First Stage Investor Issue No. 32

First Stage Investor Issue No. 32

There’s Ample Reason to Invest in This Food Startup


Startup: Ample Foods
Security type: Crowd SAFE (Learn more here)
Valuation (cap): $15 million
Discount: 20%
Minimum investment: $100
Where to invest: Republic
Deadline: March 17, 2019

Since the late 1960s, health “experts” have told us that fat and cholesterol cause heart disease. This was almost certainly a big fat lie. Sugar and carbohydrates are likely the real cause of spiking heart problems in the Western world.

How do I say this so confidently? Because we now know that in the 1960s, the sugar industry was worried about new studies pointing to sugar as heart disease’s probable cause. So in 1967, it paid three prominent Harvard scientists to conduct a biased study that blamed fat for rising heart disease rates.

This deception was finally revealed in 2016 by a researcher at the University of California, San Francisco. And the story garnered headlines like this from The New York Times: “How the Sugar Industry Shifted Blame to Fat.” Here’s an excerpt:

The sugar industry paid scientists in the 1960s to play down the link between sugar and heart disease and promote saturated fat as the culprit instead, newly released historical documents show.

The internal sugar industry documents, recently discovered by a researcher at the University of California, San Francisco, and published Monday in JAMA Internal Medicine, suggest that five decades of research into the role of nutrition and heart disease, including many of today’s dietary recommendations, may have been largely shaped by the sugar industry.

The sugar industry successfully blamed heart disease on fat for many decades and caused untold damage to people’s health. Millions needlessly avoided foods like eggs, steak and butter. Instead they chose mostly high-carb and sugary foods, and cheap seed oils (soy, canola).

But the tide is finally turning. A growing number of us believe that saturated fats are actually quite healthy and that sugar and carbs are the real problem. “Ketogenic” diets, ones very low in carbs, low in protein and high in healthy fats, are becoming increasingly popular.

In fact, Weight Watchers recently cited a “keto surge” as one reason its stock is down 80% over the last year. Kraft, another carb-heavy company, is also struggling.

We are witnessing a total rethink of what “healthy food” means.

Our newest recommendation, Ample Foods, is a pure play on this ongoing shift in thinking.

The Product

Ample Foods is a leading startup in the meal-replacement category, which is an $18 billion per year industry in the U.S. Ample’s products are powdered drink mixes. Each “meal” comes in an otherwise empty bottle. Fill it up with water (or milk), and you’ve got a healthy 400-calorie meal on the go.

Ample’s formulas are all made with top-quality ingredients, including coconut, macadamia nuts, probiotics and grass-fed whey. They’re low in carbohydrates and high in healthy fats.

Here’s a nutritional breakdown of Ample’s original formula (it also makes a keto and vegan version).

Ample has received some high-powered endorsements, including one from Dom D’Agostino, Ph.D. D’Agostino is a leading voice in the keto community. I’ve been following him for years. And he says, “Ample spends more energy and thought on the quality of their formulas than any other company I’ve seen.”

Its products are truly high-quality and, as you can see below, customers are willing to pay for them.


Ample sold approximately $3 million worth of its “meal in a bottle” products in 2018. In 2017, it sold around $1.5 million worth.

That’s a healthy growth rate.

But the really interesting trend is how it increased subscription sales.

In 2017, the company sold $350,000 worth of products via subscription.

In 2018, it sold $1.5 million worth of products by subscription.

Ample’s strong growth in subscription sales shows that the company has developed a very loyal following. People love Ample’s products, and they fit in well with customers’ active, healthy lifestyles.

Bullish Outlook

Ample Foods is well-positioned in a long-term growth market (low-carb, keto-friendly meal replacements). As it continues to grow, there will be plentiful opportunities to move into other areas (protein bars, for example).

It also has four near-term catalysts that could catapult sales higher.

  1. Ample will soon start selling bulk bags of its powdered drink mixes. Founder and CEO Connor Young told me this is by far the top request from customers. By selling product in bulk, Ample will significantly lower the cost to consumers. Connor says the launch of bulk powder is on track to happen in May.
  2. Ample is adding new flavors, including chocolate, to its lineup this summer.
  3. Ample has been ramping up its focus on selling through Amazon with very promising results. Connor sees this as a significant opportunity. The company will soon offer a larger selection of sizes on Amazon and the ability to buy a subscription directly through this channel.
  4. The last near-term catalyst is Ample’s nearly complete redesign of its website. Ample has spent months talking with customers and design experts, and will soon launch a totally revamped website that should increase conversion rates (the number of people who buy) significantly.


I had a nice long talk with Connor. He showed impressive knowledge about his industry and was clearly excited about his business. Connor is a former CrossFit trainer and a current cross-training enthusiast. He is well-connected in the fitness world.

He started his company because he wanted a healthy, on-the-go meal option. But other meal replacements use mostly cheap ingredients and are high in carbs. He wanted to make a better product, so he built Ample Foods.

Connor has shown he has what it takes to run a startup. He’s raised more than $4 million from notable investors, including venture capital firms Slow Capital and LivWell Ventures, Instagram co-founder Mike Krieger, and former Twitter CEO Dick Costolo.

He’s moved his company forward consistently and delivered products that customers love. I spent a while discussing upcoming marketing plans with Connor and was impressed with his knowledge and strategic thinking (I have a marketing background).

In Summary…

The low-carb craze is not a fad. It’s here to stay. Ample Foods is a pure play on this seismic shift in the way we think about healthy eating.

Ample has built high-quality products and is building a business with strong recurring revenue from subscriptions. It has a loyal following, continues to innovate and is growing quickly. The vast majority of its sales are “direct to consumer,” meaning there aren’t any middlemen to pay.

Ample has an impressive 64 Net Promoter Score (NPS). This is a common measure used by companies to determine how well customers like the product. Anything above 50 is considered excellent. For comparison, Apple’s NPS is 72.

How to Invest

Ample is raising up to $1 million on If you don’t already have a Republic account, you can sign up for one here:

Once you verify your account and are logged in to Republic, go to the Ample Foods deal page here:

Now click the blue “invest” button. Enter the amount you want to invest, and proceed through the required steps. Be sure your investment is confirmed, then you’re good to go.

How You Can Help

If you know anyone who is into low-carb eating or healthy meal replacements, or for whom this might be a good fit, let them know about Ample. You can refer them to, the official website.


This opportunity, like all early-stage investments, is risky. Early-stage investments often fail. Ample will probably need to raise another round of funding in a year, possibly sooner. If it executes well, this shouldn’t be a problem. But that’s a
risk worth considering when investing in early-stage companies.

The investment you’re making is NOT liquid. Expect to hold your position for five to 10 years. An earlier exit is always possible but should not be expected.

All that said, I believe Ample Foods offers a very attractive risk-reward ratio here.

Startup Trends

Why Asian Startups Are Migrating to America

Success breeds success in the startup world, but it also encourages a harsher competitive environment.

An American startup’s journey is incredibly difficult. As it overcomes obstacles and proves its idea is wildly profitable, it usually draws more new companies into its space.

Fair or not, it’s the price of success. And the price is getting steeper. Newly disrupted markets in the U.S. are drawing the attention of not only American startups but also high-quality, aggressively run startups from Asia, especially China and India.

Both countries are churning out impactful startups in record numbers. China accounts for 97 unicorns (startups valuated at $1 billion or more), more than a third of the world’s 262 total. It produced a unicorn every 3.8 days in 2018. The Asian giant is among the world’s top three markets globally for venture capital (VC) in digital technologies, including virtual reality, autonomous vehicles, 3D printing, drones and artificial intelligence.

China’s unicorns account for 43% of the global value of such companies. And five of the 10 largest unicorns hail from China. In 2018, early-stage companies in China received more VC financing in the first half of the year than new companies in the U.S., according to a study by Preqin and INSEAD Global Private Equity Initiative. That’s the first time that’s happened since 2010.

India isn’t far behind. It boasts dozens of highly successful startups. Some you may know (Snapdeal, Flipkart, Zomato)… and some you may not (Capillary Technologies, Druva, Justdial, Micromax, Vini Cosmetics).

VC heavyweights, including Sequoia Capital and SoftBank, are investing hundreds of millions of dollars into Indian startups, including many of the above.

The Grass Is Greener in the U.S.

More than ever before, Indian and Chinese startups are setting their sights on the large, tech-friendly and VC-rich U.S.

China is going through an economic slowdown, a downturn in consumer spending and a trade war with the U.S. Domestic conditions are not as friendly as they used to be either. Investors and entrepreneurs are calling it the Chinese internet’s “freezing winter.”

Chinese startups also don’t relish locking horns with Tencent and Alibaba, the powerful companies that dominate China’s tech scene. They’d rather look at tech-friendly economies overseas – especially huge economies.

The U.S fits the bill quite nicely. For example, Chinese startup Asia Innovations Group has more than 80 million users. More than 80% hail from outside China. Co-founder Andy Tian says that “The old guard are generally more successful in domestic China, but what works in China doesn’t necessarily work overseas, so that gives opportunities for startups like us.”

Indian companies are grappling with a different set of problems. Sales cycles in India are frustratingly long, and profit margins are thinner than the norm in the West. Indian companies also deal with poor domestic infrastructure, unreliable power supplies and burdensome regulatory policies.

Perhaps because of the difficulties the Indian economy presents to early-stage companies, local investors are increasingly asking startups to extend their marketing initiatives to other countries. So like their Chinese counterparts, Indian startups find the U.S. an attractive overseas market.

Increasing Globalization Takes Many Roads

My previous experience has given me a unique perspective on this. I used to advise small to midsize American companies on the benefits and downsides of moving into overseas markets. My basic advice was, if you’re ready, it’s a great way to grow.

But if you can’t compete domestically, don’t expect overseas markets to rescue you. They’re not a magic remedy for companies struggling in their home markets. It’s extremely unlikely you’ll do better in markets with different rules and unfamiliar customer behavior.

And there’s a real downside. Stronger overseas companies, after outcompeting you in their home markets, will take what they’ve learned, go into the U.S. and successfully compete against you there.

That’s why it’s important to put startups migrating overseas into two distinct categories: those that have “won” their home markets and are looking for additional markets from a position of strength… and those that are less experienced, less successful and looking for what they hope are “easier” markets to make money in.

There is no hard data on how this breaks down, but there are plenty of examples of both. India’s Synup scaled to revenues in the millions of dollars before setting its sights on the U.S. It now serves more than 150,000 businesses.

On the opposite end of the traction scale is India’s Freshdesk. This cloud-based software company decided to incorporate in the U.S. because it seemed a better fit for a company that wants to handle recurring payments from international customers. Freshdesk may prove to be a formidable company, but its track record at this point doesn’t scare anybody.

There’s no reason to panic. It’s not as if Asian companies are overrunning the startup population in the U.S. Nor are all these companies proven successes. But it is important to pay attention to this trend. This is not a flash in the pan. This migration will continue to increase, and it will have a growing impact on the startup ecosystem here in the U.S.

This isn’t necessarily a bad thing. One unforeseen consequence could be deep-pocketed Asian startups coming here and buying out early-stage U.S. startups to better compete (or as a shortcut to acclimating to a new market). Another possibility is that U.S. companies, armed with knowledge gleaned from Asian companies operating in the U.S., could experience success more quickly in Asian markets.

And longer term? Promising Asian startups will come here not only to compete but also to raise from crowdfunding sources, much like BrewDog USA did. BrewDog, which we recommended in 2016, did its crowdfunding raise more for the opportunity to grow and invigorate an American community of enthusiasts than to obtain funding.

It’s a model that Asian startups are sure to follow.

Marijuana’s Local Control Problem

How to Cultivate a Thriving Local Marijuana Market

Local control. Those two words make up the second-most important phrase in the cannabis industry. Almost as important as “illegal at the federal level.” And when Congress (eventually) legalizes marijuana, “local control” will be the most important phrase in the industry.

So why is local control so important?

Because as states legalize marijuana, the cities, towns and counties in those states are often given a choice. They can opt out and prohibit marijuana sales in their communities. Or they can opt in and set their own rules and guidelines (in addition to state regulations) for the sale and use of cannabis products. Either way, local governments have the ability to dramatically shape the industry.

Less than 20% of the cities in California permit the sale of recreational marijuana products. And 82 of the 88 cities in Los Angeles County prohibit the sale of recreational weed.

In Michigan, some of Detroit’s biggest and most important suburbs – Troy, Livonia, Royal Oak and Birmingham – have decided to ban marijuana businesses.

Augusta, the state capital of Maine, is considering prohibiting the sale of recreational marijuana.

And in Colorado, more than half of the state’s counties and nearly 75% of its municipalities ban recreational marijuana sales. In 2018, marijuana sales in Colorado topped $1.54 billion. Just imagine what sales would have been like if every town in Colorado permitted recreational marijuana sales.

Barriers to Good Business

Local control is about much more than whether or not marijuana can be sold legally in a community though. States, cities and towns have the power to create a friendly business environment. But they can also create a business environment that prevents marijuana businesses from ever thriving (talk about passive-aggressive).

Consider the following examples…

In Los Angeles, marijuana stores pass on a 15% state excise tax, a 10% city tax for recreational marijuana and 9.5% in combined state and county sales taxes to pot buyers. That’s a markup of 34.5%. Throw in a variable wholesale tax ($9.25 per ounce of flowers or $2.75 per ounce of leaves), and you get a markup that can top 40%.

The town of Hudson, Massachusetts, has forced the Temescal recreational and medical marijuana facility to use its parking lot for medical marijuana patients only. It has banned street parking in the vicinity of the facility. And the store is not allowed to accept walk-in customers. If you want to buy recreational weed from the Temescal dispensary, you have to park in a remote parking lot (2 miles away), get a confirmation ticket that you want to buy pot, and ride a shuttle bus to and from the dispensary.

New Jersey is proposing a flat $42 per ounce consumption fee for marijuana. The idea behind the per ounce fee is that revenue will stay constant even as cannabis prices fall – as they inevitably do once cannabis is legalized in a state and suppliers flood the market.

None of these examples are business-friendly. As a result of the high taxes in California, many consumers and growers are still turning to the black market. That depresses licensing fees as well as sales and tax revenue. The same is likely to happen if New Jersey sticks with the $42 per ounce tax.

Stabilizing tax revenue, as New Jersey wants to, is a worthy policy goal. After all, states don’t want to become “addicted” to cannabis tax revenue and then watch it decline when the price of marijuana drops.

But trying to achieve this with a $42 per ounce tax is a terrible idea. The wholesale price of marijuana in Colorado is $54.71. New Jersey’s $42 “fee” would represent a markup of nearly 77% from the wholesale price. Who knows how much customers will be paying once you factor in the retail markup?

A Better Approach

A much better solution is to create a robust marketplace – and to stop treating cannabis revenue as a miracle cure for debt. Offering companies billions of dollars in tax breaks while trying to balance the budget on the backs of cannabis users just doesn’t make sense.

Colorado is an example of how things should work. Even with local control restricting the size of the market, Colorado has seen marijuana sales and tax revenue grow as the price of weed has dropped.

In 2018, Colorado marijuana sales hit a record high of nearly $1.55 billion. That’s about a 3% increase from 2017’s sales. And those sales resulted in a nearly 8% increase in tax revenue for the state.

As you can see, Colorado managed to create a growing, robust marijuana market AND increase its tax base, despite the fact that only 25% of its municipalities permit marijuana sales. How did the state do it? It created a reasonable tax scheme.

The state has a 15% excise tax on the first sale of marijuana from a cultivation facility to a retail facility. Colorado also has a marijuana-specific state sales tax that increased from 10% to 15% on July 1, 2017. And when the state increased the marijuana sales tax, it exempted marijuana sales from the state’s general 2.9% sales tax.

This is how you create a robust marketplace and grow tax revenue. Colorado has had more than $6 billion in marijuana sales since legalized recreational marijuana sales began in 2014. And it’s created more than $900 million in tax revenue in that time.

Other states should take note – California in particular. It was expecting to generate $630 million in marijuana tax revenue in 2018 – the first year legal recreational marijuana sales were permitted in the state. Instead, it brought in just $471 million.

Don’t underestimate the impact local control can have on the marijuana industry. It directly affects the revenue any company can generate in the market, making it a key data point as you evaluate potential marijuana investments. And don’t expect local control to go away anytime soon. After all, there are still dry cities and counties more than 80 years after the end of Prohibition. And that’s with alcohol being legal at the federal level.

We’re at the beginning of the marijuana investment game. And we’ll keep looking at all the data points to find you the best investments.

Lightning Network

Bitcoin’s Lightning Network 101

The biggest challenge facing bitcoin today is scalability. Currently, bitcoin can perform around seven transactions a second. But to compete with fiat networks like Visa, it will need to dramatically increase the number of transactions it can handle.

Currently, when the bitcoin network gets backed up, users may have to wait up to several hours for a transaction to go through.

You can pay higher fees to miners to ensure your transaction goes through quickly, but that’s not a real solution to the problem.

The bottleneck that slows bitcoin down is the blockchain, which is highly secure but not designed for speed.

Thankfully there are several projects working to scale up the network.

The project I’m most closely watching is Lightning Network (LN). LN is a layer-two scaling solution. This means it sits on top of the bitcoin network and does not change the way bitcoin’s “base layer” functions.

LN uses smart contracts to let users transfer bitcoin outside of the blockchain. Groups that frequently transact with each other set up a “payment channel” on LN and can transfer bitcoin between themselves nearly instantly and for a very low cost.

But LN isn’t designed just to facilitate payments between two parties who do frequent business. It’s designed to allow the routing of payments through a huge network of users. LN proponents believe the layer-two solution will eventually scale up to be able to process more transactions per second than Visa (about 56,000 per second).

Lightning Takes Off

Until last year, LN was mostly hypothetical.
Now the mainnet is up and running, and more than 700 bitcoins exist on more than 28,000 payment channels.

For now it’s mostly testing, but there has been a huge uptick in LN activity this year. It all started in January when Twitter user Hodlonaut suggested creating a “lightning torch” experiment. He would send 100,000 satoshis (the smallest unit of bitcoin, with 100,000 being worth about $3.50) to someone he trusts, and each person along the chain would add 10,000 satoshis (approximately $0.34) before sending it along.

The experiment took off immediately. Notable names in the crypto world, including Binance CEO Changpeng Zhao (“CZ”), rushed to take the torch and pass it on.

The Lightning Torch has now been passed around the world more than 230 times, and the value has grown to around $140. Twitter founder Jack Dorsey caused major buzz when he accepted the torch. Soon after, it was passed on to Fidelity Digital Assets, a division of the financial giant that manages $7.2 trillion in traditional assets. Fidelity posted the following message on Twitter:

We and our research team at the Fidelity Center for Applied Technology have received the #LNTorch from @Wiz.

Who should we pass it to? #LNTrustChain

A few days later, LinkedIn founder Reid Hoffman received the torch and passed it on. The Lightning Torch experiment has been a great success. Some of the world’s leading tech personalities are participating, showing that LN is not some pipe dream but a real scaling solution that could catapult bitcoin’s scalability to unfathomable levels.

Already dozens of groups are producing software and hardware to support LN. Right now it may be hard to see how useful LN could eventually become because it’s still in the very early stages of development. But with the recent uptick in interest in the network, progress is sure to march on.

The Future of Lightning

The reason many of us are excited about LN is simple. It allows bitcoin to retain all of its inherent security and reliability, and adds the ability to transact fast at huge volumes and do so nearly for free.

This is quite different from the approach that networks like bitcoin cash are taking to scale up. Bitcoin cash was split off from the original blockchain because its supporters believe the best way to scale up is to simply increase the size of “blocks” in the blockchain.

It’s true that this allows for more transactions per second. But it also makes the blockchain grow in size much faster. This means fewer people are capable of running nodes to support the network because the blockchain will soon grow to a monumental size.

It will be slow to download for new network participants, and it may eventually limit mining activities to large corporations. This would be bad for the decentralization of the network.

I’m glad that bitcoin is pursuing layer-two solutions instead of simply increasing block size.

I believe solutions like LN offer a more sustainable path for the long run.

For now, I don’t recommend most users try to use LN. Only advanced technical users should attempt to do so.

We’re still in the early days, and it is likely that there are still major bugs and other issues to be fixed.

However, with thousands of very smart people around the world working on these problems, I expect the network to be ready for prime time in a few short years.

There’s a very good chance that once it’s fully up and running, LN will form an important part of the “Internet of Money,” as Andreas Antonopoulos calls it.

Investment Update

Catching Up With Our Portfolio

The scrap metal business is a tough gig. Nobody trusts anybody. Buyers question sellers, and sellers suspect buyers. The result is a wildly inefficient market (and a really terrible work environment).

That’s where our portfolio pick, Scrap Connection, enters the equation.

Founded by scrap industry veteran Chris Yerbey, it aims to disrupt the sector by increasing trust.

And building trust requires data. The more data Scrap Connection collects on buyers and sellers the more useful its services – including reputation reports on their suppliers or buyers, verified reviews and trading history.

So I just about fell out of my chair when Chris told me Scrap Connection was increasing its data feed from information on 7,000 companies to information on 100,000 companies. “We have plugged into a gold mine!” he exclaimed.

The name of that gold mine has to remain private for now. But I can tell you this: It’s a company that’s been around for 170 years. Its data collection is so big, the only comparison that does it justice is Google.

We’re talking big numbers. Scrap Connection is now adding 500 million transactions that have taken place over the past five years into its database. And those numbers have Chris thinking big.

The company plans to expand into plastics and fibers, and eventually other enormous verticals that dwarf the size of the global scrap recycling industry. And that of course means… collecting even more data.

From 100,000 companies, Chris wants his database to expand to 400,000 companies. Eventually, Chris says, it will get into the biggest vertical of the bunch: raw materials.

Chris hopes to have 4 million companies in his database at that point. Perhaps as soon as next year, the name of the company will change to reflect its multiple business lines. It will be called Trade Fox.

In the meantime, Scrap Connection plans to issue “reputation scores” on 10,000 companies, up from its current repertoire of 1,700 companies. Those scores should be out by the end of this year.

All this will require more money and more people. The company will soon be raising another $400,000 in a bridge round and hiring two to three more people.

This is my dream scenario as an investor. I love it when a founder comes back to me and tells me his vision and goals weren’t big enough and his company will be targeting a much bigger market or markets. Believe me, it doesn’t happen every day.

Home61: Ranked No. 1 in the Miami Market

When we recommended Home61 to you last year, the tech-friendly real estate brokerage was aiming to challenge legacy real estate giants like Re/Max and Century 21. That’s still the goal, but growth has come a little slower than expected.

Home61 grew its home sales from $42 million in 2017 to $56 million last year. As founder Olivier Grinda told me, “That’s okay but not really what we were aiming for.” Home61 is expecting sales this year to reach somewhere between $80 million and $100 million. That would put him roughly two years behind where he thought he’d be when we last talked about a year ago.

That’s not great news, obviously. Olivier says the company’s big push on the listing side of the business (sellers list, buyers purchase) didn’t work out. Last June, he halted this initiative and began focusing once again on the buy side.

Since then, the company has slowly but surely re-established a momentum that Olivier hopes “will continue throughout the year.” He also acknowledged that Home61 “has a long way to go.”

February was a record month for the company. It registered $8.6 million in sales and captured more than $200,000 in revenue. And there are other positive signs…

The company is generating more leads than ever. Its 357 leads in February set another record. And it’s costing Home61 25% less to generate those leads compared with what it cost the past couple of years. The biggest difference? “Clients are finding us, [rather than] us spending money to find them,” says Olivier.

Another nice sign: Home61 has 90 agents. That’s almost 50% more than the 61 agents it had when we originally recommended the company. Its top agents are closing deals at a 30% conversion rate. That’s really good. And its website is earning high praise from customers, helping Home61 earn a 4.9 score and No. 1 ranking among real estate companies in Miami.

Olivier is taking recent progress in stride. “We’re not there yet,” he cautions. “We have to repeat the success we had in February in March, and repeat March’s in April, and so on.”

“But I think we’re on the right path. We’re growing. And we’re a smarter company than we were last year at this time.”

Portfolio Update

EXPOSED: Wall Street’s $1 Trillion Crypto Mega-Boom

In this brand-new interview, top crypto expert Adam Sharp unveils the secret catalyst behind the next millionaire-making move in crypto. While nothing is guaranteed, Adam is confident that anyone who prepares today could become a crypto millionaire in the coming months.

Learn more here.