152. How to Fundraise in this Economy with Jimmy Semrick of Brella

How to Fundraise in this Economy with Jimmy Semrick, Brella

Jordan Buckner: [00:00:00] Fundraising for CPG brands in this environment is extremely challenging, especially for emerging brands. So my guest today, Jimmy Semrick has managed to raise 650, 000 in the past couple years and is using that money to expand distribution with Molson Coors and Anheuser Busch while extending their manufacturing space.

I invited Jimmy on to the conversation to talk through what it was like. Going through that fundraising process and how he's leveraging that money to grow Jimmy. Welcome. Hey, welcome. 

Jimmy Semrick: Thanks for having me 

Jordan Buckner: Of course, it seems like every time I see an update from you There's like a big move from like new products being shipped out new packaging the new website new production space So it's been a busy year for you 

Jimmy Semrick: It has been insanely filled with change.

You know, every time you get comfortable with one way of things rolling, it seems to evolve and demand more and more. So we have to move quickly. 

Jordan Buckner: So you'll I'm curious because [00:01:00] every brand that I talk to is having a really challenging time fundraising. So how did you go about your process of finding investors and how are you able to close those deals?

Jimmy Semrick: You know I think , it's a problem that's kind of closely associated with CPG in particular. A lot of our investors Told us directly while we were raising, like, this is going to be our last investment or, you know, I've completely discontinued my CPG investing, but they've chosen to participate with us, but we're very grateful for I think.

A lot of the reason for that is that we were a little bit ahead of the curve on listening to and observing the writing on the wall around DTC and just prioritizing profitability from an early stage. We're really scrappy, so we're really lean and we are very manufacturing and distribution focused as opposed to whole.

You know, massive line item in the P& L that's associated with marketing burn that we wouldn't be able to keep up with. So I think [00:02:00] the slow and steady path and the scrappy path is really what helped us to get those over the line. 

Jordan Buckner: I think that's awesome. I mean, what is it that you found about your business that was really exciting for investors that they latched onto?

Was it that profitability side of things, the manufacturing? The fact that you're in this, like, alcohol adjacent category, kind of non alcohol segment that's kind of growing what were some of those conversations like? 

Jimmy Semrick: You know, we definitely let our consumers lead the way in terms of our product development, which helped us a lot.

We observed a consumer behavior, which was consumers were using liquid water enhancer format bottles and, you know, basically water concentrates. In their cocktails, and so we decided to throw it out there to consumer surveys, figuring out why they were doing that. At what scale were they doing that? Is there an opportunity to introduce something with a little bit of white space?

Like, and the results were that that was the case. And so I think that. You know, something that was mentioned a lot with our investors was a, of course, [00:03:00] margin. We do have a great margin due to the fact that we're able to charge a premium in this space versus the traditional water enhancer space in the center store and grocery.

But also just that no one else was doing this at the time. There's been a couple that have tried or kind of dabbled around in the area, but there were none that directly did this. 

Jordan Buckner: No, I like that you're taking advantage of that white space. And I should use this time to introduce and give you a time to share like 30 seconds on what is Brella and the category that you're carving out.

Jimmy Semrick: Yeah, we make a concentrated cocktail mixer. Essentially it's a drink enhancer in the format of a liquid water enhancer. You know, it's shelf stable. They have traditional cocktail flavors, tea, margarita. We've got a mojito and a mule roe rolling out this year. And essentially all they need is to be added into spirits and soda, which everyone's already ordering at the bar to avoid calories.

So there's zero sugar, zero calorie, which is a huge value for us as well. 

Jordan Buckner: I love that. And so I know you mentioned that D2C wasn't your like main focus. Where are, what's your channel strategy and how are you growing within there? 

Jimmy Semrick: We are almost entirely [00:04:00] centered around brick and mortar distribution. So we align with typically beer distributors.

So either the Anheuser Busch or Molson Coors houses in each county or section that they're. Representing in the state and we roll out with them. We live in a grab and go checkout, a liquor source. So, up by the 5 Hour Energies, over by the Bic Lighters, and that area that's not really seeing a ton of crazy innovation.

Jordan Buckner: Yeah, and I mean, one thing that's great, Ray, is that it's a small bottle format, so it doesn't take up a lot of space. It's perfect for checkout, and it's a value add to the category of like anything someone's purchasing, right? 

Jimmy Semrick: It's super incremental. Yeah, so it's incremental for the distributors. It's easy for them to merchandise, but it's also incremental for the retailers and that they're getting a strong margin on a product that is different in a space where very brands that have been sitting in the section that we're taking have been there for decades.

Jordan Buckner: Yeah, so I think that all leads into such a great story for that, you know, one thing I remember us talking a year ago or so, just on like your approach to fundraising and taking with investors. [00:05:00] How do you approach the outreach to investors and how you pitch to them and which parts of just that process and how you were able to manage it?

Jimmy Semrick: We early on established a really strong board of advisors. And most of our flow for investment has come from them. That's been a blessing because we haven't really had to do, you know, massive prospecting this and a bunch of cold outreach. It's mostly been inbound and a few meetings and we've Managed to build a cap table that can support us for the years to come.

Which has been nice because we were really focused on execution and I hear a lot of founders talking about how they have to completely, you know, tune out and focus on on fundraising. And I could not afford to do that. 

Jordan Buckner: Yeah. I mean, remember one thing you told me is like in that inbound process, like you'll take meetings with investors, but you're not out there begging for money, right?

You're not like, I think a lot of brands are in that situation. They're like, if we don't get money, like we're going to go out of business tomorrow. And I think a lot of investors can [00:06:00] sense that. And that doesn't make a great investment or reason to put money into the business. 

Jimmy Semrick: Yeah. We want people that are really bought in on what we're doing here and that trust us.

To be stewards of their capital, you know we really put our backs against the wall and we're in it with them. So we move as such, you know, 

Jordan Buckner: that's awesome. You know, I remember just with fundraising for Teasquares, we had a couple of different rounds. The. Essentially took on 2 investors over the time of the company who are great and working with us.

The 1st found me while I was demoing at a whole food store in Chicago and came was like, Hey, we're starting to fund. And looking for great companies, natural products companies were based in Chicago, and they ended up putting in the 1st 100, 000 dollars into the company. And then the 2nd 1. Found me from based on a Kickstarter campaign that we did reached out, had a conversation.

Initially they were going to put in 25, 000. I went out, talked to 30 other investors, couldn't close that round, [00:07:00] went back to the investor and they were like, Hey, sorry, we couldn't find other investors to close out that round. And it was like, let me like, give me a couple of days. And he came back and raised 250, 000 for me.

Without me even having to talk to the other investors involved and it just goes to show like when you have someone or people who like really believe in you, like they'll go out and help do the work for you. And those are the best people to have , on your team. 

Jimmy Semrick: Oh yeah. , our best source of new investment has been our existing investors a hundred percent.

And . That's awesome to have, you know, you, you want people in your corner and not only that, but they've really opened up their networks to us. They've, they've allowed us to move a lot faster than we would have otherwise. And that's made all the difference for sure. 

Jordan Buckner: That's awesome. So in, talk to me about your decision to continue to self manufacture and really double down on that, because a lot of companies that have been.

Working with contract manufacturers, right? They don't want that liability and the overhead of having their own facilities or renting a facility and having their own labor. Why did you decide , to continue manufacturing it yourself? 

Jimmy Semrick: So we saw it as an asset in [00:08:00] itself. You know, there's a stable base that we can lean on because we do contract manufacture as well.

So we open up our capacity to brands like us that need. You know, fill cap and pack out services and even fulfillment. So we're able to count on that revenue stream during the fluctuation of growing a brand. You know, there's times where we're shipping out Brella, you know, every single week. And there's other times where, hey, you know.

We're hitting a dry spell or, you know, in a growth mode, reaching out to new distributors or counting on the depletions to come back in at a later date. And you know, additionally. , we set out to make sure that we had kind of contingency plans in place, like, what if manufacturing doesn't work out for us?

And so we reached out. 2 co packers for liquid water enhancers and found that. The two main players in the space had both religious and family values commitments. So they would not participate in anything that was associated with alcohol. And so we're like, Oh, we need to do this either way. 

Jordan Buckner: Yeah.

Jimmy Semrick: Exactly. [00:09:00] So we, this year we've made investments. So we've got a full bottling line coming in and some packaging equipment as well for scaling our capacity. 

Jordan Buckner: Yeah, I think that to just opens up a lot more options for testing new flavors and being limited drops and so many other things that can help you there.

I'm curious, I talked with a lot of found and I did myself with Teasquares. We self manufactured for most of our company as well. And I found that it was almost like running 2 different businesses, right? You have, like, the manufacturing supply chain side of things and managing labor . And having people coming in and then you have your sales distribution, the marketing side, how are you balancing both of the demands of the business in both sides?

Jimmy Semrick: You know, we were , extremely specific with our scope. So we said, you know, these are the things that we make. And if it doesn't fall. Very well into our manufacturing process. We just say no. You know, , our COO, George Coyne has a software background and he was able to build us an ERP with this crazy software called [00:10:00] Katana.

That's been great for us. So we can just upload people directly into our process, but in terms of. Kind of toggling in and out of that function. You know, on the Brella side, . We've had to position ourselves in the path of least resistance. You know, , we want to make sure that when product goes out, , it's.

Positioned in a way that the velocity. Is there and doesn't demand a ton of in market stuff. We don't we don't want to be living in Missouri and Idaho and Wisconsin and Chicago obviously Chicago. But. You know, , that's been huge for volume for us, you know, we started off at 6. 99, brought it down to 5. 99, changed out the packaging. We really, with a product that's a low price like this, that you're not leaning on e commerce, you need to be owning at the shelf level. Super impactful in terms of merchandising. How are we doing the clipships, the displays, the six pack POPs, the two tiers, all of the different ways to really stand out on the shelf.

[00:11:00] Because , that's how you win with a product like this. 

Jordan Buckner: Yeah, so tell me about that. Like, what are you finding most effective? Is it because now you're testing out different merchandising? Are you kind of finding like, you just kind of have to do all of it? Or is 1 performing better than the other? If you're not going to be there, like, demoing the product, 

Jimmy Semrick: they want it all. You know, we started out with a pretty heavy demo strategy and found that. It was so finicky , when the tasters having to buy the liquor at the stores and then buy the club soda and then mix the product from there. It's not as simple as pouring directly into a little cup. And so we're leaning a lot more into merchandising across the board.

So being available at any. Point that we might be able to drive a purchase and store. So the clip strips, even like, even suction cups , on the fridge doors for seltzers, that sort of thing. But we're also entertaining for 2024, incentivizing at store level. So volume contest between different stores and gift carving for store managers and their volume.

Jordan Buckner: How are you managing the merchandising process? Are you working with, is it, are your distributors going to be doing [00:12:00] that? Are you and the team managing that? Are you working with an outsourced merchandiser? 

Jimmy Semrick: Peer distributors are absolute beasts at merchandising, especially the big houses. Like the, you know, , the way that they, I came from a Miller Coors house.

So I know all too well what it looks like on that end. They execute, you know, we get them what they need and they execute. 

Jordan Buckner: Okay. That makes it a lot easier because I know a lot of founders are struggling. They're like, how do I show up at every single store where my distributor just tends to drop things off at the back door.

Jimmy Semrick: I think that if it makes sense, the beer distribution model is such a superpower because they're just so well trained. I mean, it's not like a at the end of the day, all, I think all distribution should be looked at as essentially your logistics to get into store. But when you have people that are really routinely used to being excellent at merchandising, it's ideal.

Jordan Buckner: Yeah. You know, interesting because I've talked to other brands who. Are trying to like get on those trucks for alcohol distributors. And then sometimes, especially ones that are like new in the category, their [00:13:00] volume velocity is relatively low. They don't get the attention of the drivers on the trucks, right?

Because they're trying to move the core product. Are you doing anything to like share the product with. Like distributors or like the drivers who are doing like , the drop offs to make sure they like, know and want to merchandise you? Or how are those conversations going? 

Jimmy Semrick: Yeah, so you know, there's a couple things there.

One is that, you know, the thing that we're introducing when you understand that like mechanics of a beer distributor, they are constantly pitching new items, rotating product. Checking dates, we have something that shelf stable for 18 months. So that's a huge plus for us. And being able to set it. Additionally, like, they're used to building like case stackers, like.

5024 packs on this massive thing in the middle of the sales floor and, you know, putting up all the signage and different sales collateral. Whereas, in our case, our master case is a display. They set it down and it is perfectly displayed immediately. But also they're getting a lot of paralysis when it comes to new introductions flooding in from RTDs and [00:14:00] seltzers and new beers.

Whereas, they've never seen anything like what we're doing. And so when they're at the front of the house, it kind of stands out to them, but we take an extra step. We don't just leave it as, Hey, our product is so different that you're going to be fine. We go into market during all launch periods. We meet all of the reps.

We do a GSM general sales meeting with all the reps each time that we want the new distributor. And so we're there in person doing the sales training, doing ride alongs and opening , those top tier accounts at the first week. 

Jordan Buckner: That's awesome. I think one of the things that most founders. Don't invest in is a launch strategy for every retailer region distributor.

And I made this mistake myself, right? It's like, Hey, let's just send the product to the distributor again in the store and like, see how it does. And almost, you know, 99 percent of the time, like, if you just leave it alone, like, it won't do well because it's a new market, new customers. our brands, right?

You don't have awareness for people just going into the store. And so you have to like an active approach, which I love that you're doing to making sure you're supporting the entire supply chain that they know about your product. They want to set it [00:15:00] up. They make it easy as possible. You support them all the way to that customer purchase.

Jimmy Semrick: That's awesome. Yeah, I mean, so it's super exciting as a founder to get new stores that want to sell your product. And so it can be, you know, it can be tempting to just blast it out everywhere, but you have to be thoughtful about how you're going to show up for those distributors because At the end of the day, you know, your distributors are not your end customer, your stores are not your end customer.

And so you need to be making sure that it's getting to them because they're just channels. You know, they're not customers at the end of the day. 

Jordan Buckner: Jimmy, as we look towards kind of this year, what's the biggest thing that you're most excited about for 2024?

Jimmy Semrick: Oh my gosh, there's so many things. I think turning this facility into a real Factory of sorts is going to be such an awesome thing for us, but also just growing with the Miller and budge distribution networks is going to be amazing. We're really saturating Midwest and the Southeast. That's going to be huge.

And then I have, I don't even think I can share it yet, but I, we did just get a major deal with a big buyer. I literally got the email right before. So I'm still [00:16:00] giddy from it. But it's going to be huge and I'm really excited about that, but I don't, I don't think I can share it just yet.

Jordan Buckner: All good. I'll share that once it becomes public to everyone. You can go back and listen, but. That's amazing. Jimmy, I'm so excited for everything you're going to accomplish this year. You're already on a terrific journey and can't wait to celebrate more of your success. 

Jimmy Semrick: Thanks Jordan. I appreciate it. Thanks for having me on.