Building One of the Fastest Growing CPG Companies in History | Peter Rahal of David Protein, Medici Brands & RXBAR
David Senra
Peter Rahal discusses his transition from a successful $600 million exit with RXBAR to a period of investing that left him feeling unfulfill
Key takeaways
- Rahal found investing too passive because it lacks the immediate feedback loop found in operating a business.
- Brand identity should be treated like a human being, possessing values, vision, and a specific social circle.
Main topics
- Transition from investing to operating
- Brand identity and values
Notable quotes
I'm used to like fighting, being in knife fights, and it's just too passive.
Conclusion
The episode provides a deep dive into the psychological and strategic
Transcript preview
Speaker 2 (0:02) Okay, I want to start with the fact that you sold your previous company for $600 million. You and your co-founder own 90 % of it. You find yourself as a very young man with about a quarter billion dollars in cash. What happens next? Speaker 1 (0:13) The natural thing is to get into investing. Outside looking in, investing is very appealing. It's like, one, you think it's an intellectual exercise. The second real thing is it gives you a great lifestyle because you're not operating. So you have no organizational responsibility. I started studying investing and getting into it. How did you study investing? Figuring out asset classes, how to build a portfolio, grow capital, underwriting deals. Are you having conversations? Speaker 2 (0:42) Are Speaker 1 (0:42) you reading? Reading, conversations, best books on it. And then where my time was spent was on where I had the best advantage, which is in consumer packaged good investing or just privates. So early startups. and stage agnostic, seed to growth, didn't matter, and started doing that and quickly realized that the most important skill sets is charisma or whale hunting. It's like finding the deal that is quite obvious and then trying to get an allocation. That's really the game. And that's quite gay. Speaker 1 (1:22) Chasing men for allocations is something I didn't want to do. My previous experience was like, I'm going to sit back. I'm going to spend my time building a product and my product's going to do the talking. Like my product's going to do the work. Where in investing, you're taking capital and then you're trying to allocate it into the thing that's going to grow, behind the leader that you're going to bet behind. And that's just too hands-off for me. Like I'm used to like fighting, being in knife fights, and it's just too passive. So investing is very tempting because you can like make a decision and not have to do anything. And it works, like it grows. The big problem I had with it is the feedback loop's super long. Like in building and operating a business, you make a decision, whether it's a hire, whether it's a product decision, marketing, and you get the feedback right away. Like the feedback loop's like immediate. Where in investing, it's like, you can develop a thesis, develop this, underwrite this founder as really great. And then you like. Speaker 1 (2:25) Make the decision and like all right five years go by did it work or not? So you're living where when you sell our X bar Speaker 2 (2:32) Chicago, okay, you have this huge acquisition. You have a bunch of cash This is when you move to Miami. Yes move to Miami before no after okay after so now you have the money and now you're like Okay, I'm gonna I have a bunch of money you start you had this ridiculous idea This is your own words because when we were hanging out a few weeks ago You said I had a ridiculous idea of starting a family office. Yes, so you moved to Miami like I'm gonna start a family office. Yes Okay, explain that part. Speaker 1 (2:55) So I was in Chicago and I just needed change. I needed to like change environment. RX was my identity. I just got divorced. So I looked at the United States and I was like, where's the best place to go? Speaker 2 (3:05) Wait, wait, the divorce part. The divorce happened after the acquisition? Yeah. Was Speaker 1 (3:08) it anything related there? Were like you under a lot of stress? Like, no, just hubris. Say more about that. I had success bias where everything I'd done has been successful. And so there's blurred lines between your personal and professional. And I just moved too fast. Thought it was going to be easy. Yeah, because my goal is to have a family. So like career success, accomplished, next thing's family. And you try to speed run. Yeah, it went way too fast. And thinking I'm really good. So this is, if Speaker 2 (3:37) I remember correctly, me, Mary, divorce, all in like nine months? Yeah. Okay. I beat Kim Kardashian. Speaker 2 (3:46) Okay, so you moved to Miami. I'm going to invest. And then what I really want to get into is the fact that you are uniquely unsuited to invest. All the other founders I know that I ask about you is like, this guy is just like a relentless animal operator. Like the idea that he could think that he could sit and be like the guy behind the guy. Why do you think you made that mistake? This is very interesting to me because you did what you did to start, scale, sell, right? Which is very like celebrated. But I talked to a bunch of founders that did that and then they're fucking miserable. You're one of them. So I Speaker 1 (4:17) really want to hone in on what you were feeling and why you were so miserable in this situation. My plan was to get out of Chicago, change environments, and then I just looked at a map like, all right, where's the best place to go to reset a bit and invest, build my family office, get that right. And then my ultimate goal was to relocate where I was in the best interest to start my next thing. So I chose Miami as a place to reset and invest. And this is before COVID. Got there, started like formalizing a family office. And then I think like what I underestimated with investing in different entrepreneurs, particularly in food and beverage, is that like, I just assumed they all had the same tenacity as me. Like, I just thought like, that's what you did. And I didn't really know anyone else who were founders at this time. And then I quickly realized like, I'm probably actually a miserable investor because I'm like, I'm handcuffed sitting in the backseat while someone else is driving and they don't know where they're going. And that's like a torturous position to someone who knows where to go. So you didn't know how rare you were? Yes. Okay. As not humble as that is, but yeah. Speaker 2 (5:25) I was just sitting upstairs right before this and I was with my friend Patrick who does the Invest Like the Best podcast. He's one of my closest friends and we just happened to run into Adam Ferughi from Apple Oven. Yeah. Which again, there's a lot of like overlap between you and... you and Adam. And we were talking about essentially, you know, Adam's running this very, this cash printing machine with like very few employees. Like he actually, he hates entrepreneurs optimized for vanity metrics where he's just like, you should just focus on cash generation. It's like very straightforward to him. It's like obvious to him. And we were talking about the different, like different hires he had and different other founders he knows. And then through a story that he was telling, Patrick had a great line. He goes, man, it's crazy. Like in any domain, it's only like two or three guys that are actually good. Yeah. Just pick any. Categories like there's like a sea of shit and like two or three, maybe four people that are actually excellent. Speaker 1 (6:14) Yeah. And like what I just like assumed that anyone who's getting into entrepreneurship, they're like willing to die before their company fails. They are willing to sacrifice comfort to win. They want to win. And I realized like, no, some people like that's not, that's actually not what people, a lot of people do or prioritize. When Speaker 2 (6:32) you run into other entrepreneurs like this, that you made the mistake of investing in because they weren't like you. When you have conversations with them, like what is their response to your extreme Speaker 1 (6:39) approach? If I'm the one giving criticisms to the company, like that's a problem. Like the CEO should be the most critical. I shouldn't be like, hey man, the car's on fire. That relationship, if I'm the one spotting out problems or saying go faster or saying like, that's usually not a good sign. And I kept falling into that pattern. And I don't want to be in a position to be like, it's like your company at the end of the day. I don't want to be, I'm not an advisor. just here to try to facilitate stuff. But what I'm really trying to get at is like, what is going on inside Speaker 2 (7:10) of you? Like, what is your inner monologue? You're like, oh, I fucked up? Like, what is actually happening? Speaker 1 (7:14) This is frustrating. I need to get back in the game. Like, this sucks. How Speaker 2 (7:21) long did it take for you to figure this out? Speaker 1 (7:24) Probably a year. Yeah, 20, 20 Speaker 2 (7:27) to 21. Okay, so then what's the next step after that? You're like, okay, this sucks. I don't want to be an investor. I need to be an operator. I want to be my own company. I'm way too young to be retired, by the way. Speaker 1 (7:38) Yeah, for sure. So I started, one of the good things about investing is you're talking, you're getting through the deal flow process, you're ideating, you're talking to other movers and shakers. And that's a helpful process of like, all right, is that something interesting? Is that a problem I want to solve? But basically I had several false starts. I looked at recycling, garbage. I looked at synthetic biology. I looked at other consumer packaged stuff. And I started and then I basically pulled out committing to stuff. And the reason is like, if I go in, I'm like fucking all in. And that's like a really scary thing, actually, because then my friends go away, my health goes, all this stuff happens to me. Oh, we can't go on from that. Okay. Speaker 2 (8:24) Then you need to describe what all-in means to you, what you just said. It's scary. My friends go away. My health goes away. So this is just the only way you can operate? Explain this to me. Speaker 1 (8:33) Yeah, my leadership style is just all in. Burn the bridges. So I can't go into something half-ass ever. So what I commit to is very serious. And so all my false starts were like, I'm not. moving in the direction of starting it and then pull back. Moving in this direction, starting, pull back. The other thing that there was like, I needed to start a family. So my order of it, like during my hiatus of investing, I was like, I need to find a wife to go start a family. I Speaker 2 (9:03) don't know if Miami is the place, Miami Beach in particular is the place you should be searching for a wife. Speaker 1 (9:07) I agree. And then I bought a place in New York and moved to New York. But in general, it's like, all right, so if I find something and fall for it. There's a really high chance that I'm gonna go all in, I won't see my friends, lose my health, and I'll be 50 and single, and that's a version of the future I didn't really want. So ultimately I found my wife, and then all roads led back to, like, protein bars. it required some humility of being like, you know, that's like my stick. Like if I die on my gravestone, it might say like protein bar guy. Like I'm, and I'm comfortable with that. Cause first I had some like influence of Elon. Like, oh, I need to go into like, I'm not the food guy. I'm going over there. I'm not this. I need to like prove something. But then I really, I was like, I've been, I've been in the food business since I was like 12. I like have a deep intrinsic knowledge of it. And, and basically once, once my non-compete, was like a year away it just like naturally happened of like oh started connecting the dots like this is what i should do so Speaker 2 (10:10) wait you're in the food business since you're 12 how old are you at this point where you're like i'm going to be i'm going to start another protein bar 34. Speaker 1 (10:17) okay yeah so 24. yes my now compete was 22 october 6 22. how long that getting over that dialogue Speaker 2 (10:24) that inner monologue where it's like oh like you know i need to do something more impactful or I have to do biology or create hardware or something. And just like, no, I'm going to actually stick to what I actually know and maybe the best in the world at. It was three years. You had to convince yourself. Speaker 1 (10:37) Yeah. Wow. Okay. Yeah. And a little bit of like, cause I always think with a, this is both as, with as an investor, when I looked at companies and then a philosophy for myself is like the leader of the company, if they have to pick up the phone to fix the product, they're fucked. Speaker 1 (10:56) meaning like the leader has to be able to really deeply understand the product and be able to fix it. And then all those false starts were like, I kind of depended on something else, or I didn't have the time to learn the, get the deep enough understanding of the product to make that change. And so with food, I like deeply, I like know exactly what to do. So it just became really obvious and got my wife and then started. What is today, David? When we talked together, why did you laugh? It was a very clear process. Like, all right, check your personal life so you don't ruin your personal life again because you're going to go all in on something. And then like... Once that's done and then it just Speaker 2 (11:38) happens you got the family the non-compete takes Speaker 1 (11:40) fires and now you back at this Yeah, but Speaker 2 (11:42) you're maybe your ambition when you were younger cuz you started our expire when you were held early 20 something time 24 24, but now the scope of your ambitions like David is not a bar company That's like the first of the products. But how do you describe what you're working Speaker 1 (11:55) on now? We don't want to tell people what not to eat. I think that's like a lot of the food business. Like don't eat this. It's like demonization and it's pseudoscience. We want to make your favorite foods smarter. And so it's a really quiet approach. Like they're there and they're more intelligent. They're more effective. They're objectively better. So we're going to do that across multiple categories. The protein bar is the wedge. I know it. That's what we use to get to scale. And once you get to scale, you can build. the platform for there. You have the organization, you have the route to market, you have the R &D capabilities. So the protein bar got us our platform and now we're proliferating into categories that just make sense for us and our technology. When you started, David, you Speaker 2 (12:37) knew that you were not going to stay, that you wanted to build a food company and a protein bar company. So I'm going to just answer my question that I asked you, the way you said it to me before, which I think was excellent, where you're like, I have to be the best in the world. at what I do in my category. And I was like, what's your category? And you're like, CPG. I go, what does that mean? And Speaker 1 (12:55) you Speaker 2 (12:55) go, anything that you can buy in a store. That's the size and scope of your ambition. Speaker 1 (13:00) Yeah, like we're competing with Nestle. Like, I want to build the most important food company in the 21st century. And how big, what's the scale of some of these food companies? Nestle's 100 plus billion in revenue. They're real global as well. Pepsi's probably right around there. Real scale. So a couple hundred billion dollar companies. How many different products? Well, they have these enormous portfolio of brands. Yeah. And then, you know, hundreds of brands. And then those brands are different by cultures or geographies. They grow up by acquisition or no? Yeah, mostly. Okay. Are you Speaker 2 (13:34) going Speaker 1 (13:35) to do that too? Probably it's on the table, but our core competency is the ability to build brands. So like I know how to create an identity and build a brand. So for the next four years, five years, we'll probably just create brands. but I wouldn't rule it out later Speaker 2 (13:48) on. Okay, so tell me what you know about building brands and identities. This could be interesting. The analogy I think of as a brand, Speaker 1 (13:54) it's simply just a human being. So a brand has a name, it has mommy and daddy, it's the founders, it's parents. Those parents have DNA. This brand, this individual has values. It has a vision where it's going. It has other traits, tone of voice. has friends, who do you associate with? Hold on, explain that part to me. Who do you associate with? So who are you going to do partnerships with? Like, so David, for example, David Protein, Speaker 2 (14:26) has Speaker 1 (14:27) a partnership with Huberman. Like, that's an alignment. Like, we wouldn't do a partnership with... I don't know, Miss Rachel doesn't make sense, I thought she's great, but like, just like a human, the social circle matters. And so in creating a brand, that identity, both from tone of voice, visual, what clothes it wears, who is its friends, its values, vision, you define that clearly and that there's like a North Star to it. The most important factor of building a brand is it just takes time. So if you keep this identity, it can be dynamic in nature as it grows. but you are consistently doing that over time and with really great quality product and service. The time piece is critical. Like you just have to be doing that over time. David's values are around intelligence, beauty, and discipline. And that's rooted in the story of Michelangelo's masterpiece, The Sculpture of David. Those values are rooted in the symbolism of that masterpiece and then the tool, the chisel, which... It's like this crude nail. But the meaning of a chisel is intelligence, discipline. And if you apply those things, you get a masterpiece, something beautiful. So that's the logic for David's brand and brand identity. So if you have a crystal clear identity for a brand and its product offering and its position, the marketing actually becomes really easy. You just constantly hammer those points over and over and over again. Speaker 2 (15:56) I want to tell you about the presenting sponsor of this podcast, Ramp. I have been reading a lot about SpaceX lately. SpaceX is one of the most valuable businesses in the world. And one of the main themes in the history of SpaceX is constantly attacking and questioning your costs. Ramp helps many of the most innovative businesses in the world do exactly that. The median company running on Ramp. cuts their expenses by 5%. And one thing SpaceX has demonstrated is that a religious dedication to controlling costs can help actually increase revenue because you can pursue opportunities you couldn't otherwise. And we see that in the ramp data too. The median company running on ramp also grows their revenue by 16%. So when you're running your business on ramp and your competitors are not, you have a massive competitive advantage that compounds over time. Ramp is the only platform designed to make your finance team faster and happier. Many of the top founders and CEOs I know run their business on Ramp. I run my business on Ramp and you should too. Go to ramp.com to learn how they can help your business save time, save money, and grow Speaker 1 (16:57) revenue. That is ramp.com. Speaker 2 (17:00) Deal is how the best founders turn the world into their talent pool. I've been studying how history's greatest founders operate for a decade. And one thing they all have in common is they understand that recruiting and hiring the very best talent is your most important priority. A players recognize other A players, which is why top companies like Ramp, Shopify, Eleven Labs, Uber, and DoorDash all use Deal. Many of the top founders I know have personally invested in Deal after using their product. And what they discovered is that Deal is the best company in the world at building infrastructure for global hiring. Deal will help your business hire, pay, and manage any worker anywhere in the world so you can retain the best talent anywhere and spend the rest of your time focusing on what you do best, delivering value to your customers. The founder of Eleven Labs has a great description of the value Deal can give your company. He said, we built Eleven Labs to break down language and communication barriers. With Deal enabling us to hire and support exceptional talent anywhere, we can accelerate our innovation and bring more voices, stories, and ideas to every corner of the world. Deal is trusted by over 40,000 companies and growing fast. Learn how they can help your business by going to deal.com forward slash Senra. That is deal.com forward slash Senra. Speaker 1 (18:12) How much time did you put into planning this brand identity for David? Six months, maybe. Speaker 2 (18:18) Okay, so then once you have this clearly defined set of qualities for the brand. And then you're saying, okay, then we just extend this over, you know, decades. It's the plan. Yes. You just hammer it. Like, keep going. How did you learn the importance of maintaining the same brand identity over a long period of time? Speaker 1 (18:35) Just studying, like, just studying brands. Like, if you look at the best brands, they're all old. And so time's a factor that's really, really important. And the consistency of that. And the thing is, there's an asymmetry where, like, those brands are super fragile. So if you, like, fuck around. on quality or or something else like it's over really quickly the reason i asked that is Speaker 2 (18:57) because I was obsessed with this guy named David Ogilvie and I've read every single one of his books. He built one of the greatest advertising agencies of all time. And he would hammer exactly what you did. You sounded exactly like him if you read his autobiography or if you read Ogilvie on advertising. And his whole thing was just like people jump around too much. Like you pick one brand identity and you do it over and over and over again for decades. And you came to the exact same conclusion. It's like the best brands are the best brands because they did this for decades after decades. Speaker 1 (19:22) And it's fundamentally about the values of the brand. Like for David, it's about... intelligence, beauty, and discipline. Why did you pick those three traits though? They're close to me. I love beauty. I love intelligence. And I love suffering and discipline to a negative point of view almost. Protein bars are our start. So what do people come to protein bars for? They come to it for body composition. Like no one really eats protein bars is like, oh, I'm just going to enjoy this treat. It's like very, very functional. Like I'm going to, I need to transform my body, either increase muscle or decrease fat. So the category and protein in general is very oriented around those values as well. And so. What did and one of the things I wanted was like a weight loss company or a body composition company without being one So if