Future Proof

With a pre-money valuation of $60M, price is Future Proof’s lowest-scoring category. It should be noted, however, that the security type is preferred equity which could come with some nice investor perks. At this time, preferred equity accounts for just 8 percent of all deals. Future Proof’s valuation — though high — is likely reflective of its traction to date. 

For the wine and spirits market, COVID-19 has undoubtedly shifted consumer behavior. Danny Brager, SVP of Nielsen’s Beverage Alcohol practice, explains “Consumers are shifting the dollars they would have spent on alcohol in a restaurant, bar, or tasting room to alcoholic beverages they can buy at a lower mark-up from retailers, online merchants and even directly from the supplier in the instances where it is legalized to do so.” 

Other, less intuitive consumer behavior shifts have manifested in purchasing habits, trending towards larger pack sizes for both boxed wine and spirits. This trend that could very well make Future Proof’s timing optimal despite the general economic downturn.

From an exit standpoint, the market appears ripe for acquisition play. In 2015, Heaven Hill distilleries acquired Deep Eddy Vodka for an undisclosed amount. The same year Saint Archer Brewing also sold to MillerCoors. Mike’s Hard Lemonade, another competitor, was also acquired in 2015 by Labatt Breweries for $350M. With fresh hires from these networks, an acquisition is certainly not out of the question for Future Proof.

Overall, the change in consumer behavior paired with potential acquisition opportunities results in Future Proof’s market score being quite strong. The main concern for the company will be establishing itself amid strong competitors.

Justin Fenchel, Aimy Steadman, and Brad Schultz comprise the Future/Proof founding team. Prior to founding what was originally BeatBox Beverages, Justin spent time as a Financial Analyst at Bank of America and as an Equity Analyst at Bel Air Investment Advisors. In 2009 he went on to found Flying Penguin Group, a media and strategy firm out of Ho Chi Minh City. He holds a Bachelor’s in Economics from Pomona College and an MBA from the University of Texas at Austin. His current role is CEO, and he is dedicated to Future Proof as a full-time employee.

Co-founder and COO Aimy Steadman brings a venture capital background to the table, having served as a partner at Congress Avenue Ventures and as a Strategic Advisor to Springdale Ventures. She has prior entrepreneurial experience founding XL Web Services, which offered “custom websites and search engine marketing services for small and medium-sized businesses.” Aimy holds a Bachelor’s in Advertising and an MBA, both from the University of Texas at Austin.

The third founder, Brad Schultz, has extensive experience in digital media at the entertainment network, Kabillion, and as Head of Moshi TV at Mind Candy. He founded Flying Penguin Mobile in 2007, a mobile gaming company. He holds a degree in Marketing from the University of the Pacific. 

Since 2012, the founding team has brought on several individuals to fill out marketing and operations roles. Backgrounds of the new hires include Tito’s, Kraft, and MillerCoors, to name a few. 

Collectively, the founding team spans a range of complementary backgrounds. Though each has some entrepreneurial expertise, no founder appears to have successfully exited a company in the form of an IPO, merger, or acquisition. The lack of industry knowledge prior to founding the company across all three founders should be noted by potential investors — though it appears the team has made the appropriate hires to mitigate this risk. Hiring industry veterans was a smart move by the founding team. This is reflected in the higher than average team score.

It goes without saying that the alcoholic beverages space is hugely crowded and standing out takes effort. To differentiate itself among large incumbents as well as new products, Future Proof has created a unique marketing approach. Inspired by lifestyle beverages like Red Bull, the Future Proof marketing strategy is to create an “experiential” brand. This strategy fits the target market — millennial consumers — like a glove. Specifically, the team has introduced products at music festivals across the nation and has taken advantage of influencer marketing. This strategy has paid off, as the team boasts a distribution footprint across 24 states and around 150 wholesale retailers. Future Proof reported $7.7M in gross product revenue for 2020. Advertising aside, the product specs are also optimal for a millennial market. The bright colors and gluten-free/low carb nature of the beverages should appeal to a younger base, as well as the team’s environmentally-conscious packaging decisions. In fact, the Cørkless brand is partnered with One Tree Planted, a global reforestation nonprofit. 

Timing should also be of note for potential investors — much of the marketing strategy relies on live events that are on hold indefinitely due to COVID-19. However, Future Proof could capitalize on some changing consumer behaviors — including a shift from bar and restaurant “off-premise” alcohol purchases to retail purchasing. Increasing runway with this round of funding, the founders should focus efforts on supply chain management and wholesale expansion, two pain points that they have proactively identified. 

Future Proof’s differentiation score is slightly above average. It reflects the startup’s early moves to set itself apart from other, similar adult beverage businesses balanced against the need for Future Proof to not rely solely on live events for marketing and customer acquisition.

Future Proof scores highest in performance out of all the KingsCrowd rating categories and rightfully so. To date, Future Proof can be found across 24 states and in nearly 150 retailers — including major stores like Total Wine, Walmart, Kroger, and Speedway. And despite disruption in the general economy brought on by COVD-19, sales have exploded. The BeatBox brand alone brought in $5.5M in revenue as of June. Total gross product sales for 2020 currently sit at almost $8M, and the team predicts a 109% growth in sales next year to $16.45M. The estimated CAGR through 2024 is a self-reported 76.7%. These growth projections are supported by future supply chain initiatives and the rollout of the Brizzy and Cørkless brands, as well as new product development.

There is always risk that further market penetration could slow, but the Future Proof track record to date suggests otherwise. Additionally, these numbers have been externally validated: 

“According to Nielsen, for the 52 weeks ending Jan. 25, 2020, BeatBox Beverages was the fastest-growing of the top 10 wine brands in dollars, volume and sales velocity. Nielsen data also shows BeatBox as a top 10 brand in the entire wine segment, despite distribution being limited to fewer than 20 states. In addition, BeatBox Beverages was one of only five brands awarded a Silver Medal commemorating 50-100 case volume growth as well as double-digit percentage growth on both dollars and volume, with a minimum of 80,000 nine-liter cases in Nielsen channels.” 

Of note, presence in just 24 states is a double-edged sword: on the one hand, there is minimal retail presence at a time when live-event marketing is halted. On the other hand, the success to date is primed for immediate scalability from a geographic perspective.

Also of note, Future Proof has $1.5M in long-term debt and $850k in short-term debt that matures in the immediate future. Alleviating these debts is likely built into the use of proceeds for the upcoming round. With $600k cash in hand and a ~$260k monthly burn rate, the team may need to start thinking about embracing leaner operations, at least until the upcoming round is raised. These financials — though certainly a risk and mildly alarming — are not out of the question for a CPG company at this stage and are mitigated by expected receivables in the near future.

The alcoholic beverages space is undoubtedly a large market littered with both fresh faces and large incumbents. Standing out amidst the sea of competition is always a challenge for any newcomer. With an industry-wide CAGR of just 2%, this is by no means a high-growth sector. And the market has not been immune to the impacts of COVID-19. If the team wishes to keep up traction and sales, a pivot from event-based marketing is crucial. Now is also the time to optimize supply chain management which may not have been a priority in a pre-COVID world.

Another concern for investors is the lack of industry experience across the founding team. However, this risk is mitigated by the slew of new hires with industry connections. Additionally — as with any CPG — there is a risk of product/market fit. The team has acknowledged this via marketing plays, identifying and sticking to a target customer and advertising accordingly.

Finally, the team still lacks a nationwide presence. As mentioned, this is a double-edged sword that lends itself to both risk and natural pipelines for scaling.

Though Future Proof has a ways to go, the track record thus far proves that the company is here to stay. Sales have only multiplied in recent years and omnichannel marketing initiatives are flourishing. The new hires with industry backgrounds nicely complement the company’s more entrepreneurial-minded founders. 

The product/market/marketing fit is also undeniable. By isolating a target customer and marketing accordingly, Future/Proof retains a lifestyle brand image that appeals to a millennial customer base. Influencer marketing is all the rage. If executed right, it can be a low-cost, highly effective marketing strategy. 

The team has also left plenty of room for scaling from both distribution and product standpoints. There is room to expand geographically, which should be relatively seamless given the expansiveness of existing wholesale distributors and retail partners. The team has also nodded towards expanding its product line in the near future as well as improving margins via supply chain initiatives, a crucial step in the world of COVID-19.

Though investment in Future Proof presents several risks, the strong founding team appears to have acknowledged and proactively mitigated any speed bumps for the foreseeable future. Traction in the form of revenue and wholesale networking is promising — not to mention the overall potential to scale. Overall, Future Proof offers a solid investment opportunity for crowdfunding investors looking to get in early on a fast-growing CPG company. For these reasons, the KingsCrowd investment team gave Future Proof a Deal To Watch rating.

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

Analysis written by Olivia Strobl.