From Law to Lager to Venture Capital — Ruchi Desai

Fred Schonenberg
Hello everyone and welcome to the VentureFuel Visionaries podcast where we introduce you to the innovators and builders creating the future of business. I'm your host, Fred Schoenberg. I'm the founder of VentureFuel where we help the world's best companies commercialize innovation through startup collaboration. 

In today's episode, I'm so excited to have Ruchi Desai. Ruchi is a remarkable entrepreneur turned venture capitalist. Her journey spans from practicing law to co-founding one of Texas's fastest growing craft beer brands, Eight Brewing Company, to launching Rising Tide Ventures, a fund dedicated to fueling overlooked founders and untapped consumer markets. 

In this episode, we'll dive into the pivots that shaped Ruchi's career, the lessons from scaling a successful beverage brand in a very competitive space to the venture thesis that is guiding her investments today. So please join me in welcoming Ruchi Desai to the VentureFuel Visionaries podcast. Ruchi, it's so nice to have you.

Ruchi Desai
Yeah, it's great to be here. Thanks for having me, Fred.

Fred Schonenberg
So you've had such a fascinating journey from law to co-founding a beer company with Troy Aikman to now running a venture fund. Can you walk us through some of these pivots and how they shaped where you are today?

Ruchi Desai
Yeah, sure. I mean, I'd say the driving force behind all of it is really just an insatiable curiosity. Like I wanted to always know how things worked, but that's not even all of it. Before I was a lawyer, I was actually a derivatives trader trading credit default swaps back in 2008. So not to like date myself too much, but I had graduated from college and been hired to be an equity analyst. And for anyone familiar, things kind of fell apart. I very quickly got shifted into this trading role with an instrument that I had never really heard of, knew nothing about. And I had a boss that was really supportive, taught me a lot of different things, gave me a lot of autonomy and responsibility, which meant I made a lot of mistakes that I learned from. 

But I think it's really what started me thinking about work as a place to explore and to play in a way as well. And it wasn't as serious. Then from there, I went to law school, I got my master's in London and came back to New York and I was practicing for a couple of years. I think the biggest thing I took from being a lawyer is just how to take in a ton of information, kind of figure out what's relevant, identify some patterns and really understand what I could do with that and draw connections to past experiences, cases, things like that. 

And then just move forward, move forward with a hypothesis, validate things through research or trying, and then kind of readjust and reframe. Both of these were really exciting, but what I realized was I wanted to build things that showed up in the world that actually impacted people. Yeah, that's how I got into consumerism. So I've been in consumer for about 10 years, working with brands through I'd say mostly formative growth stages, a lot of product development and innovation. I've built up national production facilities. 

And then obviously, I started EIGHT, which was my first venture into beverage alcohol, my first talent-led brand. So a lot of learning, a lot of mistakes made. But over that period, we also raised $25 million. So we closed our series A last year. And as I took a step back from the day-to-day of that business, I thought there's a really interesting gap in early stage ventures.

It's really tough to build new brands, but it's just as hard, I think, for larger companies to innovate. So really, it's taking all of these learnings that I've had over the years and saying, is there a way that we can bring in capital in my experience and our network and really just accelerate how these brands develop and get to that next stage?

Fred Schonenberg
I love that. Maybe I wanna start with the founder part of your journey and then move to the venture side. Because I'm just intrigued how you go from the beginning stages to saying, hey, I'm gonna, I wanna be one of the founders of eight. And how did that come to be? I would love just sort of the beginning of that as the nugget, and then we'll kind of dive into how that shapes your thesis today. 

Ruchi Desai
Yeah, it started really with an idea. One of my co-founders, I'd say he's sort of your quintessential thinker, tinkerer, always has a new kind of concept. And we always partnered in a way where he'd bring them to me. I thought, this has a business, this doesn't have legs and evaluating it. And so one day I was driving to my job at the time and he's like, there's a lot of celebrity spirits, no one's really doing it in beer. 

And that just sort of set us down a path of really understanding what does the market looks like? Where did we see opportunities, which we had kind of identified as the super premium white category and where there was white space and what was being offered. As we were doing that, we ended up talking to different potential partners. And when we met Troy, it was such a perfect fit with what we were trying to build, his sort of idea and approach to alcohol generally and how he kind of came up. And from there it was just one foot in front of the other. 

Fred Schonenberg
So, I mean, that was, it's been called one of the fastest independent beer launches in Texas history. What do you think, what strategies or decisions do you think drove that rapid growth at the beginning? 

Ruchi Desai
Yeah, that's a great, great question. Honestly, I feel like it was a lot of just dogged work and making sure we were in the right rooms, but I think it's easy. And these days there's so many celebrity brands that sometimes people think it's table stakes and I will say it often gets you in the door. It opens up those meetings, you're able to at least be in front of important decision makers. But from there, the business really needs to follow through. 

And so for us, a lot of it was thinking about where we wanna expand into? Where can we have the most impact? That's why we focused on Texas. Our initial plan was to start in major metros. We got pulled a little bit outside of that, but really it was where are we gonna be strongest? And then what can we do to support once we get the product in but how do we leverage having Troy come up? What were the fundamentals we needed to pay attention to?

So I think anyone here in Bebel can vouch for the importance of just trade marketing and making sure you're merchandised well and you're executing well. And so we really made sure that we weren't caught flat footed there so that we could follow through with the opportunities we were getting.

Fred Schonenberg
So you've got this successful company, it's starting to grow, you're raising money. You decided to take a step back and move into venture. What was, talk to me about that decision-making and what led you to venture and maybe how EIGHT informs how you think about rising to adventures.

Ruchi Desai
Yeah, I mean, when we started EIGHT, we did our first round, we closed $5 million in less than six weeks. It was insane. It was just such a different environment coming out of COVID there was a lot of capital and the consumer was hot. Then our last round, our series A, which we closed at the end of 24 took us nine months. So you can see just like the evolution of the market and what had happened and how people were thinking about investments then versus now. 

I saw a lot of early stage funds that we had talked to go from maybe one to 2 million as a revenue threshold to five to 10, really five being the low end of that and the exception to the rule. I saw a gap starting to emerge in early stage consumer brands. And I think an interesting thing about innovation and consumerism, there's a lot of founders like myself. They see a gap or they're passionate about a product and they wanna build it. And they just don't know a lot of what they don't know, the mechanics of the business, how you have to navigate it. 

And so we really thought there was an opportunity to say, look, we'll try to find good capital, patient capital, people that are just excited to see these products out in the world. They wanna champion these founders and then take what we've learned and how to execute well and say, we'll get you to that next phase where these early stage funds are gonna start taking a serious look at what you've built.

Fred Schonenberg
Yeah. It's so interesting. So we, on the VentureFuel side, we've helped a lot of early stage consumer products. We've run accelerators, we've done a bunch with sort of big fortune 500s where they're trying to figure out how to invest and partner with early stage startups. And I will say from doing that, that gap in the market before you get to a certain size check is like, it is such a huge gap. And it's across all consumers because it's basically like there's friends and family, money, someone you know has a check and they wanna get you started and you get in the door.

But with CPG, like once you get in the door, then the real work starts, right? You've got to fund the product getting on the shelf and making sure it works on the shelf so you get the next order and the velocity and all those things. And there seems to be just a big gap between that friends and family and the more institutional larger check when you've kind of proven this out. 

So I can say from just doing what we do, I've seen this gap firsthand and it's a struggle for a lot of startups that we see. And I'd love that you're filling it. And I would love to dive into your thesis a little bit because it taps into two things that I think are really interesting together which are like these untapped markets and also overlooked founders. Can you expand on those two?

Ruchi Desai
Yeah, yeah. I'll start with the second with overlooked founders. You know, we define that fairly broadly. Like, look, I'm obviously a minority female. I've been raised as one, but I also had partners that were not and that were very visible. And so, you know, I had that advantage when I needed it, I think, but beyond that, right? Beyond minorities, beyond women who are still getting less than 2% of venture dollars overall, there's some stats out there. 

The Kauffman Fellows did a great study where non-traditional kinds of overlooked founders are returning 30% more than kind of the status quo or the average of where investment is coming from. So we really took that to heart. And, you know, our focus is, again, just generally people who aren't necessarily having as easy access to capital. So that can include older founders, non-coastal founders.

I think, you know, in consumerism, there's an incredible bias to winning on the coast and then kind of just driving that innovation inward. But there's great examples of brands that are popping up, you know, in local communities across the US. And those founders, I think, sometimes have a little bit tougher time getting access to capital. If there's not, you know, when you're in LA, there's a new happy hour or something like that. Some networking thing every other day, you just can't get to all of them. So that's really where we look at overlooked founders.

And then when it comes to untapped markets, you know, I think there's a few different ways to think about it, right? When I think about EIGHT, there are a lot of light beers on the market. You know, it's not necessarily untapped, but I do think a large portion of what makes brands win and consumers is how they connect with consumers. You know, do they elicit a certain emotion? Do they provide an identity? Do they create entries into a new community that maybe people couldn't get to as easily and their affinity for a purchase of these products kind of helps get them to that. So we look at that. Is there a connection there that's missing? 

And then largely, you know, is there something new, right? I think there's great examples we've seen of new food tech that's coming out or even non-meat products that are looking at ingredients that are just not readily available. And, you know, one company that I love, they were developing their own internal vertical urban farms to make this ingredient that was really great for a meat substitute more available. And so they kind of backed up from their consumer play and said, let's get the tech right to have this and actually build a platform and things like that are really exciting for us.

Fred Schonenberg
That's so cool. Are there specific areas or maybe untapped markets that you are excited about? Whether that is right now, you've already invested in it or it's something that you're starting to, you know, dive into more because you think there's a big opportunity.

Ruchi Desai
Yeah, that's a great question. I mean, it feels like there's protein and fiber and everything now. I would say the obvious thing that people are going after. Some of the things that I've been really excited about are products that are targeted and specifically formulated for younger demographics. 

So looking at Gen Alpha and tweens, whether it's supplements or beauty products, I think there's one product actually that I really like where they were looking at young men and no one's really talking about to young men. You know, when you look at products, they start with acts, which are really made for an older individual, not someone who's 12 or 13. 

So really finding ways to connect with those people and how they're buying, how they're thinking about things, who they're listening to. That's actually been something I've been really curious and excited about. I think it drives a lot of spend.

And then I think another one generally is just healthy food, especially making nutrition more accessible and from a price point as well. You know, I think there's a lot of healthy things that went natural, but they're priced out of where most shoppers can actually afford things. So can we bring that accessible nutrition and fun products at an accessible price as well?

Fred Schonenberg
I love that. I think there's a lot of niches there. I thought one of the things that we saw last year was a company that launched a frozen cottage cheese. And to me, that was like such a strange untapped market. One, like I'm not a cottage cheese person. I never thought about it. It tastes like ice cream, but it's loaded with protein and it's good for you. A guiltless ice cream alternative. And that market wasn't being spoken to, right? The people that would, everything that had chemicals in it that was low fat and all those types of things. 

There's these niches, right? That then moved from niche into mainstream pretty quickly. And there is that gap of people that are looking in those spaces and finding the untapped markets. So I think it's really exciting that you're there. I have a question for you. A lot of the people that we work with are innovators at large corporations. They're always curious about how they make the move from there to VC? Or even entrepreneurs that are thinking, hey, I'm gonna exit one day. I might move into VC. Do you have any advice for folks that are thinking about joining you in the venture capital world?

Ruchi Desai
Yeah, look, for individuals and founders, I'd say if you have the capital and the time, I would do it. It is incredibly time consuming. It seems really easy to be like, I'm gonna get a pitch and see if I like it or not. But look, I've made some terrible investments. I've made some good ones as well. And that's how it goes. And you learn kind of through iteration. 

And the biggest thing, even for us at Rising Tide, we'll often spend six months getting to know a team before we're ready to even put something out to our network. So having the time and the space to really dig into the fundamentals, especially at an early stage, how are these teams thinking about building? 

But if you have that, I think it's really great. And coming from a former operator, founder perspective, you can add a lot of value. It's also so much fun to talk to people about what they're building and dream with them and think about it and think in verticals that you probably wouldn't have jumped into because it's so far outside of what you were building before. 

For corporations, and you might know this answer better than me, but I think it's difficult. Corporate VC can be a challenge, I think, depending on how it's structured. And the biggest thing I've seen in different formats is if they kind of come into it is understanding how it's going to leverage through the entire system. 

And I say that in a way that the compensation, even just starting there for how does carry work? Is there carry? How do founders, or if you have something you're incubating and building, how do you get someone who is technically in a corporate setting have the drive of an entrepreneur who's working up at 3 a.m. with a new idea that's all they can think about, who's giving up their weekends, because that's what it takes to really build at that early stage.

And then I think beyond that, it's what resources and things that they can have access to. Are you pushing it through your distribution system or is there a hurdle rate that's pretty clear that they need to get to before you're willing to put it on your trucks? I think really thinking through that nuance is really important for a CBC to be successful, kind of within the framework of a larger corporation that also has its own biz dev department, right? How does it tie into that M&A? I think there's just a lot of nuance that might not always get fully thought through at the outset. 

Fred Schonenberg
Yeah, it's definitely, I think in both cases, right? It is about really understanding what you want out of it and what lever, especially in a corporation, what lever does this pull? What are you trying to get out of this versus your internal R&D, versus business development, versus M&A? It's a really interesting game and dynamic to have to think through and know where your swim lane is. I think as individuals, you nailed it. That was such a good way to frame it. 

Speaking of individuals, what about the founders? Maybe they're in the CPG space or consumer goods today. I'd love it if you could give some advice on two fronts. I also hate when people ask two-part questions, so I'll try not to make it two questions at once. But one is like for a founder of a consumer goods company, what advice do you have for them as they go to raise money? Because I've found a lot of founders are great at finding the niche, the problem, and even building the solution and the product, but then all of a sudden they have to wade into the waters of going to ask people for money for their idea. What advice do you have for them as somebody that has raised money before and is now investing?

Ruchi Desai
Yeah, I would say first, if you're starting a company or a new product and you do not, absolutely do not want to raise money, don't do it. It is part of the job of being a founder and an entrepreneur. It's not only about building a great brand and a product and a business that can support it. It's making sure that you, your team, whoever's in it, always has the resources they need to excel. 

And that doesn't mean it can't be smaller amounts of funding and you're scrappy and you can find success, but it's gonna be a part of it and it's often going to be a full-time job on top of the full-time job of running a business. So I think that's the first kind of thing I would say is if you are deeply uncomfortable with that and don't have a connection or someone on your team that can take that, it's gonna be tough, especially because early on, people are gonna want to meet with founders. That's what you're investing in at an early stage. 

The second thing I think about is the investor mindset. I've talked to founders who are like, look, it's $400,000. Someone should give me that check. Or I have Whole Foods waiting for an entire national expansion. Who wouldn't want to do this? And I think you really have to back up and think about how VC work or whoever you're kind of coming out to. And I think a lot of founders forget that VC is almost as much about portfolio construction as it is about each individual investment. So understanding that venture capitalists are gonna want something that returns their fund eventually. Their goal is to return their fund a few times over. So I think that's really important to think about. 

I think another interesting thing on that front too is valuations. It's really easy to get caught up in, I only want to give up X percent of my business or I don't want to get too diluted, but your investors are kind of thinking the same thing, especially at an early stage. I mean, we think about that a lot. When I get pitched something, I look at where I think this can exit? What is it gonna take them to get there? And how does their current valuation fit into that and maybe change that dynamic? 

The higher it is at the outset, the higher valuation you're gonna have to exit at. So you're putting that pressure on yourself and also kind of misaligning incentives with potentially what the venture capitalist is gonna say, growth at all costs, I want you to expand, I want you to win and sell at a high valuation. If your thought is like, look, I wanna build slowly, I wanna build in my backyard, get to good margins, you're gonna have a bit of a mismatch. Those are some of the things I'd start thinking about. 

And the last thing I'd say is don't start raising if you don't know what you need. You said it earlier, where are you going with this? What do you wanna get out of it? What milestones is this raise gonna get you to? How long will it take you to get there? And have the materials to support it. If you don't have a good data room or a good model that you're comfortable sharing, it doesn't have to be super detailed, it has to show how you think. It's gonna be really tough for an investor to like to move quickly or take it seriously or not to raise their eyebrows a little bit and say, I wanna dig in further here.

Fred Schonenberg
I love it. You said so many things there. I think the job on top of the job is part of it is like realizing you're gonna be raising and also running the business. And then this idea of the investor mindset and the power law and the fact that they need a certain return in order for it to be interesting. It's a different game and it's worth spending time understanding. Do you wanna be in that game? Or do you wanna bootstrap it and find other ways that are maybe more patient? 

I have one more question for you, which is in the same lane as helping a founder. What advice do you have for them on the scaling side? This question comes from the idea that I think people are very good at finding their niche and they've got something, but they have never had to take that product beyond their regional store where they know the person who works there, where they got in somehow, or they're selling at a farmer's market, depending on what type of product it is. Now, they're suddenly going to pitch to the Whole Foods of the world. Do you have any early advice from what you all have done in how to do that responsibly and effectively?

Ruchi Desai
Yeah, I'll share two mistakes I made actually, but maybe we'll help kind of inform the lessons that we took from it or the advice, which is the first one I mentioned with A, we thought we would do the four major metro areas in Texas. We had a retailer who told us they wanted us in every single one of their stores on launch. And at the time being new to the space, I didn't really know how much wiggle room I had to kind of push against that.

Conversely, we had been talking to Walmart who wanted to launch with us and we had said, no, we just can't do it at all. And we had talked to someone else who, we had started with a full state launch, realized we couldn't do it, wanted to scale back. And they told us, no, it's all or nothing. So when we were presented with this opportunity, we said, okay, I guess we have to go across the entire state and it stretched our resources so thinly. I mean, it took us years to recover from that and really meant in some ways a bit of a retrenching to then re-expand from a place of strength. 

And I'd say two lessons from that. One, you don't have to go everywhere all at once. And if you're talking to retailers, talking to them about how to expand with them strategically in the smart way, they've been burned now too. They understand. So if you can say, look, I'm in my backyard. I found that in these three types of stores with this demographic or like these kinds of other things around them, that's where I do best. Let's look at your footprint in this region and start with stores or areas that meet the same criteria and have the same characteristics.

That's gonna give you a lot of leverage, give you a chance to prove velocity in places where you're probably gonna be successful. You already know how to win. And then let that kind of expand from a place of strength where you're recreating it. And it's great data for investors. It's great data for other teams. 

And the second lesson from that is make sure you have enough money to activate. You're gonna be in retail and it's an execution game. I was just actually out at a couple stores and liquor stores yesterday looking for a brand and I couldn't really find it. One store, I actually completely missed it even though I was specifically looking for this brand. They have one case kind of wedged in in this refrigerator door. There was another brand I had never heard of and I saw it in every single place I went, multiple, there were multiple shelf spaces. It was also on the warm shelf as well as the cold. And I left that little store visit thinking, what is this brand? I should go look at it or like I should try it next time. So I really just don't discount, just don't discount the, I think like the importance of execution.

Fred Schonenberg
I love that. Ruchi, thank you. This was awesome and so helpful. Where can people that are interested in learning more about you, about Rising Tide Ventures go to explore and get in touch with you? 

Ruchi Desai
Yeah, I mean, I'm on LinkedIn. I think that's the best place to find me. I'm fairly responsive to messages there. And then I have a sub stack. It's at Ruchaluch, which is R-U-C-H-A-L-U-C-H. That's a great place to find me. I think that's a great place to find different things that I've been publishing on, how to raise, how to build brands from scratch and a little bit of my own journey.

Fred Schonenberg
I love it. Well, thank you so much for everything you're doing to spark change and for your time today. 

Ruchi Desai
Yeah, thanks again for having me, Fred.