Due Diligence For

CROWDFUNDING

Company Overview –

Fizzics is a universal beer dispenser that delivers a fresh-from-the-tap experience from any can, bottle, or growler.
*Souce: Microventures

Company Investment
Name: Fizzics Minimum Raise: $100K
CEO: Philip Petracca Maximum Raise: $1M
Company Founded: 2014 Structure of Raise: Series Seed Preferred Stock
Location: Wall, NJ Valuation: $18M pre-money valuation
Crowdfunding Portal: Microventures Minimum Investment: $200
Crowdfunding Link: https://app.microventures.com/crowdfunding/fizzics  
Website: http://www.fizzics.com/  

Review Overview

Positives Risks and Reservations
Great early traction with retailers and consumers, as well as with crowdfunding sites. Cashflow management is paramount. Manufacturing requires significant upfront investment followed by long payment terms of retailers. The more successful the company is the greater and greater upfront cash required.
Shark Tank investors all highly impressed with the taste difference. Though the company is not able to comment on the results of the Shark Tank program, based on the QVC results, it would appear that they are moving forward with Cuban and Greiner There is only one board member – the founder and CEO.  It would be beneficial for the “shareholders” (a.k.a founders) of the company to have elected multiple board members.  In its current state, the CEO and sole board member is free to operate the company at his sole discretion. It is often preferred that big issues are discussed, debated, and wrestled with, even if with a close tight-knit group.
Significant market and product line expansion opportunities. The amount of cash available for operations ranges from roughly 1 month at the low end of a successful raise to 1 year at the top level. In any event, the company will continue to require additional funding as it grows and the investors will face additional dilution
The company has not planned nor identified any potential paths for an exit event, which may defer a return on investment indefinitely.  This issue is compounded by the absence of a board directors beyond the founder, CEO.

Problem

90% of beer is consumed from cans or bottles and the experience, flavor, and taste is not as good as it is fresh from the tap.

Solution

Current:
Fizzics created a beer system that delivers a fresh from the tap experience. Fizzics controls pressure flow and utilizes sound to create a rich, creamy foam (head) that enhances the appearance, aroma, flavor, and a smooth bodied mouth-feel. The system is compatible with standard-size cans and bottles and is powered by AA batteries.

Long Term:
Fizzics plans to release two new products in 2017, the Waytap Savor+ and the Waytap Host.

Business Model

Fizzics generates most of their revenue by selling its products wholesale to retail partners. The Original Beer System has margins of 69% and the Waytap has margins of 61%. They also make money by selling their product direct to consumers through their website. The Waytap retails for $149.99 with gross margins of 75% and the Original Beer System retails for $200 with gross margins of 78%.

Traction

  • Appeared on Season 8 of Shark Tank
  • Available at Best Buy, Brookstone, Target, Amazon, QVC, Total Wine & More, Best Buy Canada
  • One of Brookstone’s best-selling holiday items in 2015
  • Received 86,000 purchase orders in 2016 compared to 16,450 in 2015
  • Had 14,000 purchase orders in January 2017
    *Source: Company provided on crowdfunding campaign website

Senior Management Team

  Philip Petracca David MacDonald Tom Steckbeck
Position: CEO & Co-Founder CTO & Co-Founder CCO
Ownership Percent:d 28.5% 28.5% N/A
Linkedin: https://www.linkedin.com/in/philpetracca https://www.linkedin.com/in/david-mcdonald-3699847 https://www.linkedin.com/in/tom-steckbeck-5906293

Summary:
The team has solid experience in launching and marketing products as evidenced by their early traction in crowdfunding sites, in retailers, and on Shark Tank. The company should build out its board of directors to provide additional comfort for investors/shareholders.

Market Analysis

Industry: Alcoholic Beverage

TAM (Total Addressable Market): $22.3 (craft beer market in 2015)
*Source: Portal Page

Driving Trends: Craft beer sales rose 13% in 2015

Industry Opinion:
The consumer appliance industry is highly competitive and with several competitors in this space, the company can anticipate margin erosion over time. If they are able to innovate and create a product suitable for commercial operations (bars, restaurants, etc.) that delivers the same excellence in product enhancement, they may find a market with fewer competitors and sustainable profitability.

Competition

Differentiator:
The size and quality of the bubbles in the head of the beer provides a taste and experience that has rave reviews.

Main Competitor

  Synek Sonic Foamer BeerTender EdgeStar SPT
Funds Raised $3.145M $160 on Indiegogo N/A N/A N/A
Retail Price $399 $29.99 $391 (Amazon) $149.99 $160 (Amazon)
Website https://synek.beer/ https://sonicfoamer.com/ http://beertender.usa.heineken.com/ https://www.edgestar.com/edgestar-deluxe-mini-kegerator-tbc50s-beer-cooler/TBC50S.html http://www.sunpentown.com/bdmikedi.html

Company Financials

Revenue to date: ~$7.3M

Revenue Last Fiscal Year: $5.6M+ (2016)

Previous Funds Raised:

  • $260,000+, Indiegogo, May 2015
  • $1M+, Kickstarter, September 2016

Use of Funds

The majority of the funds raised will be used for development of new products and marketing. They will also use the funds for general working capital, repayment of obligations, equipment purchases, and repayment of debt.

Exit Opportunities

Investors ultimately want to know this. If they invest, how much will they get back and when.  The company has stated that it has not considered any plans for an eventual exit and that shows a disconnect from the needs/wants of its shareholders. Should there be a change of disposition, there would likely be a number of potential acquirers from the very deep pocketed beer industry.

Expert Opinion Summary

This company has gotten off to an excellent start. If the company were to build out its board of directors it would provide more comfort that the team could weather the inevitable challenges new ventures face, as well as communicate a wisdom in understanding corporately leadership. Further, the leadership should communicate how it plans to provide return for investors, through M&A, IPO and/or Dividends. Additionally, because of the nature of the consumer appliance business, cash flow will need to be actively and successfully managed.

AngelList: N/A
Crunchbase: N/A

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.
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.
Todd Mortenson

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