Due Diligence For

CROWDFUNDING

Anikona Farm

By January 31, 2017Due Diligence

Company Overview –

Anikona farm grows 100% Kona coffee in the slopes of Hualalai Moutain in Hawaii.
*Souce: Wefunder

Company

Investment

Name: Anikona Farm

Minimum Raise: $50K

CEO: Chris Somogyi

Maximum Raise: $100K

Company Founded: 2015

Structure of Raise: Revenue Share, 3% of net revenues

Location: Holualoa, HI

Return Cap: 1.5X investment amount

Crowdfunding Portal: Wefunder

Minimum Investment: $100

Crowdfunding Link: https://wefunder.com/anikona.farm

 

Website: https://www.anikona.com/

 

Review Overview

Positives

Risks and Reservations

Unique, quality product

Very low revenue in previous year

Self-funded up to this point

Revenue share is out of net profit, which is subjective and easily manipulated

Experienced management

Return could take several years on current projections. This greatly reduces the return on the investment.

Good brand image

Producing a commodity in a very competitive space and relying on nature to produce the crop yields.

Asian market can be difficult to penetrate

Problem

Most premium coffees who advertise as Kona only contain 15% or less Kona beans and is produced outside of the United States.

Solution

Current:
Anikona sells 100% Kona coffee bags that are 100% estate grown in the United States.

Long Term:
Anikona’s next steps are to acquire more acreage beyond the 5 acres they currently have. They also want to build a big brand presence through advertising and by providing samples at exclusive publicity events.

Business Model

Anikona sells their estate grade Kona coffee for $48/lb with a gross margin of 42% per pound.

Traction

  • Estimated to triple harvest to 12,000 lbs of Kona this October
  • Now shipping to U.S., China, New Zealand
  • Currently in discussions with coffee distributor to carry Anikona coffee large bags
  • Initiated discussions with Los Angeles gourmet café to sell Anikona coffee
  • Received various outstanding reviews including former Starbucks executive
    *Source: Company provided on crowdfunding campaign website

Senior Management Team

 

Chris Somogyi

Aniko Somogyi

Position:

Co-Founder/President

Co-Founder/VP

Ownership Percent:

51%

0%

Linkedin:

https://www.linkedin.com/in/christopher-somogyi-7944ab9

https://www.linkedin.com/in/aniko-somogyi-86587520

Summary:
I believe this team gives Anikona the best chance to succeed. Chris and Aniko both have backgrounds running companies and scaling. Given their experience, I believe they will grow and operate the company efficiently.

Market Analysis

Industry: Coffee

TAM (Total Addressable Market): $24B worldwide specialty coffee market, ~$11.8B U.S.
*Souce: Portal Page

Industry Opinion:
Although coffee is a commodity, I believe there is room for a company like Anikona to differntiate itself and gain traction at the $48/lb price point. Given the amount of competition in the industry, there is a potential for an industry incumbent to begin growing coffee similar to Anikona’s. Overall, the industry should continue to grow as the Asian market continues to develop.

Competition

Differentiator:
100% Kona coffee, creating a superior product for the high-end consumer.

Main Competitors:

  Aikane Kona Coffee Al’s Kona Coffee

Location

Holualoa, HI

Holualoa, HI

Website

https://www.aikanekonacoffee.com/

http://www.alskonacoffee.com/

 

Company Financials

Revenue Last Fiscal Year: $1,361 (2015)

Previous Funds Raised: $0

Use of Funds

  • Scale business to accommodate the expected 12,000lb fall harvest
  • Purchase equipment to increase & improve production
  • Increase acreage to plant 800 more coffee trees
  • Marketing & sales

Exit Opportunities

For a small farm like this, exit opportunities are quite limited. Since this is a revenue share contract, exit opportunities are not as important for this deal.

Recent Acquisitions in the Field

Date

Company Acquired Acquired By

Amount

July 18, 2016

Taylor Maid Farms InHouse Ventures

Unknown

Expert Opinion Summary

I think Anikona is well-positioned to grow and create a well-known brand, especially among Kona producers. The success of the growth depends upon the traction they are able to gain with their branding and marketing efforts. If they are able to enter into some high-end touchpoints with consumers, the company will create more than enough demand for its small farm. I do believe they will be able to have success with these efforts given the quality of the product and the human-like feel of the brand.

One concern I have is they both seem well-versed in raising funds (Chris is a partner at a VC firm), so why are they choosing the Reg CF route? I believe the return is the underlying issue—there is not a large enough potential for a large investor. The offering under Reg CF behaves much more like a loan and the potential return is much more reasonable—although not fantastic. In my opinion, the investor’s 1.5x return should be paid back in 2 to 3 years.

Another concern I have is the revenue share agreement. They had very low revenue in 2015 and they ran a net loss of about $60,000 last year. The revenue share also does not start until one year after the fundraising closes, and the payout is at the end of each year. This significantly delays the return of capital for the investor. Finally, the revenue share is out of net revenue, which is a highly subjective number and easily manipulated. If the owners decide to invest most of their revenues back into the business, this will hurt the investor and it will lower net revenue and the investor’s return. This aspect needs to be carefully considered prior to investment.

Overall, I think this is a fairly stable investment and Anikona should provide a very modest return. However, there is some speculation and trust on the part of the investor. In order to receive a return, the revenue needs to be drastically increased and net revenue needs to be calculated with the investor in mind. Given the farm is new, there is a high potential for the revenues to mature as the farm grows and operates more efficiently.

Disclaimer

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.
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Sam Labine

Sam Labine

Sam has spent time as a private equity analyst and in business development, gaining expertise in due diligence and startup growth. Currently, he is working on his second company in the medical space and also splits time as a Startup Weekend and TEDx organizer.
Sam Labine

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