Magic Spoon and Exo: building two food startups from crickets to cereal

Executive overview

Two college friends spent five years trying to normalize cricket protein bars in America, only to hit a ceiling — mainstream consumers wouldn't cross the psychological hurdle of eating insects, and the supply chain couldn't keep up with ambition. They sold Exo, stepped back, and asked a simpler question: which massive grocery category has had zero real innovation in 25 years?

Cereal was the answer. Magic Spoon — high-protein, grain-free, zero-sugar, nostalgic-flavored cereal — launched in 2019 and blew past first-month targets within days. The Exo failure provided the exact playbook for what not to repeat.

The core insight: choose a massive, beloved, declining category and upgrade it — rather than pushing a niche idea toward a reluctant mainstream.

The Exo years: cricket protein bars

• Idea born in a Brown University entrepreneurship class; pivot came when a competing bar launched and Greg introduced cricket protein.
• UN report on edible insects + sustainability narrative (crickets use far less feed and water than livestock) provided intellectual hook.
• First supply sourced from a Louisiana cricket farm that served reptile owners; no food-grade cricket supply chain existed.
• Kickstarter raised $60K against a $20K goal; coverage in New York Times, Forbes, Fast Company followed purely from the novelty.
• Chef Kyle Connaughton (formerly of The Fat Duck, later Michelin three-star Single Thread) helped develop flavors.
• Raised ~$5M total; paleo influencers (Mark Sisson, Tim Ferriss, Rob Wolf) drove early sales through their audiences.
• First-year revenue roughly $1M — fast for a cricket bar, but growth beyond early adopters stalled.

Why Exo failed

• Mainstream psychological barrier proved much harder than anticipated — "pushing a boulder up a hill."
• Supply chain crisis: cricket flour costs were too high at meaningful protein volumes; the industry barely existed.
• Traveled to Thailand (20,000+ cricket farms) seeking cheaper supply; still couldn't make economics work.
• Even at $2.99 retail with industry-standard margins, only ~10–11g of cricket flour per bar; scaling to protein-powder quantities was unviable.
• Effective ceiling: ~$1M annual revenue with no clear path to mass market on a venture timeline.
• Sold the business; brand still exists online.

Pivoting to Magic Spoon

• Strategic inversion of the Exo approach: find a large category begging for innovation, not a niche idea fighting for acceptance.
• Scanned major grocery categories — milk (too much innovation already), soda (same) — landed on cereal.
• $11B cereal category declining because products hadn't evolved; emotionally resonant brands (Lucky Charms, Cocoa Puffs) still beloved.
• Target customer: 20–40-year-olds who grew up on sugary cereal but wouldn't buy it for themselves or their kids.
• Guardrails set early: 10g+ protein, ≤5g net carbs, zero added sugar, grain-free.
• Key ingredient unlock: allulose (naturally occurring, doesn't spike blood sugar, no bitter aftertaste, functions like sugar in manufacturing). Paired with monk fruit.
• Timing mattered: allulose wasn't commercially available 10 years earlier.

Building Magic Spoon differently

• Raised $1M pre-launch from returning VC (Collaborative Fund) and health/wellness influencers who took equity in exchange for promotion.
• Created a bonus equity pool for influencer-investors tied to revenue driven — aligned incentives rather than paying flat fees.
• Discovered manufacturer at a Las Vegas trade show by pretending a plain-loop cereal was their prototype.
• Manufacturing is genuinely hard: dairy protein burns at low temperature during high-pressure extrusion; "line between perfect puffs and burned shriveled puffs is very small."
• Packaging choice was deliberate branding: cardboard cereal box over resealable pouch to evoke nostalgia.
• Named the company Magic Spoon after briefly calling it "Discos" — pivoted when they realized "being Disco'd" is retail slang for being discontinued.

Growth and scale

• First-month revenue shattered projections; went direct-to-consumer only for nearly three years by choice, not necessity.
• Retailers kept approaching them; they kept saying no until supply chain could support the step-up in volume.
• Celebrity investors found organically: Questlove posted about Magic Spoon on Instagram; they DM'd him. Nick Jonas invested after discovering the product as a diabetic.
• Became the number-one best-selling cereal on Amazon.
• Now in Target, Walmart, Safeway/Albertsons, Kroger, Sprouts.
• Not in Whole Foods: Whole Foods doesn't carry products with allulose.
• Raised just over $100M total over four years; ~half the most recent round provided liquidity to early investors rather than going into the business.
• First product outside boxed cereal: a protein-forward Rice Krispie Treat-style bar.

Lessons from both companies

• The same founders doing the same idea at different times can produce wildly different outcomes — timing is a major variable.
• Exo influencer post → a few hundred dollars in sales; same influencer promoting Magic Spoon → several thousand dollars. Product-market fit is the multiplier.
• Going DTC first lets you learn the customer and build brand before retail scale demands.
• Being well-capitalized before retail launch matters: cereal extrusion equipment is two stories tall, requires five operators, runs eight-hour shifts.
• Co-CEOs with similar personalities can work — Gabby runs sales, marketing, fundraising; Greg runs operations, product, finance. No major disagreements on record.