AMASS Botanics is offering preferred equity at a $75 million pre-money valuation. This price is much too high for the company’s current stage. With only $3.4 million in revenue, a $75 million pre-money valuation represents a 22x revenue-to-valuation multiple. That’s far too large for an early-stage consumer packaged goods company in a highly competitive market. At this valuation, AMASS will have to scale dramatically to deliver a strong return for investors. There’s little evidence to suggest that AMASS has what it takes to become a billion-dollar company, so investors aren’t facing excellent odds.

AMASS Botanics has a somewhat scattered product portfolio that touches several segments of the alcohol market and also the market for personal care products. AMASS is introducing alcoholic products in segments with growing demand. The global market for premium spirits was valued at $107.74 billion in 2019 and is expected to grow at an impressive 10.3% annual growth over the next six years. Another good sign for AMASS is that the spirits market is growing more fragmented over time, and demand is increasing for premium spirits brands faster than for non-premium alternatives. AMASS’ hard seltzer products also meet a growing market that’s valued at $4.4 billion in 2019 and is projected to grow 16.2% yearly over the next six years. 

For AMASS Botanics’ personal care line (hand sanitizers, soaps, lotions, etc.), market demand is large and steady. The full US beauty and personal care products market is projected to hit $128.7 billion by 2030. The market specifically for natural personal care products is expected to grow at a healthy 9.3% annual rate over the next seven years.

AMASS Botanics has a wide line of products, and all of them reside in large and growing markets. AMASS’ lack of focus on one market and the stiff competitiveness of each of these markets raise concerns, but the company benefits from pure market demand and growth potential.

AMASS Botanics was co-founded by Mark Thomas Lynn and Morgan McLachlan. CEO Lynn is the company’s business brain. He has impressive experience as the co-founder of several successful startups. His first company, PlayCoed.com, was acquired by LeagueApps in 2008. Since then, Lynn co-founded Winc Wines (a DTC wine company with more than $250 million in lifetime revenue) and Digital Brands Group, a NASDAQ-listed collection of digital-first luxury brands. 

Chief Product Officer Morgan McLachlan also serves as AMASS’ lead distiller. McLachlan founded The Spirit Guild in Los Angeles 10 years ago and has been honing her craft ever since. Her spirits have won several awards. 

The AMASS Botanics team includes several other executives, including Chief Revenue Officer Gene Song and Chief Digital Officer Jennifer Fan. Song previously served as the vice president of crafted spirits for Rémy Cointreau, a leading spirits brand. He has more than two decades of cumulative business experience, 15 of which are in the liquor industry. Jennifer Fan most recently led customer retention at REVOLVE, a millennial-focused e-commerce clothing boutique. Both Song and Fan hold bachelor’s degrees and MBAs from Ivy League schools. 

All in all, the AMASS Botanics team is well developed. It includes senior executives from highly relevant companies, including Winc Wines and Rémy Cointreau. The senior leadership team has decades of combined business experience with several former exits and advanced degrees. It’s difficult to imagine a team more qualified to lead a growing alcohol startup. 

Differentiation is often where consumer packaged goods companies fall flat, particularly in the alcohol industry. Each brand claims that its value proposition is unique. But the alcohol aisle is crowded with emerging brands focused on natural ingredients, fewer calories, millennial branding, sophisticated taste, and more. Most marketing messages get lost in the clutter, and AMASS Botanics is no different. While premium spirits and seltzers distilled with plants may have seemed more unique two decades ago, there are now several options that meet the same criteria. Haus is a prime example of a competitor touting similar messaging as AMASS — alcohol for the modern drinker, focused on clean and natural ingredients. 

AMASS Botanics argues on its raise page that its focus on self-care products like hand sanitizers and soaps are a differentiator from most alcohol brands. It’s true that this approach is unique, but it’s not at all clear why the strategy actually benefits AMASS. Hard seltzer and lotion isn’t an obvious product combination, and it doesn’t seem like a competitive advantage. The company’s claims that this product diversity allows for better data insights and customer targeting aren’t backed by evidence. 

Given the stiff competition of the alcohol industry and the personal care industry), it’s very difficult for AMASS to have strong differentiation. Furthermore, defensibility is often an issue with consumer packaged goods, and AMASS suffers here as well. The company has little to set it apart from competitors. 

AMASS Botanics is showing several signs of success. For one, the company’s revenue growth is impressive, particularly given the COVID-19 pandemic. In 2019, AMASS brought in $534,617 in revenue. In 2020, revenue jumped to more than $3.4 million, representing 540% year-over-year revenue growth. That’s a major surge for a young direct-to-consumer brand. However, AMASS’ net loss also grew between 2019 and 2020 from $2.56 million to $3.35 million. 

All of this revenue growth is thanks to steady progress in securing distribution accounts around the world. AMASS Botanics is sold in more than 1,500 stores and restaurants around the US, with additional distribution in the UK, Spain, Netherlands, Greece, Singapore, and Hungary. Five Michelin-starred restaurants serve AMASS Botanics products. The company’s direct-to-consumer channel is reportedly also growing steadily, though precise metrics aren’t offered. 

In addition, AMASS Botanics has been unusually successful in raising money, likely due to its CEO’s strong network as an exited entrepreneur. AMASS has raised $11 million across five prior rounds, from a $2 million valuation cap all the way to this round’s $75 million pre-money valuation. All of this fundraising has diluted the founders’ ownership significantly, down to 23.65%, which is unusual for a startup at this stage and may cause less founder buy-in than investors would prefer. 

The data is clear. AMASS Botanics has grown steadily over the last two years, with a strong distribution network and enthusiastic backing from previous investors. If this trajectory continues, AMASS will continue to scale toward potential returns for investors.

An investment in AMASS Botanics offers a low-to-moderate risk profile. The riskiest factor prospective investors should consider is the company’s financial status. The company’s roughly 1.5 debt-to-asset ratio is very weak and indicates that investors risk losing their money if AMASS were to go bankrupt in the near future. Beyond financials, prospective investors should consider more moderate risks in the areas of time, funding, and market. Direct-to-consumer brands typically scale more slowly than high-growth software businesses and may require more funding to fuel growth. Further inhibiting that growth is a highly competitive market. There’s no guarantee that increased time or funding can actually push AMASS Botanics past the other brands vying for market share. However, the company has exhibited strong year-over-year revenue growth and is an increasingly well-established alcohol brand with international distribution. 

The alcohol market is extremely competitive. It’s too soon to say whether AMASS Botanics actually has any sort of secret sauce to outpace the huge number of emerging brands vying for market share. The company insists that its personal care product line is a differentiator, but that’s not a clear argument. There’s no obvious reason why selling hand sanitizer and lotion creates any sort of proprietary data pipeline that enables more efficient alcohol sales. In fact, one could argue that focusing on both alcohol sales and personal care product sales actually holds AMASS back from being truly successful in either domain. 

Lack of focus seems to be an issue. Even within the alcohol product line, AMASS simultaneously offers premium spirits and hard seltzer, and it will soon introduce no-alcohol spirits and cannabis-infused spirits. Most startups focus on just one of these segments as it takes significant effort to carve out market share from longtime liquor giants. Given the pressure that AMASS Botanics faces to scale quickly and justify this round’s inflated valuation, prospective investors have reason to be concerned that the company is doing too much at once. 

AMASS Botanics is a bit of a confusing brand, given its focus on both alcohol and personal care products. At first glance, it may seem as though the company is still struggling to hone in on its lane. However, AMASS’ performance data tells a different story. With more than 500% year-over-year revenue growth between 2019 and 2020, almost $4 million in lifetime revenue, and significant distribution infrastructure around the globe, AMASS seems to have found a formula that’s working. 

AMASS’ success isn’t entirely surprising, considering the strength of its team. The company’s CEO is a seasoned entrepreneur with multiple exits, including prior experience as the co-founder of a successful direct-to-consumer alcohol brand. Other executives previously occupied senior roles at growing startups and established alcohol businesses, with decades of combined experience and strong academic credentials. 

All of these are strong signals that AMASS might have what it takes to scale into an attractive acquisition opportunity for a larger alcohol brand. Acquisitions are common in this industry. There are numerous examples of well-branded startups that catch the eye of liquor giants like Anheuser-Busch or smaller spirits brands that are building a portfolio of product offerings. Given AMASS’ steady growth and its CEO’s industry connections, investors could potentially achieve returns with a lucrative exit in coming years.

AMASS Botanics is primarily an alcohol brand selling premium botanics-infused spirits, hard seltzers, and more. The company also produces a line of personal care products, like hand sanitizers and soaps. In just a few years of operation, AMASS Botanics has scaled internationally to more than 1,500 stores and restaurants and generated almost $4 million in revenue. The company is led by an experienced founding team with domain expertise in the alcohol industry. 

On the other hand, AMASS Botanics seems to be splitting focus between alcohol and personal care, a strategy with little obvious upside. Its debt-to-asset ratio is weak, and prospective investors should also be concerned that a $75 million pre-money valuation is inflated for a consumer packaged goods startup of this size. Therefore, AMASS Botanics has been rated a Neutral Deal. 

For questions regarding the KingsCrowd staff pick or ratings for this company, please reach out to support@kingscrowd.com. 

Analysis written October 4, 2021.