Investing and Scaling Your Early-Stage Beverage Brand with Carlton Fowler and James Pelligrini


by Drew Hendricks
Last updated Sep 15, 2021

Legends Behind the Craft Podcast
Carlton Fowler

Carlton Fowler is a Managing Partner at Goat Rodeo Capital Management, a venture capital fund focused on growing and scaling your early-stage beverage brand. He graduated from UC Berkely with a Bachelor of Arts in Political Science and Government and The University of Michigan – Stephen M. Ross School of Business with a Master of Business Administration. Carlton’s experience includes Spirits Innovation and Brand Development at E. & J. Gallo Winery, Co-founder of Pickpocket, Co-founder and Managing Director for Granters Drinks, and Founding Partner of sPacific Gravity.  

James Pelligrini

James Pelligrini is a Managing Partner at Goat Rodeo Capital Management. His past experience as an External Consultant at EcoTarium, Consultant for Oriskany Manufacturing Technologies, Internal Consultant for Liberty Mutual Insurance, Director for Granters Drinks, New Brand and Product Development for E. & J. Gallo Winery, and as a Founding Partner at sPacific Gravity has helped hone his financial skills.

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Here’s a glimpse of what you’ll learn:

  • Carlton Fowler and James Pelligrini discuss their backgrounds and what led them to the spirits industry
  • James discusses key differences between wine and spirit consumers
  • How is e-commerce changing the way consumers purchase alcohol?
  • Carlton talks about trends in the cannabis beverage industry
  • What to expect when pursuing outside investors
  • The importance of continuously building to be better
  • Why customer acquisition is an essential piece of the brand-building puzzle
  • Carlton and James discuss who they admire in the industry

In this episode with Carlton Fowler and James Pelligrini

How do you cultivate and scale your brand? When looking to take your brand to the next level, where do you start?

The first piece is selling — but the essential piece is funding. Partnering with someone who will be helpful in your journey is critical, but you need to be constantly putting in the effort to connect and always have a pitch in your pocket ready to go. Carlton Fowler and James Pelligrini know that a good financial foundation, collaborative conversations, and a sober mind for building and scaling your business can lead to success.

On this episode of the Legends Behind the Craft podcast, Drew Hendricks has a conversation with Carlton Fowler and James Pelligrini from Goat Rodeo Capital Management about fundraising in the wine, cannabis, and spirits industries. They discuss the importance of constantly providing investor updates, being comfortable with bringing in an external partner, and why you should continuously be raising. Invest in this episode!

Resources Mentioned in this episode

Sponsor for this episode…

This episode is brought to you by Barrels Ahead.

Barrels Ahead is a wine and craft marketing agency that propels organic growth by using a powerful combination of content development, Search Engine Optimization, and paid search.

At Barrels Ahead, we know that your business is unique. That’s why we work with you to create a one-of-a-kind marketing strategy that highlights your authenticity, tells your story, and makes your business stand out from your competitors.

Our team at Barrels Ahead helps you leverage your knowledge so you can enjoy the results and revenue your business deserves.

So, what are you waiting for? Unlock your results today!

To learn more, visit barrelsahead.com or email us at hello@barrelsahead.com to schedule a strategy call.

Episode Transcript

Intro  0:03  

Welcome to the Legends Behind the Craft podcast where we feature top leaders in the wine and craft beverage industry, with your host Drew Hendricks. Now let’s get started with the show.

Drew Hendricks  0:20  

Drew Hendricks here and the host of the Legends Behind the Craft podcast where I talk with leaders in the wine craft beverage industry, from tech companies to help wineries operate at maximum efficiency. to today’s guest, Carlton Fowler and James Pelligrini. These investments enable alcohol startups to quickly scale. Today’s episode is sponsored by Barrels Ahead, Barrels Ahead, we work with the ATO implement a one of a kind marketing strategy that highlights your authenticity, tells your story and connects you with your ideal customers. In short, if you’re a business looking to retain a winery, a craft beverage producer as a client Barrels Ahead, we’ll figure out the plan to make it happen. barrelsahead.com today to learn more. Now, before I introduce today’s guest, I want to give a big thank you to last week’s guest Taylor Foxman on last week’s show, Taylor and I talked about the importance of understanding the mind frame of an entrepreneur when selling your services to a beverage startup. And this week, we’re gonna keep that startup momentum going. I’m super excited to talk with Carlton Fowler and James Pelligrini. founding partners at Goat Rodeo Capital got ready as a VC fund dedicated to beverages both in the alcohol, the traditional in the cannabis beverage space, the backgrounds in brand development and brand finance from their timing Ernest and Julio Gallo, Carlton and James are in the unique position to bring an operator background to their investing in a particular interest to them and our investments in companies. They’re taking advantage of the digital space. Welcome to the show, Carlton and James.

Carlton Fowler  1:45  

Thanks for having Mr. Thanks,

James Pelligrini  1:46  

Thanks, Drew.

Drew Hendricks  1:46  

Yeah, thanks for being on. So guys, tell me how did that idea of Goat Rodeo come up?

Carlton Fowler  1:52  

Well, the actual name kind of has two Genesis points. One of them like very clearly are James and I we met when we were working at Gallo together, we’ve always had a sense of humor about things, we work in a really fun industry, if you’re not having fun in this, you’re doing something wrong. But our senses of humor has kind of always, always served us well. So from that standpoint, we couldn’t imagine calling this something like execution capital, or like, you know, you’re probably never gonna, you know, it’s a mixture, there’s something different and unique about it. The other aspects to it is there. I mean, when you’re dealing with startups, especially on the early stage, as they’re kind of building out, you know, what they’re going to become, they usually do one thing really well, and everything else is a goat rodeo. And a lot of what our what our job is, is to identify the companies that are really thinking about them something that can scale, and then do our best to kind of help them hurt the goats and get to that next level. So it’s got to do a meeting. 

James Pelligrini  2:55  

And at the end of the day Drew, when we’re investing in founders who put so much time and effort into their personal brands and their company’s brands, we certainly wanted to indicate that we were able to help them by coming to them with a brand of our own, that we felt very proud of.

Drew Hendricks  3:11  

I’ve never heard the term goat rodeo, but I’m a big fan. I guess I’d have been like kitten wrangling capital. Cat Cat herding cats. I like that. So guys, how did you get into the beverage industry? Like Ernest and Julio, was that your first?

Carlton Fowler  3:29  

Yeah. I’ll start you know, I joined E and J. Gallo out of my MBA program. And it was a great place to learn. And really, you know, I think a lot of folks who are deep industry don’t quite realize just how big Gallo is and how well recognized it is for tremendous high character business, great training grounds. For me personally, it was it was it was a really, really perfect situation. Like, I took a piece of paper and designed like, hey, how would you like to learn about this business in order to eventually start something like Goat Rodeo, like what I did, there is exactly what I do again. So you know, for those who are listening, if you can somehow manage to join an industry, and then end up working for Ernest Gallo, obviously not the original while he’s the GM of the spirits business unit, and is like one of the most inquisitive and smartest and interesting thinkers in this entire space, and then work with him to kind of figure out what makes new brand launches work. And then subsequently trying to build out a lot of a lot of their spirits portfolio. Go for it if that opportunity ever, you know, falls in your lap do it again, you’ll love it. I joke around sometimes. There’s a lot of luck that goes into this and I feel I feel very fortunate to have had those choices and and that really informed kind of what we wanted to do. Next, but if James was also a gallery,

James Pelligrini  5:02  

yeah, I came through a bit of a different tracks and then CJ didn’t come through, or Carlton, I’ll call them CJ, for sure. But I didn’t come through a marketing program, I actually came through on the finance side of things and was lucky enough to find my way into the spirits business unit. And again, you know, I liken it to the an environment that was a lot like a late stage startup, it was like a well funded startup, they had a couple of brands that were working really well. And they wanted to figure out how to build out a portfolio of better brands. And also, while we were doing that, we were trying to figure out how alike and how just similar are the wine and spirits industries. And it turns out, like there are very many commonalities. But there’s also a lot of differences in the way that consumers interact. And, again, you know, working under the leadership of Ernest, it was really an amazing environment, to bring forth interesting ideas, have them challenged, be able to test them in the market, and just learned a lot and I was exposed to a lot of different things, I really enjoyed the time I had there, not least of which, because I was able to meet CJ, you know, he was running new brand development while I was managing the finances for the business unit. And very quickly, we recognize that we saw a future that looked similar to, you know, each other submissions, but how that future was going to come to pass, we had very different ideas about upon, and that that created a really interesting environment for us to you know, sit down and talk through the way that we thought the world could evolve and how, you know, the industry was changing, and what turns it might take and how that might be supported. And I think very early on, we recognize that there was something special in that relationship.

Carlton Fowler  6:51  

It also informs a lot of times how we view our investments, I mean, to you know, we have so much in investing, especially early stage investing is understanding team understanding their vision, you know, how are these founders going to navigate difficult aspects, because nothing’s going to go the way that you think it’s going to. And, and I think we’re very fortunate to have our, you know, our partnership, which is kind of defined by, you know, strong opinions loosely held, that if we disagree with each other, it’s never an entrenchment. It’s, you know, there’s a basis of respect that forces you to ask internally. Well, if, if he doesn’t agree why I might be wrong, not not, I’ve got to figure out a way to convince him of my way, affects what

Drew Hendricks  7:36  

we look for our founders as well. That’s great. Having complimentary partners is so important. James, you mentioned something about the differences between the wine and spirits space, what are some of those differences that you’ve found out, or, well jump

James Pelligrini  7:50  

like it, let’s take a big step back. And let’s say that, you know, you’re a consumer and you consider yourself a, you know, consumer of, let’s say, brown spirits or a consumer of red wines, what we tend to find is, when you start to segment those consumer populations, oftentimes, the wine consumer is shopping a price point by price point and by varietals. Whereas spirits, consumers tend to be a little more brand loyal. So if they find a brand, they like, they stick with it, like you, I’m sure, you know, some Bean drinkers or some Jack drinkers. And that’s what they are. And they’re not going to waver from that too much. Now, there is as you start to, you know, march up in price point. And as you start to march up into a different type of psychographic, there are explorers who will always be out trying new things and looking for new things. But what we tend to find is that if there is a spirits brand that can entrench itself as part of your ritual, as a consumer, you tend to stick with it for quite a while. So that’s one of the main differences that we found early on was you know, the power to switch it was the cost I should say, to switch a consumer from one brain to the other was a lot higher and experience than it tends to be one

Carlton Fowler  9:04  

couldn’t agree more. It’s, it’s fascinating for two points one, like the higher a brand loyalty is essentially the closer that business becomes a proxy for recurring revenue. What like what which is a fundamental drives why spirits brands tend to get higher multiples acquisition. So when if you know that kind of on balance, once you hook a consumer, whatever it costs to acquire them, they’re going to be a very loyal consumer over time, that means they have a higher lifetime value, which means you know, they’re worth more bringing into the practice, like almost counterintuitive that you know, seems described as you go further and further up in spirits price. People get a little bit more discretionary and shop around because of their consumer behaviors. As you go down in wine price. You tend to see that brand loyalty we also the Barefoot drinker Yeah, is actually more loyal, and like the Kamus drinker for the losing party and drinker and, and that’s, like what it means is as as we’re out investing, especially if we’re looking at I don’t want a server like we’re informed about this, and what really excites us is, okay, cool. How could you know? No one it was as powerful as Gallo and constellation are, I would argue that no one’s really cracked the $20 and up wine market. Well, they’ve done a great job of acquiring a lot of great and iconic names. And their Salesforce has a really good job of getting them into their on premise. But like, they’re, you know, taking a step back and say, okay, you know, what does it take to get barefoot level brand loyalty in a $25 cab is something that is fascinating to us, and we continue to work off.

Drew Hendricks  10:51  

That’s super fast. Yeah, right. Exactly. On that 2025 there’s just yourselves are riddled with it. And most of those wine drinkers are looking for that new one, or they’re loyal to a bridal more than brand. Where now in the craft beverage space, where do you see beer, kombucha cannabis? How is that as far as brand loyalty?

Carlton Fowler  11:13  

Good to know that the easy answers is gonna take some time. Right? Yeah, so yeah, I think hard. kombucha is here to stay. You know, it hits on a lot of different trends that exist out there just for their consumer trends and all food and beverage, you know, it’s, it’s perceived of as healthier. It’s perceived as cleaners conceived of as a little bit more artists. And so I think it’s going to continue to grow. You know, craft beer, again, is one of those things that tends to demonstrate, you know, a little bit more fragmented perception, although there’s always exceptions that prove the rule, like a lot of the guys and the goose islands, that, that, that transcend that. And so, you know, when when we look at something, like a beer, you know, we’re getting we’re looking for, for things that that can grow, but then keep growing, because I think, you know, one of the things that we learned from the craft beer explosion, what’s happened over the last 20 years, is that it’s, it’s not going anywhere. It’s absolute Lee, large and important part of the market. But it doesn’t seem to perfectly scale.

James Pelligrini  12:23  

When regionally but how do you like if you’re the beer of choice? Let’s take a great example, like rock Russian River, here in Napa. It is a fantastic beer isn’t Aboriginal there? Yeah, no, no, sir. It’s a fantastic beer. You know, they make planning the elder which is kind of like constantly ranked as one of the top IPAs in the world, their distribution is still limited. And now could they change that? Maybe, but they tend to find that, like, they can consistently meet and exceed consumers expectations in the place that they are distributed. And they can draw people into their, their brewery? And how do you get that type of brand loyalty in the northeast, when you have like main launch, for example, you know, servicing the New England market, like just climbing, you take a place that can fit a lot, they’re like, I don’t want to play second fiddle to anybody. You know, so I think you start to see that there may be a settling of, you know, iconic regional brands that never become national. And that’s okay. But it also means that there’s a limit on how big that they will get. And there’s not going to be the same benefit to a potential acquirer who looks at something and says, what happens when I put this into my portfolio, and I provide it with outlets that extend beyond this region, you know, nationally, and maybe internationally? Is there room for this to continue to grow and continue to scale with the sit without without damaging the brand? perception?

Drew Hendricks  13:56  

I’m sure. So one of the things that you’re looking for, what are the things that you’re looking for as far as potential investments and

Carlton Fowler  14:05  

very broad? I’ll tell you some of the things that really excite us and the there’s always exceptions to prove the rule of course, and even having a portfolio but one of them is a digital orientation. We look at the world and say okay, like what’s true about the consumer that hasn’t yet become universally true in the categories that we invest in. And I think the easiest thing to point out is okay, and in many fast moving category, fast moving consumer categories, you have you know, 1015 20% e-commerce penetration meaning, you know, that percentage of the transactions in that category are done via Amazon or Shopify or something like that. Alcohol, it’s under 2%. And that’s even after COVID made it bigger, but as we look at it, okay, that’s that’s got room to change. You know, the consumer behavior exists, like buying things through this, everybody has one, you know, the second you get used to buying your groceries, you know, online, it’s not, no one goes, I can’t wait to go to that kind of rundown corner liquor store. Like, that’s not like a positive shopping experience for most people. So why wouldn’t they are digitally. So we tend to look for whether or not it’s brands that are particularly well adapted to that world, or platforms that help more brands, you know, participate in that world, that stuff excites us. So if you’re talking about the IP stuff,

James Pelligrini  15:35  

yeah, I mean, another thing that we look for is IP, like intellectual property, in terms of like true patents or trade secrets. So something that has, you know, a protection around the type of package that it’s that it’s sold in one of our portfolio companies drink Smith is a good example of that. It’s a dual chamber package that separates fresh juices from the alcohol that you deliver it, you can twist it, it releases a chamber internally, that makes it so you get the closest thing to a fresh made bartender quality cocktail that we’ve seen. Now, there’s some novelty to it, and it adds to the ritual of actually twisting and shaking the drink one thing that we love, but more than that, it protects the integrity of the ingredients, there’s no oxidation because they were mixed in sitting in a bottle together for over a period of time, we’ll look for places where there’s intellectual property around certain types of, you know, data management, and sales. I guess just distribution, something that helps manage a distributed group of individuals, and push out inventory in a more seamless manner, is something that I’m just trying to think of like examples that we see.

Carlton Fowler  16:58  

Within that, it’s just, hey, it’s 2021. And a lot of distributors still manage a lot of their inventory on Excel. Like that’s probably not the right way to do it. The whole reason that Salesforce exists because everyone’s collectively decided, like, Hey, man, probably sales, not the right way to do so in anything that touches that space within our industries. And something’s pretty exciting to us. On the on the cannabis revenue side, we just don’t know. Like, we’re pretty strong believers that not all humans like to inhale combusted, you know, plants. And we’re also pretty strong believers that plenty of consumers enjoy the physiological effects of cannabis. So you know, when you put those two together and say, Hey, you have an entire set of humans that are designed to understand well, if I have three years, it does this to me, if I have, you know, you know, a couple mixtures that does this to me. So it kind of it pretty easily goes to follow that we think that cannabis beverage and other edibles are going to be an increasingly large part of the market. We were we look at things that we call share of buzz. We know even though we’re really love the beverage alcohol industry, we’re not like unaware of the trends of people drinking less. And that’s, that’s a positive choice that we support. But that doesn’t mean that people aren’t going to like to consume substances that evolved into reality. So we love the idea of also working in the cannabis beverage space, because it’s, it’s, you know, it’s what consumers are always going to want, in some way, shape or form.

Drew Hendricks  18:30  

So it’s not not so much I’ve got this great beer, I’ve got this great alcohol or this great cannabis drink, it’s it, I’ve got some procedures in place that show that it has the possibility of scaling, or I’ve got some intellectual property with the packaging that you can then build on it.

Carlton Fowler  18:45  

That’s what we love. And if you if you look at our portfolio, I think it tends to go that way. Doesn’t mean that like, if you if you have the hottest, canned RTD in the world, and we find you early and we can be helpful, like, of course we invest. But what like the number one thing we’re looking for isn’t I want to make, you know, a new whiskey and go compete in the same way that everyone else has competed in whiskey for the last 50 years. Like that’s, that’s less what we’re excited about.

James Pelligrini  19:12  

It’s not because we don’t think that people can be successful doing that. We just recognize how, you know, capital intensive it is, how time consuming it is, and how hard it is to be right? And is we look at, you know, where we can help things be right. Like, if we can remove the friction in any way, shape or form. That’s, that’s ideal for us. We want something that doesn’t have a lot of antagonism in what it’s doing, hopefully, because it’s pushing into a space that is underdeveloped or hasn’t been developed yet.

Drew Hendricks  19:45  

So from a from a from a producer perspective, what are some of the things that like a startup should consider when they’re thinking about maybe pursuing VC funding or that sort of Route versus doing themselves are you ready to do a panel on

James Pelligrini  20:00  

Yeah, you know, I think understanding the types of funding that are out there is critical to any entrepreneur, I think going in as part of your plan, you should have some some goals in mind of, here’s what I’m building, here’s how far along I can self fund or I can rely on bank debt to funds. Here is the first option, which may be friends and family to go get friends and family to invest. And then you know, it’s maybe looking at Angel investors high net worth individuals or family offices. But like the big understanding is when you’re going to pursue investment from an outside source. And the first thing you need to understand is you are going to have to give up some control of your company. And you may not be giving up majority control, but you are selling a piece of your company and a lot of founders tend to go into that idea, and tend to be a little hesitant to price themselves appropriately. And, and that that can be a challenge. So oftentimes, what we see is people who have a fantastic idea, and have a vision of the future, which all good entrepreneurs probably do. They value that vision as if it’s already come true, we love that, because that means they’re going to fight to make it true. But that also tends to taint their view of what the current value may be, and tend to overvalue themselves. So I think that going in understanding that, hey, a good partner is as important, if not more important than a small amount of dilution is really, really important for early founders, I believe. And I may be just speaking our own position here, because we’re that side of the trade. But I’ve tend to tend to find that when you start off that journey, thinking like, hey, it’s about who I can get to give me money at the highest valuation, you always find yourself running into a situation in the future where you may wonder, I should have partnered with somebody who could be helpful. So I think one is having a really good understanding around how far you can get without help to making that decision that I’m comfortable bringing in an external partner. And then three, it’s trying to find the right partner, and hopefully valuing that partnership, more than you value, you know, the worst of your company at the time. Because good partners early tend to stick with you for a long time and can be a source of funding, and they’re a great signal to outside investors down the line. So you know, a little bit of something really big is way more valuable than a lot of something that doesn’t exist.

Drew Hendricks  22:49  

Great point. Is there a certain inflection point that should trigger the pursuit of VC funds, I mean, it’s not going to be a matter of cash, we’re about going up, let’s get VC funds, then it’s too late when it when is that time.

Carlton Fowler  23:02  

I mean, always be raising, always be cultivating, like, even if you’re not taking cash, and you you know, you know, get yourself in the practice of putting out investor updates, get as many people on that list as you possibly can. Only good will come from teaching yourself, I would say in a lot of in a lot of cases, like the where we see people not raised well often has nothing to do with how good their product is, or even how good their traction is. It’s just that they they aren’t always be raising, they haven’t gotten themselves in the sense of I’m going to I’m going to send out quarterly updates, and I’m going to rigorously get as many people on this list as possible, because you never know where your next lead investor is going to come from. to answer your questions specifically, you know, we frequently want to see some traction, you know, you know, a trailing 12 month period of both growth, and you know, we’ll get we’ll get much more excited if you’ve made seven figures in your last 12 months, then if then if you’ve you know, made six figures or five figures, the closer it is, the closer it is to seven figures Plus, the more it’s truly an idea that can use and deploy seed capital. And there’s some validation of that idea, but doesn’t mean that we don’t invest others we’ve invested in some sort of pre revenue, but the bar is much, much higher is much more akin to we better really believe in the value of VIP because ideal alone is very rarely going to get us to invest pre revenue. I think

James Pelligrini  24:42  

the other benefit one thing I’ll add to your Drew is like you know this this idea around always be raising like I it’s a simple phrase, I think encapsulates a lot. And part of it is getting yourself used to telling a narrative and really refining your story. On one hand, like a lot of startup, entrepreneurs are really, really great at product development and really, really great at sales. When you’re explaining the benefit of the product, or you’re explaining, you know, the brand of the product, in the conversation with fundraising tends to be a little different. You’re talking about different things, and you’re talking to a different audience. And I think this idea that you start early and have like, know your elevator pitch and refine it and refine it and refine it, like, you never know who you’re going to be sitting next to on a plane, you never know, when you’re going to bump into somebody who’s like, Oh, you do want to tell me a little bit about it. Like so often, we see those serendipitous relationships turn out to be a great segue into funding, that I think it’s important to just always understand that, you know, there’s two sides to the business when you’re an entrepreneur, and one of them is the most important, which is the selling piece, but very close. Second is the ability to bring in funding, if you’re going to look to grow rapidly.

Drew Hendricks  26:06  

That’s a great advice. And I think I’m probably miss stating when I say it, but it’s almost like getting yourself ready to date. I mean, if you’re, you’re starting up your beverage brand, you’re you’re really honed in on the craft that have that investor thing at the bottom, I mean, learn your pitch deck, learn your elevator pitch, start, even if you’re not pursuing funds, versus like hiding out in the hole for five years getting your beverage ready. You’re nowhere near once it’s time to go get funds, you’re not really seasoned or fit to actually do the pitch.

Carlton Fowler  26:39  

Yeah, exactly right. Practice really does make perfect,

James Pelligrini  26:43  

and it always takes longer to do everything is an entrepreneur, or you know, in the startup space, even in our world, like everything takes longer than you want it to and then you expect it to. So starting early, it’s always going to be to your benefit. Like, for every entrepreneur out there listening, like Wouldn’t it be great to be to have five or six people that you know, are interested by the time you need to go and raise the capital, so that you start warm conversations, because I’ll tell you, it reduces a lot of anxiety, and it can make that process a lot more smooth.

Drew Hendricks  27:18  

That’s great advice. So everyone put a investors thing in your, in your footer on your website? Yes. What do you see some of the challenges like with people, not waiting too long to get venture capitalism and going out of business? Just lack of scale lack of market penetration? Yeah, I

Carlton Fowler  27:35  

mean, so I mean, the kind of pre emptive answer that question is in things that really need venture capital, that and where the payoff for both sides is great, is usually things that couldn’t otherwise have grown into their, their, their own cash flows, right. So you either have a really interesting piece of custom packaging, that is expensive at small scale, but will will flip at high scale, and you need to cover that burn as you’re growing. Or you’re trying to build a new platform that can, you know, you know, bring on a bunch of new brands, but but you need to burn money to get there. So I mean, managing that burn is is kind of everything is is having a really good sense of, you know, you know, how far can I get the money I’ve raised, you know, how how’s my cash in the bank doing and making sure that that it because it’s always a gamble, because that you know, from the entrepreneur side, they always want to get a little bit further to get a better valuation to raise that. And that’s, and that’s fine until you run yourself into a situation where you have to have money to get going. And then you’ve given all the leverage to the funders. And, and, you know, the interesting is, we don’t like that situation, either. We would, we would way rather fund someone where the founder has a very clear and you know, kind of Pun intended sober mind about what their what their cash burning necessities are. And they’re managing that growth. We don’t like being predatory. We don’t we don’t like, like, well, I need some money to survive. So here’s some really nasty terms, like, it’s not fun for us is definitely not fun for the founder. And it’s more a signal that they couldn’t understand that about their business, which probably doesn’t bode well for the future.

James Pelligrini  29:22  

And I think that that really kind of starts at the ground with having a good business plan. It starts with understanding the you know, financial underpinnings of your business, like how much do you sell your products for? How much does it cost you to make it? How are you supporting it in the market? How much is your overhead? And what levers Can you pull to increase or decrease different areas of spend? You know, how fungible is your marketing bucket? Have you bought a bunch of POS that hopefully works and you’ve already invested $200,000 into it? Because that that may not be the great, great use of spender. You know, so I think that a good financial understanding of your business is where it begins. And it should always be with a keen eye on how long can we survive at this pace? And with additional money in the system? How much faster can we grow?

Drew Hendricks  30:18  

That’s good answer on, you guys talked about the importance of partnering with a with a with a company that can actually add value and you guys bring that operators viewpoint to your investment, when you come into a new investment, what is the mix on the capital spend? Is it going to be on capex expenditures, marketing branding? Where do you usually see the biggest need when you go into these new new investments?

Carlton Fowler  30:40  

Again, it depends. If they’re making a product, its inventory is going to be the biggest thing. Usually, they have to make more things to sell them. And if we don’t get involved in too many super cap X heavy stuff, like if the idea is I want to build a distillery and then launch a brand from it, like our responses, like Yeah, well, maybe you should use a contract manufacturer person. And once you branded them, and then a couple years in there, we’ll build the distillery. So, you know, actual inputs are usually the highest cost, especially if you make something, you know, if if, if it’s, you know, more of an asset light model, or you’re building the platform, or otherwise, it’s customer acquisition. So I understand the question, but it’s very, it’s very varied. The nice part about that is, in all situations, underlying that, like, we’re going to be looking at a couple very clear things, like, we’re always going to want to try and figure out like, how much does it cost for you to acquire a customer, whatever your customer is, because if you’re if you’re an e-commerce platform, your customer is other brands, not the eventual consumers? And and, you know, no way is someone you know, we typically invest early or seed in the series A, so we’re never really going to know what the the full on lifetime value of customers, but what we can expect to have a really good understanding of like, if it costs me $10 to acquire a consumer how quickly that’s paid back. And can we project forward some of these metrics? So that’s that’s almost always what what we’re what we’re looking at across industries. But then to answer your question specifically within industries, you know, if you make something that’s probably cogs if you if you are more technology oriented, it’s probably customer acquisition and straight personnel to be building out your digital platform.

James Pelligrini  32:39  

Yeah, and most importantly, in the broader conversation is the entrepreneur who’s out fundraising. Sure, as hell better have a good idea of how they’re going to be using your money. And they better be able to walk you through like, Hey, you know, x person is going to, you know, additional headcount one, two, and three, here’s what they’re going to do, here’s the value they get, or the value we get out of those additional headcounts X percent is going to marketing and we know that our you know, ROI on this marketing channel is x. But like not having that plan and just saying, hey, I need a million dollars, or I mean, a couple million dollars, is a surefire way to get it get a meeting ended very quickly. So I think understanding and it’s going to differ business to business, but understanding your business understanding in your ask of how you’re going to deploy someone’s capital, super important. And you know, and we may have some ideas, as we’re going through it and say, You sure you want to do that because I, you know, we’ve seen in the past where this can be problematic. And here’s another option you might want to consider. So it can be a collaborative conversation, but come in with a really clear idea of how you want to do it. I think

Drew Hendricks  33:50  

that collaborative conversation also helps you find investments that are going to work for you because you want to work with founders that you can collaborate with and not constantly be at odds with one another. Absolutely. It’s almost like a dating question. Can we work together? can we can we grow? what some of your biggest or favorite investments right now? Um, you know, we’re,

Carlton Fowler  34:10  

we’re really excited about drink Smith, you know, when you take a step back and say, okay, you know, what’s the fastest growing category? It’s definitely ready to drink and drinks with kind of, you know, this by no means do i mean to denigrate a lot of the success that’s happened in the cannabis space, but you know, putting something in a king and carbonating that with veggies, there’s a lot of competition. You know, drink Smith has, you know, a proprietary you know, package that allows you to make a cocktail that is absolutely as good as we want you to get from at the very best cocktail bar. So that’s really exciting to us. You know, we’re, you know, we kind of outlined before how high we are on the digital world. We’re invested in a company called Speakeasy, but the easiest way to describe it is it’s kind of Shopify, for craft spirits, you know, Anybody who has you know, a prosperous business up and running, can get on speakeasy and can and can sell in, you know, 40 plus states overnight without having to compliantly without having to get distribution in all those states. You don’t have to do, like a game changer in

Drew Hendricks  35:17  

my neck of the woods. Yeah.

Carlton Fowler  35:19  

Are you down in San Diego? Yeah, we’re done. Um, yeah. So we’re I mean, we’re high on all of our Yeah, man. But, but, you know, I think those are two really good examples of the type of world that excites us. Yeah.

Drew Hendricks  35:36  

Yeah. Yeah. That was a tough question singling out to your favorites. Yeah.

James Pelligrini  35:40  

I mean, like, we can just keep going and talk about every single one of them. Yeah. Well,

Drew Hendricks  35:43  

let’s talk about what you’re not investing in. What do you like drinking when you’re not investing? Oh,

James Pelligrini  35:49  

that’s a good question, lately. So I like it. Hey, another shout out to Speakeasy here. There, they carry some of the limited release products from whistlepig. And they have 18 year old dry that, like, I’ll be the first to tell you, I don’t fall into the typical trap of like age being an indicator of quality, like it is, is one of the the number one signals that whiskey distilleries typically use to say, Hey, this is better than everything else, because it’s older. Like, I don’t necessarily agree. And that comes goes back to a you know, a guy that I worked with good mentor, David Warner in J. Gallo, who helped explain the science behind how too much age can be a bad thing and showed it to me and I was like, wow, you might be right, there is a sweet spot and that sweet spot can be exceeded. And oftentimes, I think it’s now that said, this 18 year old was Unbelievable. Unbelievable. So that was a bottle that we had in the office. It was I think, the shortest live bottle that was here. I think every every person that we hosted over the course of like two weeks, we were like, Hey, you got to try this. You gotta try this. Try this. So that we were I personally was really hot.

Carlton Fowler  37:09  

now. I’ll take this even one step deeper. Agree you can over age things that are aged and new. So I think the best deal out there in brown spirits is like armagnacs and cognac. So I mean, especially funky harmony, you can get you can get like a 25 year old Armagnac and because they’re not aged in New York and New barrels that they have, you know that time to interact with the world for that long. You can get it for less than you’ll pay for like an eight year bourbon. And people haven’t figured this out yet. I hope they never figure it out. Because you can get incredibly complex and decadent brown spirits. Just you know that as long as they’re not in Kentucky. You’ll get them in great prices.

Drew Hendricks  37:58  

Now I love again, Armagnac. I was talking to someone the other day, who’s we’re trying to. We’re trying to explain the difference to someone between Armenia and cognac and we can’t it’s like a difference between Cuba and Mexico. Yeah, sure. Yes. Funky mezcal is out there. Yep. Similar to the, in all the small farms and smaller maniacs.

James Pelligrini  38:17  

Yeah. Yeah, I love it. So I learned this is this is a fun piece of fun tidbit of information. For your listeners, you may know this already Drew, but apparently, a lot of the armagnac that’s produced each year is produced on these rolling stills. So it’s like a still that’s attached to a tractor. And they literally just roll through these small farming towns, and everybody makes their Armagnac and they take like a month for this process, you know, so it’s post, you know, post harvest, they make the wind and I think it’s like late late fall that these little like roaming distilleries kind of go around. And they turn all these independent farms that make their own wine in armagnac, and then they have this huge party afterwards. And it’s like a 48 hour party or something like that. Like I don’t know the exact details but I’ll tell you what, like it is a bucket list trip for me.

Drew Hendricks  39:13  

That would be a bucket list for me to know I’m looking that up right after this Yeah, that’s great. So guys in this in this industry, who do you guys admire most right now? Great question. Yeah.

Carlton Fowler  39:25  

And you even told me we’re gonna ask this question I stopped thinking like a pop it in like this. Obviously I’ve got a lot of admiration for for our old boss Ernesto got a lot of admiration from Ernest but you know what one of the the people who are doing some of the most interesting things and spirits right now as you know, the the the Samson story group that Mr. rover, they’re kind of putting together a really, really nice, nice portfolio of stuff that’s working well. The on premise I

James Pelligrini  40:00  

like it. Yeah, I you know, I think I’m gonna I’m gonna take like, maybe this is a bit of a cop out answer but I really like what Molson Coors has done. You know, they’ve made a very clear decision to, you know, not necessarily be Justin brewery, their their investment in LA libations to go after the non alcoholic space. You know, a clear desire to be involved in things other than, you know, molten beverages is really interesting. I think it’s indicative of a new future that we’re going to see where a lot of large suppliers are not large feared suppliers, large wind suppliers, you know, large software and suppliers. Like when there’s going to be a little bit of a blending I expect Molson Coors to kind of be at the forefront of that.

Drew Hendricks  40:50  

That’s interesting. So we’re so Carlton and James, where can people learn more about you? And the Goat Rodeo Capital?

Carlton Fowler  40:58  

goatrodeocapital.com And you know, we’re really easily reaches I think the emails on the website, but is it roundup? roundup? roundup? roundup@goatrodeocapital.com? Will get to both of us.

Drew Hendricks  41:14  

Awesome. Thank you guys. Thank you so much for being on the show.

Carlton Fowler  41:17  

Yeah, thanks. 

Outro  41:25  

Thanks for listening to the Legends Behind the Craft podcast. We’ll see you again next time and be sure to click subscribe to get future episodes.