13 March 2021

In today’s show, Trey Lockerbie is joined by Jason Karp. Jason has had an incredible career, starting as a quant at major hedge funds like SAC Capital, under billionaire Steve Cohen, as well as Carlson Capital, where he became the Co-Chief Investment Officer. He then moved on to start his own fund, Tourbillon Capital, which at its peak managed over $4 Billion in AUM.

Along the way, he helped his family start a successful company called Hu, most known for its chocolate bars, which was recently sold to Mondelez. For his next act, he has now founded HumanCo, which focuses on providing permanent capital to health and wellness brands, as well the launch of a recent SPAC or Special Purpose Acquisition Company.

Subscribe through iTunes
Subscribe through Castbox
Subscribe through Spotify
Subscribe through Youtube


Subscribe through iTunes
Subscribe through Castbox
Subscribe through Spotify
Subscribe through Youtube


  • The view from the mountain top
  • Opportunities in health and wellness
  • What is a SPAC and why they are so popular at the moment


Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

Trey Lockerbie (00:03):
Hello, everybody. Welcome to The Investor’s Podcast. I’m your host Trey Lockerbie and I am so excited to have with me on the show today, Jason Karp. Jason has had an incredible career so far, starting as a quant at major hedge funds like SAC Capital under billionaire Steve Cohen, as well as Carlson Capital, where he became Co-CIO or Chief Investment Officer. He then moved on to start his own fund, Tourbillon Capital, which at its peak managed over $4 billion in assets under management. Along the way, he helped his family start a successful company called Hu most known for its chocolate bars, which recently sold to Mondelez.

Trey Lockerbie (00:42):
For his next act, he has now founded HumanCo, which focuses on providing permanent capital to health and wellness brands, as well as the launch of a recent SPAC or Special Purpose Acquisition Company. In today’s episode, I guarantee you will learn some incredible wisdom from Jason’s experience both as a hedge fund manager and as an entrepreneur. We discussed the view from the mountaintop, opportunities in health and wellness, what is a SPAC and why are they so popular at the moment, and much, much more. I thoroughly enjoyed this conversation, and I hope you do as well. So without further ado, please enjoy my conversation with Jason Karp.

Intro (01:22):
You are listening to The Investor’s Podcast where we study the financial markets and read the books that influence self-made billionaires the most. We keep you informed and prepared for the unexpected.

Trey Lockerbie (01:43):
All right, everybody. I’m here with Jason Karp. Jason, I cannot tell you how excited I am to have you on the show today. We’re going to be talking about a lot of things that I’m curious about, that are near and dear to my heart, like health and wellness, and just going over this amazing career you’ve had so far. So welcome to the show.

Jason Karp (01:59):
Thank you for having me.

Trey Lockerbie (02:01):
All right. So I do want to touch on some of your early success starting out at SAC capital under the leadership of billionaire Steve Cohen. What did you learn from that experience? And how did it shape your investment approach?

Jason Karp (02:12):
It’s been an interesting journey. My period at SAC was actually a great one. And I spent my first call it six and a half, seven years at another hedge fund, where I started as a quant in a fund called George Weiss Associates. And I met many people in SAC. At the time, it was sort of viewed as the best of the best in terms of places to learn, and they didn’t disappoint. I was brought into a unique position of a new entity with inside of SAC, where the goal was to really focus on much bigger positions, much longer term oriented investing versus what SAC was known for prior to that, which was much more short term and even day trading, in some instances.

Jason Karp (02:59):
Steve is a just a phenomenal manager, trader and investor, he started to see where the puck was going towards the need for bigger, more concentrated positions where you could actually withstand the volatility and hold it for quarters instead of holding it for weeks. And so I was brought in to basically be one of the lieutenants of this new entity, where I functioned as a director of research. And I combined a lot of my quantitative training where I started as a street quant, doing things like statistical arbitrage, I used a lot of my quantitative training to basically build a hybridized fundamental research model, which incorporated a lot of data that we were able to capture and combined it with subjective human judgment in terms of what positions we choose, how we size them, how we hold them, how we do our fundamental due diligence.

Jason Karp (03:53):
I think what was amazing about that environment was it was pre, this was 2000, late 2004, early 2005, when I got there, and it was before some of the scandal stuff happened in ’09 and later, and it was really an entrepreneurial culture that took incredible, open-minded approach to figuring out the best ways to invest. And they were also able to attract, I mean, I still think to this day, some of the best people and smartest people and most thought provoking people who brought really the best out of me, many of those people I met at SAC.

Read More

Trey Lockerbie (04:29):
So for those in our audience who are curious or interested in going into the hedge fund industry or even starting their own fund, maybe talk to us about your decision to start Tourbillon Capital and what that entrepreneurial experience was like for you.

Jason Karp (04:44):
I was at 3 funds over the course of 14 years. I went straight to a hedge fund when I was 21 years old, right out of college in 1998. And each chapter was very different. My George Weiss chapter was very much about understanding quantitative methods, really hardcore analysis, that’s where I began as an analyst, understanding how to marry fundamental research with quantitative research. The SAC chapter was very much about large concentrated positions, activism, very deep fundamental research that was required to hold positions through thick and thin, take big, big drawdowns, hold them for multiple quarters. And then after that I went to become the co-CIO, a Dallas-based hedge fund called Carlson Capital, and there were a lot of hats.

Jason Karp (05:34):
I was helping manage some of the fundamental portfolios. Carlson was really known for their market-neutral approach. By the way, almost everything I do over those 14 years was what some people call kind of pure alpha strategies, where you’re generally market-neutral as many shorts as you do longs, and you’re trying to capture true alpha, as opposed to just sort of riding the direction of the market. And each of my bosses and mentors at each of those three places really had this sort of pride in the reason hedge funds should get paid is for alpha, not for beta. And all three of them really ingrain that into me. So my three bosses and mentors over those three chapters all took a lot of pride in the reason we get paid a fee is to create alpha. And that was kind of deeply ingrained in my own philosophy of investing, because of how they approached to the world.

Jason Karp (06:32):
The Carlson chapter for me was amazing because prior to that, I’d just been basically a portfolio manager and an analyst. But I hadn’t learned how to run a firm. I hadn’t learned kind of how the sausage was made, how everything from operations, to marketing, to dealing with the back office, to dealing with things like trade breaks, and all of the … There’s enormous complexity in managing a hedge fund. And I don’t think I appreciated it fully until I was the co-CIO of Carlson. When I was there, I quickly realized like this was a big piece of the puzzle that I was missing. And then after I felt like I really learned it from Clint, who was the founder, and was a fabulous mentor for me, I felt like it was my time and it was my turn.

Jason Karp (07:16):
What I learned about myself throughout all of this was, I’m actually an entrepreneur at heart, I love investing, I’ve always loved investing even from when I was in high school. It’s more about the business aspects of investing, as opposed to just sort of a notion of pushing pieces of paper around and sort of arbitraging, which I did do a fair amount of, and it was quite lucrative for me. I always enjoyed that part of investing more from the sense of playing a game and winning at a game, as opposed to like deep fulfillment. The deep fulfillment I got from my experiences over those 14 years was much more about the entrepreneurial itch that I needed to scratch. It was about building teams, it was about solving real problems, it was about providing a service to people who couldn’t do it on their own.

Jason Karp (08:07):
So there was a moment where I sort of felt like I’s hit a wall at Carlson. And I went to Clint, actually, just for the sake of your listeners will probably appreciate this, I was in a funk, where I just kind of felt like I was hitting a wall as an investor and as a manager. And my wife, who at that point I’d been married to for seven or eight years, obviously, knew me very well. And she looked at me and she’s like, “Something’s wrong. You got to change it. You got to start [inaudible 00:08:32].” And I looked at her and there’s a … That’s the PG version. There is sort of an R version of that story, where she basically swore at me because she saw how frustrated I was. And it’s probably not appropriate to give you the R version. And I said, “You know what, you’re right.”

Jason Karp (08:47):
And I went to Clint, and Clint had started his own fund many years earlier. And he was a real gentleman about it. And I said, “I got to do this on my own. It’s sort of the last chapter, like I can’t go higher than starting my own fund in this industry.” I think I was 34 or 35 at the time. And I said, “I got to try it on my own, because I can’t really like go up from here.” And that was the genesis behind starting Tourbillon, kind of all the things I have learned and express it in the way that I finally wanted to express it. And that was how that got going.

Trey Lockerbie (09:22):
All right. So now Tourbillon is managing over $4 billion, and it’s this incredible success. Did this turn out to be everything you thought it would be?

Jason Karp (09:31):
This is the most interesting part of this interview, I think. So I launched Tourbillon, I really believe that I think I wanted to do that. And I certainly knew I wanted to invest my way. But I definitely made a bunch of, I think, mistakes in how I set it up. I think I did a great job in hiring the right people. We had an amazing culture. In fact, one of my lieutenants who was my president, her name’s Amy, Amy was fabulous in sort of being the yin to my yang in helping run the business. Amy’s also with me now and HumanCo. And she and I basically worked together now for 11 years at three different places. She was also at Carlson with me.

Jason Karp (10:09):
But what happened in 2015 was sort of this remarkable revelation. We had three very strong years in a row of pure alpha. We were top decile for our strategy three years in a row, which is why we got to four and a half million in three years, which is a pretty rapid growth. And then that year, we also won best new Hedge Fund Manager in the country from Institutional Investor, which was an award that I was sort of coveting. And to me felt like that would mean like we did it, being effectively crowned best new hedge fund. And yet, my health at the time was pretty bad and I was depressed. And we finished that year with another great year. And it was my biggest earnings year up until that point by a lot.

Jason Karp (10:54):
And it was one of those years that you’re supposed to say like, I made it. And by all accounts, on the surface, it looks like I did. And I said to my wife one day, I said, “I don’t think I could do better than this. And I’m sick, and I’m miserable.” And there was this sort of deep, deep hole inside of me that I thought would be filled from kind of getting to that point, and it wasn’t. And then I sort of had this kind of real panic moment, this demon I’ve been chasing for most of my life is still there. And I sort of thought I would kind of quiet that demon by doing everything that I had done.

Jason Karp (11:30):
One of my mentors who’s extremely well accomplished, I won’t mention him by name, but it’s one of the people you can imagine. He said to me one day, and I think a lot of top hedge fund managers suffer from this, and they don’t talk about it. Because when you’re that successful, and you’re the head of your firm, there’s this shame in being able to talk about things that are wrong. Because people look at you and a lot of people just presume that if you’re financially successful, it means you’re successful in other aspects of your life, like your family, your friends, and most notably happiness. And most often, those things actually are negatively correlated, despite this belief that getting financially wealthy means all those things get solved.

Jason Karp (12:11):
And what this mentor said to me was, he said, “Jason, I’ve been to the top of the mountain, and there’s nothing to see.” And I kind of didn’t believe it when he said it to me, because I’m like, no way. And then I kind of had that moment myself in 2015. And I’m like, “Oh, my God, he’s right.” And I think there’s a number of managers who I’ve now spoken to over the years, where we could literally have like an AA group of people that would just talk to each other because they can’t talk about it to other people. Because nobody has any sympathy, obviously, for financially successful people. But many of them are miserable people, and have terrible family lives, and many of them die young and get sick. And I had, I still do, but I had that demon that kind of fueled me to get to where I was.

Jason Karp (12:57):
And then, unfortunately, my competitiveness continued to drive me despite my illnesses. And I kept going, my financial performance thereafter suffered. I proceeded to have my only down year after that in 16 years. I was really proud of the fact that I basically hadn’t had a down year for my entire career. It wasn’t bad. I mean, from the beginning, I still made double digits for my investor when we returned the money. I knew over the course of the next couple of years that this wasn’t my ultimate calling. I was doing a disservice to my investors by just keeping the money and still trying if I really felt like I wasn’t going to be the best at what I was doing.

Jason Karp (13:39):
And it was also, I’d also had been a student of the industry from the moment I got into it in ’98. And I watched a considerable evolution happen, where there was just a massive amount of legal edge in the late 90s, because only a third of probably managers even out of Bloomberg when I got started and people were still going to the public library to get 10-K’s and 10-Q’s. And so information was a tremendous advantage when I first got started. And then with the rise of quants and the rise of the democratization of information, and hedge funds all of a sudden became popular and lots of people started going into it, I started to watch the reasons they got me excited about being in that space were being arbitraged away. And it was becoming less and less interesting.

Jason Karp (14:27):
Because it was becoming much more competitive and much more difficult, there was a lot more noise and a lot less signal than it used to be. And so a lot of my challenges that were happening as an investor in ’16 and 17, were actually things that I didn’t even think I got wrong, but I actually got them wrong, obviously, in terms of price. And so that connection between effort and outcome, which I believe is always a key marker for people’s sanity, literally in psychological experiments, if you want a great make someone crazy, you disconnect effort and outcome. We’ve all these famous studies where people like pull on a lever and sometimes it gives them an electric shock and sometimes it gives them a reward. And if you make it random, it literally drives them crazy.

Jason Karp (15:11):
I felt like there were aspects of at least short term investing. And by short term, I mean, under a year, not like day trading. Some of the shorter term forms of investing, I felt like were having more and more and more of a disconnect between effort and outcome. And those, there were just a variety of variables that sort of conspired for me that made me ultimately decide that I was basically done managing a hedge fund.

Trey Lockerbie (15:37):
That’s some amazing wisdom and insight. Thank you for that. Now, before we go on to the next chapter, I just want to touch on one investment you made that stood out to me, which was your activist involvement into SunOpta. Now, activism pops up here and there, especially with hedge funds, but it’s not as common as it was maybe in the 80s, especially when you’re just running a pure alpha playbook, like you mentioned. So I’m curious what drew you to this opportunity and what made you get involved?

Jason Karp (16:05):
Activism, for your listeners, and there are a handful of hedge funds who’ve sort of made their name being activists. ValueAct, Bill Ackman is probably the most notable. And an activist is basically like a hybrid between a private equity investor and a public investor. Where you take a meaningful position in the company, you usually have a board seat, and through your large ownership, you try to affect things in a way that you think will dramatically improve and enhance shareholder value. I did a handful of them at SAC, I was involved in a couple of them at Carlson, and so I had some experience in being an activist and I really enjoyed it when we did it.

Jason Karp (16:46):
It was part of what I think helped me realize that ultimately, I am an entrepreneur because you do have a clear linkage between your effort and the ultimate outcome when you’re an activist. Because you’re literally trying to make yourself right, as opposed to just sort of helping the management team, in the case of a traditional passive investment, just gets it right. SunOpta was a company, and we didn’t really talk about my, I think we can get to it, the HumanCo piece, but I’ve had this kind of dual path in my whole career of health and wellness as well as investing. Because right when I started working in my second and third year of work straight out of college, I got very sick.

Jason Karp (17:26):
I was diagnosed with several autoimmune diseases and a degenerative eye disease where they told me I would be blind by the age of 30. I was actually losing my vision and seeing double for almost six months when I was 23 years old. And it was a very difficult time for me. I was deeply depressed, I was ashamed. I didn’t really tell people about it. And I hid it. And I was also told there was no cure for what I had. I actually solved my illnesses, for the most part. I mean, I’ve had some relapses, but I’ve basically been in remission for 20 years, through food and through lifestyle. And I had to figure all this out on my own before health and wellness was like a thing. And I ultimately discovered through DNA sequencing that I don’t detoxify like a normal human. And so I have to eat and live in a much stricter way than the average human guys so that I don’t get sick again.

Jason Karp (18:18):
And so this has deeply shaped my worldview in a lot of areas. But one of them was health and wellness, and how important it is for all of humanity. And I was kind of like the canary in the coal mine in that whatever made me sick and months, makes everybody else sick over many, many years, and sometimes decades. But it’s just that I’m sort of a faster responder to some of these common aspects of modern living that are making everyone sick. And so I’ve had this sort of really acute sense for health and wellness, and for what goes into the kind of food and all products that you put either in your body or on your body over the last 22 years.

Jason Karp (18:57):
SunOpta was one of these companies that was like nobody knew about them. I’d actually discovered them through my experience with Hu Kitchen, the snacking chocolate company that I co-founded with my family. And they were at the time, the largest organic ingredient provider in the world. And we were buying more and more certain ingredients for Hu at the time. And we kind of outgrew our middlemen. And somebody said to me when we’re like, well, where do we buy, at the time it was one of our ingredients. We’re like, well, where do we buy this quantity? They’re like, you got to go to SunOpta. And I’d say, “Who’s SunOpta?” And then I started digging on it. I realized it was a Canadian public company that was also cross-listed here in the US. Nobody I talked to had ever heard of it. And I started doing a lot of digging on it.

Jason Karp (19:46):
What happened was SunOpta also, it was kind of a hodgepodge of a business back then, this was back in 2016 when I first started looking at it, but they also had and it’s actually quite topical today, they had and now have the largest plant-based milk manufacturing capacity for other companies, what they call private label manufacturing, in the country. So if you go into whole foods and you see Organic 365, which is the whole foods brand, or you go into Costco and you see the Kirkland brand, and you want to buy organic almond milk, SunOpta makes it for them. And now, they’re the largest private label oat milk manufacturer in the country, which is relevant because today, Oatly announced that they were IPO at a $10 billion valuation. And Oatly is going to come out at 10 times, 10 times the valuation of where SunOpta is [inaudible 00:20:42].

Jason Karp (20:43):
So for your listeners who want to figure out a sneaky way to play Oatly, SunOpta is the way. And my belief was health and wellness were exponentially growing. And that more and more people like me, I was sick, and so I approached health and wellness from a curative perspective. But everyone around me was approaching it from just people just want to live healthier, they want to look better, they want to perform better, they want to age well. This is a universal trait of humans. And so I had this governing belief that health and wellness was going to be a segment of business that’s going to rise and grow much, much faster than other segments. I viewed that SunOpta was effectively an arms dealer in a war.

Jason Karp (21:24):
And there’s an expression, which is, in a war, you don’t want to pick a country, you want to own the arms deal. And I didn’t know necessarily who all the winners or losers were going to be. But I knew that if this company was supplying all of the innovation that was happening, that they were going to benefit. And what happened right when I first started investing in it, and admittedly I was 18 months early, which does tend to happen, they made a terrible, terrible acquisition. And so all the trends and aspects of the business that I wanted to be long for, were basically overshadowed by this bad acquisition they did in a frozen fruit business where they overpaid for something that also kind of had some real operational challenges. The theme was right, but the execution was bad.

Jason Karp (22:07):
So I got really big in it, I bought 10% of the company, we wrote a letter, this is when the stock was about $3.50. Today, it’s around $15. And we wrote a letter to the company as the largest shareholder and basically said, we want to help you fix this because your theme is dead on. And literally, if you just do a B+ job, your company’s going to go up many fold, but you got to get out of your own way. It took a few kind of trials and errors over a couple of years, Oaktree ended up becoming the largest investor. We helped bring in a few different people involved on the board. Then another activist got involved, a firm called Engaged Capital on the West Coast.

Jason Karp (22:50):
And it was basically Oaktree, me and Engaged were the top three shareholders. And a very ambitious, yet logical plan was established that would take a couple years to basically clean up the operational challenges, and just allow the company to thrive in a way that they were already on path to do. And last year, which was the first year basically, that all were things were firing, SunOpta was the top-performing food stock in North America. It was up 360% last year. And as all of your listeners should know, it was my single worst contribution to my fund performance in 2018, which was the year that I returned the money. And we were down small, single digits that year. But SunOpta was 75% of my loss that year. And then of course, I couldn’t allow that.

Jason Karp (23:38):
So I created a special purpose vehicle for my investors to basically say, look, I’m going to return all the money, but I’m not selling this position, because we’re just a little early. And so we created an SPV. And thankfully, I had a few investors who stuck around. I put a considerable amount of money into it myself and now we’re up considerably. And I think it’s got a long way to go because in the last 12 months, oat milk in particular has become very, very popular and interesting to a lot of people. Oatly is obviously capitalizing on it, but SunOpta makes the oat milk for all these competitors. And they’re all being well funded. And so I think SunOpta has a considerable amount of runway to go. And Oatly will only highlight the valuation disparity between them and everybody else.

Trey Lockerbie (24:22):
So that ties in really nicely with your Hu Kitchen experience, which you noted you founded this with your family, and it’s become very well-known as of late, especially for it’s chocolate. So if you’ve seen Hu chocolate on the shelf, which is my favorite chocolate, I got to say, it’s been a huge success and just recently sold to Mondelez. So talk to us a little bit about how you became more involved in that company with your family and help ultimately bring it to an exit.

Jason Karp (24:47):
So the background to Hu was my brother-in-law, Jordan Brown is my wife’s brother, so he was aware of the journey that I had just gone through. I incidentally met my wife right after I kind of cured myself. And I was just a prolific reader of all of these books around health and wellness, biohacking, functional medicine, which is a growing field that wasn’t accepted as real science back then but now is, which is basically treating the root causes of diseases as opposed to the symptoms. And Jordan started reading a lot of the same books that I was reading, and he didn’t have my autoimmune issues. But he just noticed that when he started eating cleaner, he performed better and look better, and felt better. And he really got into this style of living.

Jason Karp (25:35):
Where Jordan I gravitated the most when we were doing a lot of our kind of research and sort of studies was around kind of his evolutionary approach or what some people call ancestral, which was the basis behind paleo and the paleo diet. Jordan came to me in like 2010, and said, “We’re trying to eat this way.” Which was basically paleo inspired before really paleo was kind of accepted term. But it’s this idea that we don’t eat like humans anymore, and that we’ve evolved. And there’s a lot of indisputable science behind kind of evolutionary influences on how we’ve become who we are. And it also works, obviously, with animals. And that really resonated with us. But we felt like there weren’t many offerings out there.

Jason Karp (26:19):
And he said, “Why don’t we create a restaurant that is the manifestation of all of this stuff that we’ve been reading and doing?” Because even in New York City, it’s too hard to find things that need the guardrails of how we want to eat. And I said, “Look,” I said, “I’m a professional investor, restaurants are notoriously terrible businesses.” He was in real estate at the time. I was at a hedge fund at the time, this was before I started Tourbillon. And I said, “Look, we don’t know really what we’re doing, but we know we have a passion.” I said, “Maybe it’ll be a decent business. I can’t really tell. But frankly, if we could have a place where we could eat every day, and we could sort of prove to New York that you can combine ultra-simple ingredients that are evolutionarily inspired, where everything in the restaurant would be gluten-free, grain-free, everything that needed to be organic would be organic, all the animal products would be wild and grass-fed and sustainably raised animal products.”

Jason Karp (27:15):
I said, “If we could prove to New York that this could be done, let’s give it a shot.” And we hired a bunch of people because we knew what we didn’t know who could help us. Jordan ultimately quit his job in real estate development to pursue this full-time. And we took no outside investors. It was all us to fund this very large experiment, because my view was this was a very controversial topic at the time, it was unproven, and we did not want to compromise our guardrails. We didn’t want any investor ever telling us like, yeah, why don’t you use the shittier ingredient, which will improve your profit margins and nobody will notice the difference. We wanted this to be truly what we were willing to eat every day ourselves. And that’s how Hu Kitchen, which started as a restaurant in New York City in Union Square got started.

Jason Karp (28:01):
And then when we were kind of we did a lot of experimentation in the year leading up to the opening, which was in October of 2012. And we were doing a lot of baking with grain-free flowers and making grain-free cookies and muffins and scones. But we wanted to have chocolate chips for these things. And our philosophy was no refined sugar. And we could not find chocolate chips that met our ingredients guardrails, which was dairy-free, refined sugar-free, no soy, no preservatives, no additives. We couldn’t find it. There were a couple at the time that taste terrible. And so we hired a chocolatier using our ingredients to try to develop a baking chocolate that we could use in our stuff. And the recipe that we ended up landing on was so delicious that Jordan had this idea of turning them into bars.

Jason Karp (28:50):
And then we started making bars out of the same chocolate that was inspired by baking, and out of just luck, one of our chefs at the time, his girlfriend worked at Whole Foods Columbus Circle, he was bringing her bars and one day she asked, “Can we sell these in Whole Foods?” And we said sure. And that’s how Hu consumer products business really got born. And it was Jordan’s idea to basically take his baking chocolate and turn it into bars.

Trey Lockerbie (29:13):
So chocolate in particular is a pretty crowded industry. So I’m curious what you brought to the table from your days as an investor as you entered into this entrepreneurial experience and what helped set Hu chocolate apart from the rest.

Jason Karp (29:28):
It’s funny because we when we’ve been asked this and I do think that quote from Buffett that being an investor makes him a better businessman and being a businessman makes him a better investor. I wholeheartedly agree with that. And obviously, a lot of I’ve studied hundreds and hundreds, if not thousands of businesses over 22 years as a professional investor both long and short. And I learned a lot. And I learned a lot the right way and I learned a lot the hard way. And this was no exception. And a lot of those learnings went into, I was the controlling shareholder and the chairman up until the day we sold to Mondelez.

Jason Karp (30:02):
And a lot of my learnings as an investor obviously influenced how we built Hu, how we raised money for Hu, how we manage the finances of Hu, how we hired at Hu, along with Jordan and my wife, Jessica. And my wife, Jessica, and Jordan were really the sort of day-to-day operators in the business for the first many years. And I thank [inaudible 00:30:21] chairman, because ironically, and this is just sometimes how life goes, I started Tourbillon within two months of launching Hu Kitchen, which was a disaster of the year. But just sometimes the stars just align to kind of make it work that way. The chocolate was never intentional in the sense of, hey, let’s go build a business in chocolate as sort of a business plan.

Jason Karp (30:42):
We knew we had a winner because of how good the product was and how hard it was to make. I think, Jordan and Jessica and I did not appreciate the literally infinite variability that goes into making chocolate. If you had told me A, what the competitive set looked like, and B, how hard it would be to make chocolate beforehand, I don’t think we ever would have done it voluntarily. I think there was sort of this really interesting insight that I learned from the process, which was counterintuitive to what I learned in business school, which was, if you go into a category that’s very well-established, like chocolate, where there’s a lot of demand, there’s a lot of demand internationally, too. It’s not just a US phenomenon. But it was relatively homogenous.

Jason Karp (31:26):
There wasn’t much of sort of a healthy chocolate category. And the few healthy chocolates that existed back in 2012 were, frankly, gross, and they were ultra dark, they were bitter, they were tasty, and they didn’t even compare to the taste of like a conventional milk chocolate. But milk chocolate isn’t healthy. It’s laden with refined sugar, it’s got a lot of other crap in it, the stuff that you would buy in like a gas station or a movie theater. And we developed a chocolate that we didn’t realize at the time, but now in retrospect, it’s obvious, that was kind of one of the first that actually tasted as good as anything else out there. And it also happened to be ultra clean, and healthy and actually lower glycaemic than conventional chocolate.

Jason Karp (32:11):
And so if you fall into a category that’s very big and homogenous, and you come in with a challenger that’s just really different, it’s almost like that competition is irrelevant. And in fact, it gives you even a bigger tailwind, because you already have a category that people care about. And so we just started to take off almost without like intention. And we didn’t approach to the business in a true, deliberate, like let’s scale this huge. We didn’t approach the chocolate part of the business that way, until probably like three or four years later. And when we realized collectively that we had something … Because our restaurant was actually doing quite well. And the focus was on the restaurant initially.

Jason Karp (32:51):
And when we realized that we had something that was truly different and unique, and was having such resonance with people that we didn’t even know about. And we were helping all different types of people, from people who actually needed the help, like many diabetics consumed Hu chocolate to people who just wanted to have a healthier treat, then we realized we had something special, and then we decided to really lean into it.

Trey Lockerbie (33:14):
So often, when you’re growing and scaling a company like Hu Chocolate as rapidly as you did, you’re not so often focused on the bottom line. You’re more focused on growing top line. So I’m curious as to how you approach that, what your strategy was especially going into this exit with Mondelez, were you focused on producing free cash flow or just growing the distribution?

Jason Karp (33:35):
Great question. Now that I’ve been an angel investor and a private, I’d a venture investor for the last decade, I’ve seen a lot of different approaches. And usually in venture, particularly if you have a winning product or early stage stuff, you never try to make money, because the returns on your capital to reinvest in the business will always be much greater than you taking that cash as a dividend. And that is why it makes sense to take whatever potential profits you might have and just keep redeploying because you’re getting effectively a much better return on that capital. We actually because it was a family business, we only had one outside investor, which we took on a few years after we opened, and they were a minority. But they like us, we’re very focused on cash flow. And our restaurant actually made money.

Jason Karp (34:22):
And so we had this sort of luxury of using some of that cash flow to push it into the consumer products business, the CPG business for growth. But we did it in a much more slow way than some of the other companies I’ve been involved with that raise venture money, meaning from venture capitalists who have a time horizon where they want you to grow as fast as they as you can, and they ultimately need to sell that business so that they get paid. As I watched some of these other businesses that I invested in that had actually really good financial outcomes. I had a few early investments in some health and wellness companies that were sold for big multiples to public companies. I felt like in a couple of instances of those, they sold too early.

Jason Karp (35:02):
They harmed the brand because of the venture money that was behind them. They kind of grew way too quickly, they oversaturated, they harmed the integrity of the brand because they just needed to get into as many stores as possible. Jordan, Jessica and I had this view that we didn’t want to do that. We wanted to make sure that it’s okay if we grew more slowly, and we never wanted to compromise on the authenticity and the integrity of what we were offering. That ended up being, I think, a really good decision. We grew much more slowly than some of our competitors. But I think we ultimately got a much higher multiple than our competitors because our brand was so much stickier.

Jason Karp (35:43):
Before we sold, we had metrics that you could see like key performance indicators on how many bars and other products. Now we have Crackers and we have Hunks, which are chocolate-covered nuts. And our kind of fastest growing skew is our Hu Gems which are our chocolate chips, which you can both bake with and eat as a snack. And our metrics around all these products were really unprecedented in terms of how frequently they return. Return, meaning like sell in a store, and how many dollars we would generate called dollar velocity in a store. And to an acquirer, what they care about is, okay, you’re pretty small relative to us. In the case to Mondelez, we took Mondelez on as a small, minority partner in the beginning of 2019.

Jason Karp (36:28):
Mondelez is the largest snacking company in the entire world. They’re the parent company or the holding company behind Oreos, Cadbury, Toblerone, Fitzroy, and more recently, they’ve gotten into some healthier brands that they bought. They bought Enjoy Life Foods, which is an allergen-free brand. They brought Tate’s Cookies and they bought Perfect Bar, and they’ve been actively trying to stew healthier. And I thankfully think they’re actually doing a good job with it. And we kind of looked at ourselves and we were thinking about like, what do we want to look like when we grow up, and scale and really providing access to a lot more people was a big part of our mission.

Jason Karp (37:06):
We thought we could create the best chocolate on our own, but we didn’t have the learnings or the know-how and how to get truly national, and how to get into all of the big [inaudible 00:37:15], how to deal with all of the challenges of producing in scale, and how to produce in scale without compromising on quality, and how to buy much more of our ingredients, again, at the same quality that we wanted. Mondelez made it clear that they were very understanding and had shown in their previous acquisitions, that they didn’t want to compromise on the quality, and they didn’t want to compromise on the brand mission. And we did a lot of diligence. And we got comfortable with them as a partner and they were a partner for almost two years before we sold to them.

Trey Lockerbie (37:45):
You recently launched a SPAC with Rohan Oza and his crew of CAVU. We’ve never really talked about SPACs on this show. So I want to just break it down for our listeners really quickly, give it a little bit of a SPAC one on one break down so they understand what that is and what his purpose is for.

Jason Karp (38:02):
So SPACs have actually been around for 20, 30 years. But they’ve gotten very, very popular in the last 2 years for several reasons. A SPAC is a single purpose acquisition company. And it is basically a blank check company that is public, where you go to a group of public investors, anyone to participate, and you raise a pool of funds that is locked in a trust bank account, you then have just cash when you raise it. And there’s a sponsor group, which are kind of think of it like the management team of the SPAC. The sponsor group is behind it. And you are betting on that sponsor group to identify a private company that you think should be public. There’s a misnomer that specs “buy companies”. SPACs don’t buy company.

Jason Karp (38:51):
SPACs are typically much, much smaller than the company that they, what’s called, reverse merge with. What a SPAC does is, just to use round numbers, our SPAC, HumanCo Acquisition Corp raised approximately $300 million. That $300 million is sitting in a bank account. Our sponsored group is the HumanCo team and the CAVU team. And CAVU is one of the top performing venture funds within health and wellness and consumer packaged goods. They’ve had nine exits in the last five years. They’ve had numerous unicorns. Rohan, as you mentioned, is on Shark Tank. He’s been involved in some of the best brands in the last decade, including he was the Chief Marketing Officer of Vitamin Water when they sold the Coca-Cola. Rohan has an amazing background and his partner, Brett Thomas, have an amazing background in identifying brands that can become bigger.

Jason Karp (39:41):
So our team is HumanCo, their team is CAVU, and then we also assemble a group of our board members who bring real interesting learnings and experience to the table that money cannot buy. And if you look at some of our board members, three of which were very high profile public company executives. For example, one of our board members is a guy named Brian Kelley, who was the president of Coca-Cola, then was the CEO of Keurig Green Mountain, and took Green Mountain and Keurig to a $14 billion valuation and sold it. And here’s a guy who ran a huge public company. We also have a guy named John Foraker, who was the CEO of Annie’s, the organic food brand that he took public and then sold it to General Mills. And so we have this great group of board members. And we all bring a lot of things to the table. But right now, it’s just cash in a bank account.

Jason Karp (40:29):
And what we have is we have 24 months to go find a private company that has an enterprise value of call it a billion dollars up to a billion dollars, that are private, and a SPAC effectively, shepherds that company public, and helps bring it public. It’s an alternative way to go in public. The reason that in the last 18 months there have been probably 300 SPACs that have been created, which is probably more than like the five years combined before that, it’s been well over $100 billion has been raised in bank accounts, and everybody has 24 months to find a private company to bring it public. SPACs are controversial because it’s very much about the management team, the sponsor group. SPACs are a way that the sponsor group can get very wealthy.

Jason Karp (41:17):
The sponsor group typically takes 20%, like a hedge fund of the capital that’s raised. In many instances, the sponsor group is just interested in matchmaking, where all they’re trying to do is find a private company basically say, hey, we’re a good way for you to go public. And then the investors, it’s actually a good vehicle for the public market investors too, because prior to the announcement, SPAC has to go look for a private company. And then what happens is, let’s say we find a private company, we will announce it that we have now come to terms with the private company to bring them public. It’s almost always a much bigger company. So the SPAC will end up owning 20, 15, 25% of the pro forma. By the SPAC, I mean, all the shareholders have a SPAC. And then the existing company will still have the super majority of the equity.

Jason Karp (42:04):
You as a public market shareholder, you have a vote when you announce the deal. If you announce the deal and the public market hates it, they can vote no and block the deal from happening. And you effectively have a put option, not effectively, you actually have a production at $10 a share, which is where SPACs typically go public, and you could all your money back at 10. And where you can lose money as a public shareholder is after the deal gets voted through in officially what’s called De-SPACs. Once it De-SPACs, now you actually just have a regular public entity. And the shareholder base of that is going to be a mix of the participants in the SPAC itself, the sponsor group, and the company that was private that is now public.

Jason Karp (42:45):
In the case of HumanCo Acquisition Corp, and of course, every SPAC sponsor is going to be biased towards themselves. But we’re taking a different approach. And we are not just matchmakers, this is our day job. This is not a side hustle. This is what we do every day. We observed that there were a lot of large private companies that we think should be public. And we think the public markets do not have enough offerings for mission-driven, ESG, socially responsible type of investors. There are just not many ways to play it. And Tesla has become sort of de facto way for everybody to play ESG. Beyond me in the food space was probably the first kind of high profile play that went public and now commands an outrageously high valuation, because there are not many ways for public shareholders to play.

Jason Karp (43:34):
And so that’s what we’re doing at HumanCo Acquisition Corp. We went public two months ago. We are actively seeking and talking to many private companies. We obviously can’t say who and how and how far along we are, because we are a public company and we do have to obviously adhere to the SEC regulations. That is what we’re doing for big companies as our SPAC. And for smaller companies, call it $300 million and smaller, that’s what HumanCo is for. So for big companies, we’re using the SPAC, and for smaller companies, we’re using our holding company.

Trey Lockerbie (44:04):
So yeah, I know, for example, in food and beverage where exit opportunities for investors, there’s sometimes only a handful of what they call strategics. There’s bigger companies you mentioned, like Mondelez, who are willing to take on a smaller company and put it under their umbrella. So it sounds like the SPAC is going to democratize this a little bit more, and allow for a lot of these companies to be able to exit or at least go public and pay off their shareholders in a new way. It’s an old way, but it’s coming back into vogue.

Jason Karp (44:34):
It is definitely a way for democratizing. It’s going to massively accelerate the number of private companies that can go public. SPACs have some significant advantages over the regular way IPO process. It is much faster, you do not have to roadshow for months and months and months, you get a determined price from the stack as opposed to when you go public the regular way you don’t know where the market is going to value. Whereas when you go public with a SPAC, the price is determined. And so that’s a big advantage. And probably for the kind of companies that we’re talking to at HumanCo Acquisition Corp, one of the greatest benefits is that you get our entire team now as part of your team.

Jason Karp (45:11):
You get our board, you get people like Rohan and Brett, you get the HumanCo team, several of us may or may not become board members of your pro forma company. On the HumanCo side where we have a lot of public market experience, my partner and I, Ross, we both have over 20 years of public market experience. A lot of these private founders don’t want to deal with public markets. They’re worried about reporting quarterly earnings, they’re worried about investor relations, they’re worried about watching your stock price move every day. There are a lot of downsides to being public. And I think having a sponsor partner that knows how to navigate that part so that you, as a management team of your private company can focus on what you do best, I think that’s a compelling value proposition.

Trey Lockerbie (45:53):
Well, you touched on ESG. So I just want to spell that out for our listeners, that’s Environmental, Social and Corporate Governance focused company. So you’ve mentioned Tesla is sort of taking up all the market share of ESG opportunities and public markets, which I think is a fascinating viewpoint. What do you think the future of ESG looks like beyond SPACs in the public markets?

Jason Karp (46:14):
Well, I think it’s accelerating massively now. I think, for a very long time, ESG was viewed as almost like a tax where big corporations and companies that had a mission of trying to help other stakeholders, not just stockholders, but other stakeholders like people and the environment, and your employees, and aspects like diversity, those concepts used to be viewed as sort of like they were mutually exclusive. Like you couldn’t have a good return if you cared about all those other things. And in the last decade, it’s been very clear that those two actually are correlated and not negatively correlated.

Jason Karp (46:53):
And that many ESG oriented companies who care about these other things attract better talent, they actually compound returns faster, and in some cases, they actually grow from a revenue perspective, and not just the valuation, from a revenue perspective, they actually grow faster because the people who want to buy those products actually care about who’s behind this. Why are they doing this? Does this support my own personal values? And in the last decade, what’s been great about some of the younger generation is that they’re starting to vote with their wallet, and starting to buy products that actually are kind of manifestations of their own personal values.

Jason Karp (47:31):
I think companies like Hu benefited from that, I think certainly companies like beyond Meat, that’s almost their entire business model, and a lot of big kind of sexy private companies like Allbirds. There’s many really successful companies that are using these aspects behind them and are working. And the more they work, meaning the returns come, the more capital will go towards them. And the more capital that goes towards them, the more innovation accelerates. And it’s this virtuous cycle that will continue. So I am super bullish on categories where you have this intersection of mission and business. And I don’t think they’re mutually exclusive.

Jason Karp (48:10):
I would caution your listeners, though, that there are many concept companies, what I call sort of pie in the sky hope stories, that have no prospects for years and years and years of ever generating even revenue. And there are some insane things happening in the public markets right now that are very scary. And as investors, and unfortunately, I’ve lived through a few cycles, including ’99, 2000, and then 2008, as an investor. There are going to be many of these companies that sound like they have a great mission and have a great hope, but go to zero. And what I always like to tell investors and entrepreneurs and companies that even were involved with HumanCo is you can’t help people if you don’t have a viable business model. You’re not going to help people if your business doesn’t succeed.

Jason Karp (48:57):
The best way you can help people is make sure you have a viable model that can employ more and more people, that can raise capital, that can generate real ultimate profits, and ultimately be a real business. And I feel like right now, we’re in a very bubble-ish period where people are ignoring business models again. And the last time I saw that was 1999. And so you definitely have to be careful as an investor right now in the difference between speculation and investing, because there’s going to be a lot of companies that go to zero and I just want everybody to be cautious about that, that they’re actually doing their real work about like, how does this turn into a real business?

Trey Lockerbie (49:35):
So I know that you’ve thought about this, but at what enterprise value would you consider taking HumanCo public?

Jason Karp (49:43):
I’m not saying that. I think we’re too early. We’re still in like anyone, and we’re really building it. We have a lot of work to do to continue building it, to continue hiring. We’re going to announce a very high-profile partner in addition to our company next week. It’s early days but it is something that I do intend to do at some point.

Trey Lockerbie (50:06):
So Jason, thank you so much for coming on our show. Maybe hand off to our audience where they can learn more about your funds, your SPAC, HumanCo, your other endeavors.

Jason Karp (50:15):
We have a website, humanco.com. Our SPAC has its own website, humancospac.com. We are listed on the NASDAQ, HMCO as a ticker. We’re also on Instagram @humancobrands. I’m not that active on social but my handle is @humankarp on Twitter, @humankarp on Instagram. And obviously, keep a lookout for the evolution of our own products and brands, Coconut Bliss, Montes, and Snow Days are all brands that you can follow and try if you want to sort of experience what we’re doing. And then finally if you’re interested in playing plant-based milk, SunOpta is a public company, the ticker is STKL. It will be highlighted as Oatly is working to go public.

Trey Lockerbie (50:59):
Jason, thank you so much again for coming on the show. I really hope we get to do it again sometime.

Jason Karp (51:03):
All right. Thanks so much for having me. I appreciate it.

Trey Lockerbie (51:06):
All right, everybody. That’s all we had for you this week. Be sure to tune in next week where Stig is going to be sitting down with the mastermind group. And if you’re loving the show, don’t forget to subscribe to the feed so that you get these episodes in the app every week automatically. And while you’re at it, go ahead and follow me at @TreyLockerbie. Find us on Twitter, check out theinvestorspodcast.com or go to asktheinvestors.com to send in a question. And with that, we’ll see you again next week.

Extro (51:35):
Thank you for listening to TIP. Make sure to subscribe to Millennial Investing by The Investor’s Podcast Network and learn how to achieve financial independence. To access our show notes, transcripts, or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.


Help us reach new listeners by leaving us a rating and review on Apple Podcasts! It takes less than 30 seconds and really helps our show grow, which allows us to bring on even better guests for you all! Thank you – we really appreciate it!



P.S The Investor’s Podcast Network is excited to launch a subreddit devoted to our fans in discussing financial markets, stock picks, questions for our hosts, and much more! Join our subreddit r/TheInvestorsPodcast today!


  • Get a FREE book on how to systematically identify and follow market trends with Top Traders Unplugged
  • Elevate your writing with 20% off Grammarly Premium.
  • Automate your money with M1 Finance. Get $30 when you sign up for free today.
  • Push your team to do their best work with Monday.com Work OS. Start your free two-week trial today.
  • Take your business to the next level by hiring the right people with ZipRecruiter.
  • Join OurCrowd’s Investment in ByondXR—a platform that’s enabling the world’s leading brands to attract customers with the future of virtual shopping journeys. Open your account today.
  • Invest in high-yield, professionally managed real estate, starting with as little as $10K with EquityMultiple.
  • Support our free podcast by supporting our sponsors





Check out our latest offer for all TIP listeners!

WSB Promotions

We Study Markets