Making Your Alcoholic Beverage Attractive to Investors
The adult beverage market is a changing landscape. In 2015, its value was 1,344 billion dollars. Over the next four years, it's supposed to grow to just under 1,600 billion dollars. A market this size encourages growth, expansion, and diversity. Conglomerates and independent distillers stand side-by-side with similar opportunities in front of them. The difference for independently owned and operated wineries, distillers, and breweries is the financial start. Larger corporations can buy out beverage brands that are succeeding.
Take Kentucky Owl as an example. Their first batch of bourbon was under 1500 cases and sold out before it could ever leave the state. The bottles cost roughly $170 each which is a premium price in the bourbon industry. It's popularity and sophistication caught the eye of SPI Group who decided to acquire the brand and expand their portfolio. But, to position themselves favorably, and to create their product, much like every company that starts — they needed capital.
Getting the funds you need can come in different forms. We take a closer look at what those are and how you can position yourself favorably.
Getting Financing for Your Beer, Wine, or Spirit Brand
The good news for anyone who wants to start their own adult beverage company is there are several financial resources available. Bank loans are standard but aren't always approved when you're building a distillery or brewery. Some banks find this sector of the market too high-risk and deny the loan. That isn't to say other options don't exist. On the contrary, investment opportunities might work out better long-term than a standard bank loan.
Every business will need a little money to get things started. This money is called "seed money." Today, you can raise the capital you need through crowdfunding. Rewards-based crowdfunding lets you obtain the capital you need without having a product. They are campaign based and last about 90 days. The issue is you could miss out if you don't reach your desired goal. Investment companies and individuals also offer seed capital, but it is a little risky for them. Most start-ups will try to get their business off the ground first before trying to find investment opportunities.
Two of the most common investment opportunities are angel investors and venture capitalists. Angel investors are usually single individuals with an expressed interest in the industry. They have a substantial net worth that they are willing to contribute to your business. How this plays out depends on the deal. Sometimes it's an honorable contribution. Others, it is a "loan." The average amount an angel investor gives is between $100,000 - $200,000.
Products and concepts that need a little more dollars to move forward can work with venture capitalists. They've been known to loan out upward of seven million dollars. Venture capitalists tend to invest in businesses that have shown growth. The contribution is a little different because the money they spend gets them a seat at your table. Involvement in business decisions is usually part of the deal. However, if you need considerable investment to move forward, venture capitalists are going to be your best bet.
Attracting Investors for Your Alcoholic Beverage
Research your investment companies.
Before meeting with anyone you'll need to conduct research. It will give you a good idea of who they are looking for and if you are a good fit. Typically, they have a "type." You'll want to confirm you're a match before setting up a meeting.
Review your financials.
Gaining capital is all about money. Review your financials. Three years back is ideal for illustrating value. Get a reputable accounting firm. A third party legitimizes your success and integrity, giving others more confidence in investing.
Eliminate excess costs.
Give yourself one year before seeking outside financing. During this time, review and eliminate excess costs. It demonstrates control and maximizes cash flow which investors appreciate.
Hit or exceed your annual budget.
Let's continue with financials. Buyer and lender confidence revolves around the numbers. Not meeting your goals puts doubt into their mind this investment will work.
Conduct market research.
Solid market research goes a long way. Proving your product in some way solves a problem positions you more attractively. Include this analysis in your pitch.
Identify your business objectives.
Just getting someone to invest in your product isn't enough. You should have a thorough understanding of how you want them to participate in a project. Talk expansion, exit strategy, and development strategy, so they know how the two of you are expected to work together.
Never go to a meeting without leadership in place.
The absence of solid leadership is a red flag for investors and sometimes considered a deal breaker. Buyers need confidence that the people spearheading the initiative are driven and have a desire to see their investment flourish.
Use counsel during the deal.
Get in touch with a consulting agency with experience in the adult beverage industry. Consultants work in your favor advising you before, during, and after the pitch. Agencies like the Brindiamo Group have decades of experience in the industry. Deals around financial investment are something we've had first-hand experience with and can provide expert advice. Our only goal is to get you the most favorable deal.
For more information about working with Brindiamo Group for financial solutions in the adult beverage industry, contact us today.