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Investment Climate Podcast
On Surviving the Long Game, and Renegotiating a "No" - Sérgio Pinto, Cellva Ingredients
00:24:34
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- [00:00]
A
My son was born on September 5th. In this very day, one of the guys from Digi board operating the fund sent me a sent a message. Hey Sergio, we are not going to invest on you. We decided not to move forward. Best of luck in your fundraising. I gave the guy a call, he said, man, I'm here in the hospital, my son's about to be born and you send me this. I do not accept this. I will take an airplane and go to to Manaus. As soon as I leave the hospital, sitting at the table again and renegotiate and something. Almost 14 months after, in December last year, we finally signed the papers. My name is Sergio Pinto. I'm founder and CEO of Salva Ingredients. Our mission is to transform Brazil into a nutrition platform using co products from coffee as our main engine of growth. And we have just ended a fundraise of 20 million reais which is pretty much $4 million here in Brazil.
- [00:57]
B
Amazing. Well, so excited to have this conversation. I'm a huge fan of coffee and obviously cocoa. So this is gonna, we're gonna deep dive, very nerd out together. How did you meet digiboard?
- [01:07]
A
Well, actually we met digiboard. This story is very interesting. I went to Feature Food Tech in San Francisco in 2023. There I had the chance to meet a Mexican guy who actually was managing funds for World Bank. And I had the chance to introduce him the work that we were doing at the time, we were both managing cultivated fat, plus this development of using microencapsulation to transform coffee husks into cocoa substitutes into sugars and et cetera. I will explain this in a while. And he invited me to go to a meeting in Manaus. So imagine that a guy, a Mexican guy in United States inviting me to go to Manaus for having like a session with some different investors. And when I was there, I used to go to Manaus for tourism, but never for business. It was my first time going there for business. So before going there, I do what every founder does, right? So what I did was I went in the LinkedIn, tried to understand who were the main important guys over there. So I had the chance to meet, let's say the main lawyer and one of the most important persons in the region, in the Amazon region. Who the name of guy is Achila Dennis. He's a great, great, amazing person. And he introduced me to digiboard who two years after that led our pre series round.
- [02:30]
B
Wow, that's an incredible conversation. Way to meet the investor. And I'll say for Our listeners, you should fly to Manaus just so you can go to the mall in Manaus, because they have, literally it's like the Amazon and they have a mall that's built around Amazon. That's. Yeah, I'm not Amazon, the company, I'm talking about the little Amazon.
- [02:47]
A
Yeah, it's the real Amazon. Actually the in my house is, I think first time people go to Manaus, when they land in the city, they are thinking that they're landing in the middle of the forest, right? Because of the airport. The airport's like a 30 minutes drive from, from the downtown. But when you get in Manaus, it's a crazy city. 2 million inhabitants in the middle of the jungle. So imagine that that was built by the like say by the priests, by the fathers that came from the Catholic Church, like two, two centuries ago, with no resource, just traveling using small boats. And they built this huge city, not only Manaus, but there is a city like the name is Barcelona. You need to take another ship. It will take two days off ship before going there. And then one interesting thing about Manaus and the Amazon is that you calculate the distance is not in kilometers, but days in the ship.
- [03:39]
B
Wow, okay, well, now we can know the days in the ship of how long it took you to find that investor in Manaus in the middle. Basically up to Amazon. And curious. If you'd have looked at digiboard and you were thinking like, would you have thought they're a good fit for you as a company, like from the outside, if you didn't know what was, get the introduction about them, like, where is the fit between DigiBoard and your company?
- [04:04]
A
I think that explaining how is easier, Alex, to be honest. But by the time was not that, let's say, easy to connect, right? So the dots, they were not that bounded. But what made me interested about having this conversation with digiboard was the fact that you have some very important funds in Brazil trying to transform and to protect the Amazon, right? So what they are doing, if you want to protect the Amazon, you have to offer employment for the population that lives over there. Otherwise they're going to do something that we of course will not like. And this board is one of the sponsors, one of the main sponsors of this fund. So they are not like, let's say a food company, they are not a VC oriented in any kind of thing. They are like a tech company. But as a tech company, they want to develop the region, they want to bring more, let's say more founders, more entrepreneurs. They try to develop, using this socioeconomical development as a tool for bringing wealth to the region. So they, they are not the kind of guy, they say, sergio, there's a client over here, there's a client over there. But they're the very kind of, let's say, operator that help us in understanding how to connect with the whole environment of the Amazon, with everything that it benefits and it brings even the challenge that we will be facing. And also having the opportunity to talk with the government, which is very important when you have like to talk with regulators, to policymakers. So this is the kind of support that they do offer nowadays. It's easier, as I say, because I have been navigating these exosystems during the past three and a half years, but at the time was not like, as I said, something that I would say out of my, out of my mouth.
- [05:58]
B
Yeah. So it's an interesting case because they, there they are a essentially corporate in that region and they also have a venture fund that tries to cultivate local business or create employment. Yes. Through. Through strategic investments.
- [06:15]
A
Yes, it is, it is. And as we work with coffee, Brazil is pretty much known with, through the Arabica coffee. Right. Which is harvested in Sao Paulo, Mina Gerais. So these are, let's say, the main places that we harvest coffee, Arabica coffee. But we are also working with Cornelon, with the Robusta. Right. And the Amazon is getting to be known in Hondonia, in Amazonia, in Inacre, with the production of Robusta. So this is also an important point for us because as we have our commercial office, which I'm based here right now in Sao Paulo, we can talk with like providers, we can talk with, with our clients. And we are very close friends to the Arabica production. And we are also now operating Manaus. We are opening our semi industrial facility by the end of August, in the beginning of September 2026. And over that we can also work with all the side streams from coffee. And in the future we are considering working with ASAI as well.
- [07:18]
B
Incredible. And for digiboard, what was with the largest or the biggest objection you had to overcome? Like what was the, you know, it wasn't a quick sales process, Right. It was seems like the process almost like a two year relationship. Yes. So what would you say was the biggest challenge that came up during this fundraise and how did you go about dealing with that objection?
- [07:40]
A
Well, I think it's not like an objection, it's like you have to have some graduation over the process. So it's not like a traditional VC. We have some traditional VCs in our cap table, Alex. So then you open your data room, you expose your business case, explain and all the blah, blah, blah that we are tired to hear, right? But with DigiBoard, we have to build a concrete business case that we would like generate wealth in the region, not only in Sao Paulo, not only in Europe, not only in Japan, but bring wealth to the region and bring prosperity to coffee producers. So of course, we had an idea. The name Selva is not Selva because we don't like the jungle. It's the opposite. We love the jungle. So I always wanted to have the opportunity to work over there. But one thing, Alex, is to have a brief idea of what we're going to build. Another thing is to prepare a concrete case. In this case, of course, nowadays is easier because we have ChatGPT, Cloud and ET cetera. But I have to write down personally a business case with more than 100 pages explaining case by case, point by point, comma by comma, what I was going to do, who were the persons that I was going to hire and why, the profile of this persons, what they were going to do, what they are going to do, how I was going to connect the Robotsta production with the Arabica production, the profile of the technology that I was going to introduce in the region. So every piece of the business case. And of course I have to be profitable. I have to generate revenues, pay my taxes and all the et cetera, right? So I had to build case by case. So actually it was good, of course, tiring, exhausting. Several times I thought that we were not going to be able to do that after 18 months, I was almost like, okay, I think this is not going to happen. And one interesting thing, Alex, my son was born, my second son was born on September the fifth, right in this very day. One of the guys from digiboard, the guy that was operating the fund, sent me a message. Hey, Sergio, we are not going to invest on you. We decided not to move forward. Best of luck in your fundraising. I gave the guy a call and he knows who he is, right? I said, man, I'm here in the hospital, My son's about to be born. And you send me this. I do not accept this. I will take an airplane and go to Manaus as soon as I leave the hospital. So I left the hospital like 10 days after that. And the first thing I did was traveling to my house and sitting the table again and really negotiate. And I'm here and something almost 14 months after that in December last year. So we finally, we signed the papers. So it took me almost two years.
- [10:32]
B
Wow. So take me. That's incredible story. And I think a lot of our listeners can just learn about persistence from you. Why didn't you give up? Like, the guy calls you, he says, I'm not interested. And your response is, I'm actually going to take a plane 10 days after my son is born to see you. Like, why was that the response? Rather than to say, okay, well, you know, we're moving on to the next one. I speak with founders raising every day and they're all telling me the same thing. It's harder than ever to find investors who are actually deploying. And getting access to those leads takes time founders just don't have. Every month fundraising is a month burning Runway. This is why we created ftw, a community of founders actively fundraising the world's most accurate agri food tech investor database. Plus connecting you directly to ideal target investors and a community of support and accountability. Guaranteed results or your money back. Apply today at www.joinftw.com hub
- [11:39]
A
Never.
- [11:39]
B
Never.
- [11:39]
A
Alex, look, what happened was the guy told me, I'm not going to receive you because I, I'm too busy. So imagine it's like Tuesday. He said, I, I will be, I won't be in the office on Tuesday. Or better saying, I will be in the office Tuesday. But all my agenda is completely blocked. I'm full, I have no open space, I have no window for you. And I said, I don't trust you. One of these meetings will end before like, let's say the hour that the guy is requiring. One time you are going to the, the, the bathroom. You spend less time than you imagined. You have to leave your, your, your building and I will be waiting for you. And I was there. And so as soon as I got there, this was 8 in the morning. I told the guy, the receptionist says, hey, Sergio Pinto is here. Let the guy know that I'm here. And she said, okay, is, is he waiting for you? I said, yes, the whole day. But do you have a meeting? No, I don't, but I just let the guy know that I'm here downstairs waiting for him. And then 11am like three years, three hours after that, the guy called the receptionist and said, it's Sergio there? Yes. Okay, I'm going down. So he went down. We have like a five minute conversation and then we set a dinner for, for the following night. For the following night. And then we restarted the negotiation and I, I, I, I, I. You know, Alex, if I start telling all the, the stories, not only with Selva, with my life being entrepreneur, that you receive a no. It's like every day, it's like every hour, it's like every minute. Nobody wakes up in the morning and thinks, ah, we're going to help Selva, we are going to help Sergio Pinto. Nobody wants to help us. But if you go there, explain your case, make them see why the work that you do is important, is unique, and make them relate to the subject that you're developing and offer, of course, some benefits. It's always a negotiation, right? You give me something, I'll give you something. But I. This company, I always say, Alex, this company will never break. Never, never. This is not acceptable because nobody is doing what we do. Nobody's transforming byproducts into nutritional ingredients with added value, generating profit for farmers, bringing joy to every, every person over the table. So this is what we do. So I just cannot accept the no, you see, I just cannot accept the no. Every day, Every day I always say early stage company, Alex. I do not consider ourselves an early stage company because we're going to process 600 tonnes this year, right? But we are like, say we're growing, but every day, Alex, I compare a company to a. We are four years old, right? To a four years old child. You are like in the 15th floor, going, watching the streets, trying to kill yourself. This early stage companies, they have suicidal tendencies, right? So we are like the parents, they're trying to protect the company, trying to show them the way how to walk with their own legs, trying to bring people to support this growth. And of course this new life is going to bring more happiness to people who is living there. So this is what we do at Selva, Alex, we tried not to die.
- [14:53]
B
Look, I absolutely love your conviction and the fact that you were able to have that level of not taking no for an answer and literally taking a flight across, by the way, just people understand, from Sao Paulo to Manaus, it's not like an hour flights. I think people forget how big Brazil is. Like, it's like a, it's like six hours, seven hours, something like that.
- [15:15]
A
Four hours and a half.
- [15:16]
B
Four and a half hours, right? It's like, no, this is a, this is a sacrifice. Ten days after your child is born. Absolutely inspiring. Curious, if you look back at it, his objection, do you think the objection was legitimate? Like the reasons he brought up is saying his concerns and did the objection, did you incorporate his concerns into the plan and Say, hey, I hear what you're saying, I understand, but I think we can actually address it. And would you say his no came from a misunderstanding of the company or his feedback was genuine? You just had to improve the proposal without need to go into the details. Was it a lack of understanding or was it real feedback that you incorporated to the proposal?
- [15:55]
A
I think it's always a combination of everything, right? I'm not like moving from the, from the question, but it was like I was of course trying to protect my cap table. I was of course trying to protect my past investors. So you have some clause or some, let's say some, how can I say, like topics in the, in the contract here and there that were very picky. So I have to be very selective over there. I have to negotiate a lot with my at the time, current cap table. Then after doing that, I have to renegotiate with them. There are some parts of the, of the work that, you know, it's not because you're going to receive investment because I'm, I'm going to do everything that they want me to do, right. I'm going. The company that I believe that has to be built in the way that I believe it has to be built because by the end of the day, if the company goes wrong, I'm the only responsible. If the company goes well, everybody is responsible, right? So it was regarding, so the cap table, so the contract, but also some aspects of the development of the, of the facility in Manaus and of course the development of facility here in the southeast, in Sao Paulo and Minas Gerais. And by the end of the day, the thing is I have to be close of being both environments because in Sao Paulo is like the, a huge environment, a huge socioeconomical capital of South America, not only from Brazil. So everything is happening here. I saw another day, Alex, that 58% of the GDP of South America is in Brazil. And from this probably 40% is from SAO Paulo. So we are talking about, so more or less 25% of the total GDP of South America. So I have to be here, but my facility has to be close to the producers of robusta coffee in Manaus as well. So it's not a question of or it's a question of and I have to be here and there.
- [17:49]
B
So the way that I'm hearing what you're saying is that, and you know the company I work at, we have a US based R& D team in Boston, but also we have a strategic partnerships in South Korea. You have Netherlands, India, right. And when you look with regional development, you have to understand like, you know, they. They want to bring as many jobs as much activity into the region, but that can sometimes cost the region you're in. So you have to really negotiate and understand what makes sense, where to build or what to build. 2. Two final questions because again this, this is really interesting and so much we can learn from. Just if you take extra product, is it. Does it need regulatory approval or is it upcycling with no regulatory approval?
- [18:27]
A
It needs regulatory approval. So it's not another ingredient. This is the good news. And by the end of the day use. We use theses that were shown already to EFSA in Europe. So we use this as an anchor for all the work that we're doing with the regulatory agent, which is an visa here in Brazil. It's very interesting, Alex, because we have already opened Europe and Japan before we opened Brazil. So it's like this weird thing. So at least for. For investors is massive, right? Because we have three open markets already.
- [19:02]
B
But would you need to go through specific. Would you need to go through EFSA in order to get the ability to sell there? Or. Or you already are accepting under EFSA because you're using regulators, let's say technology that's been approved already. Or.
- [19:15]
A
Yeah, we use a regulated approach that both Lavazza and Nestle use in the past. I will not like getting to the details, but we use an approach over there that they used. So we shown that we were using a process that was alike. This accelerated a lot the work. But of course you have to have the conversation is this another ingredient or not? No, this is not another ingredient. Then next chapter. So let's regulate and see that these do not offer any kind, let's say of problem to the consumers. And so we did all the steps
- [19:49]
B
with the cocoa space specifically. Is your value proposition that it's also the raw ingredients cheaper than the traditional cocoa or is it considered to be more premium than traditional cocoa? Where are you positioning from a price standpoint? Are you something you could blend into cocoa similar to say like what plan A does or firm tech or is it a novel, more nutritional like you're about increasing the quality of cocoa and making a different experience which. Where's the positioning of the business?
- [20:18]
A
We have three different ingredients in our. In our portfolio, right? So one, the idea of the. One of the ingredients is to be a combat ingredient. So the idea is to be cheaper because our raw material of course is cheaper than the almond of cocoa. So this ingredient is to Be like blended into traditional formulation. It's very hard to arrive in a. In a formulation, offer any kind of ingredients, no matter this traditional cocoa, let's say real cocoa or a cocoa alternative. And make everything worse, right? Because the color will like, be a little bit, like darker, the taste will be a little bit muder. So you always have to set a little bit. But this ingredient can be substituted one by one or 100% cocoa. 1. One other ingredient that we have, another ingredient that we have, Alex. Our idea is to be superior to cocoa, to functional ingredients. And why of that? Because we are of an ingredient that brings the dark color that every producer wants, plus the taste of chocolate, plus caffeine, natural caffeine. So imagine that you have like a functional bar or any kind of functional formulation you are buying three by one. So you buy our ingredient, you have color, taste of chocolate, plus natural caffeine. And more recently, we have launched our liquid extract. So it's very concentrated. It can be even used for cosmetics, right? So this, this is an ingredient that we have launched, I think like 10 days ago.
- [21:52]
B
Exciting. Exciting.
- [21:54]
A
Everything from coffee. Everything from coffee. So I always said, Alex, that cocoa substitute is just one ingredient from several that we're still going to develop using coffee by products. Because I had to build the ecosystem. Today we have 150 farmers integrated to our ecosystem. So I have to use everything they produce that is not being commercialized yet.
- [22:19]
B
Amazing. Amazing. Sergio, there's so much to ask, but I know we're short on time, and I feel like we'll need to do like a second conversation soon. How can we help you? I mean, it's. Congratulations on this round. What are you guys looking for in the next six to 12 months? What kind of support do you need for. If I'm a listener and I just say I really like Sergio. Are you looking to raise additional capital? Is it commercial agreements? Like, what are you looking for as a support now?
- [22:45]
A
We are 100% focused in commercializing the ingredients, Alex. So any kind of commercial support. If you're listening to me and you think that this ingredient might work in your company, your country, in your state, just send me or Alex a line. I will be very happy to connect. We are building this commercial team now, Alex, the company is different, right? Because when you are R and D company, you have some, let's say, some obligations, some techniques in a team profile. Our team profile is switching really fast. So our team is completely different from what it was. So if you want to work for Selva and you are a commercial expert. You probably have space in here. So any kind of commercial support will be very welcome and happy to send samples around. We have like send samples to more than 15 countries already. Alex.
- [23:37]
B
Incredible. Well, I'm sure there's going to be a lot of people going to raise their hand and see how they can support you. Thank you so much, Sergio, and congratulations on this round.
- [23:45]
A
Thank you, Alex.
- [23:45]
B
One more thing. Don't close this episode yet. If you got value from this conversation, here's what I need from you. A five star rating. One comment, 20 seconds of your time. That's the deal. A five star rating means more founders find this content. And every time a founder raises, all boats are elevated. Every week I pick one random comment and send that person a complimentary copy of Investment Climate the book 50 sales playbooks from founders who are actually raise money during the fundraising winter. Real strategies, real closes, real numbers, not theory. So if you want a copy, comment below. And if you haven't followed the show yet, do that too. And if there's a guest you want us to bring on the show, just drop us a note or send us an email. We'll read each and every one. Until then, keep on raising.