Start-ups

Meet the 34-year-old founder who naps on a nail bed and is selling millions of dollars of mushroom products

Tero Isokauppila foraging for mushrooms.
Photo courtesy Tero Isokauppila.

As the busy founder of rapidly growing start-up Four Sigmatic, 34-year-old Tero Isokauppila needs a way to combat his usual early afternoon slump.

So he naps on a nail bed for 30 to 40 minutes daily. He even has portable mat versions for when he travels.

"It's painful in the very beginning, and then you relax," Isokauppila tells CNBC Make It about the practice, which has a long history of use as acupressure in Chinese medicine. "I fall asleep almost immediately... I come out super productive again."

Isokauppila's portable nail bed acupressure mat
Photo courtesy: Tero Isokauppila

Though napping on a nail bed may seem peculiar, is perfectly on brand for the Finnish start-up founder — Isokauppila's company aims to solve modern problems with old-world healing methods. Four Sigmatic sells products from coffee-replacement drinks to wellness elixers made from a variety of edible specialty mushrooms believed to have health benefits in ancient Chinese culture.

"My idea was to get the world drinking mushrooms," Isokauppila tells CNBC Make It.

Isokauppila realizes that also may sound peculiar but, he says, "A lot of successful businesses for a moment have been considered odd."

A functional fungi empire

Four Sigmatic, which Isokauppila founded in 2012, sells products made from so-called "functional mushrooms" — those that reportedly provide health benefits beyond their nutritional content, like Chaga, Cordyceps and Lion's Mane, which are said to have health benefits from supporting the immune system to lowering cholesterol.

Four Sigmatic sells more than 30 mushroom products including coffee-replacement beverages (10 servings for $15) for energy and focus, wellness elixirs (20 servings for $38) for a boost or for calm, protein supplements (15 servings for $50) for muscle repair and beauty products ($50 to $55).

And functional mushrooms are trendy.

Currently, Four Sigmatic's mushroom coffee mix with Lion's Mane and Chaga is the No. 1 best seller in the instant coffee category on Amazon, beating out Nescafe and Starbucks. Its mushroom coffee mix with Cordyceps and Chaga is the No. 8 best seller.

Globally, the market for functional mushrooms was $5.8 billion in 2018, according to Avinash Desamangalam, the lead researcher for the food and agriculture department at market intelligence firm Mordor Intelligence, and it is expected to grow 6.4 percent annually from 2019 through 2024, with China expected to be the largest producer and consumer.

The science, however, is spotty — some mushrooms may help lower cholesterol or help control Type 2 diabetes, says Academy of Nutrition and Dietetics registered dietitian Sonya Angelone, but for most varieties the "evidence for any specific health benefits other than the actual nutrients contained in the mushroom are lacking."

Four Sigmatic mushroom coffee with Lion's Mane and Chaga mushrooms.
Photo courtesy Four Sigmatic

But like many wellness types, Isokauppila is a believer. He says the potential of mushrooms should be taken seriously, and his goal is to bring functional mushrooms to modern consumers in an approachable way.

And customers are buying: Four Sigmatic's sales were "eight figures" in 2017, Isokauppila tells CNBC Make It. In 2018, a company spokesperson says, its sales doubled from there. Four Sigmatic has annual revenues of $61.7 million, according to Crunchbase.

From foraging in Finland to founding a business

Isokauppila has early, fond memories of mushrooms: He grew up on a farm in Finland (which his family has owned since 1619) where he for mushrooms with his mother starting at age 4 or 5.

Tero Isokauppila and his older brother as kids on the family farm.
Photo courtesy Tero Isokauppila

And mushrooms kept popping up in his life: While at Tampere University of Applied Sciences in Pirkanmaa, Finland, Isokauppila and a friend won an innovation award (and about 5,000 euros, which they split) for discovering a particularly rare culinary mushroom.

Then as a semi-competitive runner, Isokauppila discovered Cordyceps mushrooms, which he believes naturally enhanced his performance. (At least one study published in the National Center for Biotechnology Information of the U.S. National Library of Medicine in 2016 says ingesting the mushroom "may improve tolerance to high intensity exercise....")

Isokauppila started experimenting with other herbs and other natural product supplements and found the customer service for ordering such things online was horrible.

"I would order random powder that definitely looked like some kind of drug — it could have been easily cocaine. There was no documentation. That was one of the inspirations for [Four Sigmatic]," Isokauppila says.

Tero Isokauppila and his friend with mushrooms they had just foraged.
Photo courtesy Tero Isokauppila.

So he decided to create his own mushroom nutritional supplement, and Four Sigmatic was born.

Selling mushrooms to people who hate mushrooms

Isokauppila started Four Sigmatic in Hong Kong, where many of the mushrooms he used were sourced. He later moved to the Philippines to save money and grow the business from there.

Then in January 2015, Four Sigmatic moved to Los Angeles.

"The U.S. is the world's largest consumer market and [in my opinion] the place that needs help in health the most," Isokauppila says.

Tero Isokauppila and the Four Sigmatic team in early 2015 as they were launching the brand in Los Angeles.
Photo courtesy Tero Isokauppila.

Four Sigmatic's first product was mushroom "tea" — "herbal tea would be the closest comparison," Isokauppila says.

While mushroom tea sold well in Europe, it did not sell well in the United States.

"Europeans love tea. It was a ritual. I came to the U.S., and I was like, 'I am going to make America drink mushrooms.' And people said, 'You are dumb-dumb,'" Isokauppila tells CNBC Make It. "Americans don't really like tea."

Tero Isokauppila on his family farm in Finland.
Photo courtesy Tero Isokauppila

Another "big revelation" was that "most of our customers hate mushrooms, so they don't want mushrooms," says Isokauppila.

So for Americans, Isokauppila developed a mushroom-coffee drink (made with coffee, chaga and lion's mane mushrooms and wild rhodiola root, which is used in Scandinavian countries to treat things like anxiety to fatigue, according to Healthline).

He also stopped pushing the mushroom component and instead marketed the drink as a better experience for coffee drinkers, which according to Isokauppila includes reduced jitters and heartburn. "That's a value proposition," he says.

"Instead of selling someone a new ritual, we sold them an upgrade to their current habit," he says. "Then the other benefits of mushrooms like antioxidants and beta glucans is like a bonus." Four Sigmatic's website says its most popular coffee drink "support[s] productivity, focus, and creativity," for when "your brain needs an energizing get-it-together hug."

"It also needs to taste good enough," adds Isokauppila.

And that depends on who you ask: The powder mushroom coffee mix has been described as "a little bit smoother" in taste than regular coffee, "like velvety in a way," according to Amazon reviews. Another reviewer adds water, coconut sugar and half-and-half and says the result is "delicious." Of course, it doesn't win over everybody: "This tastes like a pretty nondescript cup of coffee. It isn't bad or great....It is essentially instant coffee that has some earthy flavor and really packs a kick," says yet another Amazon review.

In addition to being sold on Amazon and from their website directly, in the U.S., Four Sigmatic products are now sold in Whole Foods stores and a collection of coops and farmers' markets. Free samples of the products are also available at Four Sigmatic's Shroom Room, a tiny storefront in Venice Beach, California. Though the company has started to see some mainstream success, there was no single "tipping point," according to Isokauppila. The growth has been slow and steady with frequent feedback from consumers being integrated into the new products.

And Four Sigmatic continues to test the boundaries of what mushroom products Americans will use. In early 2019, the company launched mushroom-infused beauty products including a face mask to clean pores, smooth fine lines and reduce redness; when mixed with hot water, it is also a tonic you can drink to support sleep and detox, according to Four Sigmatic's website.

As with napping on the nail bed, the key to a successful business lies in being comfortable in the uncomfortable, according to Isokappila.

Isokauppila says his idea to make the world drink mushrooms was "outrageous." "I could go stories upon stories of people who have laughed at me, often for a good reason" he says.

But "if you want to do things differently or create unique differentiated value, you have to be comfortable in thinking differently and doing differently," Isokauppila says.

See also:

How DJ Khaled went from broke and in jail to making $24 million, working with Jay-Z

What it's like to travel to space, from a tourist who spent $30 million to live there for 12 days

How Charity: Water's founder went from hard-partying NYC club promoter to helping 8 million people around the world

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