Due Diligence For

CROWDFUNDING

Company Overview –

Alchema is a smart home cider making machine that allows anyone to easily craft delicious hard cider, mead and even wine from fresh fruit right on their kitchen countertops in just two weeks.
*Souce: Crunchbase

Company Investment
Name: Alchema Minimum Raise: $50K
CEO: Oscar Chang Maximum Raise: $500K
Company Founded: 2014 Structure of Raise: SAFE
Location: San Francisco, CA Valuation: $3M Valuation Cap, 20% Discount
Crowdfunding Portal: Microventures Minimum Investment: $100
Crowdfunding Link: https://app.microventures.com/crowdfunding/alchema  
Website: https://www.alchema.com/  

Review Overview

Positives Risks and Reservations
Team of creative scientists who appear to have found a novel product that captured early attention on Kickstarter. Team has little to no startup experience.
Fair valuation cap and discount offered for SAFE investment agreement. Team could be fortified by adding experts in distribution (retail, web, TV, etc.) of kitchen type appliances.
Burn rate seems high considering the stage of the venture.
Even though the product is on the lower side of the planned competitive products, it is still “expensive” for the average consumer and makes the equivalent of 2-3 bottles of wine over a two week or so period.
Leadership appears to be heavily consolidated via the CEO/Founder.

Problem

Traditional at-home fermentation tools do not tell the brewer when the fermentation is finished. The user must either rely on his or her experience or retrieve a sample to measure the alcoholic content using a hydrometer, which risks contaminating the brew.

Solution

Current:
The Alchema device has an air-tight seal, self-sanitizes to prevent contamination, and has a built in UVC-LED light that kills bacteria. The device also has built-in sensors that monitor important parameters during the brewing process, taking the guess work out for beginners. The coordinating App will let users know when the desired alcohol content and sweetness has been reached.

Long Term:
In addition to the Alchema device, the company plans to roll out additional accessories in 2018. They are also considering a kombucha maker and a homebrew system for vinegar and enzyme brewed beverages.

Business Model

Alchema plans to make money through three different revenue streams which include the sale of devices and ingredients, the sale of accessories, and the sale of company branded beverages. Currently, the Alchema device is available for pre-order for $429 through their website, InDemand platform, and through BackerKit. Accessories purchases and company branded beverages aren’t available until early 2018 & 2019 respectively.

Traction

  • 738 pre-orders through Kickstarter
  • 34 pre-orders through InDemand
  • 28 pre-orders through BackerKit
    *Source: Company provided on crowdfunding campaign website

Senior Management Team

  Oscar Chang Angel Huang Young Yang
Position: CEO COO CTO
Ownership Percent: N/A N/A N/A
Linkedin: https://www.linkedin.com/in/oscar-chang-06784286/ https://www.linkedin.com/in/angel-huang-711a2b32/ https://www.linkedin.com/in/young-yang-24916030/

Summary:
The team is made up of scientists who have created a novel product. The team lacks experience in business in general, with startups in particular, and also with the disciplines of sales, marketing & distribution.  The team should choose to craft their strategic disposition in the pillar of product innovation to leverage their inherent capabilities, but they need to bring on some additional executives and/or board members who can provide value in the realm of business leadership.

Market Analysis

Industry: Homebrew Industry

TAM (Total Addressable Market):

  • $500M cider market (U.S.)
  • $12.9B global cider market in 2020
    *Souce: Portal Page

Driving Trends: 13.9% compound annual growth rate in U.S.

Industry Opinion:
The home brew industry caters to a lot of hobbiests who have been ok with the complexities of equipment and procedures to brew their own beers and wines.  This product provides an opportunity to attract a new realm of consumer who seek a simpler process.  Its hard to know at this point what sort of efficiencies may be found when manufacturing at scale – I would expect the market to open up signficantly if the price point for the product would get sub $100.

Competition

Differentiator:
There are several differentiators: 1- the product is focused on ciders rather than beers or wines, 2- their product makes the process simple and easy, and 3- they are pricing at the low end of the competitive offerings (a strategic positioning of “innovation” would suggest not competing on price.)

Main Competitor

 

Brewbot iGulu MiniBrew

PicoBrew Pico

Funds Raised $1,639,940 $1M+ $283.99K $13.9M
Website http://www.brewbot.io/ http://www.igulu.com/ https://www.minibrew.io/ https://www.picobrew.com/

Company Financials

Revenue to date: $0

Revenue Last Fiscal Year: $0

Previous Funds Raised: $344,231 from Kickstarter in 2016

Use of Funds

  • Final pilot testing for the Alchema device
  • Shipping & manufacturing costs
  • Advertising

Exit Opportunities

There are definite exit opportunities from a wide range of potential strategic acquirers including competitors and industry incumbents.  Additionally, this type of product (as evidence by their kickstarter campaign) can get broad interest and attraction, which may also lend itself to additional crowd fundings and public offerings.

Recent Acquisitions in the Field

Date Company Acquired Acquired By Amount
Oct. 15, 2016 Northern Brewer Anheuser-Busch InBev Undisclosed

 Expert Opinion Summary

This deal presents an interesting opportunity at a very early stage, with a fair valuation cap and discount, led by a team of scientists who have created an interesting product that has demonstrated early traction through Kickstarter.

The team enhances itself by curbing their burn rate and building out their board of directors & executive team with people experienced in startups and sales-marketing-distribution.

AngelList: https://angel.co/alchema
Crunchbase: https://www.crunchbase.com/organization/alchema#/entity

Disclaimer

Crowdfund Research is a publisher and does not offer investment advice to any specific individual.  Crowdfund Research and its authors do not receive any compensation for the due diligence reports. 
 Crowdfund Research and its authors do not offer investment advice, nor do we endorse or recommend investments in any company or the suitability of an investment for any particular investor. Crowdfund Research is not registered as a broker-dealer or financial or investment advisor and does not provide any services requiring such registration. The information in this report or on our website regarding any company is based on publicly available information or directly from the subject company.  Crowdfund Research makes no representation or warrant as to the adequacy, accuracy or completeness of such information. Any opinions or forecasts expressed herein are our own, are not intended as investment advice and are subject to change without notice. This report has been prepared solely for informative purposes and is not a solicitation of an offer to buy or an offer to sell any security.
This report or the posting of information on our website regarding any company, including any links to information on our website, should not be construed as an endorsement or recommendation of that company for any purpose whatsoever.  This report does not take into account the investment objectives, financial situation or needs of any particular investor, and each investor should consider whether any investment opportunity is appropriate given their investment objectives and current financial circumstances. Any person considering any investment in any equity crowdfunding investment whatsoever is encouraged to consult with their own investment or financial advisor, tax advisor and/or attorney beforehand.
All investments entail risk. The companies on our site are generally small or early stage companies and are subject to risks inherent in investing in any small or early stage company as well as other risks specific to their business and operations. In addition, securities of these companies may be highly illiquid, requiring that they be held for an indefinite period of time or have a limited market for resale. Therefore, no one should invest in any of these companies unless they have no need for liquidity of their investment and can sustain a total loss of their investment.  You should only invest an amount of money that you can afford to lose without changing your lifestyle.
You should thoroughly review the complete offering materials for any investment opportunity, particularly all risk factors, prior to investing in any offering and become familiar with the investor requirements, investment limits and your ability to resell the investment.  

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Todd Mortenson

Todd Mortenson

Co-founder at Crowdfund Research
Todd is an accomplished executive with experience leading high growth ventures in addition to serving as a board director. Mr. Mortenson has played a leading role in the launching ventures across multiple industries from Real Estate to Hospitality to Manufacturing to Oil & Gas to Industrial Equipment to High Tech. Todd received his MBA with a concentration in Venture Management from the University of Saint Thomas and his Certificate of Director Professionalism from the National Association of Corporate Directors.
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