How Ron Belldegrun Closed a $95M Series C for ByHeart (Ron Bellegrum / ByHeart)

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Ron Bellegrum: I try to focus less about the extraneous factors that we can't control. Like what kind of funding environment are we in and more on how do we continue just create the best product, hit our goals and grow momentum in the business?

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Jason Yeh: Most founders, dream of disrupting an industry. But what do you do when disrupting an industry means you're going to have to build the entire infrastructure from the ground up. That's what Ron Belldegrun, founder, CEO of by heart and his co-founder Mia had to answer.

Their vision to reinvent. Infant formula was far from simple. It required clinical trials, building [00:01:00] manufacturing facilities, and define the playbook that startups in the food and nutrition industry typically follow.

Fundraising for something.

This ambitious was never going to be easy. Investors kept saying the same thing, just white label, a product and get to market faster. But Ron and Mia, weren't interested in shortcuts. They stuck to their vision, finding the kind of investors who believed in building something truly game changing. That approach paid off. By heart has raised over $180 million to date with their most recent round being a $95 million series B led by D one capital partners. Today, Ron gets real about what it took to raise capital for a business with a longer time horizon, the challenges of convincing investors in a tough market. And how they made history as the first new us infant formula manufacturer. And over 15 years, but before all that, we start at the very beginning. With bronze upbringing in a family that inspired his entrepreneurial [00:02:00] drive.

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Ron Bellegrum: Yeah, so, I grew up with three siblings. Um, an older brother, an older sister, Mia, who I actually started by heart with, so she's my co founder. Um, and a little brother. so, introvert, extrovert, when you have three brothers and a sister, it's all of the above.

We were really, really close and, you know, um, I'd say somewhere in between. Uh, but, um, grew up in really like also a life science household. Um, my Parents were both, uh, physicians, uh, initially, one oncologist, uh, and an ophthalmologist. And so science was all around, all around me and they ultimately kind of became actually entrepreneurs.

So, um, in the life science space of developing companies and developing therapies for life [00:03:00] saving, um, oncology, et cetera. So From really an early time, um, in, in childhood, kind of, I loved science. Um, and, and that was kind of drove me like a lot of, people who are drawn to the sciences that initially started as, you know, doctor, right.

It was kind of the track. It's hard, I think, early on to appreciate like actually how many options there are, how much you can do with a passion for life science. Um, and initially that took me to investing in life science, which, which I loved, uh, which I can certainly talk more about and grateful for that because ultimately that led to the genesis of my heart.

Jason Yeh: Awesome.

So a lot of people that have that, that science background don't have, um, the model to go after around what it means to be an entrepreneur, but you saw, you saw your parents do that. As you were coming up, I mean, you, you were in venture. But do you feel like you always [00:04:00] had the thought that you would become an entrepreneur or is that just something that landed in your, in your lap later on?

Ron Bellegrum: No, I, look, I was a investor for, um, just under a decade. I loved it. and. It was really immersed in life science. And I did, I think, have that inherent feeling though, that I want to do something that drives change, that drives impact. Um, I think I grew up in particularly like when you grow up in a family of entrepreneurs within life science, it's very much mentality of kind of like doing well by doing good and driving some major impacts.

I think that always kind of lived in me and as an investor, it was interesting Dumbled upon, it was back in 2008, a company that developed ingredients for infant formula and became very immersed in this space. I thought it was initially very [00:05:00] fascinating as an investor, but then started to follow this category.

And I saw something really interesting, right? Where on one side. I'm looking at a category that creates literally the food that the most important food in the world, right? Like for those who aren't, uh, parents, infant formula is literally sole source nutrition during the first year of life, like this is where future health is starts, right?

This is when all of baby's systems are developing. And I would sit on earnings calls and otherwise, and you know, this was a category that I would hear. Do companies speak about it? I mean, it's dominated by the same companies for 50 years. Um, and on a separate call, I would be talking to the medical community and it is the most exciting time right now in nutrition science and breast milk research and food technology and all of the tools are there and so much energy is there to do much better than what's [00:06:00] on the shelf today and really set babies up for a future of health.

And it was. Kind of sitting in this, uh, fascinating conflict where that ultimately led to after my time as investing, starting by heart with my sister. Um, and I think what you refer to as like kind of the childhood and what you're rooted in, I think it was that definitely that feeling of, Hey, I want to do something impactful.

Um, apply these kind of over a decade of experience in this category and getting to know this, um, space to actually driving, uh, impact and outcomes. So I think that definitely, you know, kind of surfaced in that way.

Jason Yeh: Amazing. Um, you know, there's something about going to start your first company.

It was, is this actually your first company or had, did you have other things along the way?

Ron Bellegrum: This was my first company.

Jason Yeh: So there's something about starting your first company. I think that Is a bit [00:07:00] of a benefit and there's certainly downsides, which is this idea of like ignorance is bliss. Like you kind of don't really know what you're getting into, especially if you're starting a company that requires outside capital to actually get started.

But in some ways, like you saw your parents as entrepreneurs, which the, the path of an entrepreneur and starting a company is never all up into the right. So I'm sure you, at least in some, Former fashion. So all your, your parents deal with some of the ups and downs, but more so as an investor for 10 years, I mean, I was an investor as well, uh, for, you know, five years.

And there's something about seeing it from that side of the table where you're like, man, you know exactly how hard it is. Uh, you have, you have a portfolio, right? The way the whole business model works is most of those things don't work out. And I think other listeners might not realize this, but there's this adage or there's this.

Understanding that you spend most of your energy and effort on the companies that aren't doing [00:08:00] well. So you had this front row seat and understanding of what it was going to take. Do you remember, I mean, you talk a little bit about the information and the knowledge you needed to start this company, but I wonder if You could talk us through being with your sister and hearing the ideas that she had and, and being like, we should do this together.

We should get started knowing that, you know, and maybe you can talk to it by heart as a company, um, that has a lot of sort of biomedical under, underpinning some, some real, real world requirements in terms of, um, production. So it's something that's going to require a lot of capital from the outset. Do you remember that sort of feeling or conversation that was the thing that was like, I think we're going to do this?

Ron Bellegrum: Oh, yeah, absolutely. It's a great question. Yeah.

So to give you some of the background, so me and I came at this from very different angles, right? So my background, as you know, is in investing being immersed in this category for over 15 [00:09:00] years. And it was really that experience I described where I was looking at this category and I knew that this was a moment where all the tools were available.

We had characterized breast milk, understood the components that drive their importance. We knew it better than we, we understood it better than we ever had in decades. Um, Highest quality agriculture and ingredients were available. Um, the experts were there, like there was all of the tools available to do much better than what was on the shelf today.

But all of that science was moving much faster than new products were getting to market because appropriately, this is the most highly regulated food in the world. Right. This is the only food that requires FDA approval, clinical trials. The biggest bottleneck to getting into this [00:10:00] category, which unfortunately the world learned about in real time a couple of years ago during the nationwide infant formula shortage was a supply chain.

Like when we wanted to get into this space, there were four companies that manufactured infant formula. Three owned 90 percent of the market. They're not manufacturing for a new brand. And every new entrant in the last 20 years, I'd taken the same expedited path, which is if you go to the one and only contract manufacturer in the country and you stay the same as their recipe from 15 years ago, you stay the same as that, and you can skip the five years of work required by FDA to bring a really new formula to market clinical trials, new factories, et cetera.

The problem with that is. You're referencing 15 year old science. You can't change anything and you're a marketing company. And so that was the moment that like all entrepreneurs, we said, no, no, no, we're going to be able to go this one route and change the mentality and do something innovative. And you were met with a [00:11:00] lot of, no, can't do that here.

No, can't do that here. So it was a moment where me and I got together. And at that moment, it was a big decision point. And we decided, look, we're not here to slap a label on a can. We are here to actually translate these troves of advancements in nutrition science and the better products. And we knew full well what it would take for my background, um, both in investing and being immersed in this category for 15 years, as well as in, as you said, Watching, um, the path to entrepreneurialism in really highly regulated life science categories.

We were not naive to what that would take. Right. And Mia came at it from an angle of, she had been immersed in, um, kind of CPG, um, digital technology, um, kind of, uh, business development and her mentality was a really inspiring one. Which. From her, from her perspective, she said, Hey, if our mission [00:12:00] really is to make all parents feel amazing and how they nourish their baby, no matter how they feed, it's not actually enough to just make a better product.

We actually have to create a platform where we are making accessible all of the information that arm parents with the best decision for themselves. So when we say, you know, our, our product delivers, you know, the most important benefits to babies, okay, show me the 300 baby clinical trial, it's data, here's what we did, here's the, you make the decision for yourself.

Or when we say highest quality. Here's our farm to formula supply chain. We own it end to end. Here are our supply standards, here are suppliers, here's the information, and ultimately you decide for yourself.

And so it was sort of this coming together of sort of Mia's backgrounds and my backgrounds that ultimately came into this moment of, Hey, the only way to innovate in this space is to literally build from scratch, buy your own factories, build a whole supply chain, run 300 baby clinical trials.

And, you know, that was a six year journey, but we were [00:13:00] committed and we brought the best people around us to, um, you know, live their entire lives in this category to, to really, um, help drive that mission. And, you know, with our launch in 2022, we became the first new infant formula manufacturer in over 15 years, but that was definitely the moment, uh, that we kind of needed to decide because that was the trajectory, you know, the trajectory defining moment.

Jason Yeh: Yeah. And, uh, It would be easy for me to jump forward from here, but I kind of want to pull this apart because there's, there's a lot of things to get your reactions to. I mean, so it does sound like you all thought about what was in front of you. And, um, you know, I just want to paint this picture a little bit more clearly for others.

It's like, there is this jump in. Two feet first moment for a lot of founders are like, they find their co founder. They're like thinking that they want to raise capital, but you know, the worlds that I live in, mostly it's been, it's been in software, things that can be prototyped very easily that can be tested with, um, [00:14:00] customers MVP can go out.

You can learn, Oh, this direction wasn't right. We're going to go in this direction. And given your background, um, You know, you knew exactly what that was going to take. Like there, there had to be a longer term view on what was going, what you were getting into and how long this would take. And then the additional thing is like, how many points of failure there are along the way before you can even, you know, get to that point that a lot of software based founders get to, but, um, you're, you're jumping into that.

Eyes wide open and at least if Mia, Mia, right? Yeah. Yeah. If Mia didn't have the first hand experience, you were, you were able to communicate that with her. There's a second point. I wonder if you could comment on, which is, um, the co founder dynamic of such a close relationship, right? There is, um, I think there are multiple schools of thought and investing.

You probably have your own, you probably have been [00:15:00] colored, but you Starting by heart with Mia about like what you thought about these things. But I remember at Graycroft, we talked about partners, you know, either romantic partners or like actually married couples being, uh, being co founders and the pros and cons of that.

There are a lot of VCs that, that really don't like seeing that. Like there, there's something about it. The inherent conflict that goes into starting and running a company and just the additional relationship and what communication is like. At Greycroft, early on, um, the firm happened to back a really successful husband and wife duo, so colored by that.

I wonder if you could talk a little bit about going into business with your sibling, um, what that entailed and what you kind of had to think about as you, you know, carved out roles for each other. And then because of the topic that we. That we lean into and what did that mean for talking to investors?

And did that, [00:16:00] that ever come up in the early days?

Ron Bellegrum: Yeah. Great question.

So starting with your first question on kind of the jump of two feet moment, um, cause it's actually related to your second question. Um, Yeah, you know, you're right. This is, this was no ordinary consumer category. The types of conversations we were having six years ago was sitting down with tier point investors that are used to like, Hey, get to an MVP and how's it go?

Show me some product market fit. And then, you know, let's talk about it later on a little bit of capital to de risk. We were having conversations that went something like, Hey, we're going to buy a factory before we started a clinical trial that may or may not be positive. Probably 6 years before we're going to generate a dollar of revenue.

And you can imagine that that's not a very easy conversation with a consumer investor. Um, it's all relative, right? Cause in our cap table on our board [00:17:00] and represented in our team, Is both life science investors and life science people with deep experience who have built, you know, vertically integrated life science companies and understand what it takes to build a quality first, innovative R and D driven kind of organization.

And so there was a good buying and understanding from a group like that. And on the consumer side, this really self selected for a really consumer investor that was willing to break mandate in some ways. Um, Go, whether it's, you know, Cashflow negative for as long as it would be, or whether it's, um, you know, uh, clinical binary risk or other things because they were so sort of bought into and motivated by the mission and the vision.

So, early on, that was, and had always been kind of a challenge, right? Because you're kind of. Breaking mandate and so much for investors, but I think actually it's 1 of the [00:18:00] probably most important things because it's built this really sticky, committed to the vision group of investors that bring both sides of what, you know, what the company needs to be successful, which has been really helpful for us as we've gone along the way.

Um, but because that journey. Here is so long and, and, um, you know, difficult and it's not for the faint of heart. I actually think going to your question number two, starting your company, starting a company with your sister was actually incredible. I mean, Is

Jason Yeh: Mia older or younger?

Ron Bellegrum: She's older. Oh,

Jason Yeh: even better.

Ron Bellegrum: Yeah, exactly. You know, we, you know, we've been best friends our, our whole lives. Like there's no, there's no trust like that of, you know, with, with your sister in my case, uh, thankfully. And what we're doing is hard, you know, it was not a straight line. Um, as I said, it's not for the faint of heart. So taking it, taking it on together was, I think, really important.

Beyond that, we brought [00:19:00] very different perspectives and Um, I think skill sets, right? I don't know that a sibling company would always work. Like if it's your, your expertise, it's the same thing. I could see how that would be tricky. I think in the case of me and I, um, it works really well because we came at it from different angles with different strengths, which are really complimentary to each other and actually in kind of a funny way, actually like represent this category, like the problem with the category has kind of been.

You have either these kind of big conglomerates that are creating infant formula, and like, with a title even, like infant formula, like parents view it as, they don't view it as a food, they don't view it as a, as, as, you know, as a product, it's not, um, often, and, There is a intimacy to this decision. Like it's the first decision you make as parents that [00:20:00] is critically important.

It's a consumer category. It's not a pharmaceutical category on the other side. There's more consumer brands that have tried to get into this category, but all of them until us had effectively taken this path to white label a product. And so, that, There isn't necessarily the expert, you know, kind of the, the deep R& D innovation and really kind of 21st century science, cleanest, greatest things that we've brought to this category.

And so it's sort of, in some ways, infant formula is a life science category, a consumer category, and. I think what's special that we've built is that kind of diversity of thought under one roof, right? Deep people that are committed their lives to infant nutrition next to people who all they think about is how can we be the most parent centric brand and really speak to our consumer in a direct way and really understand what they need and then translate that back actually to our innovations to innovate for them.

So, In some ways in this situation, I don't know if it always works. I don't have like, you know, [00:21:00] global advice on would I start a company with a sibling, but in our case it worked really well, I think for, for all these reasons and lent that kind of, I think much needed camaraderie and support in what, you know, is a, is a, is a tough path in this category.

Jason Yeh: Honestly, like. Play on words, I guess, but like a little bit more heart in your company, uh, if you will. Um, so I, I can't tell by crunch space exactly when initial funding came in, but you started the company in around 2018, 2019, is that right?

Ron Bellegrum: Um, we started the business in Basically mid 16, I think we formally listed Jan of 17, so it's been, yeh, nearly, nearly 8 years now.

Jason Yeh: Okay, and so, um, your initial rounds of funding must have been around, you know, 2017, like, you have to invest a certain amount of capital into it. We start seeing announced rounds, and maybe it's all bundled together, but something in 2019, yeh, [00:22:00] close to 20 million dollars. And, Where I want to accelerate this is to your most recent round of capital that got announced in, you know, um, 95 million, I believe.

There's something interesting that you said that I'm going to try to like bridge the gap here, which is You had this idea that there is better science to be applied to this most important food source in the very early days of a baby's life. But there's also a consumer brand. There's a consumer experience.

There's like giving the tools and knowledge to parents to be able to use this new nutrition in the best possible way, which means. Yes, you had some life science investors along the way, but you were able to get some consumer investors to break mandate to understand that they needed this longer horizon and expectation around the path that BuyHart was going to take.

Now, in my own experiences being involved with companies, um, you know, [00:23:00] started investing in 2012. I've had a big active role across COVID, uh, now to an interesting part of the market. There is a part of the market that you were able to raise capital in, which was very, uh, very risk aggressive, very like the, the market was growing.

Like usually we want to see companies get into market in six months. These guys seem awesome. Like this seems like a big idea. Let's invest. Yeah, long horizon. But what I found because I've been involved in companies is that the last year and a half has been a completely big shift in terms of how investors think about putting capital at work.

I've been quoted as saying like the pendulum swung one way when we had Zerp access to capital and people were like, you know, let's try this. Let's do this. And I think the pendulum is swinging And over, over correcting it in a certain way where people are like profitability today, when is [00:24:00] breakeven within a year, et cetera.

And so I wonder if we can talk like, let's fast forward now, you announced your round relatively recently, which means you were probably raising capital. In 2023, if we have to remind ourselves what's happened in 2023, um, markets are, are bottoming out SVB collapsed in the early parts of the years. So I wonder if you can talk about what it meant to one, think about, we actually did what we said we were going to do.

I believe like you started hitting your marks, but all of a sudden now you need to go raise capital in a very different market. So maybe you can talk a little bit about, about the environment that you want to go raise capital in.

I loved hearing.

Ron's take on working with a sibling as a co-founder. It's definitely not the right move for everyone. But when you're signing up for a long haul to build and scale in an industry that's been locked down for decades. Maybe having family, someone who knows you better than anyone else. Is [00:25:00] exactly what you need to get it done. After the break we'll hear what it was like to raise by hearts series B in one of the tougher markets, the VC industry. Has ever seen.

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Ron Bellegrum: [00:26:00] Yeah, it's, um, That's a great question and I think, I think you're absolutely right.

I mean, it's been, um, you know, it's, it's, you know, as an investor in my old life, there's always these cycles, right? And so I, I think probably that experience has also lent itself to my currency in that. I try to focus less about the extraneous factors that we can't control. Like what kind of funding environment are we in and more on how do we continue just create the best product, hit our goals and grow momentum in the business?

Because I [00:27:00] think in whatever market you're in. There is access to capital for businesses that are doing something game changing and are, are, are hitting their marks. Right? And so I think that's where we've tried to be focused. I mean, in this, in this particular case, and your question, I mean, I think we felt there was a lot of.

Momentum going into this race, right? We had, um, started to grow our numbers, um, in terms of, you know, just our, our experience in market, our time in market, um, quite a lot. And I think the thing as a founder that gave me the most confidence and kind of that I get most excited about is really that of.

Feedback and reception to the product, right? We were hearing from parents that they loved this product. We were seeing, um, that the, the kind of things that we saw in our clinical [00:28:00] trial, like clinically proven easy digestion and less spit up and softer stools and all these benefits we had driven. And we were starting now to hear that and see that from parents, right?

So, said another way, 50 percent of babies, Typically switch formula because they can't digest or tolerate it. Well, uh, we were seeing less than 1 percent complaints, uh, you know, on really big numbers out in, in market. Um, and so we're starting to get this feedback, these really strong testimonials. It was telling us that this was a product that parents really liked.

We.

Didn't even cover this yet, but you know, after six, seven years of development, we launched, we launched with one manufacturing facility, which we thought would be, you know, plenty of capacity for several years. And then a month later, there was a nationwide shortage of infant formula. We found ourselves as one of five companies in the country.

Supporting this critically important food. This had always been a purpose driven business, but all of a sudden our purpose had never felt this important when we're hearing directly. Online direct to consumer [00:29:00] from parents, driving state to state, not being able to find sole source nutrition for their babies, um, which should never happen.

Anywhere, but we were also in a mode of both. Kind of trying to play our role in the industry is 1 of 5 to really build more infrastructure and more supply. Um, and at the same time seeing really strong and positive reception from this product. And so last year, it was really a year about actually double down, doubling down on the supply chain.

We went out, we bought 2 more factories. Uh, we got both of those factories FDA registered as new infant formula manufacturing facilities in this country. Um, and your question, all of that requires, of course, capital. And so where we were focused was. On really that the business, right? Like, bringing up these 2 factories, we're really proud to have been the 1st, you know, kind of kind of the only company to bring on new incremental factories into this critically important supply chain.[00:30:00]

And that really kind of reception from parents that this was a product that parents really loved. I think those 2 things together, um, you know, was. What I focused on when I thought about is this a time that we can go out and raise capital? It's more, you know, kind of looking inwards versus looking outwards.

Um, I guess was what I'd say.

Jason Yeh: No. Yeah, that makes a lot of sense. And Even as I see the cadence for when some of your rounds were announced, it feels like you probably had, um, an acceleration driven by those infant formula shortages where you were like the, one of the most amazing, uh, saviors in the world, you know, for, for providing this.

And so you raised in the announced rounds were like in. End of or middle of 2020. Um, again in 2021. Hottest mark in the world. It did seem like you were hitting your marks, but you know, I wonder if you remember along this last raise of [00:31:00] 95 million dollars going back to consumer based, consumer, Focused investors or any of the others.

And you had to have started getting nose. Did you remember any of the nose that came through and what it felt like, even though you thought you were, you were hitting your marks?

Ron Bellegrum: Yeah, look, there's in, in every round, there's always nose. There's always yeses. The people you think are going to lead the round don't end up leading the round.

You know, like there's always the, you know, twists and turns of raising. Any particularly painful ones that, that come to mind? I don't know if it's painful. I actually think it, you know, I think you learn something from each of the no's, you know, like, I actually think like one of the biggest advice I give founders is like, have the phone call after the no as to why the no, you know, and some of those things you'll learn from some of those things will give you more conviction in what you're doing.

You know, I'll tell you like one of the most popular no's, Five or six years ago was investors would say to us, like, you know, I don't, I don't get it. Like, why would you go out and buy a [00:32:00] factory run major clinical trials, do all this work. You could be on market in a year if you just go the standard path and white label a product.

Like, will parents even tell the difference. Like can't you make similar claims? And our fundamental belief was yes. Parents will tell the difference. Like this is the most inspiring audience. Like they are digging, like you would not believe the questions that we get about our product and it's cool.

Parents want to do right by their babies. They really want the information. They're hungry for it. And so our approach was one of. And you could call us obsessive, right? Like there's some companies that are great at marketing or some companies that are great at making products. Like we wanted to make the best infant formula in the world.

And we were obsessive about it. We wanted to own our entire manufacturing supply chain. So we could handpick every ingredient, hold every supplier to the highest standards in the industry, to really obsess over our quality. We wanted to run [00:33:00] major clinical trials. So we're not a company about claims. We're a company about evidence.

We did the largest study in over 25 years from a new, from a new brand that showed real breakthrough benefits. That to us, we felt was core. And if we could deliver that and we could deliver a great experience for parents, then marketing and all that would follow. That is not the belief that many investors held six, seven years ago.

And that's okay. You know, there's different mandates and there's different things, but they weren't in our cap table. And now in hindsight, like we know that, you know, owning the supply chain, doing it the way we did enabled everything. I think we were able to accomplish. And it's the only way to actually make a better product.

But you doubt yourself along the way, right? So, like, there's, of course, questions, you know, from you hear consumer investor after consumer investor. Hey, you know, great story, but, you know, I don't take clinical trial risk or a great story, but yeah, you buy a factory. It's going to take you time to utilize that factory or all the things.

[00:34:00] Um, and I think, you know, founders need to stay really true to their mission and what they believe is going to drive value for, for parents in our case, or customers and others, and not every investor is going to agree with you. So I think that's the kind of, you know, one of the, one of the things I would say, but I think in our case, just to get back to your question, I think in our case, we've been very fortunate because as I spoke to earlier, This idea that early on we needed to self select like it's self selected for these really committed investors.

Our existing investors have been incredibly supportive. Like we're so grateful. Like none of this would have happened without such support from them. Both the life science ones and the consumer ones that have participated in every round added in every round have helped lead to to rounds that had significant demand.

And so, um, you know, we're grateful for that. So it's all about, I think, who's in that cap table as well as a really big A big component, obviously, of all of this, probably one of the most important.

Jason Yeh: Yeah, I mean, these later stage rounds have [00:35:00] been harder to raise, I mean, in the last year. So hearing that you had momentum along the way is kind of heartwarming.

Um, it's like, I also feel like there's, there's always like a shred of doubt, I think, even if you're extremely confident, because there's, there's always something that can happen. In fact, like over the last four years, there have been more than one Black Swan event, you know, like that, that people could not have experienced or expected.

Um, but at some point, You know, there is this feeling of momentum that you guys hit where it's like, and it might've happened quickly for you, but in, when you were raising this round, I imagine, especially, you know, even with someone who has experience now with raising your own rounds, but having been a venture capitalist for all these years, you know, exactly how to run your process.

You know, exactly what you're going to do. You have the materials, you have the data room ready. You know what the story is, but. There is always this feeling [00:36:00] like, you know, will it happen? Can we get the cars aligned? Will another global pandemic break out in the middle of our fundraise? Will, will bank shut down?

Um, but then there is also this thing that kind of like shifts where the momentum starts hitting. Is there something that you felt along the way where it was like, Oh my gosh, this is happening. This is happening. This is going to be a great round. Anything

Ron Bellegrum: you can point to?

I think it's a combination of

the momentum that you, that you referenced that we discussed, like, I think, starting to take hold, like, the reception of the product, the growth of the product, the, um, you know, um, Successful achievement of registration for 2 new factories in a very short amount of time, relaunching out of, you know, 3 site supply chain.

I think some of these things are, of course, like the milestones you try to focus on and, and, and achieve as a business, but I think [00:37:00] where that. Kind of feeling ultimately came from that you're referring to, you know, this is happening was, as I kind of said, just the, the existing investors being extremely supportive, right?

So I think this was a round of really supported by the existing investors getting in and wanting to double down and continue to support the business, which is, um, you know, really unique. I appreciate, but it's, um, I think a testament to kind of their dedication, their commitment, their vision, which, um, Was it

Jason Yeh: an early conversation, um, before you even started around with a lead investor?

I don't know if you can comment on who it was, but like, was it an early conversation where we're like, we just want to do this with you? Like, let's, let's fill it out. Or was it like, we want you to start raising and then we're going to like support you. We're going to come in and be like, you know what?

We're going to, we're going to take a lead position here.

Ron Bellegrum: Yeah, I mean, it's, um. I guess the leads have been, you know, we've done a [00:38:00] number of rounds and the kind of leads have been often and the kind of existing investors have been such substantial investors in every round that, um, I think, um, in this past round, it was sort of no difference in those conversations, but it's also, it's always, you know, it's always.

A process, right, where you, where, where, you know, of course, there was some, um, external groups that, you know, came alongside and, you know, it's always a living, an evolving thing, but we were really focused on always. With our raises and again, we've been. I think fortunate to to have significant demand for the rounds that we've done.

If we've always focused on who are the people. Um, you know, that are that are that are investing in the business because. As I said, by not being, by not being like such a clear mandate business, it really requires people being bought into the bigger vision here of what we're doing and we really focused on the [00:39:00] group and so, um, You know, our existing investors, you know, span from, as we said, life science to consumer to really dedicated food investors to impact investors and really investors that across every pillar of our business, really a lion on a values perspective and mission perspective as well, so I think that's what's I think confidence and strength going into these, you know, into these rounds, but it's, um, you know, raising is always, it's always the, it's always curves, right?

So

Jason Yeh: that's, uh, that's awesome. It's always great to hear about founders who have such strong cap tables and such such strong supporters within their investing group. You know, you've now like raised multiple, multiple rounds of capital, nine figures of capital. And so closing rounds maybe feels old hat to you, but even that response would be interesting to hear when the money hit the bank, right?

Like you can get commitments, you can get term sheets [00:40:00] and whatever. There's still a process to herd the cats and get people to wire that when that like final additional big chunk of money came in. What did you do with Mia? Is there a celebration ritual you have now, or is it just another blip in the day?

Ron Bellegrum: It's funny, a lot of people say like, Oh, when you're raising, like, that's the hard work, and then like, you know, celebrate, like, Money hits the, that's the start. The work starts , you know, sure. You're deploying it correctly. But, um, no, look, a lot of, a lot of hard work goes into these, and it's across the board because of, you know, a lot of members of our team participate in these, because I would say that.

Of everything we've accomplished at ByHeart I'd say our proudest achievement is the team that we've built. And so we put a lot of our team in front of investors during [00:41:00] our rounds. And, and not because I'm doing our team a favor, but actually because. They are driving the outcome. I mean, you know, investors, you were one, you know, you, you, you know, this, I mean, investors are investing in a team and in people.

And, um, so it's all to say it's a big effort across the board. Um, you know, in our case, there are some companies that, you know, it's really confined to a couple of people that really run the process and shirt certainly falls heavy on some groups and others, but in our case, you know, we're exposing our Chief medical officer, our chief quality officer, our head of operations, you know, our supply chain leads, as well as, you know, our, our, our teams that are focused on our consumer all the time.

And so it's. It's a broad group that, you know, perspective and existing investors get, you know, to get access to because we welcome the diligence, right? Like, I think the more diligence that a team does, the more they get to [00:42:00] know the company and really vet, like, is this the right? Fit. And we also do a lot of our reverse diligence because like we want the right people in the group.

So we certainly, uh, take the beat and take the minute to celebrate and, you know, go for, go for a good lunch or something like that together because it takes a lot of, um, a lot of the teams, you know, effort and, and, and we're grateful for that. And really it's to show appreciation. Cause I've said, I've said that to them many times.

I mean, it's, um, you know, investors getting excited about this story is really like,

Jason Yeh: I love a lot of what you just said, and there's, there's something in there that I want to underline for other people, and it's your response to diligence, which is something that I help other founders realize that they need to get to before they go fundraise. A lot of people can feel on edge or anxious and not sure.

And look, there are things, no company is [00:43:00] perfect. There are things that are, um, you know. Maybe problem areas or the company or things that you're working on. But I think the best companies are excited about the diligence. They want the opportunity to show off the different parts of their company. And even the things that maybe aren't in the best place, like it's your opportunity to show your excitement.

That's exactly what we're working on here. Like this is the one thing that's going to get better. And the fact that part that your team is such a big part of that story, it makes all the sense in the world why you've been so successful raising capital for by heart. I wonder if you could share a little bit about with this newest tranche of capital, like what are you most excited to deploy this capital to do?

What should consumers in the marketplace expect to see from you over these next couple of years?

Ron Bellegrum: For us, it's pretty simple. It's first of all, making this product just as broadly accessible as possible. Yeah. You know, that's been a big, focus for the business. I mean, this is infant nutrition, this is foundational health.

Um, [00:44:00] part of the long process we took was to. You know, vertically integrating, et cetera, was to enable building a, um, you know, nationally accessible brand, one that brought up the value of the product, latest nutrition science, highest quality ingredients, all metal and fully recyclable container, but at rough parity pricing with the shelf.

And so one that we get really excited about is to see that, you know, every single day, 90 percent of the states in the country are ordering online and, you know, across nationwide retail. In 1800 stores, you know, we're seeing 90 percent of stores scanning, you know, it's, um, kind of the more of that, right.

More making sure that this product is broadly accessible. Number 1, making sure that we're continuing to, um, innovate to our R& D teams and our, um, innovation teams are very active. Like we are kind of. Believe internally is the work never ends. We learn more [00:45:00] and more about, you know, breast milk and nutrition science every year and we want to continue to, uh, to, to innovate.

So that's another obviously focus of the round. Um, so, you know, and so I'd say those are kind of the main, the main focus areas, you know, some of the rounds that we had done. In the past, a lot of that was to support,

you know, doubling down on the supply chain, building, you know, kind of this end to end manufacturing, um, network, um, with redundancy, with resilience, with, you know, as one of five companies in the country, that was, that was really important, um, this round is really about continuing to create more access to the product and continuing to innovate.

Jason Yeh: That was my episode with Ron Belldegrun co-founder and CEO of by heart. A better formula for formula. I hope hearing Ron's journey helped you see that even the toughest industries with the biggest barriers can be challenged. Whether you're fundraising scaling, or trying to break into a [00:46:00] lockdown market, there's a lot to learn from the way he stayed committed to his mission. When we come back, we'll hear from my producer page about what she thought about this conversation.

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[00:47:00]

Paige Randall: Hello, Jason. This was a very, very cool episode.

Jason Yeh: Yeah. Slightly different on, on a number of, of elements. Right. Uh, I liked it a lot.

Paige Randall: Yeah, I know. I feel like, I mean, we've had, I think we've had a few, maybe a handful of people on that have gotten to more of their series A round. Um, I feel like we typically focus on the pre seed or seed because that's such a defining moment for a startup, um, as to like figure out if they are venture backable or not, but it's also cool from time to time to hear from founders that have raised now, for example, for by heart, hundreds of millions of dollars, [00:48:00] um, having just closed recently their 95 million, uh, series C there's so many now.

Um, so it was very cool to get to talk to him and learn more about, um, the business. And, uh, besides like that differentiating, differentiating factor, he, he's also in an industry that we don't get to hear from much, you know? Um, so overall it was very cool. Um,

and I did have some, some topics I wanted to touch on and

kind of try to bring them back to earlier stages.

Jason Yeh: I will just say like, I do love that earliest battle to try to find capital. It's, it's so like, it's the launching point for so many companies. And it, I think we do a relatively good job of telling the story of like, man, that is so hard. But I think the other thing people don't realize is that it kind of Doesn't get easier.

Like, I think some people think that with the business taking off and the business, you know, doing revenue and having customers that, wow, this is going to be so much [00:49:00] easier now. But I think investors expectations just keep growing from round to round. So you're always trying to convince an investor of some sort of future version of yourself that today is uncertain.

And that's always going to be challenging no matter where you are in your life cycle.

Paige Randall: Um, and back to like the focus of this, this industry that they're in, which is quite interesting for them. It was, even though now they're at their series C, like they are tackling something really tough here because it's so locked down by a few, I think he said like five people or five different companies total.

Like the whole country is locked down by five companies. So them trying to build, um, from the ground up, which is something that was kind of their differentiating factor, I guess, and something that some investors liked and some investors didn't like, um, was very interesting to me, like, so, and I kind of want to talk about that for a second.

So they [00:50:00] decided to own a company. Every piece of the process from factories. They wanted to get a clinical trial that hasn't been done in forever. And they wanted to control everything, which I think is awesome. Um, but it's also risky, you know, when you're dealing, when you're dealing with a market, that's so hard to get into because those things take a lot of time.

So I don't know, I kind of wanted to pick your investor brain, um, and hear some of your thoughts or opinions around why investors at first might've thought, Oh, It was a little risky in why someone might have been drawn, like kind of like the perks, the pros and the cons to each side of that coin.

Jason Yeh: Yeah, and just to take a step back there too, I think that illustrates a common occurrence when it comes to fundraising. It's like you're telling a story and you talk to equally credible people and a group of them will be like, this is crazy and idiotic. Why would you ever use this as your strategy? And then another group would be like, brilliant.

Like that's the way you should do it. And that's kind of like the razor's edge that you're always on when it comes to fundraising. It's like [00:51:00] telling this story that's credible. Crazy to some people, but like brilliant to others. In this case, I can generalize it a little bit. An investor is always looking to see like how risky is this thing that they're saying they're going to do? Do we believe these people can do it? And what's the payoff for that risk that they're taking on? And look, you know, When you say, I want to build everything from the ground up and I want to do something that people have never done before, the payoff is like, look, we will be such a unique product that no one else will be able to compete with because we do it this different way. That payoff seems interesting, right? Now the risk is tough. Had Ron and Mia ever gone through these Crazy clinical trials for baby formula. Had they ever built a manufacturing facility in the past before? And so, like, these risks are real. And [00:52:00] I think it's an investor's job, or the investors that were evaluating this deal, this, the investor's job is to, Think about like, okay, what is that crazy version of the world that they're thinking about? Would it actually create a huge amount of value and differentiation and competitive advantage in order to be able to own a part of a market that is already, like we said, controlled by five incumbents? That could be amazing. And if some people are like, that's amazing. Then when they look at the risks of like, have these guys ever done it before?

Now let's like dive into, do we think Ron's crazy enough to be able to get this done? Like, does he have enough resilience? Do they have an attachment to the, the, the direction, the North star of this company to want to keep like pushing down walls to get this done? And you kind of like take all of that together and half of the people will be like, I don't think they can do it.

And by the way, the payoff isn't that good. And the other half or, you know, a portion will go, there's a [00:53:00] chance they could get this done. And if they get this done, there's a huge prize at the end of that. So let's go do it.

Yeah.

And I think that's what they ran into and what they ended up figuring out.

Paige Randall: Yeah. Cause there really is, like when you look at it, risk either way, they could have not built it from the ground up, and then the product might have ended up being not the quality that they wanted, and then the brand would have went to crap. Or, you know, they, they do build the product from the ground up, and in their case, it ended up being something like, Revolutionary to a lot of parents, at least like in the feedback that they got that built the brand that they had.

So in this case, they ended up, um, those investors early on ended up taking the, a good bet, which, which is great.

Jason Yeh: Yeah. And I'll just say too, by the way, like no path is, is certain, right? Like, just like you said, there are variables down different paths and outcomes that can't be predicted. And part of it is, you know, betting on the jockey to, to ride the horse to the right outcome. And, you know, it seems like. These investors have picked a good one so far.

Paige Randall: yeah, that, that just made me [00:54:00] think of something too, of like, maybe it's not necessarily about the specific. I think you've said this before too, but the specific thing that the founder wants to do, but you really are just betting on the founder. Cause if there was a determined founder that was like, I am gonna, um, white label and like, and you know, not build from the ground up and I'm determined to do it.

And they saw something in his eyes to do it. He could create just as successful of a company doing that.

Um, then like building from the ground up.

Jason Yeh: A lot of times, I'll usually say this from an earlier stage company perspective, when people are like, here's my product idea and here's my strategy. And I want to go raise capital. A lot of times the strategy that you describe to the investor is less about the specific strategy and more about just a representation about how this founder thinks.

It's just another thing to help you evaluate how good you think this founder is, because in your head, you're like, No way is that actually going to be the thing that ends up being the big success story, but I want to [00:55:00] know what you think about what the strategy should be today. And that helps me evaluate whether or not I think you're amazing. And look, I think that continues to be the case as you push further and further, later and later stages. Obviously, The strategies don't go and like, you know, do 180 degree turns and pivots the same way they do at the pre seed or the seed, but you're still like, look, at the end of the day, it could have to change.

And we're at, we're, we're still just betting on a founder being amazing and bringing us to the promised land. I

Paige Randall: something else that I kind of wanted to shift to is, Something that Ron, um, shared that him and Mia both care about and is, I think, I don't want to quote him incorrectly, but is the most valuable part about their company is their team. Like, that's the thing that they're the most proud of. Um, and so that being said, something they decided to incorporate into their fundraising process throughout, I think, multiple rounds is kind of [00:56:00] Introducing investors to their team.

And I wanted to get your thoughts on that because I'm not sure if this is a common practice or not, but it was something important specifically to these founders, um, that lit them up that maybe investors recognize and saw as a green flag. And I just kind of wanted to get your opinion on that, or if you've heard about people, uh, incorporating other people into the fundraising process outside of the founders.

Jason Yeh: think, um, the cliche of team is everything is grounded in a lot of truth. Um, and a lot of times you'll see investors that just see amazing teams and they'll be like, we want to back this team doing anything, right? If they like working together, if they compliment each other, if, you know, if they bring out the best in each other, then that's, that's going to be a team that can do a lot.

And I think in the earliest stages, the most important parts of the team are the co founding team because they are the most locked into the [00:57:00] opportunity and they, they are driving the most of the outcome, um, for many, many rounds. You know, I'd say, As you get later stage, um, and if you get deeper into a fundraising process, there is a lot of opportunity to show the different assets that your company already has.

So probably introducing more of your product than you might in the pre seed, probably introducing different elements of your company. And I don't know if it's, Like a must for teams to present different parts of their, um, you know, founders to present, present different, uh, members of their team during a fundraise. But certainly during a diligence process, or as you get deeper into a fundraise, a venture capital firm is going to want to know who's your head of technology for software companies. And, uh, I think in BuyArt's case, like probably head of marketing, understanding who's driving the marketing. Motion behind the company and, [00:58:00] um, head of science and production is probably very important to understand all that. Um, but, but I do think by heart and Ron and Mia probably gave it their own spin in terms of like really, really wanting it to be, um, part of the fundraising story of how amazing their team was, how deeply integrated they were with each other. So I think there are a lot of different ways to do it. Team will come up in a lot of pitches, but probably not to the extent that the by heart team.

Paige Randall: Yeah, I mean, it's gotta be a great signal because clearly, you know, when you're proud of something, you are confident in it, um, which kind of leads me to my next topic, which is, which you guys had a good conversation around in the episode, which was this idea of diligence and how Ron's opinion on it was like, Please, please diligence us in and out, you know, like look into everything, ask questions, whatever.

And that just shows the level of confidence he has in his team and his company in a whole, um, as a whole. And, [00:59:00] um, yeah, I just feel like that's something maybe not everyone has maybe going into the earlier rounds. Uh, and yeah, I kind of want to hear your thoughts about it, but in my head, it's like, okay, if there's something that you are unsure about, or You know, you don't feel confident in, then maybe that's something that you really should look at before you go out to do anything, because

Jason Yeh: I think that's the right answer. And, um, and you're not even saying if your company isn't perfect, then you should make it perfect before you go fundraise. It really is. You got, you got to know about all parts of your business. You got to understand the strategy going forward and you got to know what are the things that need to be worked on, right? No company, no business is perfect. It's, it's more of that realization of, of what elements are not perfect, um, what things you can do to make things better, and what is the plan and strategy going forward? I, I, I think it's akin to my advice around [01:00:00] questions you get asked in a live pitch where people are like drilling you about What is this?

What is that? Do you know this answer? Do you know this answer? Do you have the perfect answer for this versus that? And in both the questions you get asked live in a, um, in a live pitch, and the diligence that someone might do offline to dig into your company, in both cases, um, You just have to be really confident with what you have and understand what's there. If they run into something in diligence that they don't like, it can't be a surprise to you. It's got to be something that you're aware of and something that you're open to discussing. If it's something that is a kiss of death, like terrible thing that you can't get around, then maybe you shouldn't be fundraising until you figure out what the plan is to fix that because you have to expect everything to come out in a fundraise. If you're Betting on and rolling the dice that during your fundraising process, this one [01:01:00] terrible thing about your company isn't going to come out. And that's what has to happen in order for you to get funded. It's probably not a good strategy. So, um, I do love the idea that Ron is like, look, we welcome it.

We can't wait for you to learn more about our company because we think our company is that good. That's the, that's the type of confidence that like everyone should have as they're going into talking to investors at any stage.

Paige Randall: couldn't have said it better myself.

Jason Yeh: Snaps to that. Is that the debrief?

Paige Randall: That is, that is the debrief.

Jason Yeh: Let's go.

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[01:02:00]

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