The last fundamental of early-stage investing from, “Winning Angels” is Harvesting. This fundamental entails finally acquiring the profits of the investment by the investor. As discussed in the book, there are five methods for harvesting.
Walking Harvest - A walking harvest is when the company distributes cash directly to investors on a regular basis.
Partial Sale - A partial sale is when the investor’s stake is sold to management, other shareholders, or to an outside party.
IPO - Many are familiar with an IPO. An IPO, or initial public offering, is when the company sells a percentage of its shares on an exchange, such as NASDAQ.
Financial Sale - A financial sale is when the company is sold to a financial buyer who purchase it for its cash flow.
Strategic Sale - A final method is a strategic sale and is the most common method. It involves selling the company to a buyer in the industry who is purchasing the company for a strategic reason.
When looking at the five methods listed above I cannot help but be reminded of the recent strategic sale that took place not too long ago with Anheuser-Busch and Wicked Weed Brewing. Wicked Weed Brewing sold their company to Anheuser-Busch which is a big player in the beer industry. This purchase is the tenth strategic sale of craft breweries Anheuser-Busch has been a part since 2011. There has been a lot of backlash in the craft beer community and among once avid customers. Many of the local stores have stopped carrying their products, festivals have taken them off their list, and the media has not been kind. In my opinion, you lose a little of your reputation and brand when you decide to sell your company. What is tough is that customers don’t always perceive a brewery as a business but a local staple in their community. When a business deal is made that doesn’t align with the customers values or beliefs then you can expect to lose those customers. From a business standpoint however, this was definitely a big win for the investors and entrepreneurs who were/are a part of Wicked Weed Brewing.
In my opinion, as a brewery it is difficult to find a winning solution for harvesting the business. I have grown up in Asheville, NC all of my life and have seen how the local brewery market has remained local and supported the community that surrounds them. I believe customers have come to expect this from breweries and it can often deter someone who does not portray these values. I believe the methods that may make the most sense for a brewery with strong local roots would be either a walking harvest or partial sale. The exit strategy should definitely be discussed by the entrepreneur, the management team, and the investors before making any kind of deal to see if their exit strategies align. It could be a difficult problem when you have built a successful company, with loyal customers, who support the brand and then want to cash in on what you have built while not jeopardizing any aspect of the business.
Amis, David, and Howard Stevenson. Winning Angels: The Seven Fundamentals of Early-Stage Investing. London: Pearson Education Limited, 2001. Print.