Polina Chebotarev and Filipp Chebotarev of Cambridge SPG

Welcome to the Puck, Venture Capital and Beyond, a show that explores the evolving landscape of the venture capital world. We'll have candid conversations with today's VCs and entrepreneurs who are shaping those changes. I'm Jim Behr, managing partner at Behr, Negron, and Troff, and president of CMUG Advisors. This podcast brings change makers to the table to discover the inner workings behind the decision making strategies and ultimately to how they got to where they are today. We're choosing to invest in consumer products that are better for you because we have this belief that if we're gonna be making investments, we can tie that into this discernible social impact.

That is the goal. It's easier for the masses to adopt a few upgrades, your daily upgrade, than to upgrade everything. On this episode of the Puck, I have a chance to sit down with Philip and Paulina Chibaterra of Cambridge SPG. We talk about the newest innovations in the food and beverage industry and the cutting edge technology changing the future of the better for you investment space. You guys both have great backgrounds and as a female male team in doing what you're doing, I'd love to understand a little bit about what your background is and then also kinda what brought the two of you together as a team so that we can kinda understand how you work together.

Right. So Philip and I are brother and sister. So I guess we didn't really have a choice. Our parents at birth kind of brassy. So we came from Russia in 1993.

I was eight. Polina was almost 10. And we didn't have any friends. We didn't speak English. So we became best friends because we're the only we could communicate and couldn't communicate with anybody else.

And then after college and we both went on to separate things, but ultimately, we wanted to start a business, an investment company. We joined forces and that was the distressed real estate acquisition effort. Yeah. So in late two thousand nine, early two thousand ten, we saw a lot of banks having these distressed foreclosed properties going up for $10.15 cents on the dollar. And we started with a small property and then later on, it got bigger and bigger.

And in a five year period of of time, we got about 350,000,000 in equity unleveraged. That was 44 different projects. And since then, we've divested out of 41 of them. We have three left. But in 2014 is really when we started to see the opportunity in real estate die down and we started looking elsewhere to other businesses, to other sectors for opportunities, and we stumbled upon consumer.

Which is interesting because, again, I have worked with various real estate turnaround funds and family offices that did kinda what you're doing. And then, they were kinda waiting for the next cycle, but they really stayed focused on that. And then, they realized there wasn't a place to deploy their money because there was some good money chasing these very expensive deals. So it's interesting in terms of you fit right into this notion of the puck and where's the venture capital world going, but where the world in general is going. So you got out of real estate at the right time and you moved into this consumer stuff.

So tell us a little bit about what was it that attracted you from real estate to the food industry? How did you settle on that? Well, so we looked at various different sectors. Like, as real estate prices recovering, there was no more distress. We looked at health and beauty businesses, retail businesses, a lot of food and beverage.

I think qualitatively for years, we knew that there's this massive generational shift in spending occurring, that millennials are shopping very differently than their parents. They want organic. They want better for you brands and just started looking into it. And for two years, we looked at so many deals. And once that looked interesting, we would dive in, we would do an analysis, but it never really hit home.

And then ultimately, we got pitched a deal here in Santa Monica actually called Foodsters. There were less than 1,000,000 in sales, but they're doing something really amazing in the better for you kind of baking category. And Sarah Michelle Gellar was a cofounder. So we really wanted to meet Buffy the Vampire Slayer. So we went to go look at the deal.

But we fell in love with the team. We fell in love with what they were doing. We ended up leading their their series a, and that was our first deal. And then since then, we did Once Upon a Farm. We helped bring Jennifer Garner into that deal as a cofounder, a major investor.

That company took off. And since then, we've invested in over two dozen companies. So that's interesting. I just had lunch with someone yesterday who was talking about the number of companies that do series a in Southern California, and it was a pretty limited group. In fact, from their perspective, it was seven.

And they said there's exceptions to that, but it really was, quote, seven. And you weren't on that list. So what's interesting to me is that you guys are doing series a rounds. People should know you're doing series a rounds. And you started in our backyard in Santa Monica.

So tell us a little more about in terms of your investment criteria and the size deals you're looking for and the checks that you'll write, how does that figure into our ecosystem? So we do do series a, but we try to do them one at a time because earlier on in the growth stage of the business, they need a lot more time hands on. And so on the fun side, about 85% of our deals are 20,000,000 plus in revenue actually. And those are like series b, series b. Series c.

And then about 15% of it is focused on series a, but we do them one at a time because there's so much of our time dedicated. And do you have an actual fund where you have limited partners that that you We have a dedicated fund. So we raise money. So all of our real estate deals, we raise money for and all of our consumer deals, we raise money. Raise money.

So is there a specific fund like in other words, is this Cambridge two, Cambridge three, Cambridge one? Is there and is there a specific amount of capital that you have to deploy that people should know about? So between dedicated fund vehicles, we have 50,000,000 to deploy. But then we also do SPVs on deal by deal because we have limited partners that like fund structures and we have limited partners that hate fund structures and only want to do deal by deal. So we do more.

Yeah. They like to cherry pick the deals. Absolutely. Because we have some corporate investors who may have an interest in produce but they have no interest in tampons or sunglasses or whatever. So do you then it sounds like going from a all the way up.

Do you typically take a board seat with these companies? Yes. Yes. So you're active investors? We are lead investor.

Yes. If we are Putting substantial amount of money. Of course. Yes. Yeah.

Right. And are you do you prefer to lead? Is that in terms of your deals? Do half of your deals? Do you lead half your deals?

I would say about half. Let's say half we lead, the other half we follow on with others. And so when you're in terms of your network of co investors and other stuff, are there particular VCs? Like, do you work with the ones up Northmore? Do you work with ones in Orange County, Silicon Beach?

I mean, we have friends in all over the country. We're in a lot I mean, we're in a lot of deals with Harbinger Ventures, with Beechwood. We're in a deal with VMG, which is up north. Pretty big fund. TSG.

Yeah. TSG, 9,000,000,000 AUM. So we're in ProvaireVote together. I mean, we have co investors on all of our deals. So when you talk about food and we talk about Southern California, are there things unique to our ecosystem that have anything to do with why food and why Southern California?

I think there's pockets around the country. And Southern California is one of the main places for food innovation. But Austin, Texas is huge. Denver. Yeah.

Denver, Colorado. Very in your pocket. Yeah. So I think anywhere where you have dense metropolitan areas with a high concentration of educated millennials surrounded by affluent neighborhoods, right, where there's capital to fund these ventures, I think that just fuels innovation. Right?

And here in LA, there's a lot of wealth, a lot of angel investors. Right? The angel investors invest in all these early stage concepts that otherwise may or may not have gotten off the ground. And sometimes they do get off the ground and take off and become a Dollar Shave Club or, you know, an honest company. So if I wanna get a deal approved, do I have to pitch to both Paulina and you, Philip?

I mean, how does that work in terms of getting approved? So we do see deals separately, but if it gets past a certain point where it seems very compelling, of course, then Philip and I will look at it together and probably meet with the founders together. Yeah. Like a few weeks ago, we actually flew out to Scottsdale together to look at this deal. It's in the Better For You Dental care space.

And this company is just, like, incredible. 82% margins, over 30,000,000 revenue in second year. So we both went. And the guy who introduced the deal to us is like, if you guys are both here, we know that you're serious about the deal. It's true.

Which is true. Yeah. So jumping around a little in terms of the dynamic between the two of you, brother, sister, are there birth order issues or anything that in terms of who plays one hat or otherwise? I'm the father of a boy and girl twin, by the way. And so in terms of the dynamics of siblings and are you the two?

Are there other brothers and sisters too? We have a younger brother as well. And is he involved in the business at all? Not in this business. Yeah.

He has his own business. He's younger. He got married first. He has his third kid on the way. So Yeah.

We have great family ratio, but he does his business. We have our business. Yeah. Philip and I are very much the same person except he's the guy in the room. Gotcha.

Like, we're very synergistic. So do you are you different or are you very Complimentary. Complimentary. So you respect the differences. But their goal is the same.

And how would you articulate what that goal is? So our goal is to from the investment standpoint, right, we have limited partners. We raise capital. Mhmm. And the goal and that is to make money for the general partnership and for the limited partners and to grow transaction size and to grow transaction volume.

But we can do that model, right, anywhere. We can invest in energy. We can invest in tech. We can invest in a variety of different things. Right?

We're choosing to invest in consumer products that are better for you because we have this belief that if we're gonna be making investments as an investment company and if we can tie that into this discernible social impact such as making better for you products more accessible, not just to the very affluent, but to all people, then that's where we're gonna focus on energy. And in real estate, we actually did the same thing. So we invested in a lot of what now would be called opportunity zones before they were called opportunity zones. And then we would donate to, for example, schools in that neighborhood and do community events. You raise an interesting issue from a social consciousness perspective.

I was listening to something on the daily today about the trickle down nature of the tax cut and they did a really detailed analysis about Fred Smith and FedEx. And what they basically said is that they lobbied a lot for this trillion dollar tax cut, but then in the year post the tax cut, FedEx has not spent any money in capital infrastructure, but they did pay it out in the forms of shareholder distributions. And there's a whole discussion about whether or not that's gonna ultimately lead to capital investment and everything else. But in the organic food space and in these better for you food categories, with 30% of the economy now, this upper middle class, these people that are buying these products. I understand that they're going to Alfred's and buying a $4 smoothie or a cup of coffee and otherwise.

But there is the 70% of the rest of the country that isn't partaking of that. Are the foods and the technologies that you're developing, will they eventually trickle down and benefit those other 70%? That is the goal. And then some of the companies, like, the ones that we try to focus on are the ones that are easily to adapt to an everyday lifestyle like a better for you bread or cup of coffee. You're it's easier for the masses to adopt a few upgrades, your daily upgrade, than to upgrade everything and especially the more expensive items in life like cars or residences or vacations, all that.

So when you talk about daily upgrades like coffee and bread, can you give us an example of some of the things that your companies are doing that are either out there currently or that we should be looking for? I mean, so Once Upon a Farm is a great example because prior to Once Upon a Farm, the fresh baby food category didn't exist. You had about 60% of moms making the food at home for their babies, and the rest buying shelf stable products from Gerber, from Plum Organics, from Happy Baby, a variety of these different brands. That are older than the baby. Right.

Yeah. These shelf stable products were older usually than the child that was eating them. Right. That's funny. And so, Once Upon a Farm came out with fresh baby food using HPP, which is high pressure pasteurization technology, which gives fresh food shelf life of a hundred and twenty days.

So now, this technology enabled this product. And today, it's the number one selling baby food at Whole Foods. It's now 40% of the whole category just two years in. But the interesting thing that once upon a farm has done, they realized, well, we sell really well in Whole Foods. We sell really well in Sprouts, these affluent stores.

Right? But they are also in Walmart. They're also in Kroger. They're also in Target. And they went state by state and have been getting WIC certification for their product, which now enables lower income mothers and single mothers, right, who are on government assistance to use WIC to purchase Once Upon a Farm.

So now it's no longer just absolute moms in Santa Monica that have access to this better for you product that makes their kids smarter, healthier, right, gives them that nutrition, no high fructose corn syrup or additives. Now it's accessible to all. I mean, that's, I think, a really good example of how brand can focus on making profit. Right? Because if it's not gonna make a profit, then it's not going to ultimately succeed.

It'll fizzle out. But also in that process, make it accessible for everybody, which has that positive social impact. So when we're talking about how you're viewed in the community and how you want investor base to look at you and just in general, are there reputational things out there in terms of how you want to be viewed that people should know about? Yeah. So since, like, 2010, we've been general partners of about 70 deals and limited partners as investors in over 30.

And reputationally so in the standpoint from our limited partners, the kind of reputation we have is that we'll go above and beyond to make sure that there's the best possible outcome in a deal. Because right in all of those deals, the one thing that they all have in common is that something goes wrong. It always does. But it's not that it always goes wrong and it's not recoverable. Right?

There's issues that need to be resolved. Right? Like one of our properties we bought for 1,800,000 and we sold it for 8 and a half million. Right. But nobody knows that in the four years from that happened, we had four lawsuits.

We had liens against the property from contractors that did a poor job. Right. We had, title company that didn't record something that was supposed to be on title. I mean, there was a lot of issues. Right?

But we went from 1.8 to 8.5 in four years, not leveraged. There's always things that come up, but it's really putting that effort in and time in to make sure that it goes from a to b. And then from the sense of the portfolio companies that we're invested in, but also ones that we're targeting and wanting to invest in, the The kind of reputation we have is that it's almost the mirror of what our limited partners see. We understand that these companies, the trajectory isn't always gonna be like this. Right?

It's gonna be like this. And we can wait out the delays. We know that it's not gonna be a straight linear lineup. It's when those problems occur, that's when we really excel because we help those brands figure things out. We don't go into panic mode and And do you have consultants that you bring in?

Is it the two of you that are kind of rolling up your sleeves and helping them? In a typical situation when there's a challenge with these companies, how do they typically get it done? I mean, we have great relationships. Paulina does it all. Thanks.

We do have great relationships. We have advisors and we have analysts. And Philip and I are very much hands on, but we have a lot of strategic relationships with other VCs. I mean, we have a wide network to reach out and tap into the resources we need. Yeah.

As a team member. Reason. Yeah. It could be. So what I hear you saying with the sophisticated team you have in place, I'm wondering though what you and your group anticipate for the future.

Part of our mission is again, the puck where is venture capital going. And we are living in a unique time right now where people are talking about the WeWork situation. And again, is is that a sea change in that it's not in and of itself representative of everybody else. And it's such a large situation, but it's calling into question everybody's assumptions. And so people are looking under the hood and saying, okay, that which we most fervently desire, we most easily believe, but is it time now to reassess where we are?

With an election coming up and we know from a liquidity perspective, nothing's gonna happen before the election. The government's gonna keep the foot on the pedal as much as possible. But recognizing that there is gonna be an after election, where do you see us going? So I think the reason that we work and, right, Uber and not just these big high profile companies that have this national attention, but also smaller companies and more local companies that have experienced growing top line at all costs. And the reason that that happened is because strategic acquirers or private equity firms or public investors and retail investors, right, rewarded top line growth and were not focusing on the burn rate.

And sometimes the unit economics behind the companies were sound and so they spent a ton of money, gained market share, but ultimately, because they had strong margins, right, the unit economics of the actual product service, whatever made sense, they reach profitability. But it oftentimes, that wasn't the focus. So it was grow top line and you'll figure out the unit economics later. Once you have this huge control of the market share and you're the monopoly, you'll be able to figure out how to actually make it profitable. And because investors rewarded this, a lot of companies, that's what they did because their rate of growth and their top line was what was gonna drive the next valuation.

And so, of course, trees don't grow to the sky. And it got to a point where a $47,000,000,000 valuation for WeWork, right, may have been the thing that tipped the hat. But it was a combination of a lot of things. And we're seeing this how companies as small as a million dollars in sales are looking at how they're going to build their business. So it's impacting the entire industry.

I'm sure in tech, in consumer, in other areas of private equity. I mean, it's a big topic in 2019 because no longer is it about just growing top line at all costs. Right? It's making sure that your unit economics are sound and then scaling from there. You know, as you're talking, I'm thinking about Amazon and for how long Amazon went without turning a profit, and they were rewarded for it.

You look at what's going on with Netflix and Amazon and Disney and Apple now and this whole race to buy content and spend as much as you can because you've got a global marketplace now 7,000,000,000 people. I was looking at statistics for Stranger Things, I think. And the number of views. I mean, there were x million in America, but it's all over the world now. So you've got all these phenomenons going on at a time when there was some sense to, you know, if you keep throwing money at it, you become Jeff Bezos.

You keep throwing money at it, you're gonna become Netflix. But it also it's interesting to me, and somebody smarter than me in history will rewrite this, quantitative easing and this notion of printing $20,000,000,000,000 that just coincidentally coincided with the real estate collapse that you're talking about, and what we've lived through for ten years, put $20,000,000,000,000 worldwide in the circulation that didn't exist. And we can keep doing that, but if we get back to real economic monetary policy, at some point, there has to be a day of reckoning. And are you seeing that day of reckoning? Yes.

It's definitely here. I mean, the kind of updates that we're getting from our portfolio companies are we are planning to grow slower next year and use less outside cash and focus on margin improvement. We're seeing that across the board. And I think that investors today are becoming afraid of companies that, right, plan to raise tens of millions, of hundreds of millions of dollars before they ever reach revenue or profitability. But is the code for what you're saying that investors are gonna let some of these companies die or they're gonna have to merge or restructure?

Because, you know, it's one thing to say that's what we're focused on, but you can focus on that for ten years if people keep investing in that new focus. For a while, you could go on for a long time and keep getting money. Is there gonna be a group of companies that get caught by these new rules that are gonna either have to merge with some of your portfolio companies or transition out of their space? I think there's three things to that. So I think some companies, even ones that don't have sound unit economics, are gonna get lucky and they're gonna become the Amazons.

It happens. Sure. But most that don't have their unit economics figured out are gonna fizzle out. The ones that have strong margins, the business actually makes sense, but maybe they spent more to gain market share, right, to take control of that sector. They scale back.

Right? They have a higher chance of success because the fundamentals of the business make sense. And I think the third is consolidation, like you said. Because for every company with crappy margins and unit economics, and it may be a crappy company in the way it is, but there's an acquirer potentially that can tuck it into their infrastructure and improve the unit economics. And I think a lot of the strategic investors, at least in our space and consumer products, they were paying these obscene multiples, eight times top line sales, sometimes 10 times for a company that was growing a 100% year over year and had 16% margins.

Like, it just didn't make any financial sense, but they were justifying it as, well, we're gonna acquire it for this in our infrastructure. We can improve the margins from 17 to 45 and we can increase ACV and get it from, you know, these 5,000 stores that it's in to 30,000 stores in one year. And so for them, the deal made sense. Whereas a private equity firm without those capabilities on the manufacturing and distribution side would never do a deal like that. So Paulina, if you're meeting with any entrepreneur that is coming to you and saying, look, we wanna get financing and I listened to your interview and you were talking about how there's this sea change that's occurring, what would you tell them?

I would tell them to focus on the enterprise value creation with the amount of money that was raised in their seed round, for example. Like, I would wanna see what they were able to accomplish with the seed investors money before coming to me because I wanna have enough data to extrapolate their success before we put in money. It will give me a better projection of the outcome if we came in for series a or b. And in terms of investing in women owned companies, women led companies, is there anything unique in terms of the criteria that you look at with companies where that gives you a competitive advantages because you're looking for women? How does that figure out what you're doing?

In consumer food and beverage specifically versus other consumers because, you know, there's fifty fifty men and women in consumers, but in the food and beverage, there's a lot of women that are shopping even in the men households. Last time I looked at the numbers, it's like 85% is the female buyer in food. So I think to have that perspective of what women want or need or desire to see on the shelves. So are you seeing in terms of and whether or not this is scientific or just in general, are there more women CEOs of food in consumer food products than in other industries because of that unique, you know, because of the woman's perspective? No.

But we are seeing more and more of them emerging. But I would say fifty fifty. Yeah. I think women are just better consumers. Yeah.

They're better consumers for several reasons. But the main reason is they're very vocal about their purchases. Right? When women find a new product that they love, whether it's cosmetics or personal care or food or beverage, Right? They're telling their friends, all their girlfriends, they're telling the men in their lives and they're sharing about it.

Like men don't really do that. Right? We're never calling up our buddies and saying, I just want the best deodorant, bro. Like we gotta use this one. It's so good.

I'm gonna post it on social media. Women are just better consumers for that reason. When you're helping your companies or you're deciding which companies to invest in, reading between the lines in terms of what you just said, are you also looking for companies that from a marketing perspective, there's a huge social media opportunity in terms of how those products are marketed? Yeah. What is the joke that you always say?

In this industry, you can't look at the industry as or at the products as a 40 year old man. You have to look at it as a woman between the ages of 18 and 30 or something or 34. To determine if it's gonna be cool, if it's gonna be hip, like, if it's gonna take off. Right. And then, if it's gonna be hip and it's gonna take off and it starts in the social media, does that But it has to last also.

But does that also then translate to the cool value then people go to Walmart and they will buy it at Walmart because they've heard about it in the social media stuff. So for those people in the bubble who are going to their Whole Foods and their Trader Joe's or otherwise, it's one thing for them to hear about it because women are talking about it at the coffee shop or on Facebook or otherwise. But in terms of the country in general, this whole social media and driving people to the retailers, the big box retailers like the Costcos and the Walmart. Do you you see a big tie in with that? I think it's different for every company.

Right? There's customers for the natural channel, for convenience. A good example of this company that we went to see in Scottsdale. So they have major, major celebrities that promote the product. Mayweather and Kardashians and just you name it.

Right? And so the way that their map looks of the country is the people that are promoting it are the influencers that live in California, Miami, New York. And then the people that are buying it are people that are actually ages 40 and higher up to 60 that live in all the other parts of the country. But they follow those people. Interesting.

So But if it was a DTC business, that's the Right. There's a lot Purely DTC that's now launching into retail, so it'll be omnichannel. We talked about that the economy is shifting. It's gonna get a little tougher out there, butting down the hatchet, so to speak, because we're gonna have some rough seas. But in terms of exciting new technology that not everybody may be aware of, are there other things like that that are gonna change the way we buy products that are gonna be healthier for us, but also things we may not know about yet?

Definitely. So process like HPP is definitely one of them. But I think there's a big focus right now in sweetener systems. So that's a big big topic from a technology or innovation standpoint. Yeah.

And being able to derive from fruit versus all of these artificial sweeteners. Anything that disturbs the gut is like Well, sugar is the enemy. Right. Sugar reduction is a huge social phenomenon that's occurring. Yeah.

But the alternatives like sugar alcohols, they cause the digestive distress. They're not optimal. Some have strange aftertastes. So there's actually quite a bit of innovation coming in sweetener systems and then using those sweetener systems in products. So for example, that sweetener system may work great in a baked good, but won't work well in a beverage or may work well in something else.

Right? Like, so optimizing the format. So that's big. I think blockchain in produce and other products is huge. It's starting to emerge.

So we've done episodes on the blockchain and cryptocurrencies. And one of the things that our listeners ask all the time and one of the things that I ask all the time is, what are some practical applications of blockchain? In the real world, how is it gonna be brought down and affect our lives? Well, so I by no means will pretend that I'm, like, an expert in Blockchain food, but using Blockchain as a way to document where the product was grown, who collected it, where it traveled to on the truck, how it got to the warehouse, and monitoring all those steps along the way. Like, I know Walmart does this with everything that they source.

Right? So traceability. And ultimately, right, the consumers are looking for that, I would say, transparency in the supply chain. Because for them, it's important not just the certification of the product, right, whether it's organic or not, but also how it was harvested and sourced. There was a thing called acai.

Right? Everybody kind of remembers acai craze. Was it the Brazilian fruit. Right? Yes.

Yes. Powerful antioxidants all over the place and acai sales went sky high. But then it was discovered that all of this acai was being gathered in South America by modern day slave labor and all of a sudden acai sales went down because, of course, nobody wants this antioxidant if the cost of it was human slave labor. Right? So I think, I mean, transparency in the supply chain is very important, and blockchain is one of the things that enables that for the retailers to give that transparency to consumers.

But then also, how cool would it be to just go into a grocery store and use some Bitcoin to buy a carrot? Right. It's fascinating. We've been involved in a lot of organic food companies and understanding the different ratings from all over the world and having chia seeds shipped to Europe and sold in Europe versus sold here and the expiration dates and the sample rooms for these things. It's very complicated and, you know, people read organic, but what the heck and there's so many layers to that and I think you're right that Blockchain, one of the things it's very good at is authentication.

I think more and more you're gonna see that people are gonna wanna know what's in their water, so to speak. Have you looked at any water deals? I have a water deal. Okay. Well, so you wanna tell us about your water deal?

H factor. So it's hydrogen water and it really works. The hydrogen enters your body and attaches to the free radical oxygen and binds together and flushes out. Impurities and stuff. Interesting.

The reason I'm asking is just because with so much focus on recycling, there's been studies done in terms of plastic bottle recycling versus can recycling and does it make sense to package things because of that in aluminum cans or things that are recycled at a higher level. There's also this You still have to recycle though. Right. And that really is all up to the consumer to do. But, for example, each factor, the pouches have a lower carbon footprint than, like, a glass bottle or So is there a unique packaging to that?

It's a pouch. So once it's empty, it's very flat. Oh, interesting. So it's better for you. And they're and and then are they recycled?

Yes. That's fascinating because again, in the studies that I've seen on cans versus bottles, bottles do not lay down flat easily and so they're less recyclable. I mean, they're just not recycled nearly as often because it's a pain. Whereas the Unless you incentivize them with bringing back to the store, these glass bottles, and we'll give you some money towards the next purchase, which I know some milks do that for example, in the glass bottles. Interesting.

But you have to incentivize the customer. Otherwise, why would they do it? I think the single use plastics is another big issue Yeah. Today for consumer products. We're constantly looking for new package alternatives for our brands.

Are you doing anything in the pet space? We also have a pet deal. Because it seems to me that in this new environment, people care more and more about their pets, and there's natural this and there's that, but nobody really that I'm aware of has really taken ownership of that space and really said, start to finish, here's our product and here's why you should use this raw dehydrated all natural low in ash product. So what are you guys doing in the food? Do you have a dog?

I have a cat. Okay. And I have a colleague who runs an all natural pet store and is pushing raw food. So I'm curious what you're seeing in that space. People are treating their animals as if they were part of the family nowadays.

Right? So as they're making the different changes in their diets, it's all starting to trickle down to the animals. And I mean, just the other day, somebody pitched us pet water, special water for a pet. So we're starting to see it really penetrate not just with the food but the water and other supplies. But in our pet food deal, we have raw Well, the issue in pet food is that over 90% of pet food that's sold in this country is just garbage.

It is trash. It's worse than McDonald's. It is so bad. It is like feeding your pets trash. And if you love your pets, like which we right?

Americans love their pets. Why would they want to feed them this stuff? It causes chronic illness and pain for them and inflammation. And so because of this awareness is growing, the pet food industry is having the same shift as the human food industry. Uh-huh moment.

Yeah. The raw organic biologically appropriate is a big term. So dogs, cats in the wild, they'll never eat grains. They're not gonna eat soybeans. They're not gonna eat corn.

Right? And all these fillers that are in these conventional pet foods, they're supposed to eat meat. So having an appropriate biologically appropriate diet for pets is also very important. The The pet food company we're invested in is True Pet, which was recently acquired by Better Choice Company, which is a company that acquires better for you pet food brands. Yeah.

And and again, to show that none of this is simple, I was also told that, yes, pure meat is good. But in the wild, when they eat a mouse or an animal that eats certain types of vegetarians, they will get some vegetable in their diet, not corn. But if you're trying to really mimic what they get in the wild, there really should be some. Not filler, but some Yeah. And so I think sweet potato is used commonly where Yeah.

Or just some healthy fats. But not GMO soy. Right? Where, like, 80% of it is GMO soy and, like, there you go eat it. Right.

Keeps their cholesterol down. I think you guys, in terms of, again, the pocket where it's going, as you're saying, as people are interested in what they're putting into themselves, do you do see people getting uninherited and their houses being left to their pets and the pets eating better than the children. So it's definitely a movement and I'm interested to hear that that's part of your segment. They say you're not a real private equity firm until you have a pet food deal. So we have to do one.

There you go. So, Paulina, we know there are companies outside the food and beverage space that you are investing in. I'd love to hear a little bit about those companies. So we're investors in Cora, which is organic feminine care. I mean, obviously, organic is a big deal because you're putting something in your body and there's been association with toxic shock syndrome.

But also the interesting thing about that company is that they donate feminine care to girls in India And Africa. And Africa where these women kinda lose their prospects at 12, 13 because they don't have the right products to be able to have them go to school. We really like their social mission. But I think the thing that ties all of this together is that consumers are realizing they're gonna pay for it now or later in their health. Either they're gonna pay a little bit more of a premium for a healthier product now, but save on all of the money that we've seen, you know, now like the baby boomer generation spending on medication because they were not conscious.

I think this is the thing that's fueling what is going on in The Atlantic. And it's not just baby boomers. I mean, chronic illnesses. Yeah. Even genetics.

All generations. 85% is diet. That's the fuel that you require every single day, three times a day at least. Of course, that's gonna play the largest. Preventative is so important in health care.

Have you gotten into this whole gluten free movement stuff? Were you investing companies that are doing a lot with gluten or are you focusing on giving people a gluten free alternative? How does that figure into the kind of companies you're investing in? So like in the case of Foodsters, which makes organic better for you baked goods. They have a core line which uses identity preserved organic flour.

So the highest quality pure natural flour that you can buy. But they're also coming out with keto, gluten free. Right? All these different alternatives that have lower sugar, for example, and having different lines that offer different consumers what they want. I mean, the issue that we've seen with gluten intolerances, lactose intolerance, food allergies, a lot of times, it's not the actual food that's creating the allergy.

It's either the process or the pesticide that was used that's creating the allergy. Right? So a lot of genetically modified ingredients, the reason they're genetically modified is so they can withstand pesticides because the weeds can't withstand the pesticides. But if you genetically modified that crop, it's not not impacted by the pesticides so the weeds die and the crop stays alive. But that pesticide residue is what's creating a lot of the food allergies.

Lactose intolerance is created because of the way that the milk is pasteurized. So the lactose, which is the protein stays, but the lactase, which is the enzyme that helps your body process that lactose is destroyed by the pasteurization process. So that's why a lot of times people that are lactose intolerant, they can drink raw milk and they don't have the issue. It's not just a food. Right?

It's when man gets involved with food and over processes it and sprays it with too much stuff and does all these scientific experiments to it, that's when it starts creating issues. I followed the whole GMO campaign, for instance. You know, was it gonna be outlawed in California? Was it gonna be not? There was this whole initiative.

And they kept constantly saying that there's no evidence that anything with GMO is dangerous. And that may well be a 100% true. But this is the first time I've ever heard anybody in an articulate way explain that good news and bad news. When we make these crops stronger so that they can withstand pesticides, it only means that they have more pesticide residue. So it's not the GMO process that is dangerous.

It's the fact that now you're eating foods that have more pesticides on it. But that's something people need to know about. Interesting. I always learn more and do I love you. Great stuff.

You guys were great. Thank you very, very much. Thank you for having us. Yeah. Thank you for having us.