Sometimes the best ideas are hiding in plain sight. In 2017, Bill Shufelt—a Connecticut hedge fund guy—was tired of hangovers. Or more specifically, back-to-back hangovers from an endless stream of work dinners. Why wasn’t there a non-alcoholic beer that tasted good and was (don’t laugh) aspirational enough to enjoy in front of clients? That was Shufelt’s pitch for Athletic Brewing—which 120 venture capitalists swiftly passed on.

How does an entrepreneur get right back up to pitch again? And again? That’s the story of Athletic Brewing which, seven years after those disastrous meetings, is now the number one selling beer at Whole Foods (alcoholic or not). Celebrity ambassadors like J.J Watt, Naomi Osaka, and Karlie Kloss have all shilled for the brand; a writer for GQ once described the near-beer’s flavor profile as “bitter and complex,” adding: “It tasted real.” For that, you can thank Athletic’s co-founder and head brewer, John Walker, who is a veteran of Second Street Brewery in Santa Few, New Mexico.

Whether Athletic’s founders anticipated the wellness trend or got lucky doesn’t really matter. (For the record, some 80% of their customers also drink traditional beer.) But the industry was suddenly paying attention. In 2022, Keurig Dr Pepper—owner of brands like Canada Dry, Snapple and Green Mountain—invested $50 million dollars in Athletic Brewing, taking a minority stake in the company. According to Global Market Insights, the nonalcoholic wine and beer market is set to surpass $30 billion by 2025. And Bud and Coors are now pushing their own non-alcoholic beers. Anheuser-Busch, meanwhile, announced they want 20% of their global beer sales to be alcohol-free by 2025.

How did we get here? How did a non-alcoholic beer end up in everyone’s summer cooler? Over some cereal and (naturally) a few cans of Athletic Brewing, the company’s founders talk J.J. Watt, what it takes to reinvent a category, and one very surprising encounter with law enforcement.

Athletic Brewing cofounders John Walker and Bill Shufelt launched the non-alcoholic beer company in 2017.

MICKEY RAPKIN: We often talk with entrepreneurs about disrupting a category. But in this instance, there was almost no category to disrupt. When I was a kid, the only non-alcoholic beer was O’Doul’s and it was a joke. What made you think that there was a market here?

BILL SHUFELT: I was sitting there as just a modern, healthy, busy adult who wanted a beer that kept up with my lifestyle, and there was nothing out there that did that. I was like, “I have to get up and do busy stuff tomorrow. I can’t go to that dinner.” I started asking either my sell-side coverages or colleagues, “Would you rather meet at a SoulCycle or Barry’s Bootcamp instead of doing a dinner tonight?” And everyone was like, “Yes.” It just seemed like it was a category hiding in plain sight.

RAPKIN: Didn’t 120 V.C.s turn you down?

SHUFELT: There was a time when I’d dine with eight prospective investors, only to be met with eight rejections in a row. There was a period where I faced a string of 30 consecutive no’s—an incredibly disheartening phase. But then, an old college mate of mine convened a group of four friends who all agreed to invest $5,000 each. This was incredibly uplifting, especially given the lack of enthusiasm I’d been encountering.

RAPKIN: Does the experience of receiving funds from friends rather than a bank feel distinct?

SHUFELT: Our initial round of investment was backed by 66 individuals. There’s indeed a massive exertion of pressure due to fiduciary obligations towards shareholders. Both John and I left our jobs, with John even relocating across the country. We truly made some significant sacrifices.

ERIC RYAN: Can you relate an instance of an early setback?

SHUFELT: We have this old chiller that would just inadvertently blow glycol all over the parking lot.

RAPKIN: Wait, what’s a chiller?

Athletic now has brewing facilities in Milford, Connecticut and in San Diego, California.

SHUFELT: It runs coolant throughout the jackets around the beer—not actually touching the product, but it cools the tanks. Every once in a while it would just blow out—from pressure—all over the parking lot. We’d not only lose time and lose beer but we’d have to do a big cleanup, too.

JOHN WALKER: Producing each drum required an investment of about a thousand dollars, and we were quickly burning through our funding.

RYAN: Many find the biggest challenge in designing a non-alcoholic beverage is capturing the distinct mouth feel and heat of alcohol. How did you tackle this?

WALKER: Our approach is to start with the end result and work our way back. Will this have a water profile similar to a Czech Pilsner? Or will it have the finish of a Northeast or Northwest IPA? Rather than trying to mimic alcohol, we focused on what truly defines a beer – the malt, the hops, the water, the carbonation, and even the occasion.

RYAN: That’s an interesting perspective. The occasion does add its own distinct flavor when enjoying a beer. Such a thought-provoking idea.

RAPKIN: Do you still drink alcohol?

WALKER: I do, yeah. My tagline is, “I drink a lot less alcohol and a lot more beer.”

RYAN: What you did was take the social stigma out of non-alcoholic beers. And it’s a big part of my playbook. Cleaning products are really dorky, but when I launched Method, I found the aspiration of home design as a way to make it cool.

RAPKIN: That’s right. Did J.J. Watt make it cool to drink non-alcoholic beer in public?

SHUFELT: We initially gained notice among advanced endurance competitors. Then we enjoyed another surge in popularity, with J. J. Watt being among our new supporters. He says, “I enjoy your beer while watching college football on Saturdays. And I feel great when I play my games on Sunday.” He did mention, “Bill, I’m not yet ready to be seen as the face of non-alcoholic beer. But I’ll chip in where I can.”

Bill Shufelt, a co-founder, abandoned his hedge fund career to dedicate himself to Athletic Brewing.

RYAN: The positive aspect is that Athletic Brewing can be sold in locations where you wouldn’t ordinarily see beer.

SHUFELT: True. To name some, places where beer has never been seen before: State Parks.

WALKER: Climbing gyms. The office.

SHUFELT: My favorite beer every day is my drive-home-from-work beer. That’s not exactly an alcohol occasion.

RYAN: Have you been pulled over yet with a beer in your hand?

SHUFELT: I haven’t. But one of our teammates got pulled over, I think it was about 1:00 A.M., a couple months ago, and an eagle-eyed police officer saw the beer in his hand and pulled him over. Which makes total sense. But I guess he was nice enough and let him on his way.

RYAN: I was contemplating the extensive data you must gather on your clients thanks to e-commerce sales.

SHUFELT: We mentioned to our investors, friends, and community that our e-commerce business will be launched right from the start. Many queried the feasibility considering the weight and the resultant cost of shipping beer. Yet, we responded, “We’ll start by shipping one package at a time, learning from each order we process.” Consequently, we now have a direct communication channel with our customers—possibly the fastest iterative loop in the beer industry.

RYAN: You’re referring to new flavors, are you not?

SHUFELT: Absolutely. We have direct relationships with millions of customers. I believe we’ve established the first truly omnichannel business in the beer space.

RAPKIN: While discussing marketing, have you considered stadium naming rights? This is usually associated with beer brands.

SHUFELT: We explored one opportunity with stadium naming rights to some extent. Although it might not have been the most effective use of our time, it’s something we may pursue in the future. We have a wealth of fun concepts in mind. I’m open to evaluating any ideas.

Athletic Brewing can be sold in locations where you wouldn’t normally expect to find beer.

RAPKIN: Athletic Brewing has now become Whole Foods’ best-selling beer. Keurig Dr Pepper has invested $50 million in your company. Have any of the venture capitalists who initially rejected you returned to admit they were mistaken?

SHUFELT: We’ve had a lot of outreach from people who passed on us and I kindly say they had their shot. I mean, I definitely don’t blame anyone for passing. We were pre-revenue, we didn’t have product, I was literally walking around with a 96-page business plan but no product. And it was kind of, “This is what the world could be. We’re going to build a brewery, and this is where we hope to take it.”

RAPKIN: Last question. Bill, when you launched this thing, you were working at a big hedge fund in Connecticut. What made you feel like it was time to take a leap? Were you dying inside?

SHUFELT: I thought nobody liked what they did for work. And that work was something you did to be able to participate in the rest of life. I was in the mindset to work really hard, save money— I thought that’s what an adult was. I had this idea [with a] very low probability of economic success. I worked on the plan for two years. It was really my wife who helped me see that we could have a positive impact if we made moderation cool, accessible, de-stigmatized. She had seen the turn in my life. That’s what really got the fire going for me.

The conversation has been edited and condensed for clarity. Click here to watch the last episode of Cereal Entrepreneur, where Unapologetic Foods’s CEO Roni Mazumdar and executive chef Chintan Pandya talk beating the reservation bots, teaching Americans to think outside the naan, and goat brains.

“Cereal Entrepreneur” is an interview series for Forbes hosted by Method founder Eric Ryan and … [+] journalist Mickey Rapkin.

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