For Daniel Welch, taking on the CFO post at Kate Farms in May 2023 wasn’t just an exciting professional opportunity that well leveraged his prior experience. It also aligned with closely held personal values and the very positive aftermath of a family health scare.
The venture-backed company, which launched in 2012, sells a variety of plant-based, high-nutrition shakes and other beverages to hospitals and home-care organizations for tube-feeding or simply additional nutrition for patients. Kate Farms markets itself as a healthier alternative to products from large, traditional players in the space.
The job keeps Welch on a path he’s taken for several years.
After a decade in investment banking, most recently with Morgan Stanley from 2014 to 2018, he had a sense of wanting to find work that helped create more tangible societal value. He took a small first step in that direction as finance director with Sonos, the audio entertainment company, which was newly public and needed to build out its finance organization accordingly.
After two years there he moved to Oura, maker of the Oura Ring, the popular sleep- and health-tracking device, as head of finance, and then a few months later was promoted to his first CFO job. “I spent three years there in a very similar capacity to what I’m doing now,” Welch says, a reference to overseeing finance at a venture-backed technology company in its mid-to-late growth stage.
There may be a lot more growth ahead for Kate Farms, which is in the early stages of expanding into the direct-to-consumer market. The push may be well-timed, as the steep growth in the use of weight-loss medications like Ozempic and Wegovy presents the company with an opportunity to aid in the nutrition of individuals who are in calorie-deficit mode.
Daniel Welch
CFO, Kate Farms
First CFO position: 2021
Notable previous employers:
- Oura
- Morgan Stanley
- KeyBanc
This interview has been edited for brevity and clarity.
DAVID McCANN: I don’t know whether there are plans to take it public, but the company started up 12 years ago. Would it still be accurately described as a startup?
DANIEL WELCH: We have probably evolved beyond the startup stage, especially since we measure revenue in the hundreds of millions of dollars now. But it’s not a significantly sizable company relative to large public companies and some of our competitors. We raised a Series C funding round in 2022, so I’d call it a mid to late-stage growth company.
Is there a sense of serving the good of society in your work at Kate Farms?
DANIEL WELCH: Yes, 100%. I wanted that from the time I made the decision to leave Morgan Stanley. You might think of Sonos as an audio entertainment company, but there’s a core mission and value there to fill people’s homes with music.
And then I moved to the health and wellness side with Oura, where the customer feedback was about how the product changed a lot of people’s lives. And it’s even more so at Kate Farms.
Is that specifically what brought you to Kate Farms?
WELCH: I met Brett Mathews, who was one of the early investors and eventually became the CEO. We had some friends and colleagues in common. He convinced me to come over here to my hometown of Santa Barbara, which is a kind of small town with a lot of interesting, innovative companies.
But also, my father nearly passed away from a heart attack at a fairly early age, and his father died at an early age. It was a rude health awakening for me, and coming out of that experience I adopted a plant-based diet and then watched that improve my biomarkers. Now I’m out of the high-risk category and much healthier. I’ve personally seen the power a plant-based diet has on overall well-being.
So, the career experience, the life experience and the level of personal interest aligned when this opportunity came along.
I know two of your large competitors are Abbott and Nestle. What’s your differentiation?
WELCH: Our products are fully organic, easily digestible, designed for much higher tolerance levels and free of common allergens. They’re packed with plant phytonutrients. It takes the view that food is medicine.
If you go into your grocery store and walk to the pharmacy section, you’ll see a lot of shelf space dedicated to medical nutrition products. If you take a look at the ingredient list of any of them, you’ll see that corn sugar is usually one of the top ingredients. They’re full of artificial flavors and dyes — the same ingredients that have found their way into the hyper-processed foods that have been very problematic for the health of the developing world.
That’s really in stark contrast to the rest of the grocery store, where there’s been an explosion of better-for-you products. In this one segment, and it’s the one where people are most vulnerable nutritionally, there hasn’t been [much] innovation in decades.
Is there anything that’s unique or unusual about the CFO job at this particular company?
WELCH: This is somewhat common with growth-stage companies, but it’s very important for the CFO to forge a really strong relationship with the sales and marketing function. That’s where costs can very easily get out of control.
I probably spend at least 60% of my time on making sure the finance organization, from both a strategic and an execution standpoint, is in lockstep with the marketing organization.
There’s the age-old image that marketing comes to the CFO and asks for money, and the CFO says no, we’ve got to do more with less. But the reality of a growth company is you’re almost entirely dependent on sales and marketing to scale to what you need.
A few years ago, growth companies were just throwing money at sales and marketing because capital was abundant and cheap. No so today. A lot of companies are trying to do more with less. That means being sharp on what KPIs you’re using, understanding your unit economics at a granular level, understanding what it costs to acquire a customer, and then what kind of value that customer brings.
What do you do with the rest of your time? What are your leading strategies?
WELCH: There are two objectives that are closely related: strategic focus and lean growth. At growth companies, especially innovative technology companies, it’s very easy to get distracted by all the possibilities. Those distractions, I’ve found, can lead to overspending, over-hiring and spending too much time on things that might look attractive or valuable but are probably not the right fit for the company.
So it’s about understanding what the company’s core competency is, what the key value drivers are, and obsessively focusing on those [few] things.
With the company having expanded into the direct-to-consumer market, do you think the medical channel will still comprise the bulk of the business for some time or is the consumer opportunity even larger?
WELCH: We talk about this a lot internally. Right now, in rough numbers, 80% of our business is sold through medical channels, primarily hospitals and home-care organizations. [The other] 20% is sold through e-commerce, but only a negligible percentage of that is sold in retail, so that’s a big expansion area for us in the future.
I think for the mid-term the medical side will be the largest segment of the business because that’s where we started and it will take time to grow other channels.
But we’ve been doing a lot of work on our e-commerce channel, whose growth rate is significantly outpacing the growth on the medical side. If you look at some of our competitor companies it’s a little closer to 50-50, and over time we’ll probably trend toward that.
