Steeped Coffee

Steeped Coffee

Growth Stage

Specialty Coffee Brewed Like Tea in a Single-Serve Brew Bag

Specialty Coffee Brewed Like Tea in a Single-Serve Brew Bag

Overview

Raised to Date: Raised: $1,468,235

Total Commitments ($USD)

Platform

Republic

Start Date

02/18/2024

Close Date

04/25/2024

Min. Goal
$50,000
Max. Goal
$5,000,000
Min. Investment

$100

Security Type

SAFE

Series

Series B

SEC Filing Type

RegCF    Open SEC Filing

Valuation Cap

$38,000,000

Discount

0%

Rolling Commitments ($USD)

Status

Active

Reporting Date

04/18/2024

Days Remaining

6

% of Min. Goal

2,936%

% of Max. Goal

29%

Likelihood of Max
unlikely
Avg. Daily Raise

$24,471

# of Investors

1,343

Momentum
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Year Founded

2017

Industry

Food, Beverage, & Restaurants

Tech Sector

Non-Tech

Distribution Model

B2B/B2C

Margin

Low

Capital Intensity

Low

Location

Scotts Valley, California

Business Type

Growth

Steeped Coffee, with a valuation of $38 million, is raising funds on Republic. The company makes specialty coffee that is brewed like tea in a single-serve bag. Steeped Coffee’s single-serve bags do not require any machine for brewing and come in compostable and sustainable packaging. The coffee is barista-approved and ultra-premium and has partnered with over 400 top coffee brand partners. Josh Wilbur founded Steeped Coffee in April 2017. The current crowdfunding campaign has a minimum target of $50,000 and a maximum target of $5 million. The campaign proceeds will be used for sales and marketing, general working capital, leadership and management, accounting systems implementation, and intellectual property and legal costs.

Summary Profit and Loss Statement

FY 2022 FY 2021

Revenue

$2,828,531

$2,922,061

COGS

$2,462,362

$2,851,959

Tax

$0

$0

 

 

Net Income

$-4,999,091

$-2,964,275

Summary Balance Sheet

FY 2022 FY 2021

Cash

$2,266,809

$192,267

Accounts Receivable

$200,853

$434,808

Total Assets

$5,128,664

$1,897,470

Short-Term Debt

$708,586

$1,104,377

Long-Term Debt

$16,042,986

$7,412,131

Total Liabilities

$16,751,572

$8,516,508

Financials as of: 02/18/2024
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Raise History

Offering Name Close Date Platform Valuation/Cap Total Raised Security Type Status Reg Type
Steeped Coffee 04/24/2024 Republic $38,000,000 $1,468,235 SAFE Active RegCF
Steeped Coffee 10/07/2022 Republic $33,000,000 - SAFE Funded RegD 506(c)
Steeped Coffee 07/26/2022 Republic $33,000,000 $5,000,000 SAFE Funded RegCF
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Price per Share History

Note: Share prices shown in earlier rounds may not be indicative of any stock splits.

Valuation History

Revenue History

Note: Revenue data points reflect the latest of either the most recent fiscal year's financials, or updated revenues directly from the founder, at each raise's close date.

Employee History

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Analyst Report

Synopsis

The coffee industry is a bustling marketplace with a continuous demand for innovation and convenience. Steeped Coffee has positioned itself as a unique player, offering specialty coffee brewed like tea in a single-serve bag. This innovative brewing method does not require machines, simplifying the process for consumers and reducing the environmental impact of traditional coffee pods. Steeped Coffee's single-serve bags come in compostable and sustainable packaging, aligning with the growing consumer demand for environmentally friendly products. 

Next Section: Price

Price

Steeped Coffee is raising funds on Republic with a valuation cap of $38 million under a SAFE (Simple Agreement for Future Equity). This valuation is based on a revenue multiple of 13X, given the company's most recent fiscal year-end revenue of $2.8 million. While the revenue multiple is somewhat high for the food and beverage industry, it is justified by its innovative product offering, strong partnerships with over 400 premier coffee brands, and presence in major national grocery chains. In summary, while Steeped Coffee's valuation may appear optimistic, it is supported by its unique product, market traction, and strategic partnerships. 

Next Section: Market

Market

Steeped Coffee operates in the highly competitive U.S. instant coffee market, a segment known for its convenience and appeal to efficiency-seeking consumers. The market is currently valued at $6.27 billion and is projected to grow at a CAGR of 4.28%. This growth is underpinned by the rising demand for single-serve coffee options that offer convenience and customization. Steeped Coffee's product innovation, which allows consumers to brew specialty coffee in a single-serve bag without needing a machine, aligns well with these market drivers. While the coffee market, in general, is much larger, the instant coffee niche will contain much of Steeped's closest competition. Both markets are growing steadily and will likely continue to see modest growth for years.

Next Section: Team

Team

Steeped Coffee is spearheaded by its founder and CEO, Josh Wilbur. Wilbur has spent seven years building the company. Wilbur is a serial entrepreneur. Before founding Steeped, he was on the founding team at PayStand, a digital payment processing solution. He also founded a surfboard company and a creative branding agency that was acquired by SocialGuides in 2010. Wilbur's entrepreneurial expertise is evident in Steeped's performance thus far. That said, he has no prior background in the food or beverage space. According to Form C, there are 16 employees currently working at Steeped, including salespeople, a CFO, and an executive assistant. 

Next Section: Differentiation

Differentiation

Steeped Coffee stands out in the crowded instant coffee market by offering a unique brewing method that marries the convenience of single-serve coffee with the quality of specialty coffee. Unlike traditional instant coffee options from Folgers, Nescafe, and Maxwell House, which often prioritize convenience over taste, Steeped Coffee provides a premium alternative that does not compromise flavor. The company's commitment to sustainability further enhances the differentiation with compostable and eco-friendly packaging that appeals to environmentally conscious consumers.

The company's innovative approach to coffee brewing—using single-serve bags similar to tea bags—significantly departs from the machine-dependent methods that dominate the market. This allows for a fresher cup of specialty coffee and eliminates the need for additional equipment, making it ideal for settings where space or convenience is a concern. Steeped Coffee's product is resonating with the market, as evidenced by its partnerships with over 400 premier coffee brands and presence in major national grocery chains.

Steeped Coffee's business model, which encompasses both B2B and B2C distribution, allows it to address a wide range of customers, from individuals to retail partners. The fact that Steeped Coffee is backed by venture capital and has a founder with a successful exit history further bolsters confidence in its business strategy and potential for future profitability.

Despite the low barriers to entry in the coffee industry, Steeped Coffee's patented brewing method and focus on quality and sustainability provide it with a competitive edge. The company's claim of a "game-changing brewing method" is not just marketing rhetoric but is supported by multiple awards.

Next Section: Performance

Performance

Steeped Coffee has made significant strides in establishing itself in the specialty coffee market. The company has successfully raised over $11 million in prior funding rounds and is currently valued at $38 million. Despite being in the pre-profit development phase, Steeped Coffee reported $2.83 million in annual revenue for the most recent fiscal year-end. However, it is important to note that this represents a slight decline of 3.2% in annual revenue year over year.

The company has secured a strong presence in the market through licensing partnerships with over 400 premier coffee brands, adding credibility and diversity to its offerings. These partnerships include Blk & Bold, Peace Coffee, Counter Culture Coffee, and La Cabra. Moreover, Steeped Coffee's products have entered major national grocery chains such as Whole Foods, Albertsons, Kroger, and Safeway, indicating a robust distribution model that spans both B2B and B2C channels.

Steeped Coffee has also garnered attention in the hospitality and corporate sectors, with customers including Hilton, Virgin Hotels, Amtrak, Industrious, and Waldorf Astoria. This demonstrates the company's ability to appeal to various customer segments with its innovative single-serve coffee bags that require no brewing machine and come in compostable packaging.

Despite these achievements, Steeped Coffee is facing challenges. Since the last round, the company has experienced a decline in team count, which may impact its operational capabilities and future expansion plans. Additionally, with a monthly burn rate of approximately $416,591 and cash and cash equivalents of $310,442, the company must carefully manage its capital to sustain operations and support further growth.

Overall, Steeped Coffee is navigating an extremely competitive market with a unique product offering that has gained traction in various sectors. The company's partnerships, distribution channels, and customer base are promising. Still, careful attention to financial management will be crucial as it seeks to achieve profitability and capitalize on the instant coffee market.

Next Section: Risk

Risk

Steeped Coffee operates in an extremely competitive industry, going up against established giants such as Folgers, Nescafe, and Maxwell House and omnipresent retail chains like Starbucks. These competitors have a robust market presence and deep pockets for marketing and product placement, which could overshadow Steeped Coffee's efforts to gain significant market share.

The company has yet to achieve profitability and is likely relying on external capital to sustain operations. This is evidenced by the high net income loss for the most recent fiscal year-end, which, when coupled with the fact that the annual revenue growth was slightly negative, indicates financial vulnerabilities. The significant long-term debt on the company's balance sheet could also impact its financial flexibility and future fundraising efforts. The company reported over $16 million in long-term debt for the most recent fiscal year.

While Steeped Coffee's product does not require brewing machines and offers a unique value proposition with its compostable and sustainable packaging, its success heavily relies on consumer adoption and repeat purchases. Any disruptions in production or quality control could damage the brand's reputation and customer trust, potentially impacting sales.

Lastly, the company's monthly burn rate is substantial, posing a risk in terms of cash flow management. They must closely monitor and control expenses to avoid depleting cash reserves before reaching a sustainable profit level. The company's financial health will be a critical area to watch, especially if it cannot scale revenue and move toward profitability quickly.

Next Section: Bullish Outlook

Bullish Outlook

Steeped Coffee's innovative approach to coffee brewing, offering specialty coffee in a single-serve bag, presents a unique value proposition in the instant coffee segment. With no requirement for brewing machines, the company aligns well with the growing consumer demand for convenience, quality, and sustainability. Steeped Coffee's compostable packaging and partnerships with over 400 top coffee brands enhance its credibility and market presence, indicating a strong potential for brand expansion and customer loyalty.

Given the increasing consumer awareness and demand for sustainable products, the company's environmental impact investing angle is particularly compelling. As Steeped Coffee's single-serve bags are both compostable and sustainable, this positions the company as a socially responsible choice in the eyes of eco-conscious consumers.

Despite the highly competitive landscape of the coffee industry, Steeped Coffee's patented brewing method is a significant intellectual property asset, differentiating it from traditional offerings. Protecting its brewing technology can provide a barrier to entry against competitors and may catalyze potential licensing opportunities or partnerships.

Overall, Steeped Coffee's market positioning, commitment to sustainability, and innovative brewing technology offer a bullish outlook for investors seeking to capitalize on the specialty coffee market, particularly within the niche of environmentally friendly and convenient coffee solutions.

Next Section: Bearish Outlook

Bearish Outlook

Despite Steeped Coffee's innovative approach to specialty coffee that requires no machine brewing, the company is operating within an extremely competitive landscape dominated by giants such as Folgers, Nescafe, and Maxwell House and ubiquitous retail chains like Starbucks. This environment poses a formidable challenge for Steeped Coffee to carve out a significant market share, especially when consumer habits around coffee are deeply entrenched, and brand loyalty is high.

Although Steeped Coffee has secured partnerships with over 400 coffee brands and holds patents for its brewing method, the product's novelty may not be sufficient to disrupt consumer behavior on a large scale. The company's financials also raise big concerns, with an annual revenue decline of 3.20%, a net income loss of $4.9 million, and a relatively low cash on hand of $310,442, which may not support sustained growth without additional funding. Additionally, the company is burdened with more than $16 million in long-term debt.

The reported monthly burn rate indicates that the company may rapidly deplete its cash reserves, which could necessitate further fundraising in the near term to continue operations. This may result in equity dilution for existing investors and poses risks for potential new investors.

Next Section: Executive Summary

Executive Summary

Steeped Coffee is an innovative company in the single-serve coffee market, offering a unique product brewed like tea in a single-serve bag without any brewing machine. The company's product stands out for its commitment to environmental sustainability with compostable and sustainable packaging. Steeped Coffee has seen significant traction by securing over 400 premier coffee brand partnerships and establishing its presence in major national grocery chains, including Whole Foods, Albertsons, Kroger, and Safeway. It also boasts notable customers such as Hilton, Virgin Hotels, Amtrak, Industrious, and Waldorf Astoria.

Steeped Coffee's financials are of concern, however. The company did experience a slight decline in annual revenue growth of -3.20% and has over $16 million in long-term debt. The company's financial management and path to profitability will be key areas for potential investors to consider. Overall, Steeped Coffee presents an interesting opportunity in the single-serve coffee space, but financial risk must be seriously considered.

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Steeped Coffee on Republic 2024
Platform: Republic
Security Type: SAFE
Valuation: $38,000,000

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