Highly unusual investment: Own part of this world-class cocktail bar

Food and beverage hospitality has long been known as an industry backed by wealthy families and heavyweight investors. But one New York City-based group has found an alternative route to raise capital.

Death and Co., which first opened its doors on New Year’s Eve of 2006 first established itself as a moody speakeasy in the East Village. It has since been heralded as one of New York’s most influential cocktail bars. The parent company Gin & Luck LLC, has a business model with three revenue streams: craft cocktail bars, a hospitality consulting firm and an eponymous book that features 500 of the bar’s cocktails.

“We were originally on the traditional path. We were around the table with one of New York’s largest families. It was exciting but kind of intimidating. They wanted 50% of our company and majority board control… things that wealthy investors want. And then we got this competitive term sheet to lure us away from that table — and that was SeedInvest,” said Dave Kaplan, founder and co-owner of Death and Co.

The bar raked in $1.9 million in revenue from its New York City location last year, representing 71% growth since 2008. Death and Co’s second outpost opened in Denver this May and hit its target revenue of $313,000 in the first month of operation. Proprietors LLC, the company’s three-person consulting arm, served clients including Hilton, Bacardi USA, Pernod Ricard, Wyoming Whiskey and NeueHouse, making a total of $539,000 in revenue last year. To date, Gin & Luck has shipped 120,000 copies of its book, generating $379,000 in royalties.

SeedInvest is six-year-old equity crowdfunding platform that connects investors to a vetted platform of startups. The company has helped over 220 companies raise capital. Currently, 60% of the startups apply to be listed on SeedInvest and 40% are through cold outreach and referral. Only 1% of those that apply make the cut.

The company’s business model expanded and evolved in 2016 after Title III of the Jobs Act, which allows non-accredited investors (those who don’t make $200,000 a year or have a net worth of $1 million) to legally invest in private companies. SeedInvest was the first equity crowdfunding platform to capitalize on this previously inaccessible cohort of individuals.

“Equity crowdfunding is like a mini-IPO”

Death and Co. has to raise a minimum of $1.5 million dollars to close its first round of funding. Currently, Kaplan has raised $1.25 million with two weeks remaining in his campaign. He calls the campaign a mini-IPO that is “exciting but somewhat terrifying.” With a $13 million pre-money valuation, he’s looking to raise up to $3 million. The final percentage of equity each person receives will depend on the total amount they are able to raise. Those interested have until September 14 to invest.

“The pace of our expansion is going to depend on what target we hit. If we hit close to $3 million we’re looking to expand to probably Chicago next. Beyond that, a lot of investors have selfish motivations. We’ve gotten a lot of calls asking us, ‘What would it take for you to come to Detroit?’ One gentleman even wants us to come to India.”

“For so many people this is their first investment. Fellow bartenders are contributing $1,000, $2,000, $5,000. It’s been the way to give this brand true ownership back to the people who helped us stay alive — our fans and our customers,” he added.

Kaplan, 36, believes that having a diverse set of offerings makes it a desirable investment.

“Investing in a portfolio obviously minimizes the risk. So obviously if a flood or a fire happens at one, you’re still getting solid returns from the rest of the portfolio because hopefully if you’re doing your job well, the rest of them are profitable,” he said.

A common criticism from those wary of equity crowdfunding is that the startups choose this route as a last ditch effort because they are unable to raise venture capital or angel money.

Kaplan said this fundraising opportunity has connected him to not only cocktail connoisseurs and loyal fans, but folks who have bought into the idea from around the world.

“I was naive to the crowdfunding space before this. We had opportunities within that space and we chose this. I think this allows a few really key amazing things – opening up yourself up, company up to understand everyone in the pathway we’re going. It has introduced tons of opportunities. We have people calling and emailing with opportunities in all sorts of states, cities and different types of businesses. Things that wouldn’t have come unless we chose this route. We now have a legion of die-hard fans and ambassadors for our company.”

Melody Hahm is a senior writer at Yahoo Finance, covering entrepreneurship, technology and real estate. Follow her on Twitter @melodyhahm.

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