CellarStash (May 2020)

Deal Abstract

https://www.seedinvest.com/cellarstash/series.a

Building a wine store by pursuing a custom Fulfilled-by-Amazon model. Believes that it can build a more lucrative business by letting wineries hold the inventory while they just drive the digital marketing/online pricing angle. Could be interesting depending on whether they’re actually eliminating a middle man (e.g. becoming a marketplace for wineries to sell their own goods,) or if they’re just becoming a more efficient middle man.

Decision

Pass

Why Investing/Passing

  1. Pre-revenue instantly killed it for me.
  2. Doesn’t feel like the right team to build an online marketplace.
  3. Lack of familiarity with the market and uncertainty/skepticism about the business model.

The 6 Calacanis Characteristics (91 161 18)

CheckPass/Fail
1. A startup that is based in SVFail: But interestly enough, in the original (Napa) “Valley” e.g. Napa, CA.
2. Has at least 2 founders Pass (5)
3. Has product in the market Pass
4. 6 months of continuous user growth or 6 months of revenue.Fail: The Company is pre-revenue and may not be successful in its efforts to grow and monetize its product.
5. Notable investors?Fail
6. Post-funding, will have 18 months of runway Fail: Burned $200k in 10 days for 02/19/20 to 02/29/20. Following that burn, would only raise 3 months of burn at full subscription.

The 7 Thiel Questions (ETMPDDS)

  1. The Engineering question:
    • Interesting: I like the FBA model for wine but 1) am unfamiliar with the market e.g. is anyone else doing this.
  2. The Timing question
    • Good: not quite sure if wine works like coffee e.g. people drink as much coffee during economic recessions, just cheaper coffee, but see it as a fairly recession proof concept.
  3. The monopoly question
    • Maybe: The key variable here is how many “FBA marketplaces” the wineries want to sign on with. I guess if it’s like Amazon, then in this case, WineStash is like Amazon and eliminating those retailers who buy wholesale from wineries to tell sell at a profit margin.
  4. The people question: 
    • Mostly Uncertain: Seems like people with the right experience, but this seems like traditional-trying-to-go-tech rather than software-eats-the-world team.
  5. The distribution question
    • Excellent: Direct to consumer, baby.
  6. The durability question
    • Excellent: If they can build it, maintaining the relationships between wineries and consumers seems solid.
  7. *What is the hopeful secret?: 
    • Biggest cost for online retailers of alcohol is inventory management, and that wineries want to get some of that consumer surplus instead of selling wholesale to e-commerce. Big bet.

What has to go right for the startup to return money on investment:

  1. Generate revenue
  2. Establish relationships with wineries and confirm “hopeful secret” from Peter Thiel’s EMTPDDS framework
  3. Compete with the Vingo’s, WineTV’s, higher margin e-commerce competitors.

What the Risks Are

  1. Fight for market share: Just on one Google search, wine.com, totalwine.com, drizly.com (delivery for alcohol stores,) and all of one’s local wine stores getting into the delivery business.
  2. Wineries that are eager to get into consumer game are exception not the rule.
  3. Besides wine aficionados, consumers don’t find that much add from being able to buy wines directly from a vineyard, e.g. the market isn’t very large.

Financials (References)

Total Amount Raised: US $341,968
Total Round Size: US $600,000
Raise Description: Seed
Minimum Investment: US $1,000 per investor
Security Type: Crowd Note
Valuation Cap: US $6,000,000
Offering Type: Side by Side Offering

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