Embarking on the journey of starting a drink company is truly thrilling. After careful consideration of every detail of your product, the time has finally come to turn your dream into a reality.
Starting out can be overwhelming, but one key factor in this process may sometimes feel like the most challenging to tackle:
Where is the money going to come from to grow your company?
Finding the necessary funds may feel overwhelming, but rest assured that there are individuals actively seeking opportunities like yours.
They are known as venture capitalists, and they can be a great help when starting a drink company.
But what does that mean? And how can it help?
A startup company typically lacks the funds required to set up its infrastructure. This includes developing the initial product, establishing a brand, creating a website, planning marketing strategies, implementing various systems, and compensating employees - all of which demand significant resources.
And a company that has just begun its journey in offering items for sale may not yet have a steady source of income to cover these initial expenses.
So how does a person cover these costs when first starting a drink company?
Venture capital helps to do just that.
A venture capitalist is a private investor who provides funds to new companies. They actively seek out startups that they believe have high growth potential.
However, they don’t provide these funds out of altruism. Their initial investment is in exchange for equity in the company. This equity essentially represents a share of the company, meaning the more a venture capitalist invests, the larger percentage of ownership they acquire.
Providing the investors with equity gives them a direct stake in the success of the company.
A venture capitalist is assuming a fair amount of risk by investing in new companies, as it’s reported that about 90% of startups fail. This risk is mitigated as much as possible by their selectivity, and it is rewarded with equity and the potential for large gains.
Although singular people can be venture capitalists, it’s much more common for a group of people to form limited partnerships.
Limited partnerships divide the responsibility for debt between them based on their initial investment. This helps not only divide the risk but centralize the decision-making process for the partnership.
Typically, a committee is established to oversee investment decisions. Their role involves assessing the projected growth of the company, determining the necessary funds to support their goals, and evaluating the potential returns from acquiring equity in the deal.
Venture capitalists are on the lookout for a strong, capable, and knowledgeable management team. They entrust the day-to-day operations to these individuals, ensuring that the team has the necessary skills and tools to drive the company's growth.
Along with that, venture capitalists look for a strong product or service in an industry with the potential to support continued growth.
The company seeking financing will have put together a detailed plan of what they need to move forward, how much it will cost, and how it will be used. And if the venture capitalist thinks the benefits outweigh the risk, a deal will be made.
As we said, a business needs to prove to potential investors that their company shows great potential for growth and continued success. So, you must first make a case that your company possesses these attributes.
Having a solid business plan in place from the start is crucial for anyone looking to launch a drink company. Not only does it serve as a valuable tool for guiding your company's growth, but it also offers potential investors a clear roadmap of your vision for the future.
But before investors see your business plan, it's important to pitch them first. Create a concise and engaging summary outlining your business, growth potential, and the rewards for investors. Keep it brief - around a page - to grab their attention and kickstart the conversation.
Don’t simply search “venture capitalist” and contact every entry on the list. Be selective. Find someone who has worked with similar businesses. These partnerships are largely initiated by personal taste and built on trust. There’s no point courting an investor that doesn’t operate in your industry.
Ensure that you approach potential investors in a professional manner, as many of these partnerships have specific preferences for communication. This can be challenging to navigate on your own, so seeking guidance is key to making a strong impression.
Brindiamo Group helps facilitate productive introductions between those starting a drink company and those looking to invest.