Yerbae Turns to Crowdfunding Platform To Fuel Next Fundraise

Yerbae, the maker of a line of functional sparkling waters made with yerba mate, is looking to raise $10 million as it grows its national retail presence. But rather than turn to private equity and venture capital, the Arizona-based brand is turning to the public for support in launching a crowdfunding campaign through website StartEngine.

Unlike platforms such as Kickstarter and GoFundMe, where cash raised effectively functions as donations, StartEngine’s platform offers individuals to purchase equity in Yerbae at $2.14 per share, with a minimum required investment of $246.10. Speaking with BevNET, Yerbae co-founder and CEO Todd Gibson compared the process to the public stock exchange, noting that investors will own non-voting common stocks. Beside the max offering, there is no limit to how much an individual can invest.

Launched on Friday, the equity round will include two stages; the first seeks to raise just over $1 million by the end of 2020, while the second part will open with a loftier $9 million goal next year. As of Monday, the campaign has already raised over $83,000 from more than 100 individuals.

“The world is changing right now,” Gibson said. “We see what’s happening on apps like Robin Hood and we see the engagements of consumers and retail investors who want to participate in upside potential for companies. So we’ve decided that we’re going to take our $10 million raise and we’re going to go straight to the public with it.”

Though crowdfunding is often associated with startup brands aiming to get off the ground, Yerbae is no stranger to raising money from institutional investors. The brand previously closed a $5 million venture round led by Zenfinity in 2018 and earlier this year taking investment from food service distributor Vistar as part of a national distribution deal. However, Gibson said he decided to open the brand’s new round on StartEngine in order to maintain more control over the fundraising process, as well as to have more control over the company in the long term since no ownership stake will be sold.

Turning to crowdfunding, however, has required Yerbae to go public with some of its own finances. The company has valued itself at $34 million and has grown 333% since launching in 2017. In 2019, the brand generated $3.61 million in net sales. The company has also grown during the pandemic with $2.49 million in net sales in the first six months of 2020, up 31%. Gibson added that the brand’s sales on Amazon are up 237% since the start of the pandemic.

Breaking down revenue by distribution channel, 50% of net sales have come from DSD accounts, 22% from broadline distributors, 18% from direct-to-consumer and 10% from direct-to-retailer. The brand is currently at a 50% gross margin.

“At the end of the day,” Gibson said. “We have a healthy set of existing investors that are going to be reinvesting with us; we’ve got a healthy set of new potential investors and they’re going to be investing with us. And it’s all going to run right through this platform.”

Founded in 2014, StartEngine has to date been sparsely utilized by non-alcoholic beverage companies, but Yerbae is not the only brand turning to the platform. This summer, Washington-based microbrewery Kombucha Town launched a campaign that six weeks in has raised over $87,000. Citing a $20 million valuation, the round will help the brand to expand distribution outside of the Pacific Northwest region.

“Beyond growing and scaling the business, we are also excited to give our loyal customers and the community the chance to partake and profit from this promising opportunity,” said Kombucha Town founder Chris McCoy in a press release.

For Yerbae, the campaign comes as the brand continues to target expansion in retail, with the company expecting to be in over 20,000 accounts nationwide by the year’s end. In June, the brand signed a distribution agreement with Pepsi-Cola Bottling Company of New York, which Gibson said has already placed the brand in over 1,900 accounts in the New York metro area. Yerbae is now planning to expand its relationship with Pepsi, adding blue trucks in Delaware, Maryland, North Carolina, South Carolina and Virginia later this year.

Though the brand has continued to grow during the pandemic, the shutdown of food service accounts has temporarily halted growth plans with Vistar, Gibson said. However, as the channel slowly opens up — movie theaters are one sector currently re-emerging, Gibson noted — Yerbae intends to reignite its plans for the space.

“We’re going to be there every step of the way with them,” Gibson said. “So as that business returns, our company will be a healthy business to be delivered right off their trucks.”