With only $150, a 43-year-old started a side hustle in college that now generates $200 million annually.

Seth Berkowitz, a college student two decades ago, had a late-night craving for a "warm, delicious treat."

As a college junior, he co-founded Insomnia Cookies and grew it into a global chain with over 260 locations. Today, Insomnia is valued at more than $500 million after a 2018 majority-stake acquisition by Krispy Kreme.

According to the company, the product generated over $200 million in revenue last year. Berkowitz, 43, stated to CNBC Make It that he initially thought a warm cookie would satisfy his craving, and it seemed to resonate with others as well.

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At the University of Pennsylvania in 2002, Berkowitz began his insomnia business by baking cookies in his college house and delivering them personally around campus in the early hours of the morning. In one semester, he made approximately $10,000 in profit.

In 2004, after graduating, Berkowitz leased the first Insomnia store, which was located near a college campus in Syracuse, New York. Following that, stores were opened in Champaign, Illinois and College Park, Maryland.

Berkowitz is "grateful for the journey" as Krispy Kreme considers selling Insomnia.

"The warm, delicious moment is really working for us," he says. "Therefore, our objective is to continue."

School by day, cookies by night

Grubhub and Uber Eats were not available in the days before them, leaving college students with limited options for after-hours food delivery. Berkowitz grew tired of eating the same Papa John's pizza every night.

Berkowitz, an economics and history major, spent approximately $150 on ingredients to start baking cookies in a "really small kitchen" shared with eight friends in college housing. He took orders on his cellphone and delivered them around campus as late as 4 a.m. some nights.

Berkowitz says, "I planned to give myself some time to determine if Insomnia Cookies would be successful."

Insomnia's marketing efforts, which included distributing flyers in dorms and offering free cookies, did not gain much traction until a campus newspaper published an article about the business. After the article, Insomnia experienced a significant increase in cookie orders, going from an average of three per night to as many as 80, according to Berkowitz.

""I was featured on the front page, along with a backwards baseball cap and a hand mixer," he says."

To expand, he brought in a co-founder, Jared Barnett, and hired employees to grow Insomnia's operations. He reinvested profits, building an online ordering website and renting a commissary kitchen off-campus to increase cookie production.

Insomnia's journey to national success was not straightforward after they introduced the concept in Syracuse, as stated by Berkowitz.

The difference between a side hustle and a startup

Running a college side hustle was much easier than managing the growth and expansion of an aspiring national business, Berkowitz quickly discovered.

Berkowitz explains that professionalizing a business can be costly, requiring an investment ahead of growth.

An entrepreneur who was starting for the first time spent several years trying out various business models to achieve profitability once more, with funding from angel investors. He experimented with ghost kitchens, licensed frozen yogurt shops, and even launched vending trucks.

During that period, Barnett sold his equity stake to Berkowitz because his vision for the company was no longer aligned with Seth's, and they agreed to part ways.

In 2008, Insomnia generated over $1 million in annual revenue for the first time, but it remained unprofitable. The CEO then made a significant cost-cutting move by reducing Insomnia's corporate team to just two people: himself and a finance associate.

He assumed a significant amount of responsibility for managing Insomnia, including traveling from New York to Philadelphia to repair a faulty generator in a vending truck, delivering cookie dough to the Syracuse store on a weekly basis, and exploring college towns across the country in search of new potential locations.

"Berkowitz states that 2009 and 2010 were some of the toughest years ever at Insomnia Cookies. He explains, "Since there wasn't anyone else to do it, if I was going to grow the business, it was going to take everything that I had.""

'Insomnia Cookies is a perseverance story'

Berkowitz, after a decade of experimentation, returned to a physical store model. He believed that a large sign in the window would generate excitement and prompt customers to return.

In 2012, Insomnia opened its 22nd store in Kent, Ohio, with its own internal cash flow, thanks to the success of its mobile ordering app.

"He declares that reaching that milestone was monumental. It allowed us to become self-reliant and take control of our own fate."

Insomnia opened 125 new stores over the next six years, according to Berkowitz. However, the acquisition of Krispy Kreme by Insomnia during the Covid era caused some co-founder drama, with Barnett suing Insomnia over the sale, claiming he was entitled to a share of the proceeds.

In January, Berkowitz allegedly reached a $3.5 million settlement with Barnett, but neither man spoke about the lawsuit.

Krispy Kreme recently announced plans to sell Insomnia, creating uncertainty over the future of the business. However, Berkowitz says he remains focused on growing the brand, which recently announced plans to open dozens of new locations across the U.S. in 2024.

"Berkowitz often says that Insomnia Cookies is a perseverance story, right? He says, "There are so many reasons why we shouldn't be here, and they outweigh the fact that we are.""

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