Lee: [00:00:03] Welcome to Episode 65 of The Stairway to CEO your podcast. I'm your host, Lee Greene. And today I spoke with Achal Patel, the Co-Founder and CEO of Cabinet Health. Cabinet Health is a sustainable health care brand on a mission to provide high quality and fairly priced medicines directly to your door. In this episode, Achal shares with us his entrepreneurial journey from growing up in a family of doctors, to working as a Sandwich Artist at Subway, to launching and growing Cabinet to over 13 million dollars in revenue in just three years. He talks with us about the lessons he learned from meeting with over 300 investors, which led to raising 5.2 million dollars, and how the role as a Founder evolves into a CEO and how they differ. Tune in to hear all of this and more, if you like what you hear, don't forget to subscribe to the show and leave us an awesome review. We hope you enjoy this episode.

Lee: [00:01:52] Hi Achal, thank you so much for being on the show today. I'm really excited to hear your awesome story in building Cabinet Health. Thanks for joining us.

Achal: [00:02:00] My pleasure. Thanks for having me on the show.

Lee: [00:02:03] So let's start from early days. I know you have a very significant family story, your history into even getting into this business. So I definitely want to start with, you know, how you grew up. Where were you born? What did your parents do? Did you have siblings? Let's hear about childhood.

Achal: [00:02:23] Yeah, absolutely. So the way I describe my childhood is I grew up in a family of health care entrepreneurs and healers. So for me, what that really meant is being in a family of parents as physicians, aunts and uncles in the pharma space. Literally spent childhood summers in an over the counter medicine factory that my grandfather built in India.

Lee: [00:02:43] Wow.

Achal: [00:02:44] And so really, the early days of my childhood were highlighted by this deep connection to the world of health care, but from many different vantage points. Everywhere from literally the manufacturing of products that we take to alleviate pain, which is Acetaminophin, to rounding in the hospital and spending summers working in my parents' doctors offices, scanning charts into digital formats. And really, for me what that highlighted was this amazing opportunity that health care provides us to help people live healthier, happier lives. Tactically, I was born in New York City, grew up in Virginia and have lived in Washington, DC and spent a lot of time in New York ever since. So for me, it's been this interesting blend of growing up with parents as immigrants who lived in New York when they first moved to the US, eventually settling at a quieter town in Virginia and then over the years, really bridging that gap between what was their experience like growing up in India. I've been spending a lot of time, especially before the pandemic in India, working with factories that are literally family or de facto family. And so it's been a fun adventure to kind of see them grow as individuals, learn from them, and then really connect the dots back to my family's lineage in the world of medicine, manufacturing, as well as care.

Lee: [00:04:04] So it sounds like both your parents were doctors.

Achal: [00:04:07] That's right.

Lee: [00:04:08] What kind of doctors?

Achal: [00:04:10] My mother's a pulmonologist. So it's been a busy year for her. She focuses on critical care pulmonology.

Lee: [00:04:18] I actually have no idea what that is.

Achal: [00:04:21] Yeah, so she's a lung doctor.

Lee: [00:04:25] Ok so lungs.

Achal: [00:04:25] Patients who are in the ICU for lung related conditions like Covid, Pneumonia, etc. She's the one taking care of them and was a really critical part of developing my vantage point on life, but also like the way that care should be delivered. She's still the first person I call when I'm sick, whether it's a real sickness or I just need to talk to my mom. And it's something that I've always wanted to emulate, even in the business world, for all of our customers. And then on the other side, my dad is a cardiologist, a heart doctor. And so it's been really fun to learn from both of them. I think in an early age, just understanding what it's like to have someone is knowledgeable and loving take care of you. But at this later juncture in life, actually understanding the importance of being able to have access to that information, to that care, is really unique and unfortunately not the norm. And so that's been something that's really been formative in my upbringing as well.

Lee: [00:05:24] And so do you have any siblings?

Achal: [00:05:26] I do. I have an older brother, lives in Dallas, Texas, works at a big health care company. And so speaking of getting the different vantage points of the world of health care, he's in a different part of it and something that's always helped me learn about the business side of health care as well, so focuses more on building, scaling, and acquiring startups into a large health care system.

Lee: [00:05:53] Oh, cool. And so when you are a kid, I mean, did you play doctor all the time? Did you want to be a doctor? What was the dream as a kid?

Achal: [00:06:01] Yeah, for my family, there's always this keep the door open to becoming a physician mentality. And so I would say that I was interested by many things. I ended up studying history in college, but to my parents delight, I also did this premed track. But a few years into college, I realized that going to med school and having the responsibility to take care of patients every single day wasn't the best fit for me. And so I knew I wanted to get back into health care in some way, shape or form. Really had this unique vantage point of understanding the pharma manufacturing space, seeing how physicians interact with patients and also the business side. And to me, being a doctor is something that I really admire and respect. But I also believe it's something you have to do with your whole heart and to actually take care of humans.

Lee: [00:06:53] Yeah.

Achal: [00:06:54] For me, while I care about that is not something that I knew as my calling.

Lee: [00:06:58] Yeah. So you went to the University of Virginia, and you said you studied history. What kind of jobs were you doing while you were in college? What were some of your first jobs? Maybe it was even before college, but what did your kind of early days in working look like?

Achal: [00:07:14] Yeah, absolutely. A couple of experiences. So one was I spent summers, my parents' doctors offices, literally scanning patient charts into digital format. This is when the electronic health record was just first coming around. And instead of having some sort of automated system or clear cut way to bring to the physical charts into the digital world, I would spend summers scanning documents one by one. And pretty remarkable that that was actually a summer job. But that's what I did initially.

Achal: [00:07:48] And then I spent some summers working at Subway as well. So I was a Sandwich Artist in my hometown, which is a lot of fun. Got to talk to people all day long who were coming in. And just like relationships with the same people every single day.

Lee: [00:08:04] Make some great sandwiches.

Achal: [00:08:06] Yeah, exactly. So if any of the listeners want to have a good lunch, feel free to come over to my apartment and I'm happy to make some sandwiches.

Lee: [00:08:14] {laughter} Inspired by Subway.

Achal: [00:08:15] Yeah, exactly.

Lee: [00:08:17] That's funny. So what about when you graduated? What was your first job out of college?

Achal: [00:08:24] Yeah. I, like many students, wasn't totally sure what I wanted to do. I had this lineage in health care, but also had no business experience and really wanted to just start to understand how does the actual working world frankly work and how does the world of business work? So I jumped directly into management consulting at a college. I worked at Deloitte Consulting in DC. And I would say the highlight of that experience is within the first couple of months there I met my now Co-Founder, Russ. So Russ was starting this program to think about how do you channel the skill sets of Deloitte consultants to help build and scale social enterprises? For those social enterprises are, they're small businesses that prioritize not only profitability but also solving for social and environmental issues within the communities they'r operating in and beyond. And what Russ and I really focused on at Deloitte was how do we actually go around the world partnering with social enterprises, understanding, and what are some of the creative business models that are being deployed that allow these businesses to be profitable but also generate social or environmental impact? And we had a lot of fun. Our first project together was literally going on a bus tour around Bosnia, running innovation tournaments to really take ideas, turn them into effectively like five hundred dollar seed investments for community development projects and then scale them from there. And so I had a very unique path in that I joined a management consulting firm, but was very fortunate to meet one of my closest friends and Co-Founder now within my first couple of months. That would have been eight, nine years ago at this point, and I think really set the foundation for some of my beliefs now in how to build business which are around ultimately as a steward of society, and then just like [00:10:28] my vantage point is, if you build a business, especially in the world of health care, that isn't prioritizing consumers' well-being, then that's directly oppositional to the purpose of being a business. [00:10:40]

Lee: [00:10:41] Right. It's like, what are you doing here in health care? Yeah. So that's really interesting because I feel like a lot of people I talk to that have been in the consulting world, their experiences are not so positive. But you seem to have had a really unique experience in having the ability to build in scale social enterprises and community development projects. How did that happen that you were able to kind of be in a totally different world, I feel like, of consulting?

Achal: [00:11:11] Yeah, absolutely. So for me, it was a journey of learning what intrapreneurship was throughout that process. So I was frankly just very lucky to have stumbled upon someone who was already trying to build this program, in Russ, on my first couple months on the job. But what I really learned quickly is that if you understand the needs of the broader business in a management consulting firm, priorities are how do we develop our talent, which is the greatest asset in a services based business? And how do we then tell that story effectively to attract more talent and to attract more clients? And what I learned to do, I would say fairly adeptly, pretty early and with great mentorship from Russ, was how do you build a business case to create, build, scale programs that allow you to work on things that you want by actually crafting that business case in a way that makes sense for the larger...

Lee: [00:12:10] Mm hmm.

Achal: [00:12:10] Russ and I spent a few years just on a yearly basis pitching the now CEO of Deloitte on how we can channel partnerships of social enterprises to motivate and scale like talent development, but also learn business models that we can then translate into our Fortune 500 client base and ultimately we just created jobs for probably about three to four years before we left when starting a Cabinet.

Lee: [00:12:37] Wow. So this is kind of like an idea you guys had and you were pitching it basically like, "Let us go off and do this."

Achal: [00:12:43] That's exactly right. So we were able to build the business case for why this is important for Deloitte, get funding for that in the form of ours, as well as kind of smaller investment dollars and then harness that into our full time jobs. And I would say a really important part of that, which I still I think carry forward as a lesson today is we ha a ton of mentorship and like champions around us who were supportive of this, who we got input on for these business cases. So by the time we were pitching them, they were already kind of this done deal. And I think that was my first understanding of like, how do you get buy in for developing business cases before you're even in the room pitching them.

Lee: [00:13:25] Yeah. Very, very good learnings, even for fundraising for sales... I mean, that's a really awesome early learning that you got there. So after Deloitte, what happened after that?

Achal: [00:13:39] Yeah. So after a number of years of building, I guess what folks have called purpose driven business models, I shared a lot of my personal background with Russ along that journey of wanting to work in health care in some way, shape or form. And so towards the end of my tenure at Deloitte, what I was really thinking about is, are there ways to harness this supply chain and fifty five years of over the counter manufacturing expertise to build a more sustainable and quality driven OTC medicine experience? I use a ton of allergy medicine, like the challenge of navigating the aisles of Walgreens and CVS was very real to me, and it was very counter to the experience I had with my mother as my caregiver growing up whenever I was sick. And so I thought, let's start simply with just seeing if consumers even want to buy a new medicine brand online. And what we launched in late 2017 was a white labeled medicine brand on Amazon. The intent was to understand, one, can we activate our supply chain and actually harness the manufacturers that are de facto or actual family to bring high quality products to market? Two, are customers even willing to buy from new brands in the space? We've been marketed from the largest pharmaceutical brands for decades, if not more. Are customers comfortable buying from an alternative if it's sensibly priced, more sustainable, equal quality? And then three, the intent of selling those white label products and Amazon was what can we just learn from customers? I have literally responded to thousands and thousands of customer service questions, read every single piece of feedback that anyone gives us on the Amazon Marketplace, as well as reviews, which has both positive and negative impacts on my health. But what it really led to is this understanding that there is a real market opportunity here, that a business line grew rapidly with no upfront funding for a month over month for the first 12 months it was in the market. And I remember just having so many conversations via the email with customers around really fundamental questions around health that were frankly appalling to me. Customers who didn't understand the directions on their medicine. Customers who didn't understand the interactions between their OTCs and their prescriptions, customers who bought the wrong product altogether because we haven't done a good enough job as a society helping people understand the difference between ibuprofen Acetaminophen, and your next active ingredient pain reliever.

Lee: [00:16:27] It's so true. Yeah, yeah. I mean, it's funny because even with just COVID, getting vaccinated, they're like, "Take Tylenol, don't take Advil." And you're like, "Why? Aren't they the same thing?" Like, honestly. So you're right, there is a very big lack of knowledge around, like what the difference is between basics like Tylenol and Advil. So this is interesting. So in 2017 you basically launched this to kind of test this out. It sounds like you had a bunch of questions that you wanted to find answers to, to basically vet the idea and concept, realized that this is something that's working. Where did you take it from there? And were you called Cabinet at the time? And if so, how did you come up with the name Cabinet? I always like to ask, you know, how Founders come up with the names of their companies. Because I think, you know, as a consumer, it sounds so obvious. Like, "Ah, your medicine Cabinet." Right? But when you're in it, it is so hard sometimes to name your company. And so what was that moment like?

Achal: [00:17:26] So we have this funny moment where Russ and I were in this room putting together a list of potential company names, and we had probably one hundred of them, and one of them is called like The Medicine Cabinet. And we thought it was really cool. And fast forward a couple of months and we're working with this brand agency that we were connected to through friends and they're like, "Guys, you shouldn't be The Medicine Cabinet. You should just be Cabinet." And I was like, oh, cool, that's amazing. It's like that moment in The Social Network where Justin Timberlake is like, "You're not The Facebook. You're like Facebook."

Lee: [00:18:05] Right. {laughter}

Achal: [00:18:05] And it is a big revelation for Russ and I. The folks we are working with they were surprised at how surprised we were, but we loved the name. It made sense. And I think it's emblematic of the fact as we look at this space, it's not just about your medicine or specific products, but how do we actually reimagine your health and everything that's in your cabinet? And for us, it's been representative of the ambition from day one. And we were fortunate enough to have much cooler people than us help us with the name.

Lee: [00:18:38] Awesome. And you guys have grown quite a bit. Thirteen million dollars in revenue over the past three years. You are also just are launching, your website says, "The world's first fully compostable medicine system." Why hasn't anyone else done this already? It's kind of shocking, right, that you guys are the first in the world?

Achal: [00:19:04] That's a great question and it's something that was surprising for Russ and I as well. [00:19:09] I think our physical health and the environment around us are inextricably linked. And yet in the world of health care, there are no sustainable options today. There [00:19:20] are two hundred billion or so single use plastic bottles produced by the pharmaceutical industry every year. One to two percent of those are recycled. The rest end up in oceans, landfills, and in other places and back into the environment that we breathe air from, that we swim in, you name it. And so, as Russ and I were building this company and one of our learnings along the journey was even just seeing the sheer amount of plastic that we produced to launch this brand was terrifying to us. [00:19:51] When you build a business in pharmaceuticals your options are HDPE plastic. That is known to be safe, it's known to be stable for products. And to your question of like why has no one else done this? It's because that's been the norm for decades and that's just what we default to. The second part of that is that it's exceptionally complex to innovate in the space. The supply chains are global. They're fragmented. Bringing more sustainable products to market requires regulatory expertise, requires buy in from your entire supply chain, from factory through consumer. And it requires an actual level of resilience and ambition to spend years actually being able to bring new packaging format to market and having conviction that it's important either because of your personal values or because you have enough customers reinforcing it. Ideally, a combination of both. [00:20:48]

Lee: [00:20:49] And so what made you guys think that that was something that would be super important to consumers? Did you do any tests or anything to kind of validate that? I mean, obviously, I mean, I think everybody realizes after you announce it to the world like, "Hey this is what we're doing," like fully compostable medicine system, it's like, "Oh, yeah, that makes sense. I want to buy in on that because that's the better way to do things," you know. But I think, you know, how do you maybe validate that that's something consumers care about?

Achal: [00:21:21] Yeah, so, I mean, to be perfectly honest, the early inkling to do this was very personal. So we were just running our first production run of Cabinet products in these plastic bottles. Russ had to go back to visit his family in Singapore to take care of something. And the pollution was terrible there. He was taking his wife there to show her the city for the first time. At the same time, 12 hours forward in New York, I was in a warehouse sifting through piles, piles of plastic bottles that had been shipped to us incorrectly. And I just remember this moment where Russ is calling me is like, "Hey, man, I'm in Singapore. There's a bunch of pollution. I'm sorry, I can't be there and help you sift through these bottles." The flip side of the frame, I'm in a warehouse sifting through hundreds of thousands of plastic bottles, being like this is absolutely ridiculous and stupid. And both of us kind of a week later coming together and thinking through it. Would we really be proud of building a health care company that's contributing to environmental issues that eventually lead to pollution in Singapore because plastic's being burned in Malaysia? And do we really want to spend our lives sifting through plastic bottles in warehouses? And after that first personal wake up call and realization, we just started talking to folks who were doing research on sustainable products in the world of consumer goods. We called up a researcher at NYU Stern who had been publishing reports on the growth of sustainable products and CPG. And what we started to see was that in the last five years, sustainable products have led to majority of market growth and consumer products. Yet in the world of over-the-counter medicine and pharmaceuticals, there were no options. So there's about 16 percent of market share in our adjacent categories. Nothing in the world of medicine. And for us, that was our opportunity that corroborated what we'd felt personally with actual market data. And then we just started talking to our existing customers. So we have been in the market, as you mentioned, for a few years now, called up our customers, asked them and "What would make you a Cabinet customer for life?" And the common themes that kept emerging where having a more sustainable product system and having a way to ensure that our products are higher quality or equal quality as what was in the market today. And so those were really the signals for us, like 1) strong personal conviction 2) actually seeing rapid market growth in the space around us. And then 3) just talking to customers and having them tell us straight up that if you build a sustainable product, I will stick with you because no one else in the market's even tried.

Lee: [00:23:59] Yeah, that's interesting. So you guys are in a fight against single use plastic, which is amazing and promoting sustainability. But you're also the first to do batch level quality testing. What does that even mean? I had no idea that there were so many drug recalls. There's about three every day. How is that possible? Is that just like stuff that's buried under the rug? I mean, why are there so many recalls?

Achal: [00:24:26] Yeah, so to shed light for folks listening on how complex the pharmaceutical manufacturing world is, your average medicine cabinet of five to ten products might have 20, 30, 50 factories involved in getting you those products to your door. There are different folks who are making raw products, taking those real products and turning them into tablets, different supply chain elements that are then packaging them and then eventually distributing them. Even the largest retailers in the United States don't produce their own products. And really what that's led to is this really global, very fragmented, supply chain complex, which is fundamentally just hard to actually ensure quality around. The FDA, I think does a great job of being able to put processes and structures in place. But if you really just think about the number of factories involved in making products. It's really difficult to be able to ensure that not just the factories, but every individual medicine that you're producing is that the quality that is safe for consumers. And so as we think about our push into batch quality testing, it really stemmed from customer learnings, first and foremost. So we were on the phone with one of our customers, Liz, who has celiac disease, and she was sharing with us how difficult it is to find certified gluten free medicine. And for us, that was this highlight of, OK, if Liz is having this issue, then there probably are other customers with certain allergies that are also hoping that they have medicine that can be certified that's gluten free. And what that led us to is this exploration of, OK, are there ways that we can certify that not just at the factory level, but actually the batch level?

Lee: [00:26:20] There's really sorry, gluten in medicine? Like how is that even in there? Is that normal that gluten is in almost every medicine? Is that a thing?

Achal: [00:26:34] Certain medicines do have gluten. I would say it's not the norm for there to be gluten in medicine, but it is the norm for there not to be a verification that there isn't gluten in a product. And so I think that's where it creates this anxiety and lack of understanding, which for some consumers is a really critical input in terms of understanding what they're putting in their body.

Lee: [00:26:58] Yeah, definitely. I mean, my husband has a gluten allergy and now I'm like, wait a minute, what's in this thing? You know, and speaking of what's in there, Cabinet is free of harmful substances, toxins, et cetera. I mean, are those things that we should be worrying about that are in other brands?

Achal: [00:27:18]  [00:27:18]So really building on what batch level testing is for us, it's a few things. One, it's a certification of the products to be free of glutens and other allergens that are verified in a third party lab test at the batch level, but also certification that products are free of heavy metals, carcinogens, and other contaminants that we as humans should not be putting in our bodies. [00:27:43] The challenge in the market, as I mentioned today, is that there are so many factories involved that certifying products, even at the brand level is exceptionally difficult. And so as we've thought about this problem, how do we think about every single batch of product and certify it as free of those heavy metals, carcinogens, allergens? And what I would say is that on the balance, most products that are in market today are safe for consumption. But what we've learned is that for certain consumers, that slight chance is actually not acceptable. And we believe that there shouldn't be any risk in any product that you take with the end goal as helping you feel better.

Lee: [00:28:25] Yeah, it's pretty annoying to read ingredient labels all the time. I mean, it's like you barely know what the words are and just get so confused. You're like, why does this have to be so difficult? You know, like why can't we all just speak the same language here and like create products that won't kill us and that aren't toxic and that we shouldn't be having to read the label basically. You know, and it's just really sad that there's so many of these old school legacy brands that we just have learned that we can't trust. And hence why there's a whole new wave of products, including your brand, you know, that have to exist.

Achal: [00:29:00] Absolutely.

Lee: [00:29:03] Annoys me. Gets me so riled up that it's like, why is it like this? I don't understand. What are these people doing for years? You know, for years, just like turning a blind eye. But anyway, so you have raised about five point two million dollars over three rounds. You have some awesome investors like TechStars and Pixel Perfect Ventures, The Global Good Fund, SoGal Ventures, and some pretty great Founders as well. Talk to us about what fundraising was like, you know, your challenges and any advice you have.

Achal: [00:29:37] Yeah, absolutely. So the first investor meeting that Russ and I went to was literally in the dining room of one of our earliest investors. His name is Peter, and he's been a supporter of us from day one. But honestly, the journey for us has been somewhat hilarious to reflect on. And we probably talked to two to three hundred investors at this point, ranging from being in dining rooms all the way through to the top venture firms in San Francisco. And what I would say is that nothing could have really prepared us for that journey. And ultimately what we've learned along the way is that... A few lessons... I think the first one is that finding investors who believe in you as humans, first and foremost, does a whole lot of good on days where the business is not going well, which you will have [00:30:30]. Being able to call someone who actually believes in you as a person, and not just the business, has been fundamentally important to our well-being and our success over the last few years. And it's something that I would just share with the audience to not compromise on.  [00:30:45]If your gut tells you that someone is not the right fit for you, you don't think that in the worst moments they'll have your back, then is probably not a good person to take investment from.

Lee: [00:30:55] Yeah.

Achal: [00:30:56] So it's kind of like lesson one for us. The second one is that just because other companies in the market, or peers, seem to be raising money easily or readily doesn't mean it's a good idea and does not mean that it's going to be an easy process. I think if you want to embark on fundraising, it'll be a full time job for two, three, four, sometimes even six months for one of the Founders, most likely the Co-founder and CEO.

Lee: [00:31:25] Yeah.

Achal: [00:31:25] And I think recognizing the impact that has on you as a builder, on the company, on the team around you, and preparing for that is critically important. The first time Russ and I went out to try to raise capital, we did it kind of half assed, like where we would have meetings in between working sessions. And what it led to was a longer lingering process that probably lasted nine months. And what I would share is that having a very regimented process, lining up your meetings in very particular waves to the point where you're even having 20 investor meetings a week and doing it in a very concentrated period is really important. So the second lesson is, if you're going to fundraise, do it with conviction and know that it'll take your full time for at least three months or so. That'll extend further as your rounds evolve as well. And then the third lesson for us is that there's no one size fits all capitalization structure. And what I would say is [00:32:30] really reflect on why you are raising money before you go and raise capital. Is [00:32:34] it because you're seeing TechCrunch articles and it feels like that's the right thing to do? Is it because you're on Twitter and everyone's doing fundraising announcements of their ten million dollar "seed round," which is absurd in and of itself? And do you even have a business that needs to be backed by a venture firm or even a pre seed or an angel investor? There are a lot of businesses that I think actually could do equally well without raising capital, and especially if you're in the consumer goods world like us. [00:33:04] If you sell a product, it makes money, really think twice about why you're raising and if there are ways that are not just focused on a more heavily equity driven route that could actually enable you to be more successful in the long run. [00:33:18]

Lee: [00:33:19] Yeah, I totally agree with you. And I think this topic is so important; a fundraising strategy, having a strategy behind your raise. Because you're right, I think so many Founders start out raising like you did where you're like, have a meeting here and there and take a check here and there. And there's just no strategy, no plan, no urgency created. And you can kind of get away with that when you're raising from angels and like, just bootstrapping and trying to get by. But if you actually need to build a team and scale your business, you have to get your fundraising done and like, just out of the way. And so the best way to do that, also to get the urgency and get these investors excited is to create a timeline where, "Hey, we're fundraising right now. We plan to have things signed and funded by the date. Does that work for you?" And just working against that date and having as many going full on, like you said full time. There is definitely a full time job to fundraise because like you said, you end up having hundreds of meetings and that takes a lot of time. And it's interesting, actually, that the first investor you met with actually invested, because I think that's really rare. Normally when you do your first pitch, it sucks. And you most of the time get a "No."

Achal: [00:34:31] Yeah, absolutely, and I think that's one of the last lessons we had, too, is that you'll probably know in that first meeting whether someone's going to invest or not. Whether they tell you or not. They probably won't. {laughter} But within 20 minutes or 30 minutes, if you don't feel like they're going to invest, they probably won't invest.

Lee: [00:34:51] So what's your strategy in asking for the money? Because I think a lot of people don't realize you actually have to ask for the check and ask, you know, direct questions. Money in such a weird, kind of like awkward topic, especially if you've never fundraised before. Asking someone for money is really intimidating and you're like, oh, I'll just wait for them to, like, send me the check or tell me what they want to do. But you're the one fundraising and you're the one that needs to ask. So what have you kind of learned around the dialog with investors?

Achal: [00:35:20] Yeah, it's a great question. So I think the first thing that's really important is doing your research before you meet with someone. Understanding what does their process typically look like? Do they write checks after one meeting, two meetings, three meetings? If they're an angel, do they write ten thousand dollar checks? Do they write two hundred thousand dollar checks? Understanding that range, I think is really important. The second part of this is really building out your process in a very thoughtful manner.  [00:35:46]Your goal when you're fundraising is to gain momentum. And so really what you're looking for is not necessarily the check itself immediately, but the commitment that the investor will participate in the round. [00:36:00] And so making sure you asked very directly and restate kind of what you've heard at the end of a meeting, either in email or verbally is really important. And I know really awkward. So you end a meeting with someone who says I'm interested in investing a hundred thousand dollars, make sure you send a follow up saying, "Lee, it was great meeting with you today. Based on a conversation, I have you down for one hundred thousand dollars. We're planning to close this round in three weeks. I'll reach back out with formal documents at that stage." And keep them engaged.

Lee: [00:36:34] Yeah. You're essentially saving them a spot in your round. And so you're kind of, that's kind of the whole mentality around fundraising is you're like going around everybody and you're saying, "Hey, do you want a ticket to the show? I'll save you a seat." Right? And it's like they have to tell you verbally yes or no so that you can save their seat. Otherwise it could be gone. And that's the whole kind of game around getting the round filled, because also at every meeting you have, I think a lot of Founders don't realize investors normally ask a very normal question of who's committed to the round. And you're like, well, committed to what? That's what they're talking about. Is how many commitments do you have from who? Who's going in on this? Who bought a ticket to your show? Should I bother? And so it's really important to have like a roster of some people or you're like, yeah, I've got commitments from X, Y, Z, even if it's verbal. They didn't fund yet. The money's not in the bank. It's just part of the curation of the crew to get the boat moving.

Achal: [00:37:32] That's exactly right, and I think this is a lesson for us, too, which is... The second time around raising we were cognizant of this and understood that building momentum is our primary objective, versus getting the check in the bank account.

Lee: [00:37:46] Yes.

Achal: [00:37:47] And so we were able to do more effectively was how do we go to investors that we know are going to say yes initially as Tier one and go to the second wave and say, "Look, we already have X dollars committed. Terms haven't been set yet, but we'll come back on those once we have a few more folks in the round. And then what you tend to find is that people will have their caveats of, "I'll only invest if it's at X dollar amount or with Y conditions."

Lee: [00:38:12] Yeah.

Achal: [00:38:13] Those caveats fall away once you have the actual dollars that you want to raise. And that's also, I think, a good lesson for folks who are embarking on this the first time is [00:38:24] don't get too caught up in setting a valuation or in some of the caveats the investors give you. Focus on getting the dollar commitment and you'll find that the rest of those contingencies typically fall away as a round comes together. [00:38:35]

Lee: [00:38:36] Yeah. So did you have a lead investor in your seed run?

Achal: [00:38:40] We did. So it's funny, the lead investor for our round, her name's Carrie Rich, she is an impact investor at the Global Impact Fund. I've known her for seven years at this point. She's known my Co-Founder, Russ, for about 10. And I share that because we did not expect her to be our lead investor because she didn't even run an investment firm when we started our company.

Lee: [00:39:05] It's very rare to have an individual be a lead, for sure.

Achal: [00:39:11] And it is a lesson in, I think, finding folks who believe in you, first and foremost, being critically important. And secondly, you don't have seven or 10 years to build a relationship with most investors. But at least think of it on a six, 12, 18 month timeline. And your first meeting should be the ask for the capital in most cases, especially if it's a larger check, but we've known Carrie for a long time. She's very aligned with our values and mission and has a strong focus in leadership development. And so for us was a great fit to help us grow as Founders, to help us build our mission in building a more sustainable health care company, and then knowing that when times get tough, we've been there with her before and she'll have our back.

Lee: [00:40:00] Yeah, it's interesting because as much as fundraising is full time, when you're, like, actually raising, it's still part time every other day of the week after the round and before the round because you still have to send updates to all of your investors and you want to send updates, all the highlights, to the new investors that you're thinking about for the next round. So it's like you are constantly building a network of investors and you're constantly trying to keep them updated, to build credibility, to build trust, so that when you are looking to raise it's so much easier. And easy is a light word because it's still tough. But at least you've gotten to like first base. You know, at least you've built some kind of rapport with this person. So then when you're looking to raise, there's a lot more interest, hopefully.

Achal: [00:40:49] That's exactly right, and I think as long as you don't conflate meeting with investors with fundraising, then I think it's a really effective way to be ready for your next round.

Lee: [00:40:59] Yeah, absolutely. So this thing about a lead investor... I just want to go back to that real quick, just because I feel like whenever I see a company raise a seed round, a lot of them are not priced rounds and they think that they need a lead investor. And so I feel like there's this connotation that you have to have a lead if you're raising a seed, but you don't need a lead investor for a seed round. What are your thoughts on finding a lead? Because there sometimes is a lot of pressure, because sometimes investors will just ask, like, say you're fundraising for a seed, you don't have a lead investor, and you meet with an investor and they're like, "Who's your lead?" I've had a lot of Founders tell me, "Yeah, I am trying to find a lead." And I said, "Why?" And they're like, "Oh, because an investor asked if we have a lead." But that doesn't mean you have to have one. {laughter} So what are your thoughts around... You know, I know your situation's a little different, but what are your thoughts around raising a seed round and having a leader not having a lead?

Achal: [00:41:57] Yeah, if you think of the tactical intent of a lead investor, it's to help set terms and to do the diligence on your company. In a more strategic way, they should also be someone who knows a lot about your industry, can support you, and is going to go above and beyond what other investors do as well. But if we're thinking of a lead investor from the perspective of harnessing them to enable your fundraising strategy, your goal as a CEO should be how do you figure out a way to make sure your company goes through significant enough diligence that other investors feel comfortable? And how do you think about setting terms in a way that is fair and reasonable? Depending on your company, your situation, like your leverage around those things, might vary quite a bit. If you are growing rapidly, you have a competitive round, then you might be able to set your own terms and you might be able to find a couple investors just doing their own diligence and write checks within a week. On the flip side, if you don't have the ability to have that leverage, then a lead investor or a consortium of folks, which is more likely to be the case for most first time Founders, will need to set the price or effectively terms at some point, even if you raise on a safer a convertible note, there has to be a valuation cap, a discount, things like that set.

Lee: [00:43:21] Yeah.

Achal: [00:43:21] And I think what your goal is as a Founder is just figure out a sensible way to set those. Valuations are wonky anyways. It's, at the end of the day, what two people are willing to pay for something. And as long as that number is fair for you and fair for investors, that's what your end goal is. And whether you need a lead to do that or not, I think it really depends on your company's situation. But there is definitely this fallacy that you have to have a lead to raise capital.

Lee: [00:43:50] Yeah, and typically the lead will write the biggest check as well. So it's kind of just like so many different ways to cut the situation. Skin the cat, I guess, is what they say. But I hate the saying. It just feels so violent.

Achal: [00:44:04] Yeah.

Lee: [00:44:06] So let's talk about your team. How big is your team today and what has hiring been like? What kind of takeaways do you have or advice around hiring a great team?

Achal: [00:44:15] Yeah. So we have about seven folks right now. We are in the process of hiring another six or seven roles and then really have this network of part time and freelance team members around us as well to support our one off or part time projects. Really building a team for Russ and I, I think was quite difficult. We had worked together and still work together, obviously, for nine, 10 years at this point. We do a lot of I guess what people refer to as no look passes. We understand like how to complete each other's sentences. And what that led to for us was a long time just being a two person, full time company, and then eventually last August decided to hire our first leadership team members. And I think first and foremost, what we're looking for is, are they a cultural fit? I think sometimes it feels ambiguous for folks. But what I would recommend is [00:45:15] as you go into this hiring process, like don't compromise on culture and make sure you actually document what that means for you. [00:45:22] What are your values as a founding team? What are the values you want your team to live by in terms like how they operate, how they interact with people inside and outside of your company, how they interact with your customers. And as you're going through the hiring process, the way that I like to think about it is not just evaluating folks for aptitude, but also attitude more broadly. And I think to make that process fair and thoughtful, you have to have clear ways to identify, like, is this person a good cultural fit in addition to are they going to be good at this particular role and job? And so for us, I think establishing those early on was really critical to being able to bring on team members who have the values that are really important to us.

Lee: [00:46:08] How do you filter for culture? What are some of the questions that you ask in an interview to really make sure that they have those type of values? What are maybe some questions you ask?

Achal: [00:46:23] For me, it's understanding how someone wants to personally grow in the next few years, like what are their personal ambitions inside and outside of work the next three to five years? What would they be proud of building? What are certain things that resonate with them? For us, we're in health care. Are there certain topic areas around health care they're passionate about? Understanding their perspective on like how would you feel and what you talk about if you called a Cabinet customer tomorrow? And for folks who are like, "I wouldn't want to do that, that's not my job," for us that's a clear metric you're not a good fit for our culture. But I think ultimately, especially in this world where we have a lot more Zoom conversations and interviews, just creating enough time and space to get to know someone, and I think they're really with methodical tactical ways you can build a set of questions to evaluate for culture. For us, it's really been about just creating enough surface area in the form of conversations. What I like to really do, too, is have like different mediums of conversations. So if our first conversation's on Zoom, have a follow up as a phone call and then perhaps grab a coffee. Really emulating the way that we actually work, which is across different mediums and getting to know people that way. And then secondly, like trusting existing team members to be beacons of that culture as well. So if we're hiring for someone who is an operations manager, having someone on our digital and analytics team actually meet with them as well, even if they're not going to be working directly together to be able to provide this kind of objective feedback on is this person a good fit for the way that we want to build our team at Cabinet? And what I find is that oftentimes in the hiring process, the pressure there to bring someone on to fill a need or a role, or if you're like the direct hiring manager, knowing that you have a ton of work to do and you just want to bring someone in. And while that can often cloud judgment around cultural fit because we're all humans, what I found to be like a good check and balance on that is having a team member who isn't feeling some of those same pressures be able to give you honest, objective feedback on on candidates as well.

Lee: [00:48:33] Yeah. So, you know, being a Founder, building a business is super challenging. There's tons of mistakes that we make, failures along the way. Tell us about one of your most challenging moments and how did you overcome it?

Achal: [00:48:47] Absolutely. So there a lot and there will continue to be many in the next few years and beyond. I think the one that we look back and laugh on now, but it was also probably one of our lowest lows was last March, we were gearing up to launch version 1.0 of Cabinet. Thirty over the counter medicines sold in kits; buy an allergy kit from us, to cough and cold kit, you name it. And as we were leading up to the launch, we really focused on building these stackable bottles that looked nice, fit cleanly in your Cabinet and nicely branded as part of this concept. How do we bring a nice, clean, convenient kit to your home? What we didn't realize is that building stackable bottles was exceptionally difficult in the manufacturing world. And at the time we were working with a couple of manufacturers in China. I'd gone and visited them, learning as much as I could about injection molding as possible. But very clearly being a novice in the space and we spent months, I mean, probably four to six months trying to make basic bottles stackable before ultimately realizing it wasn't possible with this manufacturing partner and scrapping it. That was really frustrating because we just lost four to six months to make our launch timeline because of this idea that Russ and I were thinking to ourselves like, we're idiots. Why did we even try to do this? If we brought on someone who knew what they were doing, perhaps it wouldn't have been a challenge. But ultimately, what it also highlighted for us was our frustration with plastic. We were so angry at these bottles and we ultimately channeled that along with some of the personal stories I shared of pollution and being in that factory with bottles into building a product that actually doesn't have plastic at all. And so for us, it was really frustrating because we lost six months of time. We put a lot of our love and energy into something that didn't work. but ultimately, I think the lesson for us was how do we actually just build a net new product that gives us different frustrations but gets us in a world where we don't have to use plastic. And so I would say silver lining in that one for sure, but that was definitely in the bucket of total failures as a company.

Lee: [00:51:05] Yeah. You know, it's interesting putting a lot of love and energy into something that doesn't work is, you know, there's so many companies that fail. Right? And talk about, you know, going through a journey where you've built something and you have these ups and downs and it still just doesn't work. Failure is such a tough thing. And, you know, I wonder with these bumps in the road, do you have a routine or activity or thought process that helps keep you positive and motivated every day?

Achal: [00:51:38] Absolutely, I think the first one for me is surrounding myself with people who care about the same things and whether that's work wise or otherwise. I think to reframe that a bit, I think having a Co-Founder and team that actually believe in the same mission as you can push your days when you're down. Critically important.

Lee: [00:51:56] Mm hmm.

Achal: [00:51:57] But also having friends, family, significant others who understand what you're putting into it and can pull you out of this world is also super helpful. I think we have this fallacy sometimes as Founders of what we're building, feeling like oftentimes being the most important thing in the world, whereas the reality of it is if you pull yourself out of the situation, you're in... For us over the counter medicine and building a more sustainable health care experience, it's what we're dedicating our lives to and is really important. But at the end of the day, it's it's one problem set in a much larger world of people who care about you and hopefully love you as well. And I think what that does is kind of for me at least, provide this grounding that the challenge that we're working on isn't going to make or break my life for the world, and that's kind of like a good reality check sometimes in tough days and then other times I just need that push in the back from other team members are like, "No, we need to build this and you need to keep going." And I think that's been an important balance for me. But ultimately, finding whatever works for you and your personality, I think is the most critical part. And then the last thing I'll share is that we also got executive coaches a couple of months back and just having someone to have an agenda free conversation with who's there for your personal development, who's there to help you work their business problems has, I think, been really powerful for us. Before we are able to bring on an executive coach. We had that in the form of kind of more personal mentors from investors, advisers like sometimes even my literal family, who I just call. So I think finding your network is really important, making thoughtful time to develop personally and have a venting spot, also really important.

Lee: [00:53:47] Yeah, I think executive coaching is not spoken about enough. I think it's probably one of the most important things to have, especially as you're growing in business, especially for the first time when you know, most people don't know what they're doing and everything so new. And you definitely need a place to go also for just personal development. How have you grown both professionally and personally as a leader?

Achal: [00:54:13] Yeah, I think on the personal level as we've been building this company, just like the number of things to manage, whether it is related to the company or human emotions or just being like a supporter for our team is pretty insane. Like anyone who started a company knows that it feels overwhelming. And I think personally, just learning how to manage that and being even keeled throughout it, I would say, has been what I'm most proud of. I would say if you talk to our team, I'm definitely not someone who gets really excited or really angry or sad at any point. It's just very much like steady state. But I think that's been a learned behavior where understanding my role on the team is to be able to provide that steadiness in times of trouble or in times of good. And I think building resilience to things when they don't go correctly I think is part of that as well. So my reaction is quite different today than it would have been a few years ago when things don't go quite as planned. And I'd say on a personal level, that's been something I'm really proud of. And then on the professional side, I think is just understanding like how to not just be a Founder, but how to be CEO is a huge transition that a lot of folks have to make and they're very different. And understanding when you have to put on your team member hat, your Founder hat and your CEO hat at different times is, I think, really helpful because it requires, I think some intention, but it also requires understanding, like the differences in the roles and what your team expects of you throughout those. And so I'd say on a professional level, they're fortunately a ton of resources out there for folks to learn some of those things. I find that NFX, investment firms like series of like Founders stories to be super helpful. I think there are a ton of amazing frameworks out there for people to think through problem sets, and then just talking to peers as well is a really powerful way to, I think, grow professionally.

Lee: [00:56:14] It's interesting you said the difference between Founder and CEO hat. What is the difference between Founder and then the CEO?

Achal: [00:56:21] The way that I think of it very simply is that in the Founder world, you are a builder. So how do you get whatever your ambition is into some sort of real manifestation, whether that's a physical product, software program otherwise? And how do you get that to a point where customers love it and really just want to buy it endlessly? So I think the Silicon Valley verbiage here would be how do you get your product or product market fit? And that is very much like Founder boat, like build whatever you need, solve whatever problems you need, burst through brick walls with intention. But just don't give up on getting your product to where somewhere that you're proud of, that your customers love it and that can grow. I think that's like the Founder mentality. And the challenge with that is that that also is an impediment to your own business's growth at times where if you do have product market fit, you do have customers like your product being able to scale that is really difficult to do if the team members who are supposed to be the highest leverage funds are still very hands on customers with product. And that CEO mentality is shifting from looking at specific KPIs around, like how many customers are opening our emails to how many customers really love this to setting a North Star for the broader team? [00:57:40] I think the way that many folks look at being a CEO, and I think I follow this mantra, is that I fundamentally have three responsibilities. The first is setting a clear vision for our team and the strategy that goes with that. Secondly, making sure we actually have the right team in place, making sure that they're taken care of. They understand where they sit in terms of how they're performing and where they sit in terms of how they're aligning culturally. And then third, making sure we don't run out of money or that we're making enough money to support that team. And I think within the context of, like, CEO mentality it's those three checkboxes, and I think that's very different than being a Founder. And most companies, you won't have the ability to have those two separate roles and so understanding how to wear different hats at different times is really important as well. [00:58:29]

Lee: [00:58:30] That's awesome and a really clear break down. I appreciate that. I think that it's I agree with you completely. The difference between a transition of a Founder into more of a CEO is definitely like a shift in a role and responsibilities. So thanks so much for sharing that. Do you have any other advice before we wrap up here for aspiring entrepreneurs as they're thinking about maybe taking the lead, quitting their job, whatever it is, to start their next business? What advice do you have?

Achal: [00:59:01] I think this is one that isn't unique, but I do think it's the most important one, which is finding your way. So for me, what that's meant is that [00:59:12] building this company is my opportunity to continue the legacy of my family in the world of medicine to help people live healthier, happier lives, fundamentally building more sustainable health care company.  [00:59:23]For every individual, that we will be different. And I think understanding it and actually taking time to reflect on it and think about it before you make the leap to starting a company is exceptionally important. Building a company is difficult, it's challenging, you're going to hit roadblocks, things are going to fail... You'll have kind of amazing, exciting moments where you get to build teams and culture and customers know they love your product. But the flip side is also present. And [00:59:51] if what you're building and why you're building it isn't enough to help you overcome those moments where you're down, then it might not actually be worth starting that thing. And when you feel that you don't really care if you're going to hit barriers or failures otherwise and you're going to build that thing, I think that's when you found the correct why for yourself. [01:00:10] And so my last kind of bit of advice is make sure that's clear for you and make sure you have people around you feel similarly.

Lee: [01:00:17] Yeah, and it's totally OK if you go down a rabbit hole and you realize, you know, I just don't care about this. I actually experienced that recently. I had an idea for pretty cool like food concept brand DTC, and I went down this rabbit hole pretty far on like product development and ended up working with this product development firm that totally sucked and just suck the life out of me. You know, they just sucked in every way. It was like they couldn't put together a contract customized, like, what are you doing? And then we just kept running into so many issues. They had so many internal complications and miscommunications. And I was like, get your shit together. So anyway, they obviously were just like the worst partner, but it was so draining that by the end of it I finally got a refund, thank God, for my money. I was like freaking out. But I was like, I actually just don't care now. I'm so annoyed. I don't want to do this ever again. I'm just not that into this concept because if I really cared, I'd go find another product development company to make this happen, if I really felt like this needed to be in the world. But that was such a draining experience. That was a great learning kind of for myself to be like, OK, well, good to know. Actually I'm just not that passionate about it. And I think that's important to go through, actually, is the ups and downs of like figuring out what it is that you really want to pursue, because otherwise it's just not going to be very fun.

Achal: [01:01:46] That's exactly right.

Lee: [01:01:49] So what is next for Cabinet? Anything exciting coming up that you want to share?

Achal: [01:01:54] Yes. Over the last two plus years, we've been working on building a product line that is completely plastic free. So what that means for us is the world of pharmaceuticals has only had one option, frankly, for the last few decades, which is get your medicine in plastic bottles. At Cabinet we're focused on changing that. In September we're launching the world's first fully compostable, refillable pharmaceutical system. You can think of that as these glass bottles that you get your medicine in, and you get refills in compostable pouches that are as shelf stable as plastic, but compostable as tossing away an avocado peel in your city compost pile. And for Russ and I, as Founders, our mission has always been to eliminate plastic in this world. It's been a long journey and we're just getting started. But we're really excited to be able to bring that to our customers, to be able to actually acknowledge the fact that our physical and environmental health are inextricably linked and play a role as a health care company to inspire an industry to actually evolve into a product system, product lines, packaging that actually don't negatively impact the health of their consumers.

Lee: [01:03:01] Awesome. Well, thank you so much, Achal, for being on the show. It was so awesome hearing your really inspiring story and very informative on entrepreneurship and some great advice there. Thanks so much for your time today.

Achal: [01:03:16] Thank you for having me.

Lee: [01:03:21] Thank you so much for listening to the Stairway to CEO podcast. Once again, I'm your host, Lee Greene, and if you have any burning business questions, please feel free to reach us at StairwaytoCEO.com. We'd love to hear from you. And if you like what you hear, be sure to subscribe to the show, tell your friends, leave us a review, and follow us on Instagram @StairwaytoCEO. Until next time, guys, keep on climbing.

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