Corporate VC in the Beverage Industry
The adult beverage industry continues to display profitability. There are many investors seek out this sector to support both established and startups businesses as part of a strategic strategy for investment. Consumer preferences are the core drivers behind which companies receive funding, but there is a shift changing in how the venture capital is acquired. We're diving into the what this development will look like and who will be affected.
VC Investing in Beverage Startups
The adult beverage industry in the U.S. is lucrative, and many venture capitalists are testing out the waters by investing in businesses. Henry McNamara from Great Oaks Venture Capital illustrated the financial impact of the industry in a recent article by saying: "wine in the U.S. alone is $35 billion annually, liquor is something like $46 billion annually, and the higher margins on alcohol make this a compelling market."
The tech industry usually dominates the investment sector. But with the advancement of technology and a shift in consumer needs, there is a requirement to bridge the gap. Americans spend $104 billion a year on alcohol that they consumer within their home and less than 10% of these companies and brands are active online. As we mentioned in a previous blog post, the beverage industry is still trying to carve out a unique stance in the online market. Our European neighbors, undaunted by strict legislation, has already made giant leaps by combing online liquor delivery services to their consumers. While the U.S. adult beverage industry is presented with a lot of red tape, some companies are forging ahead.
A New York-based startup Minibar is helping consumers meet their on-demand requests. With instant access to rides, caretakers, food, and other services it shouldn't take long for the trend to match consumers with purchasing liquor online. Minibar is circumnavigating the legal requirements by working with Booze Carriage who power search and delivery. Because Minibar is not listed as a merchant, they can forgo the logistical challenges.
Driving Growth in the Beverage Industry
A pool of investors is looking into options for giving venture capitalists some competition. Corporations are also turning into investors, looking to crack into similar markets. The hefty price-tags primarily impact the growth of early-stage deals. Take non-alcoholic beverage Bai Brands who was acquired by Dr. Pepper Snapple for $1.7 billion. Before the agreement, Bai raised $38 million.
How are beverage brands getting money? There are a couple of different ways, but one is through crowdfunding. Many brands are getting their foot through the door by utilizing these online services to attract other investors. The popularity of the brand launched through the use of sites like CircleUp and CrowdCube prove to VCs that these companies are worth the investment. Don't forget the impact of a well-established social media account. Beverages work well on a visual level for social-media based marketing.
Who's Investing in the Beverage Industry
Finding the capital needed to launch a successful beverage product can be possible when you work with a venture capital firm. Fortunately, there are a few to choose from that can help find success.
A successful firm from Los Angeles, the company, does require some information from their clients. Revenue must average between $1 - 10$ million and show robust and sustainable gross.
As a company, Winklevoss works with both startups and mid-sized companies. They provide guidance in addition to their capital. For the most part, they seek businesses themselves, but there are opportunities to pitch.
Sherbrooke has a long-standing reputation and has been around since 1999. They only invest in companies that have a product, and usually look for revenues to be approximately $5 - $25 million.
Another VC willing to work with startups is Great Oaks. Since establishing in 2005, they have invested in over 200 companies. In fact, they seek businesses in the early stages and usually spend between $50,000 to $500,000 of seed money.
Our team at Brindiamo has helped raise millions of dollars for entrepreneurs. The reason we're successful is our understanding of the challenges that are faced because we've been there too. If you're looking for strategic financial solutions for alcoholic beverages we can help. Visit our website to learn more.