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Masters of ScaleMasters of Scale

Her parents mortgaged their house. She sold the company for nearly $800 million (Simple Mills CEO)

Simple Mills started with its founder Katlin Smith tinkering with almond flour muffin recipes in her apartment kitchen. Over the next decade, she built a better-for-you food powerhouse.

Katlin SmithguestJeff Bermanhost
Jan 8, 202635mWatch on YouTube

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CHAPTERS

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Chapter summaries

  1. Cold Open and Introducing Katlin Smith

    The episode opens with Katlin Smith describing the hand-to-mouth early days and her parents' mortgage. Jeff Berman then introduces her and how she built Simple Mills into a better-for-you brand that sold for nearly $800 million.

    • •Early days were hand-to-mouth, with her selling her car and maxing out credit cards
    • •Her parents mortgaged their house to give her $200,000
    • •Jeff Berman frames the story as scaling with purpose
    • •Simple Mills grew from an apartment kitchen to a sale of nearly $800 million

  2. From Diet Change to Kitchen Recipes

    Katlin explains how changing her diet as a traveling management consultant inspired her mission to make real food easier to eat. She began developing almond-flour baking mixes sweetened with coconut sugar in her Atlanta apartment kitchen.

    • •A friend's suggestion led her to a whole foods-based diet while she was a consultant
    • •She wanted to change what people eat and make nutrient-dense food easy
    • •She first considered meal kits, sauces and bread mixes before settling on baking mixes
    • •Almond flour was a very unconventional ingredient at the time
    • •She tested recipes in her shared apartment kitchen with friends and family as tasters

  3. Landing the First Whole Foods Store

    Katlin describes researching LLCs, FDA rules and commercial kitchens through Google searches. She then pitched her local Whole Foods with muffins baked from the mix and won her first store.

    • •She researched labeling, FDA rules, LLC formation and commercial kitchens online
    • •She called her local Whole Foods and met the buyer on a Saturday around her consulting job
    • •The buyer was impressed that simple ingredients made the muffins
    • •She designed packaging through 99designs and printed labels on a rigged-up printer
    • •Getting into that one store took four months

  4. Production Misjudgments and Working Capital Strain

    The first small order raised the problem of how much to manufacture. Katlin overproduced, then ran short when product sold out and more stores were added, and she funded the float personally.

    • •The first order was only about four to eight cases of six units
    • •She found a contract manufacturer in the northeast
    • •She first thought she had made far too much, then quickly ran out
    • •Retailers don't pay immediately, so she was floating money
    • •She sold her car and used her credit cards and savings

  5. Business School and Underestimating Capital Needs

    Katlin started at Chicago Booth around when she reached about 10 stores and prioritized the business over school. She initially believed $200,000 was all she needed, until coaches showed her how much food companies spend on marketing.

    • •She started at Booth with about 10 stores and always put the business first
    • •She took courses in entrepreneurial selling and accounting, plus the New Venture Challenge
    • •She underestimated marketing, package design costs and working capital
    • •Her model said she needed only $200,000, and a family friend's offer fell through
    • •Coaches showed her public food company P&Ls, with launches costing around $50 million

  6. Parents Mortgage Their House

    After the family friend deal fell through, Katlin's parents decided to mortgage their house and give her $200,000. She was worried about it and asked for half to be repaid once she raised her first round.

    • •Her parents were angry about the failed deal and determined to step in
    • •Katlin felt resigned about the situation
    • •She raised a first round about four months later
    • •She had half of her parents' money paid back because of the stress

  7. Raising the First Round in an Unfashionable Category

    In 2012 investors wanted tech unicorns, so Katlin cast a wide net and relied on angel investors. She found her lead investor in a chance encounter at a Whole Foods in Charlotte and raised a little over $2 million.

    • •It was 2012, and investors favored tech over a baking mix company
    • •She spoke to about eight investors a day
    • •Her first three rounds were all from angel investors who kept returning
    • •Her lead investor was shopping at a Whole Foods in Charlotte and chatted with another potential investor
    • •The round was a little over $2 million

  8. Capital-Efficient Growth and First Hires

    Katlin explains how the funding was used for fundamentals such as new packaging, first hires, better manufacturing and a first full-time salesperson. She notes the company raised less than $10 million in its first eight years.

    • •The company raised less than $10 million in its first eight years
    • •No fancy offices or crazy salaries
    • •New package design that largely remains today
    • •First hires included junior staff and experienced consumer talent
    • •Manufacturing upgrades and a first full-time salesperson

  9. Chicago, Dropping Out, and Where the Talent Is

    Katlin dropped out after the first year at the urging of her investors, but would not change her choice of Booth. She says it made fundraising easier and placed her in a strong consumer talent hub.

    • •She dropped out after year one because investors expected her to focus on the company
    • •Booth made fundraising easier and its courses helped
    • •School gave her a safe space to explore the business
    • •Chicago is a strong place to recruit consumer talent because of business schools and large CPGs
    • •Being where the talent is matters, and talent there is more affordable

  10. Standing Out in a Crowded Better-for-You Market

    Asked how Simple Mills kept breaking through as the category grew crowded, Katlin points to product positioning. The brand pairs unconventional, simple ingredients with great taste.

    • •Positioning has been consistent from the beginning
    • •Unconventional ingredients such as almond flour in crackers and watermelon seed flour in cookies
    • •Cheddar pop'ems use butternut squash and red bean
    • •Food must taste great first, with simple ingredients as added benefit

  11. Why She Sold to Flowers and Life After

    Katlin explains the decision to sell to Flowers: wider distribution, faster innovation and reach to a broader consumer base, plus a cultural match with its CEO. She describes how her role stayed similar but the opportunities grew, and shares her parents' reaction to the sale.

    • •Her goal was to make the company as large and impactful as possible
    • •Partnering offered faster distribution, a stronger innovation pipeline and broader reach
    • •She had known the Flowers CEO for over five years and saw a cultural fit
    • •She did not found the company to make money
    • •Her role is similar but there is no moment to breathe after the sale, and her parents were mad that half was paid back

  12. Culture and Opportunity During Uncertainty

    Asked how a premium brand handled COVID and rough economic times, Katlin credits culture and the ability to handle ambiguity. She cites a 96% fill rate during supply disruption and the lessons of The Art of Possibility.

    • •Culture helps an organization move through change and ambiguity
    • •The team looks at big events as opportunities
    • •Simple Mills held about a 96% fill rate when competitors were around 80%
    • •This built retailer relationships and kept product on shelf
    • •The Art of Possibility's Michelangelo image encourages seeing possibilities in people and situations

  13. Advice for Founders: Keep Learning

    Katlin's advice to an early-stage founder is openness to learning. She recounts an advisor's remark that entrepreneurship is a downwardly mobile profession because the job can outgrow you, and describes expanding your toolbox and developing your leaders.

    • •Openness to learning is critical
    • •An advisor said entrepreneurship is a downwardly mobile profession because the job outgrows you
    • •Past versions of herself could not have done what she does now
    • •Keep adding tools to your toolbox and use them consciously
    • •Leaders and their teams need to grow too

Publisher timestamps

  1. 0:00Introducing Katlin Smith
  2. 1:31The origin story of Simple MillsRead this chapter
  3. 5:32How Simple Mills got into their first Whole FoodsRead this chapter
  4. 10:58How Katlin Smith funded Simple Mills
  5. 14:49When your parents mortgage their houseRead this chapter
  6. 19:52Building a team & scaling Simple Mills
  7. 25:28Why Katlin Smith sold Simple Mills
  8. 30:22The role of culture during uncertaintyRead this chapter
  9. 33:00Advice for other foundersRead this chapter

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