Why am I on this list?

Because you always wondered what lay at the meeting point of drinks and finance -- seen through an independent lens and written in an irreverent tone. OK, that may be pushing it but I have been pondering the intersection of this Venn diagram, especially having been unburdened from the need to "align" my views on everything. “The Speed Rail” is where money meets booze. Feel free to unsubscribe (link below) but doing so will make your life less fulfilling and more aligned.

Valuation: Take a Slightly Longer View

The question I am most asked these days by craft spirits and independents raising money is, “what’s a good valuation”. The short answer is less than you want and more than their first offer.

The real answer is that it depends. The range of options I have seen on the financing side alone — equity, convertible, deferred earn out, [non] participating preferred — make the calculus anything but straight forward. Layer on the option of distribution (not always available), control, and ability of a strategic partner to focus post-partnership … a comparison of the headline price is difficult.

The more relevant advice comes from Howard Marks of Oaktree Capital (whose memos are worth reading) about knowing where in the cycle we find ourselves. It is a great time to be a seller in spirits and consumer in general. Eventually, high valuations will meet a slowdown in earnings in Q3 2019. So I tell my portfolio of start-ups to take as much cash needed to prove rate of sale whilst being reasonable about valuation.

The combination of a bull market in new-to-world consumer brands and seemingly transparent information about what valuation everyone else is at (I am amazed at the number of decks I receive with accurate competitor private deal metrics) helps raise the temperature of expectations. Asking for a punchy valuation might work for an exciting brand with a nice liquid/pack, but the reckoning will come due in the next round when the hard slog and expense of building on-premise accounts becomes obvious.

On a tangent, one of the more egregious things I have seen is the concept of a ‘super preferred’ (my name for it) instrument that gives the holder a very chunky and undiluted stake on a liquidity event. Pass. Also pass on advisors/board members asking for undiluted stakes in return for advice. The Intermediaries

(Think of this as Page 6 but covering on the goings-on of financiers, intermediaries, and influencers in ‘The Spirits World’.)

It is more than just interest rates that are zero-bound in the world of finance: It is the number of cases you need to have sold to get a bulge bracket investment bank to represent you on the sell-side. I am curious how the economics work and how it gets by credit committee.

I went to a brand launch in Shoreditch recently. Lots of drinks but not a canapé in sight. I was ‘hangry’ as hell. Don't make me name and shame you; do budget for food and not just the influencers. Other Interesting Stuff

FT Alphaville had an article on the Virgin Galactic reverse merger into a cash shell. The deck is available for download. Think lots of pictures and few numbers. A business with $0 revenue (but customer deposits) and a lot of specific risk (let’s go to space in a rocket ship) lists at $2b. It is an entirely different take on the ‘Experience Economy’. It is also the first time I have seen something in a presentation being bench-marked to the cost of a private jet flight from NY to London. Hence the point above about knowing where in the cycle you find yourself.

I am spending the summer near Ashville, NC, the brewing capital of America. Watch my IG (link below) for posts of beer, bourbon, and me on the shooting range (but never knowingly together in the same post).