Thanks to a substantial investment by FreshTracks Capital, a Shelburne-based venture capital fund, Caledonia Spirits of Hardwick, a distillery which sells Barr Hill Gin, Tom Cat Gin and Barr Hill Vodka, has the money needed to carry out its national marketing plan.
SunCommon, a solar energy company based in Waterbury, used its FreshTracks investment money to expand from providing solar systems to private home owners, to offering residential, commercial and community systems, according to company Chief Financial Officer Chach Curtis.
“There’s nothing more rewarding to me than when we can invest in an entrepreneurial company that makes a great Vermont product and to be able to help that company grow in a way that also positively impacts Vermont’s economy,” said Cairn Cross, one of the founders of FreshTracks Capital.
FreshTracks is a seed and early-stage venture capital firm focused on financing businesses in Vermont and surrounding regions. The firm was founded in 2000 by Cross and Charlie Kireker. Partners Tim Davis and Lee Bouyea joined in 2005, and T.J. Whalen in 2016.
Venture capital is risk capital that supports promising young companies and innovative business ideas that usually cannot be financed by traditional bank financing.
“We are equity investors, which means that we typically purchase a minority investment in the stock of a private company,” Cross said.
Caledonia Spirits considered several investment options, according to Ryan Christiansen, company president, but decided to work with FreshTracks because that company was the best fit. An earlier round of capital investment by a group of Vermont angel investors and Caledonia Spirits CFO Aminta Conant aided the transition and helped the company expand distribution to 30 states.
“As we grow the company, we remain committed to our founding principles, and to Vermont, a place that makes Barr Hill products so special. FreshTracks was an obvious choice to lead our financing because of their long-term commitment to helping grow Vermont companies,” Christiansen said.
Whalen, managing director for FreshTracks, said one of the main reasons the company invested in Caledonia Spirits is its growth potential.
“The craft spirits trend is still early in its development, similar to where craft beer was 10 or 20 years ago. We believe the entire craft spirits segment will continue to expand. We’re confident that Caledonia Spirits will continue to gain national prominence.”
The Hardwick-based distillery has received national and international awards and accolades, including “Gin of the Year” at the Hong Kong International Wine and Spirits Competition; “Double Gold” at the New York International Spirits Competition; and “Best in Class” at the American Distilling Institute’s Judging of Craft Spirits.
According to Cross, the money (from FreshTracks’ IV Fund) invested in 2017 includes investments from approximately 45 limited partners, who collectively have committed to invest $11 million. Included in Caledonia Spirits’ growth plan is a second factory that will be located in Montpelier. It is now under construction.
“Our partners are mostly high-net worth individuals and families from Vermont, but we have some support from Vermont institutions such as the Vermont Community Foundation and Vermont Land Trust,” Cross said.
In 2017, FreshTracks invested $1.25 million into four Vermont companies; Drink Maple, Reilly’s Hemp Vet (nutritional soft chew products for pets), Ogee and Caledonia Spirits. The fund also invested $100,000 into a Maine company (R.E.D.D. — a superfood energy-bar brand). In December 2016, FreshTracks invested $50,000 into the Vermont-based company Wuu (a private messaging platform).
“All of these fourth-fund investments are ‘initial investments,’ meaning that it is our first investment into each company,” Cross said. “During 2017, we also made follow-on investments (subsequent to initial investments) totaling approximately $600,000 from our third fund into five existing third-fund portfolio companies, all located in Vermont. Generally we invest between $750,000 and $1 million into one of our portfolio companies via an initial investment and a series of follow-on investments over a period of three to five years. We have been investing in total approximately $2 million per year in Vermont for the past 17 years.”
A typical start-to-finish process, from initial pitch to initial funding, takes about six months. “We generally review 400 opportunities per year and we might make four to six initial investments in companies each year. We have invested in something like 45 companies so far in the 17 years of operation. Most of the companies we invest in are Vermont companies,” Cross said.
FreshTracks also runs Road Pitch, a project similar to the television show “Shark Tank.” Road Pitch sends investors and business leaders on a four-day motorcycle trip across Vermont in search of the “best and brightest entrepreneurs across the state.”
“We joke that Road Pitch is more like guppy tank than Shark Tank,” Cross said. “The goals of Road Pitch are to connect Vermont entrepreneurs to resources such as advice and capital, advocate for entrepreneurs, and help entrepreneurs refine and polish their pitching skills.”
The most important criteria considered when investing, according to Cross, are, depth and experience of the management team; size and applicability of the market; defensiveness of the product and service offering; and scalability of the business model.
“We are looking for companies that can scale their revenues and achieve profitability in five to seven years,” he said.
According to Cross, Vermont companies that have received FreshTracks investments employ approximately 475 full-time employees “and this number swells by another 800 when Vermont Teddy Bear makes its temporary seasonal hires during the November through February season.”
“High-growth startups are important for job creation in Vermont, and we have backed many companies which have grown rapidly. SunCommon, for instance, employs approximately 100 people today and has been in business for five years. Mamava (private lactation stations in public spaces) will likely end 2018 with 25 employees, and the company has been in business since early 2015,” Cross said.