Wine business start-ups – how to get funding…
A lot has changed in the UK wine scene over the last few years: not least the winemaking scene itself. Today the UK is taken seriously not only for the quality of wine being produced but increasingly looked at for market leading innovations being developed here. Eco-conscious consumers are embracing wine in paper bottles, plastic bags and cans while not comprising on quality and the businesses behind some of these game-changing initiatives are firmly establishing themselves as serious contenders in the industry.
The good news is this exciting activity is happening despite the risks involved in investing in wine companies which given long lead times to produce and distribute generates notoriously slow returns, if any. Despite this, new businesses are flourishing and widely contributing to a very positive change in the wine landscape. Vidya Narasimhan, our Commercial Insights columnist, has been catching-up with the founders of some of these next generation start-ups to find out how they funded their ideas and summarises the financial options available to other wine businesses just getting started in the UK.
Laylo Malbec
In the fin-tech and hospitality industries incubators frequently give pre-seed and seed capital to start-ups and subsequently establish funding routes from Series A to F. Standard sources of capital for wine businesses, however, are more fragmented and can vary from Bank loans to private investors, grants from local councils to crowd-funding (a subset of private investors). Actually securing funding for wine businesses, new and old, can be fickle with the success rate varies wildly from channel to channel where business assets, or lack thereof, can be crucial:
‘In Europe and particularly in France, there is access to Government subsidies via favourable rates on Bank Loans for vineyards and grape growing, where the vineyard land is the security, this isn’t the case yet in the UK’, says Justin Howard-Sneyd MW.
Bank Loans for wine start-ups without vineyards are not easy to access as there’s no land to mortgage and no track record for a young company, this leaves private investors as the primary option. Thrifty founders are boot-strapping with their personal savings to get things off the ground forcing them to keep costs low while they establish the concept idea and a Minimum Viable Product (MVP). ‘While you’re testing a product, crowd-funding isn’t an option’, say Elisha and Tom Cannon Co-Founders of Folc, a multi-award-winning Provence style premium Rosé wine brand made from top quality grapes in the UK. The Cannons started Folc with their personal savings prior to seeking funding from private investors.
Elisha and Tom Cannon Co-Founders of Folc
Popularity of alternative packaging has grown considerably for wine in the UK, as has the number of businesses entering this arena. Successful ventures such as Canned Wine Co. who sell premium canned wine, When in Rome who specialise in Italian craft wine in eco-formats and premium boxed wine specialist Laylo and are all evidence of this growing channel.
Speaking to Simon Rollings, Co-Founder and CEO of Canned Wine Co. he shared how he got his idea off the ground. When he started the business in 2019 he used personal finances but has since been successful in securing a grant from his local council as well as the Coronavirus Business Interruption Loan Scheme (CBILS) during the pandemic. Rollings then raised first round crowd-funding in late 2021 to expand the product range and to focus on quality. Canned Wine has since grown considerably with a larger team to focus on technical aspects and operations as well as acquiring the Copper Crew brand. This growth was fuelled by funding from private investors, largely repeat investors from the first round of funding, and some wine producers who believe in the format. With ambitions to set up a Canned Wine Centre of Excellence and to gain the ‘Butterfly Mark’ Certification, Rollings has most recently secured funding from Positive Luxury, an industry-agnostic sustainability accelerator.
When in Rome also started with personal finances and subsequently secured funding that aligned with business values from a Venture Capital Fund with Environmental, Social and Governance (ESG) goals. But Rob Malin, CEO and Co-Founder of When in Rome, prefers to seek private investors via crowd-funding explaining that:
When In Rome cofounders RobMalin (left) Andrea Marchesi (middle) and Lorenzo Canali (right)
Private investors become brand ambassadors for our wine, they’re often committed to buying it too which drives additional revenue and brand awareness sharing our wines with their friends and family.’
When in Rome has since been through an interim raise with institutional funding and has invested heavily in growing the can and paper bottle categories over the last couple of years. Their impact on the industry thanks to finance like this is evident: When in Rome’s Pinot Grigio and Primitivo cans have successfully replaced PET bottles on British Airways flights, among other things.
So, if you don’t have a network of wealthy investors on speed dial, how do you find them? Universities with entrepreneurship / business courses as well as crowd-funding platforms such as Seedrs and CrowdCube draw a pool of private investors who are open to investing in wine businesses as part of their overall portfolio strategy even if they don’t have wine industry experience. Beyond these platforms, LinkedIn can be a valuable channel to raise funds in as was done by the Cannons, Co-Founders of Folc, who ran a highly successful fund-raising campaign last year pitched at their external network resulting in substantial overfunding. This targeted campaign drew a lot of attention and ultimately lead to investment from a professional network of connections-of-connections who believed in the potential for an English Rosé to compete with Provencal producers, validating Folc’s business goal and showing their confidence in the brand.
In line with the original strategy of Co-founders Laura Riches and Laura Rosenberger, Laylo have been through two rounds of equity funding, since their launch 2 years ago, from D2C expert Angels. While they had plenty of wine related experience from their years at Naked Wines, they drew-up their own targeted list from the contacts in their professional network of potential angels who might be interested, as Riches says:
‘It’s really important to get the right people as investors from the get-go, as they’re often repeat investors and there’s no substitute for warm introductions and building relationships.’
Laylo Sauvignon
Laura & Laura, co-founders of Laylo with their award at the Startup Awards
This approach was key to their first round of funding back in 2021 which was oversubscribed by almost three times and subsequently their second round of funding in 2022, though larger and in a tougher environment, was rapidly wrapped.
Despite these superb success stories what is clear is that strides being taken to innovate in the wine trade are not matched by the resources needed to drive the industry forward. What else is needed to nurture and help wine start-ups grow? Will we start seeing favourable credit terms for new businesses and government offered subsidies for start-ups offsetting carbon via their operations? How can we encourage more incubators for wine companies similar to Diageo-partnered Distill Ventures and the Bernard Magrez start-up Win in Bordeaux and Alsace to nurture and grow new wine business and talent? These are many of the questions we need to address as an industry.
While we wait for incubators and Venture Capitalists to channel their investments to wine focused businesses, here are some of the options for those looking for investment right now:
* Government grants: UK Government and local council grants are an option for start-ups and businesses, not just wine businesses. Applying for grants are time consuming and applications are not guaranteed to result in funding but grants, if approved, are helpful for specific purposes e.g., staffing, web design, incubator office space etc. and these purposes are spelled out when the grants are advertised.
* Universities with entrepreneurship / business courses: Some examples of universities with entrepreneurship programmes that offer (industry agnostic) mentorship and funding:
Setsquared is a unique enterprise partnership and a dynamic collaboration between the six leading research-led UK universities of Bath, Bristol, Cardiff, Exeter, Southampton and Surrey
The Entrepreneurship Lab is an incubator for non-London Business School start-ups
The Sussex Innovation Centre of the University of Sussex is a business incubation and innovation network
The Entrepreneurship Project: Collaborator of the Saïd Business School of Oxford University is open to non-student led businesses
Enterprise100 (E100) is a private Angel network of alumni of the London Business School
* Crowd-funding platforms like Seedrs and CrowdCube
* Private investors via dedicated research and warm introductions (SEIS and EIS tax reliefs for private investors in the UK make investing attractive for qualified wine businesses via crowd-funding)
* Personal savings
About Vidya Narasimhan: After years in Management Consulting and Banking Vidya Narasimhan has recently transitioned to the wine industry and is an advisor to Private Equity Firms on investments in Food and Wine.