Drink LMNT

Growth Stage

A sugar-free electrolyte drink mix with everything you need + nothing you don't

Analytics

Raised to Date: Raised: $533,173

Aggregate Commitments $

Platform

Republic

Start Date

09/20/2021

Close Date

10/08/2021

Min. Goal

$25,000

Max. Goal

$750,000

Min. Investment

$100

Security Type

SAFE

Funding Type

RegCF

Series

Seed

Valuation Cap

$60,000,000

Discount Rate

0%

Rolling Commitments $

Status
Funded
Reporting Date

10/31/2021

Days Remaining
Funded
% of Min. Goal

2,133%

% of Max. Goal

71%

Likelihood of Max
Funded
Avg. Daily Raise

$29,621

Momentum
Funded
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Location

Naples, Florida

Industry

Food, Beverage, & Restaurants

Tech Sector

Non-Tech

Distribution Model

B2B/B2C

Margin

High

Capital Intensity

Low

Business Type

Life Style

Drink LMNT, with a valuation of $60 million, is raising funds on Republic. The company makes hydration drinks using sugar-free electrolytes. The products of Drink LMNT are science-backed, high on salt, and low on sugar to provide adequate functional and hydration benefits. Drink LMNT has been profitable since year one and generated over $25 million in revenue in the past twelve months. James Murphy and Robb Wolf founded Drink LMNT in December 2019. The current crowdfunding campaign has a minimum target of $25,000 and a maximum target of $750,000. The campaign proceeds will be used for growth and expansion.

Summary Profit and Loss Statement

Most Recent Year Prior Year

Revenue

$7,052,758

$1,536,591

COGS

$1,770,191

$449,261

Tax

$251,032

$0

 

 

Net Income

$750,306

$173,661

Summary Balance Sheet

Most Recent Year Prior Year

Cash

$1,323,862

$434,505

Accounts Receivable

$184,333

$114,232

Total Assets

$2,609,901

$836,491

Short-Term Debt

$674,373

$148,737

Long-Term Debt

$881,000

$417,500

Total Liabilities

$1,555,373

$566,237

Financials as of: 09/20/2021
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Ratings

Analyst Report

Synopsis

Hydration is essential after a workout. But most popular sports drinks that athletes reach for are loaded with sugar. The average 20-ounce bottle of Gatorade includes 34 grams of sugar. Alternatives like Powerade and VitaminWater tend to be similarly sugary. The benefits of the electrolytes in those drinks can outweigh the downsides of sugar for serious athletes, but most sports drinks are simply too sugary for the average person.

Drink LMNT has developed a solution for those eager to supplement their electrolytes without the added sugar. Drink LMNT drink powders include a better balance of electrolytes than most sports drinks with zero sugar. The drink mixes are distinctive in their focus on salt. Each drink mix stick includes 1,000 milligrams of sodium. All of that salt supports a healthy mineral balance, particularly for those on keto and paleo diets. Drink LMNT has developed a loyal community of customers and generated more than $7 million in revenue last year. 

Drink LMNT’s current Republic raise has been rated a Deal to Watch by the KingsCrowd investment team. 

Price

Drink LMNT is raising a Crowd SAFE at a $60 million valuation with no discount. This valuation seems eye-popping compared to the average crowdfunding valuation, but Drink LMNT is much more developed than the average business. The company generated more than $7 million in revenue last year and claims to be growing so rapidly that it will surpass $36 million in revenue for 2021. If that $36 million pans out, Drink LMNT’s $60 million valuation will have a revenue multiple of less than two times. This is fair for a consumer packaged goods company. Investors can get in at a relatively good price on this deal.

Market

Drink LMNT sells powdered drink mixes full of electrolytes in direct competition with sports drinks like Gatorade and Powerade. The global market for sports drinks is valued at $27.2 billion in 2021 and is projected to grow at a 4.2% annual rate to reach $36.4 billion by 2028. That’s a decent-sized market compared to the broader $923 million global beverage market. But the global beverage market is expected to grow at double the rate and reach $1.7 trillion by 2028, which far outstrips Drink LMNT’s projected market size. The sports drink market isn’t expanding very quickly, but a widespread increase in healthy eating and growing skepticism about sugary drinks are positive tailwinds for Drink LMNT. 

Drink LMNT can unlock greater market potential by expanding into liquid beverages and ultimately by offering additional product lines like protein bars, healthy snacks, and more. But gigantic scaling will be difficult to achieve given the company’s current position in the moderately sized sports drinks market.

Team

Drink LMNT was founded by a large group of health experts, content creators, and fitness community leaders. Based on the video shared on the company’s raise page, it seems that this group didn’t have capacity to operate Drink LMNT day to day. Instead, it brought in an operations team to manage the company. That group, Proton Enterprises, is a venture studio that is apparently also involved in hands-on portfolio company management. James Murphy, founding partner of Proton Enterprises, serves as CEO of Drink LMNT. He is a Yale graduate with a decade of business experience. He previously developed a separate health and fitness company in partnership with Dr. David Perlmutter, a New York Times bestselling author and nutritionist. 

The co-founding group of Drink LMNT, who are not involved in day-to-day operations, includes Robb Wolf. Wolf is a New York Times bestselling author of two books on healthy eating. He is a former research biochemist and highly ranked powerlifter. Wolf’s wife, Nikki Violetti, is also a Drink LMNT co-founder. She is a gym owner credited with developing the “On Ramp” program for new client onboarding at CrossFit gyms. The Drink LMNT co-founding team also includes Tyler Cartwright and Luis Villasenor, who are also co-founders of Ketogains, a health and fitness coaching business. 

It’s unclear exactly what the breakdown of responsibilities is between Proton Enterprises and Drink LMNT’s four co-founders. But between both groups, Drink LMNT is led by a seasoned team of health and fitness experts with strong business expertise. The company has a built-in advantage with a well-connected set of health and fitness influencers at the helm. This likely contributes to strong direct-to-consumer sales. While its management arrangement is unusual, Drink LMNT has a strong team overall.

Differentiators

Drink LMNT’s focus on salt — which contributes to both distinctive marketing and a distinctive taste — makes its powdered drink mixes unique in a crowded market. However, Drink LMNT’s products may appear very similar to other powdered drink options to the average consumer. At this point, Drink LMNT seems to be popular among a dedicated group of keto and paleo dieters who do a lot of research into mineral balance. But for the average consumer, Drink LMNT might not stand out against competing products. 

In addition, Drink LMNT has little defensibility from other beverage brands. If giants like Gatorade or Powerade recognize strong consumer demand for salt-focused electrolyte beverages, they could very quickly develop competitive products with superior pricing and distribution. All in all, Drink LMNT isn’t very distinctive to the average buyer and could face stiff competition from legacy brands.

Performance

Drink LMNT is a successful company with a strong revenue history. In 2020, the company generated $7.1 million in revenue. Income has reportedly grown rapidly since then. In the first half of 2021, Drink LMNT brought in more than $3 million in revenue each month. The company projects total revenue of more than $36 million in 2021. Drink LMNT is also profitable. The company’s 2020 net income was more than $750,000, and profitability has continued this year. Drink LMNT is projecting an earnings margin of more than 10% in 2021. 

Other performance metrics are equally strong. Drink LMNT has a 65% adjusted gross margin, including shipping. That’s relatively high for a consumer packaged-goods company. A 90% monthly retention rate for subscribers is also very strong, as is a 55% total customer reorder rate. Positive reviews on both Drink LMNT’s direct-to-consumer site and Amazon demonstrate an appreciative and loyal customer base. 

Finally, Drink LMNT is backed by a strong slate of investors and endorsed by an even stronger set of professional athletes. The company has raised $3.5 million from venture capital funds like ALIVE Ventures, Thrive Market Ventures, Wild Ventures, and more. Professional athletes like Kerri Walsh-Jennings, Brett Favre, and Lance Armstrong use Drink LMNT, and some have also invested in the company. 

Across almost every dimension, Drink LMNT is a high-performing company. With strong and growing revenues, established profitability, excellent retention metrics, and backing from a highly credible list of investors, Drink LMNT has already demonstrated distinctive success.

Risks

Drink LMNT is a relatively low-risk investment based on the company’s well-established and profitable operating history. It’s worth noting that the company’s team is unusual and may pose a risk. An outside venture and operations group, not the co-founding team, manages Drink LMNT full-time. There’s also a risk that Drink LMNT will struggle to introduce new products or achieve broader retail distribution, both of which are crucial for future scale. If Drink LMNT’s history is any indication, though, the company is on a path to success.

Bearish Outlook

Drink LMNT is a well-established company with a loyal customer base, strong team, and outstanding revenue and profitability. But as with any startup, Drink LMNT’s continued growth is not guaranteed. Rapid scale is necessary for investors to reap a return at this price, and scale will likely require both expanded retail distribution and the introduction of new product lines. Drink LMNT doesn’t spend much time discussing plans for those two priorities in its raise materials. It’s also worth noting that both of those endeavors will be major projects that typically require a great deal of effort from an established team. Drink LMNT is led by a combination of an outside management company and a part-time co-founding team busy with other projects, which is a concern. Without dedicated effort and strategic expansion into new stores and new product lines, Drink LMNT may struggle to maintain its pace of growth.

Bullish Outlook

Drink LMNT is a strong company. It’s raising at a fair price, considering projected 2021 revenues of more than $36 million. The sports drink market the company is targeting is decently sized, and the company has potential to capture additional market value with expansion into new product areas. Drink LMNT’s team includes both influential health and fitness thought leaders and seasoned businesspeople. Perhaps most impressively, the company has demonstrated strong year-over-year revenue growth, is already profitable, and is backed by leading investors and athletes. 

Drink LMNT has successfully built a strong brand and loyal customer base, both of which clearly drive increasing sales. With impressive traction from primarily direct-to-consumer distribution, expanded retail distribution could cause a huge spike in demand. The community of keto and paleo dieters will likely continue to grow alongside the population of athletic people seeking healthier beverage options. Therefore, Drink LMNT has the potential to become a well-known brand and compete with mainstream options like Gatorade and Powerade. 

Executive Summary

Drink LMNT is a sports beverage company offering powdered drink mixes with zero sugar and lots of salt. Drink LMNT is spreading the word about sodium deficiency and mineral imbalance — particularly among those who maintain keto and paleo diets — and offers drink mixes that redefine electrolyte beverages. The company is growing rapidly, from $7 million in revenue in 2020 to more than $36 million projected for 2021. 

It’s worth noting that Drink LMNT is not well differentiated. Consumers may not understand the distinctive benefits of salt-heavy electrolyte beverages, and other companies could easily offer competing products. In addition, Drink LMNT is led by an unusual combination of a venture capital and operations firm and a set of co-founders with other projects. However, there’s no actual evidence yet that either of these risks are hampering Drink LMNT’s growth. With a decent market, excellent performance metrics, a strong roster of investors and athlete endorsers, and a fair valuation given projected 2021 revenues, Drink LMNT has been rated a Deal to Watch. 

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

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Drink LMNT on Republic 2021
$
Platform: Republic
Security Type: SAFE
Valuation: $60,000,000

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