After bootstrapping for two years, Sydney-based booze subscription startup Whisky Loot has bagged a modest $400,000 in seed funding. But according to founder and chief Joel Hauer, steady growth and growing demand means this is just the beginning for the business.
The round was led by Ewert Leaf Labs, along with a group of Sydney-based angel investors, who have not been named.
Founded in 2016, Whisky Loot is a curated subscription tasting service, allowing customers to taste a few premium tipples before they commit to buying a whole bottle.
“Most people don’t want to risk buying a bottle when they don’t know what it tastes like,” Hauer tells StartupSmart.
And he seems to have tapped into a thirsty market. The startup has seen 25% month-on-month revenue growth over the past 24 months.
In its first month of trading, the service turned over $3,500 in revenue, with about 80 subscribers signing up.
By December 2019, monthly revenues were about $160,000, and Whisky Loot had more than 1,300 subscribers.
Moving into the alcohol business was a bit of a curveball for Hauer. Previously, he ran a digital marketing agency, where he worked with e-commerce clients and a few subscription businesses.
As a whisky lover himself, and inspired by his clients, he set out to solve a problem he was experiencing.
He was trying to learn as much as he could about whiskys from around the world, but when faced with choosing a bottle of $100 to $150 grog to try, he at least wanted to give it a sniff first.
“You don’t really feel that comfortable,” he says.
“I had been burnt a couple of times by whiskys I thought sounded great, but weren’t really that good when I got them home,” he adds.
Tasting premium whiskys in the bar has its drawbacks, too. If you want to try a few drams, things can get pretty pricey pretty quickly. Plus, there’s always the risk you won’t even remember what you liked.
“If you’re trying to build up your knowledge base of whisky, bars are not a very good place to do it,” Hauer says.
“It was that personal experience that really was the sprout for the idea.”
When it comes to startup funding, $400,000 isn’t a huge figure. But, for Hauer, it’s exactly what he needed to bump the business into its next stage.
“It’s not a massively capital-intensive business,” he says.
A lot of the funding will be used towards customer acquisition and marketing, he adds.
“It’s not like we need a lot of machinery, or a huge pipeline of development resources … we’re already past the starting gates and we’re growing quite quickly.”
That said, Hauer is already looking ahead to a second, considerably bigger raise, and sounding out opportunities for the future of the startup.
“The more we’re working with distilleries the more potential collaborations we’re able to pitch them,” he says.
“A lot of that has inspired tech that can solve some of the pain points distilleries are having.”
Distilleries often sell large amounts of their product to big retailers, but don’t get any insight into who buys it. There’s a big question mark over who their end customers actually are.
“Any type of info a marketer would want is not there, it’s not accessible,” Hauer says.
The founder also expects the business to expand into gin, vodka and tequila subscriptions in the not-too-distant future.
And at the same time, he’s sounding out the possibility of launching in the US.
Ultimately, all of this will require more cash.
“We’re starting very much from an MVP perspective,” Hauer says.
“As we go, we’re finding ways to test different markets and test different assumptions, before we go gangbusters into those different areas.”
Hauer has grown a budding business out of his initial ‘sprout’ of an idea, and his advice for other entrepreneurs hoping to do the same is pretty practical.
“I wish I had talked to someone about international logistics,” he says.
“I would have saved a lot of money and a lot of hassle.”
Whisky Loot’s packaging is supplied from China, he explains. Going through the process of figuring out who to work with, how to get products to Australia, and making sure they didn’t run out of anything has been a steep learning curve.
“When it’s a subscription model, it’s not like when you run out of something you can just mark it as ‘sold out’,” he explains.
“Your customers are expecting it every month.”
Hauer also notes the importance of getting to understand the industry your entering and “making friends with that industry”, especially if you’re a newcomer.
The commercial liquor community is a tight-knit one, and Hauer “never wanted to be considered a disruptor”, he says.
“We work with them and we support their businesses, so it’s important for us to have that perception, and the good will in that industry.”
You can help keep SmartCompany free for everyone to read
Small and medium businesses and startups have never needed credible, independent journalism and information more than now.
That’s our job at SmartCompany: to keep you informed with the news, interviews and analysis you need to manage your way through this unprecedented crisis.
Now, there’s a way you can help us keep doing this: by becoming a SmartCompany Supporter.
Even a small contribution will help us to keep doing the journalism that keeps Australia’s entrepreneurs informed.
And it’s not all one-way traffic either. SmartCompany Super Supporters get to dial into our monthly editor’s meeting and attend a monthly, invite-only webinar with a big-name entrepreneur.