Fast-growing beverage maker Lemon Perfect today announced the closing of a $6.6 million funding round that brings its total seed financing from pre-revenue stage to $11.6 million.
The round was led by CPG-focused private equity firms Skyview Capital, Beechwood Capital and The Big Squeeze. They were joined by Goat Rodeo Capital, LivWell Ventures, Melitas Ventures, R3 Venture Products, the RCV Frontline Fund and the Stage 1 fund.
“We are extremely excited to be partnering with [Lemon Perfect CEO Yanni Hufnagel],” said Alex Soltani, Skyview Capital chairman and CEO, in a press release. “Lemon Perfect has that winning combination that is so difficult to find: an incredible product, an amazing team, and a massive market opportunity.”
The $6.6 million in funding, closed in June, is the brand’s third convertible note round; the first closed in Q2 2018, followed by a second one year later. All three rounds are being considered as a “stack” valued at $11.6 million, representing the brand’s total seed round financing from pre-revenue to present day. The company’s valuation has accelerated over the past two years, said Yanni Hufnagel, a former men’s college basketball coach who launched the brand in 2018.
“The story has really evolved,” he said. “Each convertible note has been priced at a different valuation cap.”
The California-based company has quickly found an audience at retail, as its line of organic, cold-pressed lemon-infused waters have gained placement in 3,000 stores primarily in the Northeast, Southeast and Southern California. Lemon Perfect’s diverse roster of investors now spans to over 100 shareholders, with checks ranging from $500,000 to over $1 million, according to Yanni. Those include former Bai COO Barak Bar-Cohen and Prakash Janakiraman and co-founder of the app Nextdoor.
Yet the brand has also connected with celebrities and athletes in particular. Nine current or former NBA players — Blake Griffin, Channing Frye and Josh Hart among them — are investors, as are ESPN basketball analyst Jordan Schultz, Missouri Tigers men’s basketball head coach Cuonzo Martin and Cleveland Cavaliers assistant coach Lindsay Gottlieb, and Mike Levine, co-head of sports agency CAA Sports. With a foundation in place upon which to build, Yanni said the brand is ready to “flip the switch” on driving awareness through its high-profile partners.
“We still think of ourselves as not having hatched yet,” he said. “We wanted to make sure that the brand was ready to scale before we really started to leverage our network of influence, and we feel like now is that time for that to happen.”
The new funding will go towards further supporting Lemon Perfect’s ultimate goal of establishing a nationwide DSD network, a process that has accelerated since the brand switched from refrigerated to shelf-stable products in January. The company has established a foothold in New York through Big Geyser, and last month added both Classic Beverage and John Lenore & Co. to service accounts in Southern California. Looking ahead to 2021, Yanni said Lemon Perfect is prioritizing securing DSD distribution “from Maine to Virginia” and on the West Coast, as well as partnering with strategic national retailers in other regions.
Conscious of shifting consumer shopping habits, Yanni said the company will also “over-invest in digital growth” next year, including the launch of a direct-to-consumer platform in January; the brand is currently exclusively available on Amazon.
“The challenge is: if beverage brands have largely been built by impulse, under the roof of a retailer, how do we create that impulse digitally? That’s the great challenge for Lemon Perfect and all emerging brands, specifically in beverage, as the world changes” he said.
Though noting his company is following a strategy that previously helped Bai, BodyArmor, Vitaminwater and Super Coffee breakthrough the market as mainstream brands, Yanni said the current landscape presents Lemon Perfect with an advantage.
“There is an opportunity for us in a massive category that has seen no real innovation since Bai,” he said. “Now here we come with a chance to create something that we can stand up and tell people is better for you than the other offerings in the set.”