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Every one is different. So everyone needs a personalized approach to care. And that is true in both medicine. We’re seeing personalized treatment regimens across various disease states, and true in wellness as well. So the same diet that might work for me isn’t going to work for you necessarily. And that’s because we have different lifestyles where our genes are very different. We’re eating different things.
Jay Clouse 0:26
The startup investment landscape is changing, and world class companies are being built outside of Silicon Valley. We find them, talk with them and discuss the upside of investing in them. Welcome to Upside.
Eric Hornung 0:53
Hello, hello, hello and welcome to the Upside podcast. The first podcast finding upside outside of Silicon Valley. I’m Eric Hornung and I’m accompanied by my co host, Mr. Podcast longevity himself, Jay Clouse. Jay, what’s going on man? We’ve been doing this a while.
Jay Clouse 1:11
We have what are we at 160 something episodes 170 episodes.
Eric Hornung 1:16
Yeah. We’ve been doing this for over two years every week. You, me, the mic’s squad cast. We’ve iterated, we’ve changed.
Jay Clouse 1:24
We have gotten older. We have hopefully gotten healthier. We think our hows the health of the podcast doing.
Eric Hornung 1:31
Oh, the health of the podcast is great. I thought you’re talking about healthier in terms of you and me. I was like, I don’t know about that.
Jay Clouse 1:36
But I’ve spent the whole last week on the salad train. Mallory and I have radically improved our diet. Although Saturday is our cheat day and we have Skyline Chili.
Eric Hornung 1:37
Hmm homemade or are you doing out of the can are you doing? Are you actually going to pick it up?
Jay Clouse 1:54
We go through the drive thru.
Eric Hornung 1:55
Wow, have you done a chili? Have you done a chilito yet?
Jay Clouse 1:57
Haven’t done a chilito. Just had the cheese county for the first time yesterday.
Eric Hornung 2:02
Well the cheese county, cheese county’s good. I don’t really love the countys. Do you could have habanero cheese or do you get the regular?
Jay Clouse 2:08
Mallory gets habanero, I get the regular she gets a five way, I get a four way I don’t think that the beans add that much.
Eric Hornung 2:13
For the listener. There is a thing in Cincinnati called Skyline Chili. There’s also Goldstar and a bunch of other local chili places and parlors. And they put it on top of spaghetti. And that’s called when you have cheese and chili and spaghetti that’s called a three way when you add onions or beans. That’s called a four way. Jay saying beans, meh. And then when you have all five of those things, it’s called a five way when you have a Coney that’s a hot dog with chili on top and cheese. And now you are caught up on what we’re talking about.
Jay Clouse 2:41
It is not the healthiest meal in the world. But you know if I’m eating healthy six days a week and I have one cheat day I think that’s okay to help me live the best life that I can like I want to enjoy this life and sometimes I need to have chili.
Eric Hornung 2:58
And just like you only have one life to be eating chili dogs Jay, our friends at Ethos Wealth Management help you live that one life the best way you can. If you want to check out more about Ethos Wealth Management, go to upside.fm/ethos.
Jay Clouse 3:13
I really serve that up for you just like a chili cheese county.
Eric Hornung 3:17
Speaking of chili cheese county, speaking of the podcast longevity Jay, things that have been in our system for a while, Rachel, today’s guest has been in the pipeline for almost two and a half years.
Jay Clouse 3:31
Eric Hornung 3:31
Yeah. She was first introduced to us by Andrew Goldener, who was one of our first guests on this show. She was running a company called Patch or Paging Patch. Back in the day, we connected we said, Hey, Paging Patch, Patch is a little too early. We’re excited about you as an entrepreneur. I like you. So when you guys kind of move forward, we’d love to have you on. Then she comes out and she launches Rootine. And now she’s on the podcast. How about that.
Jay Clouse 3:58
She reached back out said hey, new company, let’s do this, or do we follow up?
Eric Hornung 4:03
We followed up thinking 18 months later see how things are going with Patch checking in? She said not doing Patch anymore. Got a new thing. Want to talk to you about that? I said, let’s do it. Great.
Jay Clouse 4:12
Wow. Well, that makes sense that we were introduced by Andrew Goldener. Because Rootine, Rachel Sanders’ new company is based in Nashville, Tennessee. Rachel is the CEO and co founder of Rootine, which is the most scientifically advanced nutrition supplement in the world per their website. Eric, they start off with a vitamin offering but now seem to be moving on into other supplements as well.
Eric Hornung 4:15
I think that’d be helpful. If you’re eating a lot of chili every Saturday.
Jay Clouse 4:40
I’m sure it could improve my diet. It seems that Rootine at this point has raised around $100,000 in funding after just being founded post Patch in 2018.
Eric Hornung 4:52
Post Patch that’s a nice little phrase.
Jay Clouse 4:54
If you guys have any thoughts on this episode as we chat with Rachel, you can tweet at us @upsideFM or you email us email@example.com. And we’ll get into that conversation with Rachel right after this. Let’s bring in Rob McDonald, a partner at Taft Stettinius and Hollister to teach us about private placement fundraising. Taft Stettinius and Hollister is a law firm known for assisting entrepreneurs across the Heartland. And as a reminder, the following remarks by tapped attorneys are for informational purposes only, and are not legal advice. This information is not intended to create and receipt of it does not constitute an attorney client relationship. No person or organization should act upon this information without first seeking professional counsel. Rob, it’s great to see you. Thanks for coming in. How are things in Cincinnati?
Rob McDonald 5:39
Things are great Jay.
Eric Hornung 5:40
I live in Cincinnati, but I am a huge Indians fan. And whenever I go up to Cleveland, I always meet with some founder friends, we go to a ballgame. And one of the questions I always get from them is what should an early stage founder consider when selling equity to investors?
Rob McDonald 5:56
It seems a lot of early stage founders don’t fully understand what it means to sell equity in a business. Obviously, there’s the quid pro quo of trading cash, presumably for equity or some other instrument. This is a relatively simple transaction to understand. But that’s hardly the end of the transaction. The founders will be committing to a lot more potentially, namely, founders will be committing to generate a return for the investors. This can become a very involved and complex relationship over time. founders will have new obligations like holding board meetings, managing financials, creating investor reports, etc. It’s important for the founders due diligence on the investors the same way the investors due diligence on the company.
Jay Clouse 6:34
Completely agree. If people want to learn more about Taft or yourself, where should they go?
Rob McDonald 6:39
The best place to go is www.Taftlaw.com or my Twitter @rwm.
Rachel Sanders 6:52
Everything personal professional has really been about health and wellness for me starting as an athlete in high school continuing that interest group college and really starting my professional career in the investment banking space. So I focused on healthcare service companies who were in the middle market and really trying to help people feel their best across a wide variety of sectors and really continued that interest. Through Business School, who I founded my first health and wellness startup that was focused on the physical therapy space, worked on that for about 18 months ultimately decided to close that. So really great experience, founder fail, I guess, would be the first but learned a lot. And then through that experience, connected with a number of mentors. And that’s really how Rootine got started and how I connect with my co founder, Daniel for Rootine as well. So, general focus on helping people feel their best.
Eric Hornung 7:49
So we connected when you were working on that first startup, which was Paging Patch, I believe was the name.
Rachel Sanders 7:55
Eric Hornung 7:57
Patch. Talk to us about the decision to wind down a startup. So often we hear about, it felt like I should wind this down and then I just push through. How do you decide, okay, now it’s time to call it quits and move on to the next thing.
Rachel Sanders 8:11
There was a number of different factors, but primarily it was market demand. So we really realized that the margins around what we were going to offer wouldn’t be scalable in a way that would work for either a venture backed or just general startup. So that was really the biggest factor. There was also some kind of team and location factors as well. But ultimately, it was the market driven decision. In the end.
Jay Clouse 8:37
Why do you have so much interest in health and wellness in the first place? You know, you have the history with being a high school athlete. At some point, you found your way through college to investment banking, and even in investment banking, you’re looking at healthcare service companies in the middle market, you said, so where does that interest come from?
Rachel Sanders 8:53
So it really stems specifically in nutrition and more kind of on the wellness side, I had some health concerns as a young Individual and really worked my way through them by focusing on my nutrition and making sure I was eating right, I was getting the right nutrients and not eating things that could cause problems which, back when I was younger, it’s kind of well before the time of food as medicine or nutrition as medicine. But that experience really stuck with me throughout and just making sure that I was kind of part of the system that was helping to advance people’s health was important to me, I felt like there is a lot of complexity throughout the industry, both and healthcare services, so and healthcare, light or wellness, a lot that can be done a lot of opportunities to be had. And it’s exciting to be a part of an on a professional level that that challenge and that complexity. So that’s kind of how the personal and the professional are bridged.
Eric Hornung 9:55
How do you think about the difference between fads and health and wellness, and the underlying truths? And how does that how’s that played out kind of through your life personally with your personal situation and getting into Rootine.
Rachel Sanders 10:09
So fads, to me are one thing that may have worked for one person for a certain amount of time, and maybe trying to generalize that to everyone in the population, or trying to create sometimes it’s creating marketing around it. Sometimes maybe it did work, and they’re generally trying to help people. But fads that are one size fits all simply don’t work for an extended period of time and generally don’t work for everyone. Everyone is different. So everyone needs a personalized approach to care. And that is true in both medicine. We’re seeing personalized treatment regimens across various disease states, and true in wellness as well. So the same diet that might work for me isn’t going to work for you necessarily. And that’s because we have different lifestyles where our genes are very different. We’re eating different things. So something that will continue is this trend towards personalization. That is not a fad that is that is here to stay and will continue to get more in depth over the years to come. And we’re definitely seeing that with an influx of people getting access to their health data. So whether it’s the wearables or genetic at home genetic testing or blood level testing, there’s more interest in that data and there’s more access so enables people to get that personalized care and that personal, personalized wellness approach that will continue.
Jay Clouse 11:36
Talk to me about when you started identifying the the problem that Rootine is starting to address, you’re winding down Patch at some point you said Well, that wasn’t enough punishment. I want to start another company. What was the you know, driving force to say this is an opportunity I can’t ignore.
Rachel Sanders 11:52
Nutrition is really the key part of health proper getting proper nutrition and proper nutrients every day is helps us perform well it helps us sleep, keeps us healthy and supports our long term health. But getting that is really challenging. Figuring out what you need is complex and actually taking or eating what you need is even more complex. And that’s compounded by the fact that so much of what’s on the market really is one size fits all. So everything from vitamins and supplements to diet and nutrition plans, as we just talked about those fats as well, really are about one plan for everyone to follow. And they’re not looking at this personal health data, like activity levels, lifestyle, diet, genetics, and blood levels. And all of that really plays a role. So that really got me on our team thinking. Our team of clinicians, scientists, health and wellness experts believe that there is a better way to help people on an individual basis, optimize their nutrition, because that’s really where the difference is going to happen. And so we founded Rootine to deliver a science backed hyper personalized approach to nutrition where people can get precision health products informed by their personal health data and backed by loads of science and clinical expertise.
Eric Hornung 13:13
And why is that product, a vitamin or a pill.
Rachel Sanders 13:18
So, Rootine is really building a platform or a suite of precision health products. And we started with our personalized nutrition supplement. And we deliver that nutrition supplement by creating a complete picture of your of your needs through biometric testing, data collection and advanced kind of analytics that allow us to provide insights, and then we deliver that to your door. That was the first kind of foray into the market for Rootine. Since then, we’ve also released our DNA at home DNA test which looks at specific genetic variants related to nutrition. We also have an at home blood nutrient test, which we recently launched in the last few months, which is a metabolite test that looks at how nutrients are actually functioning within your body, in addition to actionable lifestyle and wellness plans. Our first is a weight management DNA based weight management plan. But we’re we will be releasing two additional reports as well. The supplement nutrition supplement is day one. And we’ve we’ve moved on before that are from that, but really building out a whole ecosystem of products that really help provide people with data that empowers their wellness, and then using that data to create products that they can take on it on a daily basis to physically or actually improve their health.
Eric Hornung 14:42
Most startups have one product that they’re trying to optimize, how do you and your team balance your time on synergistic but competing priorities?
Rachel Sanders 14:53
Yes, this supplement was our one and only product for we launched it in May of 2019. So that was our one product for a year. But throughout that time, we had customers asking for additional products, additional information, and realized that there are other products, other insights that and ways to improve our core offering that would really help our subscribers and so we took the demands from our consumers from our from our subscribers and said, hey, what can we do? How can we do this? And how can we deliver it quickly? And does it fit within our core mission of these precision health products that are really based based on science and creating the data that we need to inform our products and our plans?
Eric Hornung 15:40
And how did you decide, okay, this is something we want to take on internally versus there’s someone over here already doing this. We could partner with them.
Rachel Sanders 15:49
We do have some partnerships. So we we’ve worked with a really well we created a partnership with them. They do have at blood testing that we do not offer. And their information is great to inform our nutrition supplement. So we have, in some instances created partnerships. The blood nutrient test is a metabolite test, which is an advanced testing technology that in conjunction with the lab that we work with, we were able to develop. And we felt that that was important because it really is the next generation of testing technology, which follows it within our mission. So certain things make sense for us and other things there. They do make sense to partner. But that’s kind of how we’ve how we’ve thought about it.
Jay Clouse 16:35
So historically, I, you know, take a one a day or some sort of vitamin that was recommended to me and this is one of these one size fits all vitamins that you’re referring to. If that’s not personalized to me, what is the likely outcome of me taking existing vitamins?
Rachel Sanders 16:53
Yeah, that outcome can be anything from you’re not going to feel anything or it’s going to do nothing to it. Actually. harming your body. And that is dependent on what’s happening in your body. So are you deficient in certain nutrients to where you’re not getting enough, so is your molsey giving you enough vitamin D to to function at your best or more things like that. Looking at the genetic side, iron is a really big one that’s in a lot of multivitamins. But there is a percentage of the population that has a gene called the HFE gene. Whereas if you have a gene genetic mutation on that gene, you are at risk for iron uptake disease. So the iron that you’re taking your multivitamin could actually be poisoning your body over time. So there’s a variety of different things that can be happening. The worst is you’re harming yourself. The, I guess, not worst, but the other thing is you’re just not doing anything.
Jay Clouse 17:53
If this is either being effective or ineffective, and I’ll apply this to all vitamins if a vitamin is effective or ineffective, how quickly and how noticeably Should I see something you know, like, a lot of times I take this vitamin because it feels like I should, but I don’t know if I’m actually noticing any differences,
Rachel Sanders 18:13
Multivitamins or vitamins in general, it really depends on where your body sits today. So for instance, B vitamins, if you are deficient in B vitamins, you may be experiencing fatigue or low energy. If you start to take B vitamins to compensate for that deficiency, you could see your energies start to improve within two weeks to a month. If you’re not deficient or not severely deficient, you might not feel that quite as much. And there’s other kind of instances like that as well. The other reason that people take vitamins is really to support their long term health. And one thing that’s really interesting about Rootine is we have this research backed way to say hey, these is this is where your body is based on genetics, blood levels and what you’re doing from your lifestyle. And here’s the science that says this is what you might need for the long term. So for instance, for me my GPX one gene is mutated or it’s I have a variation on both copies of my gene which means that my body doesn’t protect itself against free radicals as well as it could. So I need to take additional antioxidants or eat additional antioxidants for the rest of my life in order to continue to protect my body in that instance, I’m not going to feel it necessarily but I know from research that I need to do it so I do it but it really varies based on on where your body is now where you want to go. But we have I mean, you can customers or our subscribers are feeling anything from improved sleep, improved energy, their concentration is better their skin health is improved but it all the results depend on where your body is today.
Jay Clouse 19:54
Reason I thought that was imagining you know, a subscriber saying I want to try Rootine out versus The multi that I have been doing, I was curious to hear what type of results they’re seeing and feeling to say this is working, and I’m going to stick with it and even demand some of these other services. You’re talking about what types of and you probably just touch on a couple of them. But what types of results are these people saying they’re feeling because of Rootine?
Rachel Sanders 20:20
Yeah, so we have subscribers coming to Austin saying that their energy is improving within two weeks, better skin health, better concentration, or less brain fog, mental, more mental clarity. Other people have said that their their sleep has improved, they’re getting sick less. So a lot of different benefits and a variety. Some individuals have also talked about mood balancing, there’s certain instances where deficiencies and various vitamins and minerals can have an impact on your mood. So we’ve definitely seen that as well. And we’re working on a more complex and concrete kind of data focused way to close the loop on results that should be answered by putting those kind of results more in numbers so that our subscribers can see where they start with and where they’re going from a tracking standpoint, both on blood levels, which is more quantitative, to how am I feeling?
Eric Hornung 21:14
How does Rootine make money? You mentioned subscribers.
Rachel Sanders 21:17
Yes, so we, two, there’s two different product options that we have. So we have our subscription nutrition supplement, which is a daily pack that you take and you purchase on a subscription basis. And we also sell our at home diagnostic or at home biometric tests and our one off plan so lifestyle plans and reports so we have some one off products and subscription products as well.
Eric Hornung 21:48
If I’m like Jay, and I’m coming from a men’s once a day vitamin, how much more or less expensive is the subscriber model for a personalized approach on a yearly basis?
Rachel Sanders 22:00
We, we charge on a monthly basis and it depends on where you’re coming from. So if you’re looking at a standard multivitamin that you can get at a CVS or Walgreens or Walmart, we’re going to be significantly more expensive than that because we are creating a custom product specifically for you. So each one of our packs are precision dosed, which means no two packs or you know, two people are the same. And we also continuously update your mix as your body changes as your lifestyle changes and even just once a year, because as you age, your nutrient needs change. If you’re looking at some of the other competitors in the direct consumer space, we’re a little bit more expensive but not not hugely more, but for we offer 18 different vitamins and minerals. And if you do a compare to get all of those nutrients from some of our competitors, we’re on par or less expensive if you if you’re trying to get those all of those nutrients on on precisely dose basis.
Jay Clouse 23:04
When did it become possible to build a business like this? You know, I’m imagining, of course, personalization for anything is the ideal state for any product. But I know probably the technology to even deliver this in a, in the form of a vitamin or supplement is probably fairly new. So when was that made possible?
Rachel Sanders 23:22
Great question. So there’s kind of two parts to that. So the first is when has the science allowed us to actually understand genetics in a way that leads to a legitimate scientific approach, and that has been in the last decade and more so even more recently. So they we do focus only on genetic variants that have at least three independent peer reviewed research reports all showing the same gene diet interaction, so we’re not looking at one or even two, we’re making sure there is a medical grade proof of science. hind everything that we’re looking at. So that’s an important part two, when was this possible. The second part is the the manufacturing and the actual precision dosing. So that involves our proprietary algorithm and advanced technology to really combine the data that we’re collecting, and create specific dosages for each individual. And then actually applying that to the product itself. So we offer our nutrients in microbeads, which are slow release in kind of quinoa size beads that deliver nutrients and throughout throughout the day, and those are also the key to our precision dosing. So our microbeads allow us to dose to the microgram for our nutrients. So that technology took about, I’d say three, three to four years to to create alongside our lab partner.
Eric Hornung 25:01
Tell me about your co founder, Daniel.
Rachel Sanders 25:04
Yeah, Daniel is a PhD in biotechnology. He has spent the last 10 years at the intersection of genetics and nutrition. He’s the the scientists and the inventor behind the technology and the form factor, and really has focused his life on trying to figure out how to use genetics in a new way. So, up until a certain point, genetics and DNA has really been high, do I have this disease? And is that a genetic? Do I have a genetic component? Is that the reason but genetics can really be used to help support a healthier lifestyle helps support wellness throughout your life and in more of a preventative preventative way. So he’s, he successfully built other businesses in the space but really focused kind of on that core mission of using genetics in a way to help people.
Eric Hornung 25:54
Daniel seems like the kind of guy who would say a lot of words in a sentence that I don’t understand.
Rachel Sanders 25:59
Yes. If that’s the case, he’s very good at not only understanding the science but explaining it in a way that everyone can understand, which is, which is very nice to have as a co founder.
Jay Clouse 26:12
Point of clarification, I have my research that Rootine was founded in 2018. Am I wrong?
Rachel Sanders 26:17
No. Okay, so Rootine was officially founded in 2018. And we launched publicly in 2019. But the technologies or algorithm and the microbiome delivery system was in development prior to that.
Jay Clouse 26:32
So talk to me about that period of time prior to publicly releasing this product. It sounds like a lot of time went into research and development. I’m sure there are a lot of cost drivers around safety and compliance in this business that we don’t understand. So you can can you help us peel back the onion a little bit and understand what goes into a model like this?
Rachel Sanders 26:51
So Daniel, as I mentioned, he was the founder and the inventor of the technology and the form factor, so he worked with a team clinicians and other scientists to really build this up. I came on, after a lot about initial stages had had been completed to commercialize commercialized Rootine. So to finalize the testing and all that, and then I came on to commercialize the product. And then yes, there are a lot of safety and other parts to the manufacturing and the quality text testing and all of that, which is why we are really focused on quality control. We do third party testing, and we do all of our sample testing and a medical grade genetics laboratory, that is ISO 901 and other ISO certifications as well.
Eric Hornung 27:44
Sounds like there’s a lot of just upfront cost. How have you guys raised money to date or how are you funding this?
Rachel Sanders 27:51
We went through TechStars originally in 2018, and have raised since then from mostly institutional angels and some individual angel. We raised our last round, it’s a pre seed, and we’ll likely raise some venture funding. Again, we’re also using I know Clearbanc was on upside, but Clearbanc is a new way to kind of fun marketing that we’re utilizing as well.
Eric Hornung 28:16
One of the questions I have whenever we start talking about genetics, is data and privacy. And it’s like the last frontier of what is private in the world. So how do you think about the moral responsibility of maintaining and using everyone’s genetic data?
Rachel Sanders 28:34
Great question. So we, me personally, and we as a company are vehemently opposed to selling or sharing data for specifically genetics. So there’s other companies that have models that they make money based on selling data, we are not one of them. The only way that our subscriber data is used is to inform products that helped them and help their their health and wellness journey. So we consider that the only use of the data and can will continue to do that. In terms of privacy. It’s definitely something that’s of utmost importance to us. And something that we take into account. We have a number of policies and procedures around it. And really something we’re focusing on every day.
Eric Hornung 29:15
So I want to push that to the limit on if GNC came to you right now and said, we’re going to give you a billion dollars for Rootine, we love what you guys are doing. But here’s the catch. We want to be we want to have full rights to the data. Do you take the deal?
Rachel Sanders 29:29
Eric Hornung 29:30
Rachel Sanders 29:33
We can’t, we I mean, we have we have contracts with our customers saying that we’re not going to sell or share their data. If someone came to us. I mean, we don’t we don’t own their genetic data, they do. So we were we’re not going to say yes to a deal like that. Unless we go back to our customers and say, We need your data, they sign off on it and then that’s a different model. But but right now no.
Jay Clouse 29:55
How do these things. You talked about security and the cost involved in that how do these things actually get secure if I’m if I’m mailing you a sample of my DNA, where does that go? How does that whole process stay secure?
Rachel Sanders 30:06
Yeah, so our medical grade laboratory follows all of the procedures that are necessary to keep things private, which includes after the sample is done, they there’s a solution that’s sprayed so that no one could even no one can get genetic material off of the sampling. Everything from there to various like encryption policy procedures, and even from where the data is stored. We take into account what would be the most secure and do it that way.
Eric Hornung 30:36
You’ve mentioned laboratories a lot we’re sitting here in who knows what yard line of the COVID situation, and it feels like laboratory space in general has to be tough to come by. Have you guys noticed anything from an operational standpoint that has delayed you.
Rachel Sanders 30:53
So we have exclusive relationship with a genetics and nutrient lab which handles all of our sample processing and they they are doing COVID testing. But luckily we do have a good relationship with them and have not had any issues around delay or operational problems related specifically to COVID.
Jay Clouse 31:14
You when you’re talking about Patch and your decision to wind that startup down, you’re talking about the margins not making sense for scale. Anything that involves personalization, my head assumes, well, that probably means that margins are significantly lower, like I assume that the costs will be higher, the price will be higher, and margins will probably be lower so that you can stick closer to competitive prices. How do you guys think about margins, especially when it comes to personalizing all these things?
Rachel Sanders 31:45
All of those things are valid. margins are definitely something that we constantly look at and think through ways to improve. We likely are lower margins than the one size fits all kind of Central one a day, but that’s because we’re building a significantly different and better product, a product that isn’t even in the same category, in our opinion, but there are ways as we scale to take advantage of volume discounts. We’ve set up the the manufacturing and operations to scale and to make sure that we can continue to improve those margins as we grow.
Jay Clouse 32:20
What if a Centrum says this is a good idea? Well, we’ll roll out a new line that also personalizes. Do you guys have protections around these things? And does that matter in this space?
Rachel Sanders 32:32
Yeah, so Centrum actually launched their own personalized product called Rigr, and they’re only looking at lifestyle. So it looks a little bit more like a care of and yes, there are, there’s a lot of noise in the market, and there are potential for other people to come in. But our superiority and the testing in the technology that we’ve developed over four plus years our scientific focus, the research and the nutrient delivery system. Really one puts us in a different category and two builds a data moat for us. And we’re also building more than just a vitamin company. So Centrum is bread and butter, a vitamin company, we’re really sitting between the at home testing companies and the supplement nutrition industry where we’re delivering the the data that can empower wellness, like the testing companies. But we’re then using that data to inform these products in a way that really closes the loop for consumers that no one else is offering. And that ability will continue to improve as we have more subscribers and more people doing more testing.
Jay Clouse 33:38
I think I’m starting to grasp the differences here. But to really make it explicit, you just mentioned care of for example, and people listening to this may just be hearing personalization vitamins for you still equating it to care, which has been a super successful startup, where the the key differentiators that you guys draw.
Rachel Sanders 33:55
Yeah, so we are looking at three key data points. The genetics, blood levels and lifestyle versus looking simply at lifestyle like a Karev does. or looking at one of those maybe like a, there’s a, for instance base looks at blood levels, we’re combining all three of those key data points. We’re also bringing in significant scientific and clinical expertise, and then combining that with our technology which offers precision dosing. So the key differences are really the data we’re looking at how we’re interpreting it and the insights that customers are getting. And then the actual dosing or the product is much more personalized than what you’ll see on the market.
Eric Hornung 34:37
Besides Daniel, who is on your team, you don’t name names, but who like how big is your team who makes it up from a skill set?
Rachel Sanders 34:46
Yeah, so we have a core team of six of us right now with additional advisors and consultants and other contractors that work with us. And we our core team is really made up of Daniel and myself, we have a head of customer experience and fulfillment. We have a head of business development and head of marketing along with a graphic designer. Our we have an clinical advisory board with pharmacists, nutritionist and some other kind of clinicians there. And then we also have a team of engineers and that we work with.
Eric Hornung 35:22
Is that you mentioned data. So so much is that group of engineers, your group of data scientists as well?
Rachel Sanders 35:29
Jay Clouse 35:30
You, you’re talking about Clearbanc and using them for marketing you came on to help commercialize this product or last couple of years. How do you think about your customer avatar? Like what does the typical Rootine customer look like?
Rachel Sanders 35:43
Now we have really three so we and we break those down into different categories. The first is an individual who’s really making a health change and that is either someone has a health scare or they’re getting older or they became a parent, and they want to be able to support their health in a really clear way. So they’re choosing Rootine as the foundation for that health change. The second is kind of these super athletes or triathletes, these individuals who spend all of their time either working out or doing, like health and wellness related activities. And they’re choosing us really, because of the research and the data driven nature of the products. And the fact that they’re
Eric Hornung 36:20
That’s like Jay.
Rachel Sanders 36:23
And the fact that they’re getting really interesting and different data and insights from the from the products themselves. And then the third, we call the lazy professional, who is a busy on the go individual who wants to support their health, but not necessarily making a health change. They just need something that’s quick, convenient and good, which are daily packs and the fact that we are the ones that can combine all of the information and just give them an answer is why they’re choosing us.
Jay Clouse 36:54
If you were to choose one of those avatars, because you had to prioritize your marketing budget, which one of them would you target first?
Rachel Sanders 37:00
The individual is making a health change because it’s of the utmost importance to them. They’re already thinking about, Okay, I need to get healthy, how can I do it? And so the fact that health is on on the forefront of their minds, is something that would be really powerful for is really powerful for us. And frankly, in today’s current environment, that kind of I need to be healthy and stay healthy and support my health is something that a much larger percentage of the population is thinking about today versus this time last year,
Jay Clouse 37:30
Since this is so personalized. Does this require you to be direct to consumer solely? Are there any other forms of distribution that you guys could explore?
Rachel Sanders 37:41
Yeah, we actually are already we’ve done some distribution partnerships with a couple of different places. Neither none of them have been announced yet. But there is interesting distribution of possibilities and we are we are working on various partnerships. Doctor consumer makes sense, but we want to make sure that we’re helping as many people as possible, and then getting this in the hands of people where where they are. So always looking at new ways of sharing Rootine.
Eric Hornung 38:10
Can you give us some examples of those partnerships without going into details of what they are or who they are maybe like thematically?
Rachel Sanders 38:17
Yeah, so one is a kind of retail, health retail, so someone would come in to their actual location. And we’ve partnered with them to sell Rootine, kind of on on site. Another is more of a new new aged health company. So it is it’s also like a brick and mortar, but they’re delivering health care in a new way. And again, we’ll be kind of front and center in that space.
Eric Hornung 38:46
One of the things we heard when we talked to Andrew from Clearbanc was that their model says okay, you can put in $1 into marketing and get 2, 3, 4 dollars out. Can you talk to me about your marketing strategy and how you’ve been able to reach that kind of equation.
Rachel Sanders 39:05
Yeah, so our marketing strategy has really kind of evolved as we’ve increased the products that we’re selling and kind of increased the options for consumers. Initially, we just were kind of direct consumer paid focused a lot on cost of acquisition last on return on adspend. Just because our our subscription product was our only product, and we will be adding a little more on the long term value versus the initial sale. Since we’ve been able to introduce new products, our use of Clearbank makes a lot more sense because our average cart value is increasing because consumers are purchasing additional products other than just the vitamin, the vitamin product.
Eric Hornung 39:43
What is the average cart value?
Rachel Sanders 39:45
Yeah, our average cart value right now is closer to kind of $250. But that’s continuing to increase.
Jay Clouse 39:53
So this all sounds good to me. I mean, personalization, I think is the future for most things. I want my health to be supported. What is the issue that keeps you up at night from being able to reach these customers or serve these customers with your products?
Rachel Sanders 40:08
So there is an education piece associated with this, just because I mean, consumers want to support their health, but they don’t know how that’s a problem that everyone in this space is going to face is how do you tell the consumers? How do you educate the consumers? why this matters and and why it will continue to matter going forward. So really, as we kind of talked about Daniel before talking about or saying words that we might not understand it’s okay, how do we take the part of genetics take the part of blood levels, why this data matters and explain it in a in a really coherent, easy to understand way so that we can reach the most people possible.
Eric Hornung 40:47
Part of the thing I think about when I think about health and fitness is that people start something and then kind of fall off. So maybe they start doing workouts and then a month later they’re not going to the gym anymore and it’s February When I think about subscription businesses, I think about churn as being a key indicator that I would want to look at. So it seems like in the health and fitness space, you would expect high churn, but with a such a high cart value. Are you seeing that same level of churn? Are you seeing lower churn? Like how’s your business think about churn and what are you seeing there?
Rachel Sanders 41:21
So churn is really something we pay a lot of attention to. It’s one of the metrics, we’ve really focused on driving down since launch. But in terms of industry standards, or where we are versus industry standards, I say we’re a little bit lower, in part because when people are using their personalized health data, they really want to continue getting recommendations based on that data. And and continue seeing improvements, which is one of the reasons we’re building out that results framework I mentioned earlier, to continue to close a loop and provide even additional feedback to show kind of this is how they were feeling in the beginning. This is how they’re feeling now really, for our subscribers to understand where where they come and what their journey looks like. But that will also hopefully in our eyes play a role in turn as well.
Jay Clouse 42:04
Well, we started this interview talking about your interest in health and wellness, and how you’ve, you know, on your own journey experimented with things. My last question would be, since you’ve been using Rootine, assuming that you do use Rootine, you know, what is your experience been like? And what what type of results have you seen?
Rachel Sanders 42:20
Yeah, great question. So I, when I first started using it, my energy spiked within about a week or two, which is something I really, really love. My skin health has also improved. And I’ve seen some some mood improvements as well. But one of the biggest things so I actually recently had a baby and use Rootine as my prenatal and I was able, I took in the box to my doctor and said, Hey, this is what I’m taking, and she approved it. And the genetic testing that I did through Rootine actually helped diagnose a potential complication in my pregnancy. So not only is it helped me feel better, but it really helped inform my my health and the health of my child as well. So I owe a lot I owe a lot of that have a lot to Rootine.
Eric Hornung 43:04
Seems like there’s a fourth customer avatar developing there.
Rachel Sanders 43:08
Yeah, we have I mean, we do have some some consumers who use Rootine as a prenatal we haven’t focused on it yet but yeah, through my own experience, it’s definitely something that it’s a potential market for us. Plus I would love to be able to share it and then help other moms or moms to be in a similar way that it helps me.
Eric Hornung 43:27
Awesome. Rachel, this has been fascinating. People want to learn more about you or Rootine vitamins where should they go?
Rachel Sanders 43:35
Check out Rootine.co we recently rebranded from Rootinevitamins.com so we’re at Rootine.co and my information is on there as well. Also, of course, check me out on LinkedIn and always open to emails as people are interested.
Jay Clouse 43:52
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Alright, Eric, we just spoke with Rachel Sanders of Rootine time to get into our little closing routine, our deal memo routine, where do you want to start this routine about Rootine?
Eric Hornung 44:43
I am such a sucker for narrative fallacy. And maybe that’s like a human thing or maybe that’s just me, I don’t know. But I love that her first answer kind of tied health and wellness through her entire life, personal experiences, high school athlete, she goes to investment banking and of course what she folks on lower middle market health and wellness, first startup is in the health and wellness space. Next startup is in the health and wellness space. It’s just like one after another. This has been the thing she’s been most excited about through her entire life.
Jay Clouse 45:11
It’s a good strategy. And she gotcha.
Eric Hornung 45:13
I know. It’s I look, I get it, I get it. I’m human. I got biases. And I love the narrative fallacy.
Jay Clouse 45:21
It wouldn’t have a name if it wasn’t an effective human thing.
Eric Hornung 45:23
Yeah, I mean, you can call it out. And it’s still like effective.
Jay Clouse 45:27
Totally. I mean, you want to see, it makes you more confident that she knows a lot more about this space than we do, which we wouldn’t even need that much evidence to believe to be true. Because we don’t know much of anything.
Eric Hornung 45:41
Yeah, that’s we are we are generalists with no expertise in anything. I think that one of the things about more than just knowing one of the things about having that thread throughout your life, is that just like shows continued interest. And the way she has it is from different angles as well. But I think that people who are just able to demonstrate that they’ve been interested in one topic for so long, that makes me feel comfortable that they’re going to continue to be interested in that topic into the future.
Jay Clouse 46:10
Equally important that I’m glad you brought up and spent some time having us talk about is her co founder, Daniel, who developed a lot of this technology over the last several years making this something that could be available for consumers. The delivery mechanism of it is different with these microbeads. A lot of the innovation in Rootine is the groundwork that it sounds like Daniel was doing for several years leading up to Rootine while Rachel is doing Patch.
Eric Hornung 46:38
Yeah, it’s like that whole why now thing the question that certain investors want to ask, why is this the time? Well, this IP like three years ago, you couldn’t have done this, as far as I understand. So this process, this micro dosing process, that’s not the right term, this customized manufacturing process for me dividual pills and tablets that changes over time with the data component. That just wasn’t doable on a personalized basis as far as I understand it from this interview, and this is just a right time right place, right people.
Jay Clouse 47:13
Precision dosing is what you’re grasping for there.
Eric Hornung 47:17
Micro dosing is a much more Silicon Valley before you go to work situation, different use case. So Jay, what did you think about the actual product and product experience itself?
Jay Clouse 47:30
I am pro personalization for just about everything, right. So at just a base level, it makes sense to me that something that is meant to have such a personal effect on you is personally created for you. The cynic in me is always going to wonder, you know, how personal is it can it truly be versus is this really great marketing, assuming that it is hypersonalized it is precise and dosed for the things that I am predisposed for. I think that’s great. But it takes a lot of trust for you to believe that this company, understand not only can read your genetics, but understand what you need, nutritionally her that, if you trust that, and if it works, you know, I think that there’s a huge business here. And I’m not saying that i don’t i’m just saying that that is a very material part of the viability of a business like this.
Eric Hornung 48:30
One of the hard things with personalization is price point and scale. So she said that they are more expensive than all of their competitors, kind of like a luxury product. But how does, how does that scale right? Like, is it if it’s going to be the most expensive product on the market? Then how do you ensure that everyone has access to that product? Like how do you get to a million users? How do you get to 100 million users when you’re so far over market and maybe only 33% of the market is using the cheapest version right now.
Jay Clouse 48:59
And do do you need to? If it’s luxury enough? Is the market big enough for that segment of customers that you don’t need to? You know, she mentioned that the average average cart value is closer to $250 for their customers, that’s pretty significant. And that would add up pretty quickly to a large market opportunity, even if you weren’t going mass market. And my thought would be, if this is a luxury, good, that’s going to be good for their retention long term, because this isn’t something that is a noticeable part of people’s budgets, even if it is higher priced. What do you think about that? You asked a lot about retention and churn.
Eric Hornung 49:37
Yeah, I think, to me, this seems this still seems a bit elastic. And what I mean by that is like, okay, you have a life event, which is one of their core customers, and you have a scare, and maybe it’s a heart attack or maybe it’s a you have a diabetes scare or something like that. Whatever it is, you have a health issue, and you go I need to be taking better care of my health, I need to figure out my supplement routine. And you go out and you go to Rootine and you start bringing out some supplements and you personalize this and you’re really excited about it. And then you start feeling better and better and better. And then you start thinking, it’s kind of like the, because you did the right thing. Therefore, you don’t think you need to do the right thing scenario.
Jay Clouse 50:21
I see you’re saying.
Eric Hornung 50:22
So that’s one of my issues is like once you start feeling so good, and you maybe just say, I’m just gonna go to this one today, why am I spending all this money on this product when I feel great?
Jay Clouse 50:32
Or maybe it’s the opposite. Maybe they put so much stock into like, oh, man, once I started using Rootine, everything changed. And that becomes something that they stick to more strongly than anything else.
Eric Hornung 50:42
So much about that as the narrative and showing the data. So on a daily basis, being able to tell somebody how this is affecting them. Like, I think that’s why people wear the Apple Watch and have the exercise ring is because every day they can say look at me, I did good. And it’s telling me I did good and I know that that goodness is going to translating the long run. So if they can have some sort of quicker feedback loop that directly ties the you taking your Rootine, vitamins and supplements to your health and your indicators, and whatever it is, and you’re not taking them to not having that, then yeah, you’re going to create this dependency almost in a good way.
Jay Clouse 51:22
That’s a really good insight that I haven’t thought of before with products like this. Because ultimately, if you’re going to keep buying a product, every time you buy anything, you’re telling yourself a story. And you’re saying with a lot of these health and wellness companies, they are actively trying to help you tell the story to yourself of why you’re investing time and money into them. That’s a really smart insight. Something Rachel mentioned, is that they’re exploring other distribution methods other than DTC. I like that. Because I think the DTC always be there and that’s great. But I love different methods of distribution because that can have a big impact on your growth very quickly, I didn’t quite understand because we didn’t have specifics, how that would look for the customer and what the experience of that would be assuming that the customer experience is still really good and and no different than DTC. I, that’s that’s something exciting to me. And we’ll get to the 6 to 18 months question. I would be looking at that as one of the things in 6 to 18 months. How do those distribution partnerships look? How did they go? What are those pilots look like?
Eric Hornung 52:27
Yeah, I mean, distribution is everything in this space. There is so many bad health products, health and wellness products that just had great distribution, that whether it’s diets or supplements or whatever, that just become big businesses because they had distribution first and a bad product but that bad product didn’t matter when you had the distribution. So I’m I’m really interested in the what those distribution partnerships look like as well and how they’re going to get Rootine in front of people for the first time.
Jay Clouse 52:58
How did you feel about the product portfolio approach that Rootine is now taking versus specialization on the vitamins. For example, you asked about that.
Eric Hornung 53:07
I think that for a venture style business, it’s a different approach. Normally, you would try to reach some sort of market penetration on your first product and you would kind of sprint all out at that product. Now, you keep an eye on your product roadmap, you keep a understanding of what the next products that come out are going to be. I think it makes it harder to have multiple products, I think to the extent that they are propelling one another, that’s a good thing. Like if, if you’re launching a product that’s more of a marketing tool, like the genetics testing, to get people on board to try Rootine for the first time and you can demonstrate that, yeah, maybe we make 10 bucks on that. But people become 90% more likely, then you don’t really look at it as a product. You look at it as a marketing spend. That happens to be in product form. So I don’t I don’t know that I like or dislike the product portfolio style more or less than the other. But if it helps them gain more distribution, I’m all for it.
Jay Clouse 54:10
Speaking of marketing spend, something that is a positive indication for me of Rootine is that our friends at Clearbanc have gotten involved in helping them from a marketing spin standpoint. And when we talked to Andrew of Clearbanc, you and I both were really impressed with the models in the underlying machine that they have predicting a company’s success. So to me, that’s a positive indication.
Eric Hornung 54:37
I might have even mentioned this in the interview. But Andrew said that the way that they underwrite risk is to look at your historical inflows and outflows and say, and kind of do some prediction analysis on Hey, if you do this, then you get this. So they have some sort of formula there for we’re spending marketing dollars and we know that we’re getting More than $1 back in return for that marketing dollar. So Clearbanc underwrote that risk which tells me they’re doing something right when it comes to marketing, what they’re doing right. I don’t know that I have the answer to that from this interview.
Jay Clouse 55:12
Well, Eric, if we look forward 6 to 18 months, what are you looking for from Rootine?
Eric Hornung 55:18
I’m going to be paying a lot of attention to churn and looking at maybe even cohort churn as they bring on new customers, how are they ensuring that those customers understand the benefits of Rootine and are sticking with it? Because I do think health and wellness in general is just such a high churn space. Like you think there’s 18 fad diets a year. There’s always some new pill or some new supplement or some new something. So how do you ensure that you are not the health and wellness story does your how do you ensure that you become embedded with someone’s longevity. How do you become the men’s once a day versus the like ginseng tablet or something?
Jay Clouse 56:07
I’m going to be looking at like I said, their pilots and distribution experiments, how that’s going what adoption generally looks like something that we brought up very briefly in an interview that is a little bit of a shadow for me that I’d be keeping an eye on. What if one of these large supplement companies wants to dip their toe into this space. Can Rootine continue to hold their market share and grab market share if if one of these optimum nutritions or something wants to get in here and really make some noise? Way back in the day, Eric, we had Lindsey Moeller of Concur on the show. And she was talking about the upcoming trend in cosmetics of worrying about the microbiome and that she was moving ahead of the curve and that is going to be something big and if you’ve seen a dove commercial anytime recently, dove is now talking about their new cosmetics that put your mind microbiome at the center of their focus.
Eric Hornung 57:02
I would kind of push back on that shadow a bit because comparing it to microbiomes Dove has the ability to mark up a product that has more demand, which gives them better margins on the things that they think are trendy and interesting. And it doesn’t cost anything more to add a different ingredient to Dove, they already have all that r&d and everything kind of worked through. Whereas in the vitamin space and the supplement space, if you’re looking at going from having a once a day or having a generic suite of vitamins that you sell, those are going to be super high margin. It’s literally you send it to a Toll House or a compounder and they pump out these vitamins, they put them in a bottle and they sell them at crazy margins. Now if you need to change your entire back manufacturing process, so that you can every week update someone’s like, Oh, I’m pregnant now. So now I need a different suite of Rootine vitamins and supplements. I just don’t think those gigantic firms have the bandwidth or capacity to do that. And that might be something they if they want to launch it, maybe they white source Rootine for it.
Jay Clouse 58:10
It’s a good point. I think there’s opportunity there for sure. I think it’s a it’s a really great acquisition opportunity. You asked about acquisition. And the Ethos would really have to be right for those partners for Rootine and Rachel to be interested in that. And I don’t expect that an incumbent would necessarily change everything they’re doing. To me, it feels like a new product that they would have a lot more marketing spend that they could put into it.
Eric Hornung 58:33
Yeah, they could definitely outspend them on marketing. But can they out compete on cost? If you’re a business that’s doing $10 billion of top line that’s probably bigger than any of the business we’re talking about right now. But in your vitamin space, and your gross margins are 50%. Why would you go into a business as inherently higher risk but is getting margins of 20%. You wouldn’t make that capital allocation call because your stockholders or shareholders are not going to be happy with that decision.
Jay Clouse 59:01
We’d love to hear your thoughts on this interview. You can tweet at us @upsideFM or email us firstname.lastname@example.org. We’re excited to follow Rootine through their journey. If you have any other companies like Rootine or in the supplement space that you think we should talk to, you can email us Hello@upside. FM. Thanks for listening.
Eric Hornung 59:19
I also have a little ask here at the end. Something else I’m interested in home exercise, it’s in the health and wellness space. There’s anybody doing home exercise, whether it’s a peloton alternative, a mere alternative, something that’s in that space outside of Silicon Valley, New York and Boston, would love to talk with a pre series A founder in the home exercise space.
Jay Clouse 59:45
That’s all for this week. Thanks for listening. We’d love to hear your thoughts on today’s guest. So shoot us an email at email@example.com or find us on Twitter @upsideFM. We’ll be back here next week at the same time talking to another founder and our quest to find upside outside of Silicon Valley. If you or someone you know would make a good guest for our show, please email us or find us on Twitter and let us know. And if you love our show, please leave us a review on iTunes. That goes a long way in helping us spread the word and continue to help bring high quality guests to the show. Eric and I decided there are a couple things we wanted to share with you at the end of the podcast. And so here we go. Eric Hornung and Jay Clouse are the founding parties of the Upside podcast. At the time of this recording. We do not own equity or other financial interest in the companies which appear on this show. All opinions expressed by podcast participants are solely their own opinion and do not reflect the opinions of Duffin Phelps LLC and its affiliates on your collective LLC and its affiliates or any entity which employ us. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. We have not considered your specific financial situation nor provided any investment advice on this show. Thanks for listening and we’ll talk to you next week.
Interview begins: 6:52
Rachel Sanders is the co-founder and CEO of Rootine.
Rootine was founded in Nashville, Tennessee, in 2018 and creates custom daily vitamins based on your DNA, lifestyle, and blood level data.
- The genius behind Rootine 8:53
- Fads and the underlying truth 9:55
- What makes Rootine? 11:52
- Rootine personalizing your vitamins 16:53
- Results with Rootine 20:20
- Rootine earning as a business 21:14
- Commercializing Rootine 26:51
- Raising capital for Rootine 27:44
- Data privacy and security 29:55
- Rootine’s Demographics 35:30
- Distribution 37:40
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