Founders First was launched by Dan Wales and Stuart Morton two years ago with the intention of turbocharging Australia’s craft brewing space.
It has since raised $24 million from high net worth individuals and is backed by the likes of vineyard owner Warren Randall. That capital has been poured into breweries such as Mornington Peninsula’s Jetty Road and Marrickville’s Sauce Brewing Co.
Founders First also has skin in the game with emerging sectors, like the Motlop family’s Something Wild Beverages that produces Green Ant Gin using the traditional bush tucker ingredient the green ant, known for its lime flavouring. Then there’s K.Booch, the alcoholic kombucha business that will have stalls across the country this summer and will follow the music festival crowd.
The company is offering investors equity at 50¢ a share to raise between $10 million and $17.5 million. The proceeds will be used to complete acquisitions of more craft breweries and to invest in the Founders First sales operation, which operates across the portfolio companies to get more of the independent products into venues.
Craft beer and spirits producers have exploded in popularity over the past two decades in Australia but the path to success for startups is challenging. Major players such as Carlton and United Breweries and Lion still own close to 90 per cent of the overall beer market share by volume.
Smaller players must have enough cash in the bank to cover production, excise requirements as well as sales and marketing. Over the past five years independent producers have also been concerned about “craft washing”, where beverage giants create new brands that appear independent, or simply buy up local players entirely.
Mr Haysman said Founders First sat “behind the founders” of genuine independent companies, giving them a pool of experts from the local sector to help them grow when up against those major players.
Investing in early-stage brands is risky, and requires ongoing capital. Founders First generated $7.6 million in the 2019 financial year from its portfolio, according to its prospectus, although was operating at an after-tax loss of $1.8 million.
It currently has close to $5 million in the bank.
Mr Haysman said the company was looking to stick with businesses for the long run and increase the viability of more and more craft companies through possible future acquisitions.
Beverage giants have taken an interest in buying smaller players, and Founders First is open to those exits.
“Down the track, if someone came along and offered a crazy price for one of the businesses within the group, we have the option [to exit],” Mr Haysman said.
The company is hoping to hit the ASX boards in the third week of December.
Emma is the small business reporter for The Age and Sydney Morning Herald based in Melbourne.