Mark J. Nelson, CFO of Beyond Meat and CFO Dive’s Innovator of the Year, has a lot to be proud of.
Nelson and his finance team helped take Beyond Meat public on May 2. It was the best performing first-day IPO in nearly two decades.
The process of an initial public offering is taxing and, despite strenuous effort and planning, can go awry at any stage. 2019 has seen dozens of promising companies weather unsatisfactory IPOs. Thanks to Nelson’s measured strategy, excellent capital model, and innovative forward-thinking, he was able to bring about a successful IPO for the disruptive plant-based protein company that has just turned 10 years old.
"I was really born to be in finance," Nelson told CFO Dive. "My roles have always blended in and out of finance and operations; doing both was natural as the company was scaling, but it got to the point where, especially with the IPO, I had to make sure I was focused."
Beyond Meat is a plant-based meat substitute purveyor, offering products designed to simulate chicken, beef, and pork sausage, all with a primary ingredient of pea protein isolate. When Nelson started at Beyond, he served as both COO and CFO, "participating in fundraising and building operations on the accounting and finance team." But he channeled his focus into deep financial analysis and strategizing for what was a completely new market.
I was really born to be in finance.
CFO, Beyond Meat
"When the IPO really took off, I had essentially switched into the pure CFO role, and my entire focus was on the IPO," Nelson said. "We had to get our public company ready, get an accounting team in place. We had some very strong players, but we needed more."
Managing growth has been and continues to be rife with landmines. Start-up culture defined the 2010s, as did a number of crash-and-burns when these start-ups started growing too quickly without adequate scaling and forethought. Nelson confirms this.
"A company needs a certain amount of scale ... before it can go public," he said. "And it needs to be able to demonstrate financial performance, have several years of audited financials in place, and have enough scale that investors would be willing to invest." Nelson did not believe Beyond had each of these pieces in place until late 2018. But, he said, as the company "transitioned into early 2019, we were ready. We had grown to the point that we had enough scale."
Beyond was in a particularly difficult place in the years leading up to its IPO. It had established a dedicated executive team, sourced its materials, and found a niche market. But their exponential growth required a steady, forward-looking plan, which Nelson, as COO-CFO, had already begun to pioneer. But it wasn’t without its early hiccups; in 2016 and 2017, the company ran into a handful of product shortages.
"When we were doubling, or tripling, or even quadrupling year over year in our growth, we couldn't keep up; every month, it seemed like it continued to grow exponentially," Nelson recalled. "So we focused on just being as flexible as we could to attract good people, find opportunities to work with contract manufacturing partners, launch new innovative products, and source the materials to make those products."
"We had to do everything for the first time"
Nelson pointed out that the Beyond Burger, and all of its eventual offshoots, were new, making the market impossible to predict. Though veggie burgers have been on the market since at least the 1970s, Beyond Meat's goal was to create burger patties and sausages that could be easily mistaken as meat, rather than panned as a vegetarian alternative.
"It was something that hadn't been done before, it was a new product, a new type of food," he said. "We had to do everything for the first time."
That meant, first, converting contract manufacturers into manufacturing for Beyond. It also meant finding ways to source pea protein isolate, Beyond’s primary ingredient. Then came designing new packaging and creating a new marketing strategy. Amid each of these steps, on the finance side, was eight rounds of funding.
"That was quite a lot for a private company, but we had to," Nelson said. "And we had to time the [funding rounds] so that when we raised money, we weren't raising too much; we were raising enough to get us through the next major milestone.
"So we consciously raised a certain amount, and just about [annually], we were back out raising more. And each time it was at a higher valuation, with more results and more progress," Nelson said.
The slow and steady funding growth worked, and Beyond’s IPO was, all factors considered, perfectly timed. "It came together very, very well, in that funding environment,” Nelson acknowledged, "to provide funding for the growth that we needed."
Looking ahead, however, there’s a looming reality — Beyond has yet to make a profit.
"We technically aren't yet positive cashflow," Nelson said. "We've operated through venture funding to get the growth, and get to [our current] position. We actually just had our first quarter of positive net income."
Nelson believes that companies go to the venture capital markets for growth capital, not necessarily for turning a profit for several years, "until they can get to the scale that we're getting to now, where we start to generate profit and cashflow," he explained.
"We had models that said we would grow a certain amount, and funding that we would need. We always grew much faster than we forecast, and I hadn't seen that much before in my finance roles," he said of Beyond’s meteoric growth. "I'm used to seeing forecasts that are more aspirational. But I think we were conservative enough, and still had some tremendous growth baked in, but we always seemed to exceed that."
Thinking into the future, it was Beyond’s conservative growth model, on which Nelson insisted, that guides the way towards profit.
"When we started to generate positive gross profit on our revenue dollars, instead of selling product and having it be detrimental, we were getting to positive gross margin. And then the more we grew, we would actually contribute to the operation. So I think the business started to become less and less cash-intensive. And as we rounded the corner here for the IPO, we're now getting into a position where we're achieving profitability. So, it's a great time for us."
Nelson cited taking Beyond Meat public to such great success as an inarguable highlight of his career. "I feel like I was built for this," he said. "It had always been my dream to take a company public, and now I've gotten to do it. It’s quite addictive.
"I'm just very, very grateful," he said. "And very thankful to be a part of this company."