The adult beverage market is a constantly changing landscape. In 2015, its value was 1,344 billion dollars. Over the next four years, it will grow to just under 1,600 billion dollars. A market this size encourages growth, expansion, and diversity. Large corporations and independent distillers share the same opportunities in the market. However, independently owned wineries, distillers, and breweries may face financial challenges that larger corporations do not. It is not uncommon for successful beverage brands to be acquired by big companies.
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. Its popularity and sophistication caught the eye of SPI Group, which decided to acquire the brand and expand its portfolio. But, to position themselves favorably and to create their product, much like every company that starts, they needed capital.
Exploring various avenues for obtaining the necessary funds is crucial. Let's delve deeper into these options and discuss how you can position yourself in a favorable light.
Fortunately, there are several financial resources available for aspiring entrepreneurs looking to start their own adult beverage company. While bank loans are a common option, they may not always be approved, especially when it comes to building a distillery or brewery. Some banks consider this market sector too high-risk and may deny the loan. However, there are alternative investment opportunities that could prove to be more beneficial in the long run than a traditional bank loan.
Every business needs some initial funding, often referred to as "seed money." Nowadays, you can raise the necessary capital through crowdfunding. Rewards-based crowdfunding allows you to secure funding without a product ready, with campaigns typically lasting around 90 days. However, there is a risk of falling short of your funding goal. Additionally, investment companies and individuals may also provide seed capital, although this poses some risk for them. Typically, most startups focus on establishing their business before seeking investment opportunities.
Angel investors are typically individuals with a keen interest in the industry, boasting a substantial net worth and a willingness to support your business endeavors. The nature of their contribution varies - it can be a generous investment or structured as a loan. On average, angel investors provide funding ranging from $100,000 to $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 their money 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 will be your best bet.
Before scheduling any meetings, it's important to do your research. This will help you understand what potential investors are looking for and whether you align with their criteria. Most investors have a specific focus, so it's essential to ensure you're a good match before setting up a meeting.
Securing capital involves reviewing your financials. Looking back three years is ideal for showcasing value. Consider hiring a reputable accounting firm. Having a third party validate your success and integrity can boost confidence in potential investors.
Give yourself one year before seeking outside financing. During this time, review and eliminate excess costs. This will demonstrate control and maximize cash flow, which investors appreciate.
Let's dive deeper into the financial aspect. Buyer and lender confidence heavily rely on the numbers. Falling short of your goals may raise doubts in their minds about the potential success of this investment.
Thorough market research can make a significant impact. Demonstrating how your product addresses a need or solves a problem will enhance your attractiveness to potential investors. Be sure to incorporate this analysis into your pitch.
Simply attracting an investor to your product is not sufficient. It is essential to have a comprehensive understanding of how you envision their participation in the project. Discuss expansion, exit strategy, and development strategy to establish clear expectations for working together.
The absence of solid leadership is a red flag for investors and is 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.
Reach out to a consulting agency with a strong background in the adult beverage industry. These consultants are here to support you every step of the way, offering guidance before, during, and after your pitch. Companies like the Brindiamo Group bring years of industry expertise to the table, particularly in navigating financial investment deals. Their primary objective is to secure the most advantageous outcome for you.
For more information about working with Brindiamo Group for financial solutions in the adult beverage industry, contact us today.