Note: At KingsCrowd, we’ve seen all different kinds of investors. Some investors have been studying companies and grilling founders for years. Some have their own experience building companies. Some are familiar with the stock market but have no idea how to approach startups. And others are new to it all. But no matter your investment experience, there are always cautionary tales and lessons to be learned.
That’s why we’re sharing this piece from our friends at Early Investing. Senior Editor Allison Brickell recently took the plunge to make her first-ever investment. We think her reflection on the experience has some useful insights. We hope you find it helpful the next time you consider your own investments.
I’ve been working at investment-related companies since 2015. But I’m still pretty new to the investing world. My background is in communication and journalism, not finance. So for the last seven years or so, I’ve been researching the online startup markets and observing my colleagues’ approach to investing.
Last week, I took the plunge and made my first startup investment: Rasa. The company uses adaptogenic herbs and mushrooms to make tasty and healthy coffee alternatives. (The round is now closed.) Today I’ll take you through my evaluation process and what I’ll do differently next time.
Why I Invested
First up: research, research, research. In addition to reading Andy Gordon’s Rasa recommendation piece (which you can access by joining the First Stage Investor community), I combed through Rasa’s raise page, LinkedIn, Allied Market Research, KingsCrowd’s Rasa Analyst Report and KingsCrowd’s profile of Rasa founder Lopa Van Der Mersch.
I’ve written before about my three main criteria for evaluating startups: knowledgeable founders, a unique value proposition and a clear path to scale. For me, Rasa checked every box.
Founder Lopa Van Der Mersch has extensive experience in building sustainable companies. She brought a previous company, a sustainable engineering corporation, to an exit. And she bootstrapped Rasa to more than $12 million in revenue and a rapidly growing customer base.
I’m also an impact investor. So I was drawn to Lopa’s commitment to making a sustainable impact. Rasa sources its herbs by buying directly from farmers, which helps it obtain high-quality ingredients and build strong, sustainable relationships. Rasa also helped Jordan’s largest date seed supplier receive organic certification. This showed me that Lopa is committed to ensuring that her company has a positive impact on the environment and ensuring that other businesses become more sustainable. That’s thinking big — much bigger than just Rasa’s short-term profits.
Rasa offers a unique product. No other companies seem to be using adaptogens to power their functional beverages. Rather than rely on caffeine, Rasa’s blends use a combination of herbs and mushrooms to provide energy boosts, calming effects and other benefits. The ingredients in Rasa’s blends are all organic and sustainable. And given the popularity of coffee and the growing number of Americans who are trying to eat and drink healthier, I think Rasa has positioned itself well to take over a decent chunk of the functional beverage market.
Finally, Rasa seems on track to scale. The company has an excellent subscriber retention rate, stellar customer reviews and steady month-over-month growth. 700 retail stores approached Rasa — not the other way around –– to sell its products. And the company has generated more than $12 million in revenue. That showed me that Rasa has proven product-market fit.
What I’d Do Differently
Overall, Rasa seemed (and still seems) like a solid investment to me. But the next time I invest, I’ll do a few things differently.
Test the product. I didn’t order Rasa in time to try it before the company’s round closed. By the time I read Andy’s piece and started my other research, I had only a few days to commit before Rasa’s round closed. So I decided to go in without trying it.
Because of all my research, I felt like I had a compelling case to invest. And for the minimum $100 investment, I felt it was worth the risk. But next time, I’ll make sure to try the product before I invest.
Consider my personal use of the product. Though I invested in Rasa, I’m not really the company’s target customer. Rasa is a coffee alternative — perfect for the 150 million or so Americans who love their coffee but want a healthier option. But I’m not a coffee drinker.
I am interested in having a healthy morning beverage. So I’m still within Rasa’s potential customer base. But I’m not quite as passionate about an energy-boosting morning beverage as coffee lovers are. When I invested in Rasa, I believed that the product was compelling and would continue to be successful. I didn’t think it was essential that I personally used it. To me, it was enough that others would. (I know a lot of caffeine addicts.) Time will tell if Rasa’s success continues. But next time, I’ll think more carefully about my own connection to the product.
Do more research on competing products. Before researching Rasa, I didn’t know anything about existing coffee alternatives. In part, this was because Rasa seemed to be offering something so new that I had a hard time comparing its products to existing ones. In the end, I relied on Andy’s recommendation and KingsCrowd’s Analyst Report to understand Rasa’s competitive landscape.
It’s time-consuming to research and compare competing products. Pricing, customer reviews and retail distribution information takes time to document. And there’s some information that’s just not public. Next time, I’ll make a more concerted effort to study the competition and see how the company I’m evaluating sets itself apart.
Overall, I’m happy with my decision to invest in Rasa. I think the company has a promising future. But regardless of how things turn out, choosing to make the investment was an important step in my investing education. Having skin in the game forces me to think more critically about the company I’ve invested in.
At the end of the day, it’s a learning experience — hopefully a profitable one.