Funding Alternatives and Exit Strategies for Beverage Companies

The final day of the Craft Beverage Expo & Conference | Tasting & Tap Room Expo wrapped up in Reno with a series of presentations on financing beverage companies. Here are some of the soundbites that seem especially relevant for kombucha companies. These comments are edited for clarity from a transcript of the presentations.

Quinton Jay, Bacchus Consulting Group shared an overview of funding alternatives. This was a far more comprehensive view than my 2021 review of Creative Financing for Kombucha Companies.

He addressed:

What funding do you need to finance the growth of your company? As a producer who wants to grow, you need to understand the different sources of funding available to you and the advantages and disadvantages based on your unique situation. What will be the costs? What regulatory and reporting considerations do you need to consider? Join this discussion to better understand various sources of capital and how they compare and contrast each producer’s particular needs.


What’s bootstrapping? At the end of the day, it is running your business and funding your business without any external debts. That’s your money, that’s how you bootstrap—doing it yourself with your life savings.

The need for additional funding is driven by cash flow cycles. In the beginning of your business, cash flow cycles are small, so you buy, you sell, you buy, you sell. But there comes a point in every business where the cycles are too big. And you need to know, as a business owner, when that happens, about six months before. Because when you need money is the worst time to ask for money. I’m just telling you right now—you want to get money when you don’t need it.

So here are the main sources of funds:

Friends and Family

It’s probably the easiest money to get, but the most dangerous, because it’s your own personal capital and friendships that are on the line.

Seed Capital

The seed world is where you start taking money from people more officially, when you actually might have to sign something as collateral, like your house. It’s training wheels before you get to the bank.


With banks the documents can be this thick about what they want from you. This is when the training wheels come off. The banks have strict criteria because they are federally regulated. So, they need to make sure that they fit you within a certain box for getting their money.

Angel Investors through to VCs

There’s angel investors, institutional seed funds, through to series A and series B venture funding. These guys, their return has to be within three to seven years. They’re looking to get their money back. There is a life cycle of a fund.  It expires. They tell their investors, we are going to invest X amount of dollars, and we’re going to get back Y amount of dollars in X amount of time. They look for a return on equity of between 25 to 30 percent. That’s a lot of money. That means that that money doubled in seven years. So you take a million dollars, they’re going to want two million back in seven years.

The golden rule

Don’t forget that all investors want their money back. At the end of the day, you always have to keep that in mind, no matter who you take money from. So ask yourself, ‘How am I going to pay them back in what way?’

You must decide where you want your business to be, and this is what they call destination planning.  And you want to figure that out at the start. Which means you need to consider exit strategies from the start.

Exit Strategies

Next, a panel discussion between five experienced entrepreneurs, who would “…delve into the key strategies that led to their successful exits, and explore the challenges they faced during the process. Learn about the different exit options available. Our panelists will discuss how they prepared their businesses for sale, including enhancing brand value, understanding valuation metrics, and negotiating favorable terms. This session is not just about the endgame; it’s about understanding the full lifecycle of a craft beverage brand and how to build with an exit in mind.”

The panelists:

At what point did you realize it was the right time to consider selling your company, and how did you prepare for that exit?

I think the right time you need to consider selling your company is probably the day before you incorporate it, or the day before you sign the bank loan, or the day before you quit your job. I honestly believe you need to have the thought of an exit strategy in everything you do from the name of your company to the way you distribute your product to the way that you create your products. Every choice you make, as benevolent as it may seem, actually will have some impact on your viability to exit the business.

Can you walk us through the process of finding potential buyers and negotiating the sale for companies?

When you’re trying to figure out who is your buyer, how to run a process, I think you need to start with what do you want. You really need to be strategic and think ahead. What is your goal? Do you want a minority partner? Do you want a majority partner? Do you want a partner that’s just going to give you cash and be silent? Do you want someone that’s going to be able to offer strategic advice and be a value-added player along your journey to help you get to the milestones that you want to achieve? And depending on those answers, then you can work backwards and figure out what buyers or investors are best suited to help you achieve that.

It’s a six to 12-month process to finding a buyer or investor.  Understand that when you’re selling, especially to a private equity partner they’re likely going to want you to stay on for several years after a sale process. And so you have a lot better chance of getting the outcome you want when you prepare early, start this process earlier than you think, because they’re going to want you to stay on. If it’s just you want to walk away at the end of the day and go sit on a beach, that really limits what your buyer universe looks like.

So starting early, being thoughtful in all your decision making from start to finish, I think, really sets you up for the most successful outcome.

What were the most important factors you considered when evaluating potential buyers, and how did you ensure that your company’s values and mission would be preserved post-acquisition?

I think the key word that has already been used is alignment, understanding what the long-term goals are of the people you’re working with, knowing that if you don’t understand that, really, it matters what’s written down on paper. But it doesn’t really. If they have different long-term goals that you do, there’s going to be problems. And so figuring out what that looks like in key metrics, especially in terms of whether it’s growth or distribution, certainly how people in the company are going to be treated, whether it’s going to be reduction in workforce, or whether this is part of a larger growth strategy, those are really key things.

So how would I prepare? I would attempt to understand and codify alignment between the buyer and the seller. I would explain clearly to the buyer that the timeline of my involvement and the timeline of my waiting to be paid for the engagement is based upon the codified alignment.

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