“Headlines about just raising money to raise money make me cringe a little bit because I can’t help but wonder how much that person just gave away of the company. No money is given in exchange for nothing,” Will Nitze, CEO and founder of IQ Bar, told FoodNavigator-USA. “So, we always try not to raise money, and only raise it if we can justify it and it’s really going to help the company grow.”
So, when retail orders for IQ Bar “exploded virtually overnight” from enough to stock 12 CVS stores in a pilot program inAugust 2018 to now being available in 4,000 CVS stores nationwide and soon to be in 1,500-1,800 Kroger locations, Nitze said he and his team sat down to figure out “what’s the least amount of money we could raise to where we could be really successful in this large-scale, national context.”
The team decided the magic number was $1m, which it successfully raised earlier this month in about one week’s time with the help from a group of Boston-based angel investors. Nitze said the company chose the angel investors in part because it didn’t want to be beholden to a large institution and because fundraising at the angel investor level “moves a lot faster” than it would with a venture capital or private equity group. Going that route would require months of due diligence and interviews before inking a deal, but the angel investors can simply place their money on what they believe is a good bet.
A two-prong approach to building a business
Flush with just enough cash, Nitze said IQ Bar has a two-prong plan for expanding its young business.
“The first prong is to succeed where we exist and where we have committed to roll out, which already are a ton of locations and just being successful in those locations alone would make us a thriving business,” he said.
This will include covering the costs of building up inventory, distribution and driving velocity at the store level by evolving the brand to appeal to a larger consumer base.
For example, Nitze said, when IQ Bar first launched it was all about being “brain food” that would help consumers push through the 3 pm slump and fight against brain fog that can sometimes occur after eating certain foods. But over the past two years, Nitze added, the company realized many fitness enthusiasts were reaching for the bars, too. So to appeal to them brand reformulated to add more of the attributes this group wanted and remove what they didn’t.
This included bumping up the plant protein from 10 grams to 11, dropping the sugar from 1 to 2 grams to less than 1 to 1 gram and removing unnecessary ingredients such as rice extract and grape extract. It also replaced less desirable ingredients, like erythritol with allulose, and adjusted the product texture to be more like granola and less like a “protein paste slab,” Nitze said.
These changes allowed the brand to appeal to the growing number of people following the paleo and keto diets, who tend to be extremely loyal and, therefore, will drive repeat purchases.
With this target consumer in mind, Nitze said IQ Bar is introducing new fruit-flavored SKUs, including a blueberry and banana nut.
“We did that for a couple of reasons,” he explained. “One, we found that variety packs do incredibly well online … and two by offering a fruit-lovers variety pack in addition to our already existing chocolate lovers variety pack we could differentiate ourselves with a unique value pack that will generate more business.”
He explained that very few keto-friendly products are fruit-flavored because fruit tends to be high in carbs and low in sugar, but IQ Bar has created fruit flavored keto bars that deliver and authentic taste but still super low sugar.
‘We try to get scrappy’
The second prong in IQ Bar’s plan for the newly raised $1m is “growing responsibly” by acquiring “new cost-effective accounts that we are confident we can succeed in,” Nitze said.
“We try to get scrappy and hustle as best we can with the money that we have while still growing rapidly, and sometimes that means looking at alternative channels,” he explained.
He said he sees potential in food service, but since the company is not interested in paying slotting fees it has ruled out, for now, some of the larger grocery banners.
“We’re trying to be big and nationwide and successful, but we also are not going to be constantly raising money to enter new avenues that can’t support themselves or that would make us lopsided,” he said, again emphasizing the brand for now is focused on supporting the deals it already has in place.