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First Beverage Still In Game On Tiny Startup, But Special Incubator Fund Proved Impractical

Beverage Business INSIGHTS:

First Beverage Capital founder Bill Anderson caused a stir at BevNet Live conference a year ago, in Dec 2010, when he announced launch of $10 mil incubator fund that – unlike most private equity providers – would consider investments in range of $250K to $1.5 mil in early-stage cos (BBI, Dec 9, 2010). For startups frustrated that most private equity players will only look at more-developed brands, it seemed like potential lifeline at time capital has been tuff to procure. Plan was for fund raised from current and former distributors to seek 10-15 targets to receive equity checks in $250K to $1.5 mil range. As year progressed, tho, no deals were announced, and indeed effort has been quietly dropped. What happened? In many ways, co came to same conclusion as other firms, that making a lot of bets on small cos is simply too time-consuming to manage effectively – particularly as model evolved to one where First Bev partners take increasingly hands-on role in those investments.

Speaking earlier this week, genl partner Tom First said change was partly a result, paradoxically, of bringing on greater firepower at First Beverage, with trio of execs with deep hands-on experience: First, originator of Nantucket Nectars and O Water; Joth Ricci, formerly of Columbia Distributing and Jones Soda, and former Jones Soda and Starbucks exec Josh Groff. That prompted “new look at how we approach investing in that space,” Tom said. Given hands-on role trio takes, “our focus is to be selective about what we put our money in and do a really good job,” he said. “A lot of what these companies want out of us is us – our energy and effort,” and that’s not possible with large portfolio of tiny holdings. “Divide us across a lot of brands and a little equity and it’s a tough model.” That said, “we still can come in with a deal earlier (than rival private equity shops) because we know the space so well,” he added. Word that First Bev was in discussions to invest in brand-new Coco Café shows it’s still in earliest-stage space, but with more disciplined view from now on. Since Tom came aboard, First Bev has invested in Purity Organic and he expects a coupla more deals to come together by mid-year. Recall First Bev earlier invested in, then flipped, both Activate and Kemper Soda.