Rootine's Rachel Sanders is disrupting the vitamin space

In 2019 I launched Startup Standup here on LinkedIn. I had been a mentor to a lot of entrepreneurs that came to me for advice on raising money and just general startup tips. It was baffling to see that women had a really hard time raising money - especially when their business plans were on par (or even better in many cases) than male-founded companies.

In an effort to get the word out and learn from each other, the concept of Startup Standup was born. In Season 3 we'll hear from seven tenacious founders who are navigating the funding stage - whether it's Lexi who is still completely bootstrapped or Neha who pivoted her company and is ready to secure that next round of institutional funding. Make sure to click subscribe so you don’t miss an episode!

I'd love to hear what you think and if there are any other female founders I should get to know. Oh yeah, and let's all support these phenomenal founders! :)

Enjoy,

Marc 

Meet Rachel

This week I'm talking to Rachel Sanders. She’s on her second startup, a health and wellness company that she started with her co-founder, Dr. Daniel Wallerstorfer, PhD.They launched Rootine after a decade of research analyzing the current “one-size-fits-all” landscape of multivitamins and nutrition plans. Rootine believes that people deserve more personalized nutrition solutions, informed by personal health data, that can empower them to perform at their best throughout their day. 

Rachel walks me through her pitch deck and we chat about going from Seed to Series A — What are investors looking for? How do you paint the picture early on for why you need the capital you do? And, what’s the average step up that investors are looking for in 12-18 months? We also deep dive into the numbers and the strategy behind finding the right investors. Rachel and her team are in a highly competitive space, but I really think they have the Vision (V), the right team / People to execute (P), and now the Capital to push it forward. VCP, baby! Take a listen!

Rachel Sanders: My name's Rachel Sanders, CEO and Co-founder of Rootine. We are living in a new era of human performance, where there's an abundance of empowered health consumers who want to make the most of their time to perform at their best and really want to do it in a data-driven way.

We know that nutrition really is the core to performing and feeling our best, yet 90% of people don't get the best adequate daily nutrition, which leads to rising health concerns like mood disorders, stress, fatigue and more. We really know that health begins in the cells with cellular nutrition at the core. Rootine is a health and wellness company focused on optimizing cellular nutrition, which we do through better data science and personalized health solutions that enable individuals to perform at their best every day.

We're doing this and gaining the market traction because we're really solving an unmet need. We combine convenient health tests with one-to-one personalized micronutrients and digital health tracking, which creates a convenient and clinically backed way to address a lot of the drive in health concerns that impact performance. Our numbers really speak for themselves. 70% of people improve health, 60% see a decrease in stress, over 50% see improved average levels and more.

We're doing this really through a better process. We combine these at home health tests with one-to-one personalized nutrients and the health tracking, but we make it easy for customers to sign on through allowing customers to input their data in a way that makes the most sense for them.

Secondly, we have better data and insights. We've developed this breakthrough personalization technology that looks at a comprehensive set of data points. We're looking at lifestyle, blood levels, genetics, and then we'll be integrating with additional wearables other lab tests. Because we have more comprehensive analysis, we have better insights and those insights improve as we track outcomes over time.

Finally, we're creating the most precise nutrient formula with our technology and then delivering the most precise product on the market that has better absorption, a slow release, and expands the market beyond traditional pills. Our form factor are microbeads. We know that close to 40% of the market refuses or can't take large pills, but our microbeads open up the market to close to 95% of people.

Rootine is founded by myself and Dr. Daniel Wallerstorfer. My background, I started my career in investment banking, focused on healthcare space, also experience in product and strategy at naviHealth, which is a VC-backed digital health company. I got my MBA from Harvard and through that experience connected with Dr. Daniel Wallerstorfer. He has a PhD in Biotechnology. He spent the last decade innovating at the intersection of genetics, nutrition, and tech, and has built one of Europe's leading biometric testing labs. We're supported by a world-class team of business, marketing, scientists and clinical experts across both our full-time team and our dedicated expert advisors. Our products includes convenient health tests, which we have a DNA tests and blood tests and developing additional blood tests. These tests inform our micronutrients subscription, which creates a very strong feedback loop.

Our customers are really these quantified self executive athletes who are building their own data-driven health stacks. They're getting clinical care with Forward and One Medical. They're tracking their levels with Whoop and Levels. They're exercising with Tonal and Peloton. What makes us different is we're the only company in this personal health stack that's really focused on personalized micronutrients specifically through the lens of cellular nutrition.

I know we're focusing first on these quantified self and executive athletes, we are going to be able to expand over time. We know this because we've already acquired more mainstream customers early in our journey. We retain them, we understood what opportunities and improvements we could do. We know that we can succeed as we go back into that market later down the road.

Our go-to-market, we have been 100% digital through 2020, but by the end of 2021, we'll be 85% digital with 15% combined between retail and channel partnerships. We've signed deals with B8ta and Showfields on the retail side, also have co-branded partnership with an ID aspersion clinic. Then on the channel partnership side have recently signed a deal with a large European consumer health company called Vision Health Care to launch in Europe here in the next couple of months.

We are playing in a massive global market, $700 billion global nutrition industry in the fastest growing sector, which is personalized nutrition growing at 15% year over year. We know that we can hit $500 million in annual revenue with an average of 300,000 monthly customers.

Given the strong tailwinds, we know there's going to be new entrance in the market, but we're going to continue to win in the minds of consumers by building a trusted brand that delivers real benefits through our multiple data points and really hitting on a better process, better data and insights, and at best delivery form factor.

Marc Lore: Great, Rachel, thanks for taking me through that. One thing that, I guess this would be for the next round because it sounds like this rounds already done. With respect to the first slide, if you can go back to the first slide there. This is a good slide, Rachel. I just think before you even get into the deck, it's like just level setting with someone.

Rachel: Okay. Got it.

Marc: Again, maybe they already have context investor. A lot of investors don't when they get the deck or they hear about it, the first slide is, "What exactly is this? Is it a product? Is it an app? What is it? Where are you? How many employees? When did you launch? How much money did you raise already?" Just to level set so now I have contacts going into it. The other thing that is missing upfront, but you had it in the back was I guess the vision. What do you want this to be in 10 years? You tell me what it is, "This is what it is and this is where we think the big opportunity is." You talked about the market size and the speed of $500 million revenue opportunity for you way back in the end of the deck, I would hold that upfront, just like let people know, the investors know that you're thinking big, this is a really big opportunity.

Sometimes people check out if they have the preconceived notion that it's not that big or it's not big enough for them, or whatever. Especially in the next round of financing, when we start talking to bigger VCs and you're looking to raise $5-$10 million. I think you want to have the vision upfront. I think this gives good context. The other thing is the story. I think the story is always important in terms of, where do you come up with the idea? Why now? Do you have a mission statement?

Rachel: We do, but it's not in here.

Marc: What's your mission?

Rachel: We're really looking at helping people leverage their personal health data in a new way to enable optimal health.

Marc: Okay, that's pretty good. That wasn't in here. Any particular reason why you didn't share that?

Rachel: I've honestly just tried to cut down the deck and make it as simple as possible, especially when it comes to those intro slides around, what's the problem that consumers are facing? What is our solution? Which it sounds like, we need to be a little bit more clear on and move that around. Then just one slide on the level set where we are in the world.

Marc: I think the mission is good, Rachel, the reason why I like the mission is because I want entrepreneur to be super passionate about what they're doing, and know that they're going to go all-in and they really believe in the mission. They believe in what they're doing. It's not transactional, what I'll call mercenary like, "Hey, here's a business, we do this business, we make money, shareholders get rich." It's not that. There's a higher purpose here to why you get to me.

I think it's important that omitted from this slide in the deck would be a yellow flag for me as an investor. Just wondering how mission-oriented you are. It sounds like you are and it sounds like you have one. That's great. I wouldn't want to leave that open. I think it's important and to spend time on that. Like, "This is our mission. This is why we exist. This is why I'm like fired up. I want to make a difference in people's lives. I want to make a difference in the world." That's important.

What's the next slide? Doing economics or no? Do you have any economics where you show your CAC to LTV? I know you said that thing like 7X or whatever, but where you actually show your CAC and show how you get to the LPV. By the way, this slide has to go. That's the vision. That can go way upfront.

Rachel: Go-to market as vision.

Marc: No, no. The vision one. Yes, this one. This should be really upfront. Like you say, "This is what it is," the first slide, the introduction. Then you tell the story about why now and like how you came up with the idea and stuff. Then I would go right into like, let people know this is a massive market. I usually like to call this slide, The Opportunity. It's not even just the markets, it's the opportunity here.

Rachel: Okay. Got it.

Marc: You said the intro, then the story, then the big vision mission, then the opportunity. Then you get into more detail, "Here's a problem. Here's a unique solution. Revenue model, unit economics." Yes, figure where the competitive edge goes. Sometimes it's right after the solution before the revenue model. You've talked about your solution and then you say, "There's other competitors out there doing similar kind of solutions, but nothing quite the same." Then revenue model, unit economics, then early traction, milestone plan, team financing. Something like that. I might've missed a slide or two.

Rachel: That's fine.

Marc: That is a framework. On the revenue model slide, you had it there, just talk about how you make revenue, you had your products there, but how you think about the revenue model. When you're projecting revenue, how much of it is coming from repeats, how much is new? Like kind of just give a little rubric there for how you project and make revenue.

Then on the unit economics slide, how do you make profits? What is the CAC currently to get a customer? Why are you confident that you can increase marketing without the CAC exploding? How do you know this more room to spend at that current CAC? Then on the lifetime value calculation, what assumptions are you using on churn, on retention, repeat rate and revenue per order. Are you assuming that the early cohorts that you have already are bigger spenders than future because they're early adopters?

That's probably one of the most important slides in any one of these type companies. Is really, if you want to get big, you got to spend marketing, you got to get the word out. Then is the LTV a nice return on that marketing spend and making people feel competent if that's the case? I definitely spent some time there. Actually, the other slide we're missing too, is the financial projections. Even at a company at this stage, I wouldn't go into detail. I don't think you have financials?

Rachel: No, I don't like to include them. I get into this first and then I send them if people want to go in further, is how I've been doing it.

Marc: Why did you choose to do that?

Rachel: Based on advice I've gotten. Just like focusing on the business just does seem like something that's interesting. Have that first conversation, so like send deck, have that first call. If it's something where they want to dig in, I have the numbers ready and I send it to them after.

Marc: I think you should have the backup spreadsheet and all the detail and expensive things. I think you need just a high level like, "Here's our--" It doesn't have to be far out. It could be just like the next three years, maybe four, but, top-line revenue and cash burn, like gross margin and cash burn or something. You just need a few lines, some sense of like, how much cash do you think you're going to need over the next few years? How many more rounds of financing to get to what size business? That to me is a key, key slide.

Now, granted, it's early and any projections you put out are hard to defend, but that's why it comes back to the economics slide, because if you know you spend this much amount of money on marketing, you're going to get this many customers and this many customers are going to generate this much revenue.

You make that clear, obviously, there's balance there. There's a lower bound and upper bound, but you get some sense out. That if we spend this much money, we're going to be somewhere in this revenue range and the cash burn will depend on how efficient our CAC to LTV is. The cash burn could be anywhere between, it could take five million to get to breakeven best-case scenario, it could take 30 million.

In either case, even if it took 30 million we're still creating a business that's worth hundreds of millions, so it's a great return. Being able to set that stage. It sounds like you had success raising this money oversubscribed. That's not typically how it works. It's typically much harder to raise money. It will be much harder in future rounds, no doubt. Raising money is hard. It's really hard.

Rachel: I love to hear, we talked a little bit about we're at seed and thinking about the Series A in terms of the deck. In terms of success, like getting from seed to series A, in consumer businesses, what have you seen has been super successful? What are you paying attention to? Of course, we're talking about CAC, LTV, Average Order Value, all of that. What else is something to-- [crosstalk]

Marc: I'm always thinking one round ahead. In the seed round, I'm thinking making sure the valuation is attractive enough where you feel confident you can get a really nice increase in the valuation to the next round. That momentum is key. If you raise it too high evaluation to seed and you don't have the right metrics, it might be really hard to have a step up and then you lose momentum and if you do a down round or flat round, you're in trouble. I always like to price the rounds really attractive, where I know a year from now when I do what I say I'm going to do the valuation is going to go up. Don't be afraid.

Rachel: What's your average step up that you're like hoping for? Obviously, a lot.

Marc: At least a double in 12 to 18 months in evaluation. The pre has to be twice the post to the seed. The other thing I would do and this ties in is to under promise and over deliver in terms of what your projections are and what you intend to do between the seed and the A. That's the second thing. The third thing is try to think about what is the one thing people need to believe to want to invest in the next round.

Sometimes people have a lot of different things that need to go right for the round to be successful. Try to figure out what is the most important thing that really drives success and keep investors focused on that and make sure that metric is front and center with your existing investors.

If you've got the right existing investors in, they would do their pro-rata in the next round and like at stage-- or even better and this is my other point, if you can get an investor in the seed round, that's putting a little bit of money in the hopes of putting a bigger check in and leading the A, that's ideal.

I always try to find somebody that could lead the next round that's in the existing round. If you have that investor in and they could potentially lead the A, that's great. Make sure there's one clear metric that you have them focused on that determines whether you can call it successful between now and the A, and keep them focused on that. That's the one metric that they need to believe. If you hit it, under promise and over deliver, then you're in a really good spot.

Rachel: Okay. Got it. Last question on that. We are in a massive market, but we're also in a market with a lot of competitors and there will be new entrants. Continuing to prove that customers will choose us over others is very important. I'd love to hear your thoughts on what are the metrics around for points from your standpoint that would answer that question around, are you actually going to win in a super competitive state?

Marc: I think the winning more times than not, it comes down to the team because the team could have execution. It's an execution. It's capital and execution. I like to look at everything through the lens of VCP, Vision Capital People. Like you said, a lot of companies have a similar vision for what they want to do, but capital and people is where company's going to be able to differentiate.

Raising capital is important. I would raise as much money as you can in every round because more capital, the better position you'll be in to compete. Raising capital often comes down to the team that's behind the capital. It sounds like you have a good team now, but anything you can do to bring in people that are best in their field, into the company, you can really say, "Yes, nobody has a person like this or a person like that." I think that becomes really critical. If you do already have that, then I would play that up even more.

Rachel: Okay. Got it. No, that's super helpful. That was really all my questions. I wanted to go through the deck and get your thoughts on that and then help us too. This was super helpful.

Marc: Okay, Rachel. Good luck. It was great too.

Rachel: Thank you.

Marc: Okay.

Rachel: Have a good one. Bye