It appears that simply formatting your USB stick to be FAT32 isn't sufficient. The c64 mini also expects for there to be an MBR (Master Boot Record) within the first 512 bytes of your USB stick. If it's not there, it fails.
I'll provide some step-by-step walkthroughs below on how you'll accomplish this
There are a few ways you can do it, so I'll list them from easiest to hardest:
…and for those curious to understand the details of the matter: