This course builds on previous concepts and outlines strategies and tactics for forming, financing and launching a new venture. Topics to be addressed will include building the new venture’s initial management team, identifying and reaching out to early customers, developing financial plans, raising startup and initial growth financing, and preparing for and managing rapid growth. Course objectives: Entrepreneurial Team Building: Develop an understanding of the what is required in a new venture Initial Go-to-Market Strategy: Develop a plan to identify and approach your first customers Financial Forecasting: Building financial projections for the new venture Entrepreneurial Financing: Raising Equity Capital for the new venture Growing the Business: Monitoring the new venture’s health and scalability
Interview with Dan Klein, Tiesta Tea
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來自 University of Illinois at Urbana-Champaign 的課程
Entrepreneurship II: Practices and Approaches
32 個評分
University of Illinois at Urbana-Champaign
32 個評分
課程 6（共 7 門，Specialization Innovation: From Creativity to Entrepreneurship）
從本節課中
Module 4: Growth and Next Steps
In this final module we will be focused on post-startup issues – growth management, pivoting, and the hard decisions that must be made if the new venture is not successful. It includes interviews with two entrepreneurs who are executing on fast-growth strategies, and dealing with challenges while positioning their companies for success.
與講師見面
Thomas E. ParkinsonVisiting Professor
University of Illinois College of Business
[SOUND] I
recently had a conversation with Dan Klein who's the co-founder and
CEO of Tiesta Tea.
Dan and his co-founders started Tiesta Tea while they were still students at
the College of Business at UIUC.
They got the idea for
the business while they were on a study abroad trip in the Czech Republic.
They're working to disrupt the retail tea business by providing
all natural loose leaf tea blends with real fruits and herbs.
They're growing fast.
Tiesta Tea is now in more than 6,000 specialty, natural and
grocery stores throughout the US, Mexico, Canada and
the Middle East including Safeway Costco, Marianos and Trader Joes.
Tiesta Tea was nominated for Forbes most promising companies of 2012.
The company is now looking to expand into food service and bottled teas.
I've asked Dan to sit down with me to discuss some of the issues and
challenges he faces in managing a rapid growth company.
[MUSIC]
So Dan, it is great to be here.
I wonder if we could start out by just having you tell us a little bit about
Tiesta Tea.
>> Yeah. >> And what the company's all about.
>> Definitely, definitely.
So Tiesta Tea started as a project.
The idea came from a study abroad trip that I took in 2009 with
my business partner Patrick to Prague in the Czech Republic.
And in Prague, we noticed all these different tea houses.
And we were wondering why there were all these tea houses in Prague, but
not here in the US.
So came back to the University of Illinois, we started the business with
the help from the university, got a grant to fund the business.
We met investors, we met Jimmy John Liautaud, the guy who started
Jimmy John's Gourmet Sandwiches, and he helped us with our branding a little bit.
So we started out, this was actually our initial product here,
just a simple black bag, and this is our current product right now.
And so, we've come a long way.
We're now one of the leaders in loose leaf tea in grocery stores, and
we have distribution in over 6,000 stores nationwide.
>> And so what was it that really made you think that the bulk tea business was where
you wanted to spend your time?
>> We did a lot of market research and
we realized that the specialty tea industry was growing pretty substantially,
so tea has been kind of on a slow rise for a long time.
But specialty tea has been growing quicker and a lot of people attribute that
to the health benefits that specialty tea can provide.
And there's also been this shift in the market, especially in the past five to ten
years where people are trying to drink beverages that are healthier for them.
They want stuff that's lower calorie.
They want stuff that can help their bodies.
And the millennials, specifically, are looking for
beverages that provide function.
And so, when we came out we said,
we want to make a tea line that can fit any day park.
So we have energizer, slenderizer, immunity, relaxer, and
eternity teas so you can find something that fits your daily need.
>> So let's talk a little bit about growth.
What year did you start the business?
>> 2010.
>> Okay, and then between 2015 and 2016, I believe, the company doubled its revenue.
And I think you're planning to double again by 2019 or maybe 2018.
So that's a lot of growth and it's not a big company.
You're probably stretching your resources to the maximum right now.
So how do you manage that kind of growth in a company that's
still very entrepreneurial.
>> It is difficult to manage that type of growth.
I think the most difficult part for
us with a physical product is space constraints.
So about this time last year, we realized that we were just outgrowing
our current facility, so we started looking for a new warehouse.
We ended up renting a warehouse that we now are in
that's about four times the size of our current warehouse.
But at the same time, you have to make sure that those costs don't get too high
because that's going to eat into your gross profit.
So that's always been a big challenge for us.
And then,the other thing when it comes to growth,
you realize that there's pieces that you need that you never needed before.
So whereas in the past we might have had one marketing employee, now we have four.
And one does social media, another does PR, another does philanthropic.
And so, as the company grows there's more and
more initiatives that the company's undertaking, and
it's really a matter of figuring out which ones are the best paths to go down.
>> So how many people do you have now?
>> 15 full time.
>> And how many will you have a couple of years from now?
>> Man, I'd say we'll be at least 30.
>> So you have to put in layers of management and
hiring policies and all that.
>> Yes exactly, and that's one of the hardest things from kind of growing from
a start up to a small business is that something like a HR handbook when you
start a company, you may not need that right off the bat.
But three, four, five, six years down the road, those are things that you have
to have in place because as you grow, you're not hiring just people you know,
you're hiring people that, from the universities,
you're hiring people from the job market, and you need to have infrastructure so
that they can come in and be successful right off the bar.
>> So, we've talked a little bit in the class about growth matrix and
key performance indicators.
So what do you track in your company so that you can stay
on top of what's happening on a day-to-day basis as things get more complicated?
>> Absolutely, so one of the things that we track is sales per store, or
sales by chain.
We track both of those metrics because we want to see if we can increase our sale
through or our performance in that chain with the same flavors year after year.
And that's really a benchmark for us to continue to get more distribution or
more flavors with that customer.
The other thing that we'll look at is we'll look at KPIs with marketing
initiatives like demos and store demos where our people are sampling the product,
and try to see if there's an ROI on that.
So there's several things that we're tracking and then last but
not least, one of the most important metrics for us becomes profitability.
So our goal we have raised some financing already.
We're a profitable business, and so now our goal is how can we continue to grow at
a fast rate and continue to be profitable so that it would be self sustaining?
>> So how do you communicate these KPIs or metrics across the company and
with your board or with your investors?
>> So we break these out every quarter.
We send a lot of these KPIs and investor updates and we also set goals internally.
So when it comes to some of our team members or employees here,
they have certain metrics that they must hit in order to receive their bonus at
the end of the year.
So we set those goals for them at the beginning of the year and
then throughout the year monitor those.
We may adjust them a little bit if needed.
And then at the end of the year, we look to see have they hit their goals?
So then based on that, that can provide their bonus for the year.
So metrics are very important as a company grows and
gets past that startup stage because if you're not continuously measuring,
then you may end up in a position where your growth is flat or down.
You have to continue to push forward, to improve on everything that you're doing.
>> How do you make decisions about new accounts that you want to go after?
New stores, new chains, new distributors, how do you make those decisions?
>> That's a great question.
So the one rule we really follow here at Tiesta Tea is the 80/20 rule.
So any time we get a new customer,
our goal is that they have to be a customer that can be an 80 customer,
so meaning that Those the customers that derive 80% of our revenue.
And in a business of our scope, we have product in over 6,000 stores,
while there are some stores that are much more important than others.
So when we look to bring out a new account, we want to make sure there's
enough scale there where it's worth our while to pursue it, right?
If there's product development that needs to be done, that costs money,
that costs time, that's travel.
All of these things built in to an opportunity
that you might not see at first, but become big expenses down the road.
So you really have to identify what is this opportunity or this account worth?
What is it worth in the first twelve months?
What is it worth in two years, five years?
Is there continued growth or is it going to be flat?
How are we going to have to market it?
What's our margin on that?
So, all of these kind of come into consideration.
>> So, it's sounds like you really have to focus on larger chains or
companies that really have the opportunity to get your product
onto a lot of storage shelves as opposed to the mom and pops out there.
>> Yeah, so one of our focuses here in TSAT,
we spend a lot of time working with Costco.
They are a big customer of ours, and so with Costco it's all metric based.
They look at the sales per store, we monitor that.
And then from there, we can determine how our performance has been and
then make adjustments, if needed.
But something like Costco, that's a company-wide initiative.
This isn't something where just a salesperson's involved.
Typically, you're going to have at least two-thirds of our small company really
working on the Costco account.
So that, from a marketing standpoint, from a sales standpoint,
from an operations standpoint, everything is going according to plan.
>> So what does this strategy mean for your cash flow?
I assume that you have to be pretty aggressive in offering terms and
stocking inventory and things like that with some of these accounts.
>> Yeah, so with cash flow,
it's a challenge because we do have a lot of different flavors.
And not every account takes the same flavors.
But one thing that we can do to kind of limit the risk on our cash flow is
when we get a new account, we're looking to sell them our a products,
our top product lines.
The flavors that sell time and time again, those are the flavors we're offering.
Because in turn, what that does is it allows us to carry less inventory,
which increases our cash flow.
>> Right, so do you have banking relationships in place,
lines of credit and things like that?
>> We do, we have a great relationship with a private bank.
It's been very successful.
And someone like them has really been,
they've been instrumental in our growth because they allow us to kind of
manage cash flow in months where we might be a little bit lower in revenues.
And then when revenues are higher, you can pay that down and go from there.
>> I want to follow up on that just because,
it's difficult for early stage companies to
get banks to work with them especially when you're asking them for money.
>> Yes. >> So how mature did your business have to
be before you could really put a real line of credit facility in place?
>> It really depends on the person behind it.
In our case, our personal guarantee wasn't worth a whole lot, so
they looked at us and they said, guys, we need to see
at least 6 to 12 months of profitability before we can jump in on anything.
>> Okay. >> And so last year we had that.
And so we showed them this path of profitability and
the fact that we are already there.
And they were able to extend that line of credit.
But for years and years and years, we worked on getting a line of credit.
And bankers time and time again said,
you're too small, you're not profitable enough, you're not profitable yet.
And so, we had to continue to raise capital through angel and venture funding.
>> I do want to talk about that a little bit.
So, you've been through a couple of different rounds of financing with
different types of investors.
Tell us about how you decided how much money you needed to raise,
what kind of investors you needed to approach at
the different stages when you have raised funding.
>> Yeah, so
when we raised our first investment it was obviously a lot harder to raise money.
The company was much smaller and it's a much bigger risk for any investor.
But the reward can be higher.
And so in that first round, some of the most instrumental people we signed on
were people that were food and beverage investors or
people that had Chicago connections that we could tap into.
And then moving forward, it became easier for us to raise capital because,
as a business kind of goes through its life cycle and continues to grow and
your investors can see that traction, a lot of those investors want to
either reinvest or they know people that want to invest alongside them.
And so we're able to kind of parlay that into raising more funds at a quicker pace,
so that we could kind of raise the funds, move on, and keep running the business.
>> You think you're going to need to raise capital again?
>> I don't think so.
It's something that it really just depends on how fast we grow.
If growth is extremely fast, there may be a need for raising some outside capital.
If it's good growth and we may be able to sustain it ourselves,
then that's what we'll do.
But something where we always kind of keep that window open because
your needs change as a business so quickly.
>> So let's come back to the last couple of rounds then.
So in your first financing, I assume it was you and
your co-founder and a PowerPoint presentation and an interesting concept.
And that's what you used to raise money, is that right?
>> Yeah, absolutely.
>> Okay, and what were you able to accomplish with that?
So, it was funny we actually held investor presentations
where we had one in the Chicago suburbs and then one in the city of Chicago.
And we brought our employees into the room and we set up the room and
had tastings and different things going on.
And then we did about a half hour presentation, 15 minutes Q and A.
And so, after those two presentations, about three months after that,
we had raised the $4 million which is what were planning on raising for the round.
>> That's great. >> And, yeah, it was fantastic.
I men, it wasn't easy.
Again, it's a big risk for anyone coming into that round but people saw
the upside, they could see through maybe an investment deck that wasn't perfect.
But they saw the passion behind my business partner, Patrick, and I.
And they saw a good team, and they saw a good product, and believed in us.
>> So how did your investor presentation change from then
until the most recent time, where I assume you had a lot more traction to show?
>> Yeah, it's interesting, it was a lot more detailed as time went on.
And then the investor presentation really became more of, where are you going to go
in the next couple of years, because at that point you've taken on some financing,
you've established yourself as a business.
And then, what we've been trying in that next investor presentation,
you're almost trying to sell what the next three years looks like.
Whereas the first investor presentation, you're trying to say,
here's my original concepts.
And I'm going to make this work and it's going to turn into acts.
It then becomes, okay, you've turned something into something.
It's a real business.
It has revenues, it have profits.
What's next?
What is next for the company to go from $5 million to $20 million?
And those are the types of things that become questions in those later rounds.
>> So what is your goal now?
So where are you going to go next?
Is there a time when you think the company will be ready for you to exit or
for you to do something for your investors?
>> Yeah, one of the things that's really interesting about tea
is tea can be drank and consumed and brewed in many different ways.
And so up to this point, we've basically sold dried tea in the grocery store.
And that's been a very lucrative business for us, and we've been successful with it.
We're now starting to get more into the iced tea.
80% of the tea consumed in the US is iced.
>> Really? >> And so
we wanted to capture that market.
>> And so the fastest growing category
right now in grocery stores is ready to drink or bottled tea.
>> Okay. >> And so earlier in the year,
Target approached us and
said that they were interested in us bottling a tea for them.
So we've been developing a concept with Target,
alongside them, to launch early next year.
And so, it'll initially launch in Target, and then we'll bring it to other chains
across the country as times goes on throughout the year.
We're really excited about this product line because it has the potential for
much faster turns than what the product is on the shelf in the center store.
>> Sure.
>> The other initiative that we've been working very hard on
is food service iced tea.
So right now in food service, fast, casual,
conventional food service, what you're seeing is soda sales are declining.
And if soda sales are declining and
that customer is going to buy water, that's a big loss for that customer.
That revenue is a big loss.
And so, what you're seeing is the market is
now coming out with a lot of different iced tea solutions for that.
So they can capture that revenue back that they're losing from
a traditional soda fountain.
>> Well, both of those sound to me like they're going to require you to make some
changes in your operations,
your infrastructure, in order to really fulfill that kind of business.
>> Yeah, yes, absolutely.
You know, one of the things that we're conscious of is we don't know everything.
As a small business,
you learn throughout the years in the industry from different contacts.
But when you get into a new channel,
you need to add different pieces that can help you.
Whether that be an employee, whether that be a consultant,
whether that be an executive, whether that be a board member.
There's these pieces that you now need that you never, never needed before.
And so as we look to grow into these different sectors,
we now need to position ourselves as a management team and
as as company to be able to successfully capture that, right?
>> Right. >> We don't have the time or
the want to wait a couple years to see what happens.
We want to make that a success right off the bat.
>> Okay.
So what is the future then?
Are you looking to be acquired by PepsiCo or whoever out there?
>> [LAUGH] >> What does the future hold for
a tea business like yours?
>> So entrepreneurs get this question all the time,
and it's one that's kind of fun to answer, but also scary at the same time.
Because, at the end of the day, as a founder, this is your baby.
>> Right. >> And this is something that you've grown
from infancy up to a high level.
But at some point,
you want to figure out how can I get that liquidity for my investors?
How can I get that for myself and my partners?
And right now, very fortunately for us, the food and
beverage M&A market is very hot.
>> Right. >> There's a lot going on.
The Pepsis, the Cokes of the world, Kellogg, General Mills,
they're all acquiring companies very quickly at high valuations.
And the reason being is because they're seeing a decline in the mac and
cheeses of the world, but they're seeing an increase in the Annie's Organic.
>> Right, sure.
>> Right, so it's the shift and all these big companies want to be a part of it.
So the most likely exit for us would be some sort of acquisition.
>> When do you know it's the right time?
>> That's a great question.
I think the right time for
us is going to be right after a year of pretty high growth.
In a year that we've taken the company to the next level and
then getting an offer that accurately reflects our valuation.
And it has to be the right kind of partner, right?
>> Right. >> We don't want a partner come in,
destroy the brand or destroy the company.
We want somebody that can take it to the next level.
So if we do go down that path, it's is this partner the right partner?
Is the dollar amount the right dollar amount?
Does this give us the liquidity,
does this give our investors the liquidity that they desire?
And does it produce an overall good outcome for all parties?
And if you can check the boxes on all of those I think that's the time.
>> Okay, so last question.
You started this business, you and
Patrick, I believe it was while you were actually still students.
It was even before you had graduated.
>> Yep, yep. >> From business school.
So what kind of advice would you give to other
people in a similar situation who
are probably going to be deciding whether or not they want to take that plunge?
>> Yeah, so one of the things that we learned over the course of being in
business and starting up at the university is, is that there's so
many resources available to you as a student.
>> Particularly at the U of I or any major institution,
because you have the ability to tap into resources that can help you get funding.
The resources that can give you office space, resources that can make connections
for maybe, that will buy, purchase, your product or service.
>> Right.
>> These are things that you have access to, a lot of times, free of charge.
When you get out in the real world and you're a graduate and
alumni, you don't necessarily have those free of charge anymore.
Those things cost money and there's expectations around those things.
As a student, we always like to say we play the student card, all the time.
>> Right.
And we came in and we would meet with people and we'd say,
hey listen, we're just looking to learn.
Someone like Jimmy John Liautaud, he's a very busy man.
He might now want to help somebody who's 35 and been out of school for 20 years.
But he might want to help somebody who's in school or just out of school
that's eager, that's active, that has a lot of hunger and desire.
Because those are the types of things that he remembers when he was an entrepreneur.
[MUSIC]
