There’s a new beverage-focused venture firm on the scene and it’s looking to focus on emerging beve-alc brands.
Alethia Venture Partners’ $50 million Opportunity Fund I made its first investment in May and is focused primarily – but not exclusively – on beverages, with an eye towards taking higher stakes in lower valuation companies funding Seed and Series A rounds.
The fund is managed by Alethia CEO Mike Warren, along with Taylor Foxman, the founder of consulting group Industry Collective. Foxman, also a former Pernod Ricard communications executive, is operating as a general partner and generating dealflow through her connections within the bev-alc industry.
“I want the world to know that we exist,” Warren said in a recent interview with BevNET. “If I go over my $50 million in this fund, Fund Two will hit immediately. The paperwork is already in the hopper.”
Part of Alethia’s strategy is to “constantly be raising capital” to fund what Warren expects will be six funds for the venture firm. The next two to three funds anticipate to be smaller – in the $25 million range – focused solely on early stage alcoholic brands in the pre-seed growth phase.
These funds will focus on incubating new brands and providing them with marketing, branding and sales support through Alethia’s network.
“We are not going to be looking for individual exits in those funds,” Warren said. “We’re going to be looking to package up the entire fund and sell it off to a strategic like a Constellation, a Diageo or a Gallo…as a whole portfolio of brands.”
For Fund I, Alethia has committed $20 million so far to six companies, with at least three more beverage brands yet to be officially announced. The strategy is to get at least $1 million to $2 million into each company at lower valuations before too much dilution happens, Warren said.
“We know that these guys are going to need, for the most part, another round or two before sale. So we like to get in early in the game to where we have a pretty substantial piece of the company,” he said.
The fund’s partners bring expertise in finance, marketing and media to advise these earlier stage brands making the leap into the next phase of growth. The firm’s include genome sequencing tech company Element Bioscience SVP of Finance Logan Zinser, Element Bioscience chief people officer Brian Stolz, tech industry marketing executive Bob Frady, Jon Hoehne and Foxman.
Warren met Foxman while both were working with cocktail brand DRNXMYTH. As the firm grows, Foxman said she hopes to add more non-alcoholic beverages and even a producer of the growing Sotol space to the portfolio.
Broadly, Alethia strategy looks beyond just drink makers themselves and to the emerging “picks-and-shovels” of the beverage industry. The most significant investments – text-to-pay infrastructure business Authvia and $4 million to media platform NBTV – are two companies that will “complement the beverage brands in the portfolio,” according to Warren.
Authvia is aligned with backdoor payment processing for liquor distributors while NBTV will work as a brand-building mechanism offering marketing, advertising and DTC opportunities through the media platform’s spirits channel. NBTV has already lined up advertising deals with Constellation, Diageo, Gallo and Pernod-Ricard.
“We already have exit partners, for any one of our brands, because we have direct access to all of them through NBTV,” Warren said.
Although Alethia is eyeing some non-alcoholic beverage brands, Fund I has skewed towards spirits and RTD cocktails so far. Alethia’s first investment was canned wine company Maker, for an undisclosed sum. It also has committed $1 million into hard kombucha maker Kové, with $300k already in place. For spirits, the fund has committed $1 million in Mexican rum brand Pa’lante Rum and an undisclosed amount to Madre Mezcal.
Along with what has been announced, Warren confided that Alethia is also 100% committed to investing in disruptive canned cocktail brands El Hempe – a tequila RTD that is infused with CBD- and THC-free cannabis terpenes for smell and flavor – and vodka soda brand Gay Water.
“We’re not afraid to take on brands that are a little, you know, out there,” he said.