife, Grace. Throughout Steve’s career, she has always kept Steve focused on doing the right thing — which ultimately led them to Boulder and to Steve’s passion for the natural products industry.
Thank you so much for joining us in this interview series! Before we dig in, our readers would like to get to know you a bit. Can you please share with us the “backstory” behind what brought you to this specific career path?
As an industry veteran, I have more than 30 years of experience in food and beverage, and one area I am particularly passionate about is the natural products industry.
After graduating from the University of Chicago School of Business, I began my career in the food and beverage industry at McCormick. Over the years, I have held leadership positions at a number of global CPG companies, such as Celestial Seasonings, Silk, Tropicana and Conagra, where I led the team that launched Healthy Choice in 1988. These experiences have provided me with a large network of relationships with the industry’s founding leaders, key influencers and decision makers.
Most recently, I was the Founder, Chairman and CEO of Boulder Brands, a publicly-traded natural food and beverage company. Our portfolio included well-known brands like EVOL, Udi’s Gluten Free, Glutino, and Earth Balance.
Now, I am the CEO and co-founder of Sunrise Strategic Partners. We provide growth capital and expertise to emerging brands in the healthy, active and sustainable living space. To date, our company has invested brands ranging from Kodiak Cakes and Vital Farms to Kill Cliff clean energy and Coolhaus ice cream.
Is there a particular book that made a significant impact on you? Can you share a story or explain why it resonated with you so much?
In Search of Excellence by Tom Peters is one that has resonated with me over the years. One of the key themes is that everyone is a potential customer, which is a valuable lesson to understand in business. Even more, your boss, your peers and those who work for you are all equally important and essential to the success of the company.
Do you have a favorite “Life Lesson Quote”? Do you have a story about how that was relevant in your life or your work?
One of my favorite quotes comes from Kipling’s poem “If,” which reads, “If you can walk with kings but not lose the common touch.” It’s so important to treat everyone the way you want to be treated. In my experience, living by this philosophy brings out the best in myself and those around me.
How do you define “Leadership”? Can you explain what you mean or give an example?
Over the course of my career, I’ve been fortunate to end up at the right companies at the right time. Many of the companies I’ve joined were in a hot spot, and I was able to help them build the brand back up again. For example, I joined Healthy Choice before there was a name or product, Tropicana when it was in need of a massive overhaul and Celestial Seasoning when it was a small public company in need of a turnaround. All three of these times, I was the “new guy in charge.”
What I’ve learned from these moments in my career is how to be a successful leader. Everybody at a company wants to be a winner. Oftentimes, it just takes a clear strategy that every employee understands and believes in to get the company in a better place. There needs to be a clear punch list, and employees need to be given the authority to do their jobs. Each time I’ve been in charge, I implement a scoreboard to measure the team’s progress, which has proven to be successful.
At Healthy Choice, Tropicana and Celestial Seasoning, teams were not focused, and they were downtrodden when I first arrived. By implementing a clear strategy and focusing on execution, all three businesses were turned around within six months. We started winning, and the teams were galvanized.
How have you used your success to bring goodness to the world?
In the past 23 years of my career, I have focused my work on companies that make better-for-you products. I have had a front row seat as the natural food industry grew from a cottage industry to massive Main Street change.
Along the way, I’ve been fortunate to work with so many great people. I was shocked when I added this up, but 42 people I’ve mentored and coached have gone on to be CEOs.
Ok, thank you for that. Let’s now jump to the main part of our discussion. The United States is currently facing a very important self-reckoning about race, diversity, equality and inclusion. This is of course a huge topic. But briefly, can you share a few things that need to be done on a broader societal level to expand VC opportunities for women, minorities, and people of color?
In the investment industry, I think the shift to expanding opportunities for women, minorities and people of color is starting to happen. Companies founded by women and minorities are being recognized in the market because consumers are looking for them and want to support them.
For new, emerging brands, it’s important to highlight the founder’s backstory, which is often the heart and soul of the company. As awareness around the issue continues to grow, I believe consumers will place a real value on women and minority-owned brands.
Can you share a story with us about your most successful Angel or VC investment? What was its lesson?
To me, this is like picking your favorite child. Each company we’ve worked with at Sunrise Strategic Partnersis different and brings its own set of challenges to overcome. Regardless of what the individual idea is, the number one lesson is that every company needs a strong management team that is aligned with the Board. Beyond this, it’s important to have tenacity. At Sunrise, even when things get particularly challenging and choppy, we believe in the idea and team, so we will never quit on them.
Can you share a story of an Angel or VC funding failure of yours? What was its lesson?
Most often, failure doesn’t come from a bad idea or even the business model. Rather, it stems from not having the right team in place, or having a board/ investors that are not on the same page. Even the best business idea cannot succeed without the right team and alignment on overall company vision and goals.
Can you share a story with us about a problem that one of your portfolio companies encountered and how you helped to correct the problem? We’d love to hear the details and what its lesson was.
Maple Hill, the makers of 100% grass-fed and organic dairy products, is now the largest pure play in grass-fed milk. When we first invested in the company, their core product category was yogurt. At the time, the yogurt category was seeing massive proliferation, and there was heavy trade promotion. As soon as we invested, we lost distribution from three major customers because we were struggling to break through the clutter.
We recognized we needed to make a change in the business, so we pivoted to focusing on milk. While it’s been a hard, heavy lift for the company, it’s been well worth it. Maple Hill whole milk is now the number one half-gallon of milk at Whole Foods. The company’s organic growth has been astonishing and is running almost one percentage point a week.
Is there a company that you turned down, but now regret? Can you share the story? What lesson did you learn from that story?
We haven’t experienced losing out on a company that our team later regretted, but we have run into a few situations where we love the brand and founder, and they want to work with us, but our minimum check size was larger than the founder could work with. In these instances, the dilution wasn’t possible for them.
Super. Here is the main question of this interview. What are your “5 things I need to see before making a VC investment” and why. Please share a story or example for each.
- A Big Idea on Top of a Big Category: If done correctly, a company has the potential to be a market share leader with millenials, moms and consumers with money. Many of the companies in our portfolio fit this, including Vital Farms, Kodiak Cakes, Teton Waters Ranch and Maple Hill.
- Hard to Follow — Barriers to Entry: Whether the brand itself is the barrier to entry, as we’ve experienced with Kodiak Cakes and Kill Cliff, or the supply chain is hard to replicate, like we’ve seen with Maple Hill, Vital Farms and Teton Waters Ranch, a company’s idea needs to be difficult for others to follow.
- Great Founder Who is Self Aware: When looking to make an investment, our team evaluates the founder themselves. We’ve found the most successful founders are ones that are self aware of what he or she does and doesn’t know. A great example of this is Kodiak Cakes’ co-founder, Joel Clark. Over the course of 20 years, Joel grew the business to 15M dollars, but still wanted to be coached and mentored. He still did a majority of the work for the company, but in four years of working with Sunrise Strategic Partners, the business has grown +50% per year and is now over 200M dollars in revenue.
- Clarity and Alignment on the House We’re Building: If we walk into a store three years from now, what does perfection look like for the brand, and how do we build a blueprint to get there? In the first 90 days of our work with Kodiak Cakes, they were a business with pancake mix in Target and Costco. Through product development and working closely with consumers, the company introduced baking mixes and frozen waffles and pancakes, while still remaining true to their foundation of pancake mixes. With Joel and his team’s buy-in, the brand successfully executed each of these projects. It’s a great example of how to go from 15M dollars to 200M dollars in just four years of work.
- Scalable Supply Chain: It’s important to make sure the supply chain is scalable and that the areas to improve product and cost are crystal clear from the beginning.
You are a person of enormous influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂
I truly believe that people should treat people the way they want to be treated. I always told myself that once I became a CEO for the first time, I wouldn’t view myself at the top of the pyramid — I was on the bottom. The people at the company did not work for me; rather, I was there to make sure they had everything they needed to be successful. This includes a clear strategy, priorities and resources, all of which help a company to function at its best.
We are very blessed that some of the biggest names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US whom you would love to have a private breakfast or lunch with, and why? He or she might see this.
I’d love to have lunch with Tom Brady or Peyton Manning. Both men define excellence over decades, and I would think you could learn a lot about their approach to their profession and life in general.
This was really meaningful! Thank you so much for your time.