Rasa is raising capital via preferred equity at a $25 million valuation. The company had $3.5 million in revenue in 2020. In 2021, it had nearly $4.8 million in revenue as of November. The revenue-to-valuation multiple for this round is around 5x using the reported 2021 revenue. In comparison to other consumer packaged goods startups currently raising capital online, a 5x revenue-to-valuation multiple is rather low. Therefore, Rasa’s valuation is an attractive price for investors.

Rasa is operating in the adaptogens market. Adaptogens are plants known to be an effective and healthy substitute for coffee. Similarly to coffee, adaptogens can increase memory and concentration and boost energy levels. The global adaptogen market was valued at around $9.8 billion dollars in 2020 and is expected to reach nearly $16.3 billion by 2028. This market is growing at a rate of 6.6% each year, much faster than the coffee market’s annual growth rate of about 4.3%. Adaptogens are still a niche market space, but the market could have decent growth as consumers increasingly become conscious about the health effects of their food and drink consumption. However, education on the benefits of adaptogens is an important part of the market’s success. Rasa plans to invest in marketing through Facebook ads and social media influencers. Rasa is currently focusing on the United States market, but the company has also received interest from Europe and China.

Rasa has competitors in and out of the adaptogen market. Traditional coffee and tea brands capture the largest share of consumers looking for daily energizing drinks. Adaptogens mostly attract consumers conscious about the negative effects of caffeine on their health. The adaptogen market is disruptive to the traditional coffee and tea markets. Several companies now sell adaptogen-based coffee alternatives, but product composition varies from brand to brand. Rasa will need to stand out against both direct and indirect competitors in order to secure a market niche. However, consumer packaged goods sectors like this are rarely winner-takes-all markets, so there should be room for Rasa and other brands to succeed at the same time.

Rasa was founded by Lopa van der Mersch. She previously co-founded the Biochar Engineering Corporation and participated in its exit. From this experience, she went on to co-found The Biochar Company. Van der Mersch has been through the ups and downs of the entrepreneurial journey, a crucial experience to lead Rasa. She also has served as an advisor and board member for several companies.

Ben LeVine joined the company early in its development as a co-founder. He holds a bachelor’s in marketing and entrepreneurship from the University of Arizona. He also has a master’s in clinical herbalism from the Maryland University of Integrative Health and has seven years of experience in the industry. Due to the usage of plants and mushrooms in Rasa’s products, LeVine’s skillset is crucial for the company. 

Co-founders Mersch and Levine have strong and complementary skills. Rasa has already achieved profitability with only 11 team members. Overall, the team is efficient, experienced, and balanced.

Rasa has several competitors in the adaptogen market. MUD/WTR offers coffee alternatives made with adaptogens and functional ingredients. The company’s branding is radically different from Rasa, and it only offers two adaptogenic formulas. Joey is another coffee alternative brand, but it has only one product that isn’t caffeine-free. Rasa’s Original and Dirty blends are the closest parallels to Joey’s product, and in both cases, Rasa’s prices are cheaper per serving. Other brands, like Four Sigmatic, sell adaptogen blends that are meant to be added to cups of coffee and tea rather than being full alternatives.

Rasa has nine different products that all provide adaptogenic blends of herbs and mushrooms. Its products are around five times more expensive than tea or coffee. But its prices overall are lower or similar to its direct competitors, making it attractive for its clients. The company makes revenue from transactions and subscriptions, and its business model is the same as its direct competitors. According to Rasa’s founding team, 50% of the company’s revenue comes from its subscriptions. 

Rasa’s packaging is completely recyclable, and the company wants to make it fully compostable in the future. The company emphasizes sustainability, and this message seems to be key in attracting and retaining new customers. However, as Rasa sources products from all over the world, its carbon impact isn’t necessarily lower than coffee or tea. Rasa mainly distinguishes itself from its competitors on the adaptogen market by ethically sourcing nearly 50 plants from 15 different countries. Its products’ compositions and the knowledge of Rasa’s co-founder Ben LeVine are also key to Rasa’s defensibility. While it’s possible for another company to create products with similar ingredients, it would prove difficult since it would require extensive knowledge and branding.

Rasa’s products are pretty unique, even in this emerging market. The different options it has available complement each other and can fit various customer preferences. Rasa has succeeded in differentiating itself from competitors and has a surprisingly strong defensive moat for a consumer packaged goods company.

Since its inception in 2018, Rasa has accumulated more than $10 million in revenue. As of November 2021, the founders forecasted more than $5 million in revenue for the year. Rasa also saw positive profit in 2020. Rasa’s revenue is steadily increasing, even if the company hasn’t launched an aggressive marketing campaign yet. The product-market fit of Rasa’s coffee alternative is proven. Rasa also plans on using Facebook ads and social media influencers to educate and acquire new customers. 

The company has received more than $2 million dollars from its founder Lopa van der Mersch. The current raise on Wefunder is Rasa’s first public raise. The choice of an online crowdfunding campaign is strategic as it provides an opportunity for Rasa to educate and acquire new customers and brand promoters.

Rasa sells mostly through its website and encourages customers to subscribe for lower prices. Additionally, 15% of sales are made through Amazon, and 5% are made through retail stores. The company’s products are sold all over the United States in more than 700 retail stores. Most reviews from customers are positive, while a minority highlight the taste difference between coffee and Rasa.

Rasa has impressive revenue that continues to grow year-over-year. The company has positive product reviews and is preparing to launch more comprehensive marketing campaigns soon. Overall, Rasa’s performance is highly impressive for a three-year-old company.

The overall risk profile of an investment in Rasa is fairly low. The company is increasing its sales year over year and has successfully generated a net profit in 2020. This profit is small, and Rasa might lose money again as it focuses on marketing efforts meant to educate and attract new customers.  However, it is encouraging that Rasa’s overall debt is quite low at just over $300,000. While financials are the main area of concern with this company, Rasa’s operating history is very encouraging.

Rasa is operating in a niche market with multiple competitors. Even if its products are unique and offer more variations, it isn’t the only coffee alternative using adaptogens. Consumers have numerous choices and can easily switch to other coffee alternative solutions. While Rasa has similar prices to its competitors, it is close to five times more expensive than traditional coffee and tea, which might prevent consumers from switching to Rasa. Coffee and tea companies have extensive marketing outreach, which can influence consumers’ perception of caffeine. Advertising campaigns highlighting the newest seasonal beverages, for example, could overpower consumers’ interest in reducing their caffeine intake. Rasa’s market might be limited to health-conscious customers, and the company will likely need time to acquire consumers en masse. These factors could limit the overall impact and market share that Rasa can claim.

Given the company’s traction, Rasa’s share price is fair to investors. The company ethically sources nearly 50 herbs from 15 different countries to create nine different products. Rasa has substantially more variety than its competitors, and its unique mixes give defensibility to the company. Rasa’s market is growing, thanks to increasing health consciousness and the pandemic. Many employees that are now working from home have invested in equipment to brew their own coffee while also exploring new beverages options. There is a clear opportunity for Rasa to convince these consumers to switch to healthier energizing methods.

The Rasa team has several talented marketers building a strong and engaging brand identity focused on health and sustainability. The founding team is also passionate about the problem they are solving. Rasa’s CEO has strong startup experience, and her co-founder is a clinical herbalist with seven years of experience. The founders have complementary skills, and their go-to-market strategy had impressive early results. Most of Rasa’s sales go through its website and Amazon, and the company has a strong subscription program in place. Rasa’s performance is exciting for investors and lowers the risk of this investment.

Rasa provides coffee alternatives that use functional mushrooms, herbs, and adaptogens to give an energy boost without the negative side-effects of caffeine. The nine different formulas offered by Rasa can purportedly reduce stress and fatigue while providing energy (and in some cases, increasing libido). Rasa is positioned in the adaptogens market, a small market seeing steady growth. While it is a coffee alternative, it has several direct competitors offering similar products at similar prices. 

To differentiate itself, Rasa sources nearly 50 ingredients from more than 15 countries around the world. Lopa van der Mersch, founder and CEO, has led the company to impressive customer growth in just three years. Rasa had a positive net profit in 2020 and had close to $5 million in revenue in 2021. Thanks to this high revenue compared to most consumer packaged goods companies raising online, Rasa is valued at a fair price in this funding round. As of today, Rasa is an impressive company offering a low-risk investment. For these reasons, Rasa has been rated a Deal to Watch.

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

Analysis written by Léa Bouhelier-Gautreau, February 2, 2022.