fbpx

Jeff models four major steps that Angel Investors follow:

  1. Finding the deal
  2. Vetting the deal
  3. Closing the deal, and
  4. Exiting the deal

Successful exits usually take years, so setting expectations of a very long time horizon needs to be a mindset of anyone investing in startups. 

But in the meantime you don’t just have to wait around; you can track everything the company is up to, measure it according to plan and ensure that your money is being spent appropriately. It’s better to be proactive during this time, functioning as an advisor, board member, or mentor to the founders so that you can be active in the outcome. 

In order for a startup to reach the exit phase, three things need to happen.

 

Learning the process of seeing where the exits are going to come and what they look like, these three things have to happen. 

 

The Major Revenue Stream

The startup establishes a major revenue stream that makes it attractive to others. When you’re looking at reports of expanding distribution channels, sales volume, and profit margins, the company is achieving specific benchmarks investors like to see. 

 

The Startup is Acquired

Quite often, an established company will acquire a successful startup, pulling the startup into publicly-traded status instantly. Microsoft, Google, Kraft, Johnson & Johnson, and Pfizer are examples of companies in the acquisition business. Microsoft has been acquiring companies since 1987 [Source: Wikipedia],  taking the Windows operating system company into the software market and beyond. Which products do you use now that were once part of an ambitious startup that are now under a bigger company umbrella?

 

The Startup Hosts Its Own IPO

This path to the exit is rarer but considered the optimal success story for an angel investor and the company. 

Volcon – A Successful Exit

Volcon was one of those companies that Jeff broke.  He discussed  the early analysis of finding the deal, vetting the deal, and closing the deal. In October 2021, Jeff explained how  the exit process unfolded; an exceptionally quick turnaround on a process that usually takes significantly longer. 

Volcon stepped into the off-road vehicle space as the first all-electric outdoors-vehicle manufacturer, with the aim of becoming the Tesla of the ten billion dollar outdoor powersports industry. [Source: Wefunder]

Founders

Volcon founders include Andy Leisner, with lifelong powersports industry experience, serving as a board member of the Motorcycle Industry Council and former world championship motorcycle racing competitor; Adrian James, who was founder and CEO of Sprout Equity Ventures, and Christian Okonsky, who has been bringing leading-edge products to market for over 27 years, holding more than 2 dozen US and foreign patents, who also worked on engineering Dell’s first notebook computer. 

Other top members of the Volcon team include Bruce Riggs, who came from Compal Electronics Smart Device Group and Quanta, with experience in domestic and international electronics manufacturing and operations. Riggs served as a past chairman of the IEEE 1625 Battery Standard. Hector Moya, the lead engineering product manager is an experienced developer of consumer products including 2 and 4 wheel electric vehicles. 

 

The Market

Back in 2017, the UTV market was $7.7 billion and was projected to reach $14.1 billion by 2025 with a CAGR (compound annual growth rate) of 7.8%.  [Source: WeFunder] However, with Covid and factory slowdowns and shutdowns due to the rapid spread of the disease, the growth rate flattened a bit.  Still, demand is strong and the price of gas is encouraging buyers to look to an EV solution. 

[Source:  Allied Market Research]

 

While early days as an IPO are typically choppy for newbies, Volcon’s stock price now lands today (November 17, 2021)  above $14/share, up from opening day at $8.11 on October 6th. 

Boardroom invested $100,000 as the lead investor on WeFunder, along with approximately 1000 other investors. On October 6th, the company had targeted an opening of $5 per share, but the actual opening landed at $8.11 per share. 

 

Conclusion

Due diligence is required at every step – finding the opportunity, vetting the opportunity, closing the deal, and exiting the deal. It’s easy to get caught at any stage of this process by emotions outweighing the numbers, not keeping up on what the companies are doing with the money you’ve invested, and a myriad of other distractions. 

Author: RagingBull

RagingBull is the foremost trading education website where traders of all skill and experience levels can learn to trade or to become a better trader. Students can learn from experienced stock and options traders, and be alerted to the real money trades these traders make. Become a better trader with RagingBull.com's courses and programs.

Last week was the transition from daylight savings time to standard time in most US zipcodes. The Cher memes abounded on social media Saturday night .

Turning back time is a big deal with anyone over 30. Supplements. Organic foods. Skincare. Whatever you can put into your body or on your body….. People are looking for something that will work.

North American consumers pay out more than $79 billion annually, and the estimated growth rate on spending is 8.4%. The major players include Avon, Beiersdorf, Estee Lauder, Procter & Gamble, and L’Oreal. [source: Mordor Intelligence] With so much of the market dominated by five players, there’s still a lot of room for disrupters, especially as more consumers read labels and more studies emerge on links between cancer and immune disorders, and what goes into and onto our bodies 

Time featured a story on five common ingredients that researchers have claimed to be toxic: 

  • Parabens
  • Aluminum
  • Triclosan
  • Phthalates
  • Fragrance

Additionally, you might not find these ingredients listed on the label because trade law enables manufacturers to conceal some of the chemicals that could contribute to health challenges these consumers experience. 

Parabens are found in 75 to 90% of cosmetics. Usually used as a preservative, parabens easily penetrate the skin and the European Commission on Endocrine Disruption lists parabens as a category 1 substance because they interfere with hormone function. Parabens have been detected in breast cancer tumors suggesting a link between parabens. When you read a product label, you might see methylparaben, butylparaben, propylparaben, isobutylparaben, polyparaben or isobutylparaben. [Source: David Suzuki Foundation]

While parabens occur at low levels in certain foods like barley, strawberries, vanilla, and onions, it’s a synthesized paraben derived from petrochemicals that are used in personal care products like cosmetics. Parabens can also be in fragrances without having to be listed due to trade laws. 

A friend who is not even 35 yet, who went through breast cancer surgery this last week after 5 months of chemo and radiation, makes awareness of what I rub or spray onto my skin deeply personal. 

The David Suzuki research also points out BHA and BHT which are considered synthetic antioxidants, as highly suspect in compromising health. They are used as preservatives in lip, skin and hair care products, sunscreen, deodorants, fragrance, and creams, and in many food products such as cereals, snack foods, processed meats, and canned foods. That’s why you’re starting to see canned goods labeled “BHA Free” or “BHT Free”. They’re talking to an educated marketplace. 

Marketing to an Educated Consumer

Warren Buffett says to be fearful when others are greedy and greedy when others are fearful. Fear is an investment opportunity signal – not that you should jump right in but to sift and sort. Savvy consumers only need one influencer friend like mine, with cancer, who suddenly starts reading labels, removing all sources of sugar from their diet, and looking for organic, clean ingredients in everything to create a market opportunity.

 

Here are some startup companies that are selling to savvy consumers. 

 

Love Sun Body

Love Sun Body is in the sunscreen business that appeals not just to the health-conscious human─── but to the consumer who desires a healthier planet.  

Love Sun Body’s messaging points out three problems with most sunscreens:

  • Chemical filters that are hazardous to humans and the environment, including coral bleaching

  • Inadequate sunscreen protection

  • Hazardous inactive ingredients. 

In contrast, Love Sun Body promotes 100% natural origin mineral sunscreens, and claim they are the first and only sunscreens in the US that have been certified by Ecocert Cosmos Natural, meeting and exceeding the FDA requirements and the European Commission’s recommendation on UVA protection and Health Canada Natural Health Products Regulations. Products are biodegradable, with recyclable packaging.  [Source: Love Sun Body]

 

Prose

Prose is a customized hair care company that began in France in 2017, now operating out of Brooklyn, NY, on a mission to create sustainable materials and carbon-neutral operations. The companies looked for ingredients, sourced from local partners with a track record for fair payment and labor practices, as well as ensuring the crops are responsibly replenished or rotated to preserve soil integrity and richness while processing ingredients into the highest grade product with the least waste. 

CEO, Arnaud Plas was featured in Forbes magazine last year (August 2020). The Forbes article said that Prose was on track to hit $50 million in revenue for 2020, more than triple 2019’s figure, even with a pandemic. The company’s most recent raise that took their total funding to $25 million, in part went to buy a big machine in hopes that it could move his company from a boutique hair care brand into a major player in the $850 million high-end hair care market. 

Plas is not a novice in this market. Previously, he was VP Digital and E-Commerce Strategy and head of L’Oreal USA Digital Basecamp, as well as skincare group manager, styling and men care group manager and Elseve brand manager. 

 

Pit Liquor

Pit Liquor by Distilled Bath and Body addresses a solution using whiskey and or vodka. Alcohol has been considered a way of washing wounds for millennia. However, when Erica Feucht discovered how effective hand sanitizer was at replacing her deodorant, the idea that the use of distilled spirits as a key deodorant ingredient was born. Bestsellers in the Pit Liquor lineup include Whiskey Vanilla, Whiskey Lavender, and Coconut Rum with Lime in spray and roll-on formulas. 

The journey from hand sanitizer to whiskey began with Erica Feucht expecting a baby and her husband, Jason, wanted her to avoid anything possibly carcinogenic that could also impact hormones, immunity, and health as she worked for a healthy, happy outcome. After an experiment with hand sanitizer had a positive outcome, Erica and Jason thought high proof, drinkable alcohol would be less toxic than anything made from inedible and unregulated. After a successful Kickstarter campaign, hundreds of media stories, the company has been growing 3x per year over year since 2017, with profit margins at 86%.  

 

Skylar

Skylar countered the belief that it wasn’t possible to create hypoallergenic fragrances that smelled amazing. On a mission to apply the highest quality standards to create scents that are not just hypoallergenic, safe for sensitive skin, vegan and cruelty-free, in eco-friendly packaging. . CEO, Cat Chen is a first-generation American; her parents immigrated from Taiwan when she was 11, settling in the Los Angeles area. She founded Skylar in 2017 after her favorite fragrance caused her infant daughter to have an allergic reaction. There are 36 fragrance allergens plus a number of other problematic chemicals frequently found in fragrances, that they list on their website.  

Skylar markets direct to consumers through their website, but also sells on platforms such as Amazon. Honest Brand Reviews mentions that Skylar has a following of 80,000 on Instagram, plus frequent mentions in Byrdie, Forbes, and InStyle media outlets.

 

True Botanicals

True Botanicals began with founder Hillary Peterson’s diagnosis with thyroid cancer just after delivering twins. “It was then that I discovered an unexpected truth – my beauty products were full of toxins. I could not believe that there weren’t stricter regulations protecting our health.” She says her greatest reward now, after working with world-leading anti-aging scientists, green chemists, and pioneers in sustainability to develop True Botanicals products, is to hear from customers who have never felt better about their skin. [Source: True Botanicals]

True Botanicals has enlisted celebrities like Olivia Wilde and Laura Dern to promote the brand, and products are sold at select Nordstrom stores across the country. 

 

Bottom Line

While people spend hundreds (and more) every year trying to turn back time, staying healthy is a key part of that.  What we put on our bodies is as important as what we put in. Knocking off a Procter & Gamble or an Avon behemoth is a huge challenge, and requires a startup appeal to the people who read labels who are looking for transparency and clean sourcing.

Author: RagingBull

RagingBull is the foremost trading education website where traders of all skill and experience levels can learn to trade or to become a better trader. Students can learn from experienced stock and options traders, and be alerted to the real money trades these traders make. Become a better trader with RagingBull.com's courses and programs.

What’s in your glass today? Water? Coffee? Green tea? Something stronger? 

When you’re looking at business ventures, demand is a big part of the equation. No demand? No business! Create a demand? You’re in business!

Take bottled water, for example. There was zero demand for bottled water just a few decades ago. But in a few years after “the Big Gulp” took the market by storm, containing a cup of sugar (or the equivalent in corn syrup) in every 32 ounce cup, and diet soda started having some bad press as well, and the taste of tap water left much to be desired for folks replacing their soda habit, bottled water became a thing. 

According to Statista, consumers bought 16.2 gallons of bottled water per year in 1999, and market demand has almost tripled since then.  

 

[Source: Statista]

Growth is what leads investors to seek the next big success in the market. And it’s not just bottled water I’m talking about, in beverage industry startups.

The Food Truck Empire quotes Statista in pointing out that the average consumption of soda stands at about 47.4 liters in 2019. That’s a little less than a Big Gulp a week. (Somebody’s drinking my share in that stat – I had a 20 ounce Diet Dr. Pepper a couple of months ago, and it was at least 4 years before that since I had one – though during my first years in college, I think I single-handedly kept Coca Cola in business with my Diet Coke habit!) Coca-Cola was one of the first big beverage companies to step into the bottled water business in 1999 with Dasani. Maybe they saw the exhaustion of the upward trend in soda consumption peaking and moved ahead of the explosion of soda alternatives. 

 

[Source: IBIS World]

 

Low Alcohol Choices

Around this same time, grocery stores started giving more shelf and cooler space to energy drinks, juice-based drinks, along with alcopop, wine coolers and hard seltzers and ciders. This is where I’m talking about creating a demand that wasn’t there previously – just like bottled water. 

 

Alcoholic cider – derived from apples, pears and other nontraditional fruits, along with non-alcoholic cider products have increased in demand. “Alcoholic cider has only recently emerged as a major alcoholic beverage industry; however, the industry’s revenue growth has outpaced that of the Breweries, Wine and Distilleries industries.” But volatility has led to an overall decline. 

 

Demand for low alcoholic beverages is attributed to the increasing prevalence of various diseases, and market demand for healthier options, lifestyle changes, and increasing disposable income. The industry is projected to reach $5.21 Billion by 2026, with an annual growth rate of 2.98%, according to Verified Market Research

 

Coffee and Other Energy Drinks

According to Urban Bean Coffee, 64% of American adults currently consume coffee every day, with more than 150 million Americans drinking about 400 million cups of coffee per day, or more than 140 billion cups per year. Averaged out, Americans consume 3.1 cups of coffee per day. (That’s a lot of cramming to meet a deadline followed by insomnia!) 

 

But even coffee itself is not immune from disruptors. The National Coffee Association launched its “Coffee Achievers” campaign in 1984 when “apparently during the early 80s, young people stopped drinking coffee entirely… still coffee had yet to hook the MTV generation!” [Source: Dangerous Minds] Energy drinks were another disruption. Still coffee manages to dominate the caffeinated beverage market. 

 

Spirits

Every time I walk through an airport and pull out the magazines on the plane, Smirnoff, Bacardi, Hennessy, Jack Daniels, and Johnny Walker are always visible and are tough brands for a startup to take a piece of the market away. Innovation seems to be in competitions and marketing  – creating a perception of premium, rare, exclusive, and luxury, as well as leveraging distribution through experiential product placement in movies and television, and reality television shows, magazine features, and more. 

It is estimated that the average American adult consumes 94.38 liters of alcoholic drinks, at an average cost of $748.20 annually. Beer is the most popular alcoholic beverage[Source: Zippia

 

Here are a few companies vying to be your next beverage choice. 

 

BeatBox, aka Future Proof Brands

BeatBox Beverages, known as “The World’s Tastiest Portable Party Punch” was founded in 2012, and rebranded as Future Proof Brands in 2019. In October 2020, the brands had generated over $6.8 million on a trailing 12-month basis. October alone saw more than $1 million in BeatBox Beverages shipped from their warehouse. They were named as the fastest growing single-serve wine product by cases, dollars, and velocities. 

BeatBox has found their way to growth, moving from fewer than 100 chain locations, to now over 11,000 accounts with 150 wholesale partners. Circle K, QuickTrips, Krogers, 7-Elevens, and more now have space on their shelves for BeatBox. 

You may have heard of Beatbox after they appeared on Shark Tank with Mark Cuban saying, “You guys don’t sell wine. You sell FUN”. 

[Photo Source: WeFunder]

Top investors include Mark Cuban, Rob Dyrdek, and DJs like Party Favor, Louis the Child and G.T.A. along with others. The total amount raised so far is $1.43 million. [Source: WeFunder]

 

AsomBroso

Another brand leveraging the clout of the Shark Tank personalities, AsomBroso is featured on StartEngine – a platform founded by Kevin O’Leary, aka Mr. Wonderful. 

AsomBroso’s specialty is ultra-premium tequila. The company, California Tequila, Inc. has historic sales in excess of $20 million. Their products start at $40 per bottle. AsomBroso comes in at $2800 per bottle. [source: Business Mavericks] AsomBroso is led by founder and CEO, Rick Gamarra, who has over 20 years of experience in the tequila industry. The global tequila market is projected to reach 7.746 billion by 2026, from 5.7 billion in 2021.

AsomBroso’s current fundraising target is $12 million with a company valuation of $80 million. 

[Source: StartEngine]

REBBL

REBBL focuses on the functional beverage market. REBBL stands for Roots, Extracts, Berries, Botanicals, and Love. REBBL is targeting the more health- and eco-conscious consumer with plant-based beverages knocking at the doors to compete with coffee, soft drinks, and dairy. 

In February 2011, Dave Batstone, co-founder of REBBL sought to create an innovative and sustainable business solution to human trafficking in Peru. He brought together thought-leaders that included investors, a baseball player, an agronomist, and others. Out of that original meeting, the concept of crafting beverages from native ingredients grown in regions that needed economic empowerment to provide dignified, sustainable livelihoods for those communities and reduce the risk of trafficking and exploitation. 

Their products include 4 flavors of “stacked coffee” – or coffee with additional beneficial botanicals including baker’s yeast beta-glucan which is said to support a healthy immune system; 4 flavors of REBBL Pop which has 5 grams of sugar, prebiotics, and other goodies; 4 flavors/formulas of Super-Herb Immunity Drinks, and 2 Gold Label Elixir flavors. While the products retail just above a coffee at Starbucks, the company offers a subscribe and save discount

 

REBBL’s last round of funding was in May of 2018, bringing their total raised to $34 million, with lead investors including CAVU Venture Partners. [source: Crunchbase] In recent news, the company rolled out two more flavors, and was reported to have reached over $1 Million in donates to their nonprofit partner ‘Not For Sale’ which focuses on ending the exploitation of at-risk people and the planet. [Source: Bezinga]

 

Ugly Drinks

The word “Ugly” in Ugly Drinks context stands for “The Ugly Truth”. The founders, Hugh Thomas and Joe Benn found a lack of authenticity in other beverage brands. Their product line is marketed as “better for you”; water, plus flavor, plus caffeine, plus carbonation, depending on the product. 

 

The audience for the company’s branding is focused on Millennials who are focused on clean labels and transparent messaging. While the market is crowded, Hugh Thomas says the messaging has been effective at reaching young, digitally native consumers. Ugly drinks also donate one cent from every can sold to its partner, “Girl Up”, a United Nations Foundation charity focused on solving global gender inequality. 

 

According to Crunchbase, the company has raised $3.9 million in two rounds of funding – the most recent of which was June 30, 2021. 

 

But it’s not the only bottled or canned water to keep an eye on…

 

Liquid Death

Liquid Death is “just water” but marketed with an edge they call “completely unnecessary”. The company’s goal was to make people laugh while getting more of them to drink more water, more often. “Why should unhealthy products be the only brands with ‘permission’ to be loud, fun, and weird. And let’s be honest; almost all marketing and branding is just theater. So we’re going to treat our theater like a movie theater and have more fun with it.” [Source: Liquid Death]

 

 

The company isn’t just about water; although the label looks more like a tall-boy beer can. They do sell a lot of water. Their website also offers its equivalent of cat videos, apparel, contests (2021’s contest prize is “Live Nation concert tickets until death”), and even vegan meat. [Source: Liquid Death]

The company’s total funding tallies at $55.6 million, with a Series C round 6 months ago (May, 2021). Top investors include Live Nation Entertainment, Dwight Funding, Velvet Sea Ventures, and Convivialite Ventures. [Source: Crunchbase]

 

Bottom Line

Some companies have succeeded by creating a culture of their own, leveraging causes or cultures (or both) to their advantage. Both BeatBox and Liquid Death have capitalized on FUN to market their products. 

What people choose to drink is often determined by who they’re with. It’s a social experience. Some work cultures are all about the Rock Stars; Red Bull or Monster not so much. Some companies have the ever-flowing pot of coffee (or the Keurig pods) and others have at least one pot of Crio Bru in the breakroom.  But other company cultures favor other brands and flavors. If there’s money being spent there’s money being invested. Do your due diligence and raise your glass!

Author: RagingBull

RagingBull is the foremost trading education website where traders of all skill and experience levels can learn to trade or to become a better trader. Students can learn from experienced stock and options traders, and be alerted to the real money trades these traders make. Become a better trader with RagingBull.com's courses and programs.