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This Company Raised $40M by Focusing on Transparency Inside & Out

Kat Schneider founded Ritual when she was 4 months pregnant and began her mission to provide transparency about what we’re putting in our bodies, all while disrupting a $36B industry.

Adam Ryan: All right. Our next speaker started a company called Ritual. They have sold millions of bottles of vitamins. She started the company when she was pregnant and she wanted a prenatal vitamin that she knew was safe while she was pregnant. Before that, she was a managing partner at a venture capital firm that invested in Spotify, Uber, and Dropbox. So for the next few minutes, we have the pleasure of listening to Kat Schneider. Everyone give a round of applause.

Katerina S: Hi, I’m Katerina Schneider. I’m the founder and CEO of Ritual. Today I’m really excited to share with you how we’ve built a culture of alignment and transparency inside and out. How has alignment contributed to our growth and how can it potentially impact yours? So I started the company when I was four months pregnant, actually four months pregnant right now as well and I couldn’t find a vitamin that I trusted. So I set out on a journey to build one that I did.

And as I grew my family, I also grew the business. But I had a lot of questions. It was the first time I was medically advised to take a vitamin. So I took my doctor’s advice. I went to the store, I went online, I even looked at prescription vitamins, but I couldn’t find anything that was scientifically backed, clean, and transparent. So I did the next thing, which was I asked a bunch of friends, what vitamins are you taking? I got answers like yellow bottle, Brown cap, nature, something.

Those answers left a lot to be desired. I don’t know about you, but I believe that all of us deserve to know what we’re putting in our bodies and why. So I decided to reinvent the vitamin industry from the ground up. Quick show of hands, has anyone taken a vitamin before? Okay. It’s pretty good. Do you guys know what’s inside your vitamins?

So half of US adults take vitamins today. You’re not alone, but most of us have no idea what’s inside. So talc, PVP, shellac hooves are just a few things that are on the market today inside vitamins. Pretty shocking. So I set out on this journey, but I wanted to ask a more broader question, which was do we even need vitamins? Are we getting everything we need from the food that we eat? I eat pretty healthy, I should be getting enough.

Well, we actually are a lot from our diets. We don’t need a majority of things in vitamins today. So as I set out on this journey, I wanted to be transparent about my findings. And so it began, I left my job a comfortable job, four months pregnant and took on this industry as most of us in this room note, 2% of venture funding goes to female founded companies. Pretty astonishing. And how many of those were pregnant? Does anyone know? Well, I don’t know. There’s no statistic that I’ve been able to find on that.

The odds were pretty much against me and I was pretty naive. I walked into a really well known investor’s office and I said, “I’m going to reinvent the vitamin industry and guess what? I am four months pregnant, so excited, give me money.” He was like, “Whoa, well you can either start a family or you can build a business, but you can’t successfully do both.” And in my mind I was like, “Okay. FU, I’m going to do both.” And I did. Thank you.

So a big part of that, and I don’t know how many of you have gone through the amazing process of fundraising, anyone here? It’s really fun, right? So, I went through the fundraising process and I had several realizations, but the biggest one was that to build a meaningful business, we not only had to market transparency, we also had to align our internal culture around transparency and to create that alignment was going to take us to the next level. So that’s what we did.

Today I’m going to share what people see on the outside and what people don’t know is actually going on in our company on the inside. So first let’s talk about the outside. We became so obsessed with ingredients like crazy obsessed still are that we wanted to share the stories of the suppliers and all these scientists we met on our site and people were like, “That’s crazy. Why would you share your formula, your suppliers, your whole supply chain on your site? Anyone can copy you.”

But it felt the right thing to do because we deserve to know what we’re putting in our bodies. So that’s what we did. It turns out that over a third of people have a genetic variation where they can’t even properly utilize folic acid, which is in most multivitamins, prenatals or food is fortified with folic acid. So we found methylated folate from Italy that bypasses genetic variations. We found omega 3s from micro-algae, from British Columbia.

We sourced D3 from wild harvested lichen and we shared all of that on our site and we evolve this idea of transparency, traceability, and made all that information for the first time available on our website. One mandate was, let’s never speak of transparency on our site. Let’s actually show people what that means versus tell them. At the time everyone was saying they were transparent and we’re like, “No, this is crazy. Let’s not do that.”

Kat Schneider:The biggest way that we market transparency is actually how we communicate with our customers and we respond to every single Facebook comment, every single ad comment, Instagram comment with a team. We assembled a team of customer experience associates, scientists, and marketers. We get questions like this, where is your micro algae coming from? Since our oceans are so polluted. How did you determine 2000 IU for vitamin D3 usually women have to do blood tests to determine the proper levels. How many clinicals tests have you done? Overall, I agree the types you have included are good, necessary ones. As the rest of us we can get from our diet. How many would I take a day? That’s one question. We get hundreds of questions like that a day, sometimes thousands and we respond to every single one. That’s a full time job for so many people in our company. But that actually has actually fueled our growth and I know that it can fuel yours as well.

As we know engagement on social media actually fuels growth and it actually has built an understanding between us and our customers that we’re really want to do what’s right and we’re excited to share what’s behind the internet. We really geek out into answering those questions. I’m going to spare you from reading our response, but it’s fun. So how can transparent marketing actually hurt your company? Well, we’re up against benefit ads all day long. This product will make your hair grow 10 inches in two minutes. This product will improve your nails in two seconds, so on and so forth. We decided to opt out of that game.

Our product is based on longterm health. We have a multivitamin of prenatal. And here is a campaign that we did over new years. Last year we took over Broadway and Lafayette in New York. I actually grew up in New York, so this was incredibly meaningful for me as a refugee from the Ukraine. So we took over this Broadway Lafayette station subway in New York with this campaign called not a miracle.

At a time when everyone was looking for miracle. Miracles are great by the way. But our product is not a miracle, our a brand is not a miracle. It’s not keto, it’s not cryo. I don’t know what’s cool in San Francisco these days. It’s not kale. Whoever thinks kale is miracle. Our product is not kale. It’s not a miracle. We made that very clear in this campaign, but that in some ways celebrating longterm health has short term negative impacts.

Kat Schneider: But as a business, we’re focused on the longterm, longterm impact. And we even invested in a recently in a human clinical study with a major university, which we’re publishing those results in a couple of weeks. So now let’s talk about what happens inside our business. So here is a picture of our offices. We actually moved out of these two weeks ago. Loved this office.

As you can see, the space is very clear. A lot of our executive team, we came from startups ourselves and we saw things that we didn’t want in the culture that we were going to build. We wanted things to be done differently and we wanted transparency. So we set out to do things differently. The first thing that we did and we do, is we share all of our financial metrics and reporting to our entire company every month. Not a small executive team, but to the entire company.

As you guys know, when times are tough, that kind of sucks. But we did this consistently to the point where people get used to the ups and downs of startups. And when growth is good, they don’t take it for granted. The second thing we do is we announce hires and fires every week. There’s not hires and fires every week. But when there are, we announced them in public to the entire company as well, which is really tough and really exciting at the same time.

The third thing that we do is we set OKRs which are… Does anyone else do OKRs here? Check them out. We started doing OKRs from the very beginning. So our whole entire company could know what our performance goals and our overall goals are for the quarter to give everyone visibility. So those three things have been challenging, but they’ve set a culture of transparency inside the business.

We’re not alone. There are hundreds, not thousands of companies that have built alignment inside and out and they’ve grown into be massively successful companies where you can really feel that culture and that consistency. There’s a great book by Edgar Papke called Alignment, which goes deeper on how to build alignment in a smart strategic way, which I highly suggest that everyone read.

So our future is leveraging that transparency that we’ve built this core fundamental IP of our business to go beyond vitamins, other categories, other products. Because the foundation is solid, it allows us to create more and also leverage our mission, which is turning habits into a ritual. Thank you.

Adam Ryan: All right. Kat, we have some questions for you. We’ll start with the most upvoted please ask questions and continue to upvote These. How did you distinguish yourself from vitamins that are fads nowadays? Many companies are hoping on the vitamins trend, how do we know who to trust?

Kat Schneider: That’s a good question. There are a lot of fads. We even did a campaign which is called proof over popularity. It’s a challenging question. So we actually decided to only go into essential vitamins, which are vitamins that you’re lacking from your diets. So we have a multivitamin that only has nine ingredients instead of the 20 to 40 ingredients found in most multis, which most people are getting from their diets. Informs that our bodies can use. So D3 from wild harvested lichen, micro-algae for Omega 3s, methylated folate and so on and so forth.

So the forms really matter. So do your research when you look at forms. The capsulation matters as well. So you want to make sure that the vitamins actually get into the body. So we have a delayed release at our capsule and a really interesting technology that bypasses and gets a release where your body can use all the nutrients.

There are a lot of companies rising and while the FDA does regulate vitamins, there’s a lot of misconception around that. There’s very little enforcement. So it’s important as consumers, we do our research and that you see if companies are investing in clinical studies, we just completed our first with a major university to show quantitatively how the product also works.

Adam Ryan: Which also goes to the brand value of transparency. I think this one is really interesting. The second one. How did you go from vitamin curious to essentially vitamin expert and did you school up or find partners? What was that process for you?

Kat Schneider.: Yeah, so I’m by no means a vitamin expert. We have a full scientific team, which is why we actually… We’ve raised almost over $40 million to date is we’ve invested heavily in R and D. I’m not a scientist, but my first hire was a scientist. He was one of the leading scientists in the industry, PhD in biomedical sciences. Now we have a chief scientist who was ex Harvard faculty physiology with a PhD already. We’ve kind of just beefed up our scientific team and so I’m very vitamin curious. I’m also very vitamin skeptic, but it’s been really awesome surrounding myself with people that I’m inspired by and scientists and advisors to actually get to the truth because this industry is pretty shady.

Adam Ryan: Yeah. This next question talks about, you talked about hiring and firing in a transparent way. This is more of a management question. How do you go about tactfully particularly on the firing or keeping company morale high while also not disrespecting the person that you had to let go?

Kat Schneider: Yes, so it’s probably one of the hardest things that I’ve had to do as a leader. I think a lot of our team is used to firings being done over email to a small select group from previous companies. But we really felt to embody it… Transparency, we had to tell people directly to their faces why they wouldn’t see so-and-so the next day, the next week in the office. It’s really important, especially as our team grows. So to say it tactfully, I think just to have a lot of empathy towards the situation and also explain the rationale of what role this person played in the company and the needs have changed or whatever the reason is, is just be really honest about what happened.

Adam Ryan: Honesty is the best policy in that case. This one has 28 upvotes. That might be the most all day. Are Ritual, employee salaries, bonuses, or any benefits transparent. If not, what was the decision there? If so, how do you do that?

Kat Schneider: So it’s something we’re actually starting to explore right now as our companies scale. We have about 70 people now. So we’re actually in a point where we do have more kind of a tiered structure for what salaries are based on different tiers. We haven’t disclosed that entirely to the company yet, but I’m considering it. I think people should know where they stand. That being said the reality is there’s certain departments where a director makes more than others. That’s just kind of a supply and demand thing. So we’re actively looking into how to tactfully make that part of the business transparent as well.

Adam Ryan: This one is getting more in tactics, a way from management. But manufacturing, it’s been mentioned multiple times on stage today is one of the largest issues of getting into this business. How did you find yours and what was the minimum order quantity?

Kat Schneider.: So that was actually the most challenging thing. There was only one manufacturer that I was excited to work with. They’re an ex Pfizer company. They’re $5 billion company. To create the technology that we needed. So we actually encapsulate the oil and we have tiny little beadles that hold our dry ingredients. So a big part of that for me was I didn’t want to 10 pills myself. I only wanted to take a maximum of two and the research that we did suggested that as well. So we had to work with a special technology. We actually developed a clean technology with them.

Initially, they wanted nothing to do with me even though at that point I was probably eight or nine months pregnant and I was charming. But it didn’t work and I probably pulled them away even more. But yeah, so we had to convince them to work with us. The truth is we raised a lot of money early on, so the minimum order quantities didn’t really scare us. It was what was showing them the growth. Then showing them how our business is going to scale and then convincing them was really important. Actually, hiring a scientist that they’d worked with in the past, I think was icing on the cake for us, where they knew that this was a legitimate business and now we’re one of their, I think, favorite clients.

Adam Ryan: Sure. This is our last question. You just talked about raising a bunch of money early on. How did you raise money prelaunch? Specifically, besides the relationships that you had built before, was there actual tactics that you use in your pitch deck to help that pre idea?

Kat Schneider: I almost think it’s easier in some ways to raise money before you launch because you can sell a really big vision, but once you launch, it’s all about the metrics. So we sold a vision at the time, there were no trendy competitors. We were really the first, I would say real direct to consumer vitamin brand out there. We were the first ones going at it with transparency. So selling major investors on the vision was pretty compelling.

My background was in venture, but that’s to say that a lot of the funds and people that I knew from kind of my VC days weren’t actually interested in investing in the business. I’m sure they’re kicking themselves now. But it was a lot of selling a vision. I think having a compelling story, it was a lot easier for us to raise more money when we had, because we did two rounds when we had the branding done. I would say a vision is one thing, especially for a direct to consumer brand to show that combination of brand and storytelling and vision is really important if you’re going to go out and launch… Before you launch, because not everyone gets that.

Adam Ryan: Awesome. Well, thanks so much, Kat. Everyone Kat Schneider.

Kat Schneider: Thanks.

Adam Ryan: All right. Thank you.

Kat Schneider: Thanks.