- $200M+ lifetime revenue, 542k Customers, 13.8M bottles sold, 195% revenue CAGR from inception through 2018 (Unaudited)
- Raised over $44.8M from prominent investors like CrossCut Ventures, Bessemer Venture Partners, Shining Capital, and Cool Japan Fund
- Named as one of the 50 Most Innovative Companies by Fast Company for “using subscriber feedback to make wines millennials go crazy for,” with 3.5M+ ratings from over 542K customers
- Launched Wholesale in 2015, growing at a 194% revenue CAGR (through 2018 with a total revenue of $20.5M). Now serving over 48 states and 4,400 accounts including Whole Foods, Vons, and premium restaurants and retailers (unaudited)
- Founded and scaled flagship brands like Summer Water rosé (over $12.3M lifetime sales) and Folly of the Beast pinot noir (over $6.5M lifetime sales, with 65% YoY growth) over four years (unaudited)
- Total Amount Raised: US $4,827,059
- Total Investors: 2656
- Total Round Size: US $14,999,550
- Series D :
- Minimum Investment: US $999 per investor
- : Preferred Equity
- US $110,000,000 :
What makes Winc truly unique within the $70Bn wine market (with $2.6Bn in online sales in 2019 alone, growing 22% YoY) is how it leverages data from its customers to identify trends and produce consumer-led wines that are loved by the masses. Its ownership of real-time feedback (3.5M+ ratings from 542K+ members) is unheard of in the traditional wine business; combined with its omni-channel model, Winc’s platform serves as a formula for unprecedented scale and adaptability.
Winc’s diversified approach (DtC online membership and national wholesale & retail) outperforms traditional wine companies in a key area: optimizing around customer preferences instead of shelf space. Through a direct-to-consumer relationship with its customer, plus nationwide distribution of its flagship brands in sellers like Whole Foods, Vons, and national restaurant chains, Winc delivers a unique and convenient user experience for its largely millennial customer base.
Winc is reimagining the path from grape to glass, delivering quality wines and innovative wine brands that can scale beyond a successful online membership subscription into premium restaurants and retailers nationwide.
Winc was founded upon the belief that wine should be more accessible: simpler to get and easier to enjoy. Launched as Club W in 2011, we set out to create a model that caters to a broad audience and brings curation and personalization to the wine category. We were able to achieve this vision fully In 2015 when we transitioned to entirely proprietary wines that we developed using our then thousands of customer data points. We rebranded to Winc in 2016 to reflect this switch as well as our successful expansion into wholesale distribution.
In the four years since we began creating our own wines, revenue has grown 333%.
We have created a diverse portfolio of consumer-led brands. We’ve produced 664 wines from 78 grape varieties, and 97 regions across 12 different countries. Highlights include:
- Summer Water rosé: Since its launch in 2015, Summer Water has grown at over 1200% CAGR with a combined $12.3M in sales. In 2017, we launched a membership called Societé, delivering limited-edition formats of the brand. It has more than doubled its subscriber base in two years.
- Folly of the Beast pinot noir: Folly’s mission is to consistently deliver great, 100% Pinot Noir at an unrivaled price. Since 2015 the brand has grown at a 169% CAGR with a combined $6.5M in sales, and grew 65% YoY in 2019.
- Cherries & Rainbows: A certified organic, natural, biodynamic red blend with zero sulphur added. Launched in September 2019, C&R has already received national distribution with Whole Foods and is growing at a 150% revenue CAGR.
- Chop Shop cabernet sauvignon: Chop Shop grew over 2500% YoY from 2018-2019, with a lifetime revenue of $1.9mm.
Direct-to-Consumer Channel (Winc.com): Winc membership delivers tailored wine recommendations, while providing context and education around each glass. Since launching, we have continuously optimized our DtC economics:
- AOV increased by 27% between 2015 and 2018
- Average cost to acquire a customer of $48.10 in 2018
- Gross margin of 69% in 2018
Wholesale channel (Whole Foods, Vons, Gelsons, Cost Plus World Market, and more): After being validated through online membership (ratings, velocity, customer feedback), select brands that have proof-of-concept are scaled in the broader retail market. We launched the wholesale channel in 2015 and have seen many successes:
- Since launch, this channel has grown at a 194% CAGR with a total revenue of $20.5M
- Winc’s wines are now available in over 4,400+ locations
- In 2019, $6.9M in revenue and growth of 10% from the year prior
- Acquisition of a winery: We have our first acquisition lined up, which we will be announcing in Q2 of 2020. It is a premium high growth brand that’s cash flow positive and with $10+ MM in revenue for 2019. With this acquisition, there will be cost savings across our wholesale team, packing & bottling, storage and fulfillment, and G&A. In addition to the cost savings, we expect significant growth-side synergies in both the DtC and wholesale channels. Our goal is to acquire at least one winery a year, leading to significant top-line and EBITDA growth.
- Increase Investment in National Wholesale: In just four years, we’ve grown our wholesale channel to over $20.5M in lifetime revenue, and have only skimmed the surface of this channel. This is an important avenue for continuing to scale our existing Flagship brands, and a 360 degree customer experience.
- Brand Launches & Category Expansion: We will be launching our first clean wine brand in Q2 2020, as well as a direct-to-consumer Saké in Q3/Q4 2020. We believe that through our robust DtC channel, we can continue to capitalize on the evolving beverage alcohol market with additions like low-ABV, beer/spirits and scale them offline.
When Winc was first founded, its leaders were driven by the vision of a great bottle on every table and a great story in every bottle. Since the company was launched eight years ago, its leadership team has worked hard to ensure that the experience of getting a bottle of wine is as simple as enjoying one. Innovation is at the core of Winc's business model and the company’s key victories can all be traced back to its team members challenging the status quo.
To be an innovator in any space, one must have a clear vision, but more importantly an incredibly talented and highly motivated team to execute on that vision. While we value deep experience and expertise within the industry, we also look outside of our category in order to drive innovation. Our talented leadership team has diverse backgrounds including Red Bull, Constellation Brands, Robert Mondavi, Integrated Beverage Group, The Honest Company, Two Bulls, Living Social, Goldman Sachs, and more. As a diverse leadership team, we focus on creating high performance based on culture and empowerment. Today the team is highly aligned and built for this next phase of growth.
Investors who invest $50,000.4456 or less will have their securities held in trust with a Custodian that will serve as a single shareholder of record. These investors will be subject to the Custodian’s Account Agreement, including the electronic delivery of all required information.
SI Securities, LLC has the authority to prevent a closing from occurring if it determines, in its sole discretion, that this investment is no longer suitable at the time of the closing, which includes, but is not limited to, the Company raising at least US $1,750,000 in connection to the current round.
Investors who purchase at least 35,371 shares ("Series D Significant Investors") and investors who purchase at least 176,854 shares ("Series D Major Investors") have different rights. Please refer to the Company's offering documents.
All Investors will receive the below five perks plus their investment tier perks.
Complimentary 6-bottle pack of our flagship brands ($116 retail value)
Year-round 10% back in credit on gift cards
Friends and Family discount: $20 additional Winc referral credits
“Pick Winc’s next product”: The ability to help us name our next flagship product
Early access to wine tasting and events
Investment between $1,500 - $2,999
- $150 in Winc Credits
Investment between $3,000 - $9,999
- $400 in Winc Credits
Investment between $10,000 - $24,999
- $1,800 in Winc Credits (3 years worth of wine!*)
- 12-bottle pack of our flagship brands ($232 retail value)
- 6 Exclusive magnum bottles of high-end single vineyard wine crafted by Ryan Zotovich ($750 retail value)
Investment between $25,000 - $99,999
- $1,800 in Winc Credits (3 years worth of wine!*)
- 12-bottle pack of our flagship brands ($232 retail value)
- 6 Exclusive magnum bottles of high-end single vineyard wine crafted by Ryan Zotovich ($750 retail value)
- Exclusive meet-the-winemaker dinner (up to $750 of travel expenses covered)
- Annual meeting with the founders and executive team
Investment of $100,000 and above
- $1,800 in Winc Credits (3 years worth of wine!*)
- 12-bottle pack of our flagship brands ($232 retail value)
- 6 Exclusive magnum bottles of high-end single vineyard wine crafted by Ryan Zotovich ($750 retail value)
- All-Inclusive multi-day winemaking experience in Santa Barbara (All expenses covered)
- Annual meeting with the founders and executive team
*Assuming an average wine order of $50 per month
It is advised that you consult a tax professional to fully understand any potential tax implications of receiving investor perks before making an investment.
The graph below illustrates theor the of Winc's prior rounds by year.
Every major consumer category has a digital disruptor. At $70Bn, the total addressable wine and spirits market is quite large, and even bigger than razors ($3Bn), mattresses ($14Bn), skincare ($18Bn), and luggage ($27Bn) combined. Yet there is no clear leader in the space, until now.
Winc outperforms traditional wineries through its digital-first approach that targets the changing consumer and their preferences (instead of optimizing around retail shelf space). Rabobank estimates that US online alcohol sales reached $2.6Bn in 2019, growing by 22% YoY, and that e-commerce was responsible for $950M of sales in the DtC wine market, growing approximately 9% YoY.
We directly target millennials and Gen-X (over 80% of our member base), a demographic that traditional wineries have trouble reaching. Silicon Valley Bank's "State of the Wine Industry Report 2019" cites that Gen-X will eclipse Boomers to become "the largest fine wine consuming generation" by the year 2021, while Millennials will eclipse Gen-X in 2026. The largest consumer group in the market sector, at 73M strong, Millennials tend to value transparency, quality, experience, and convenience above all when determining loyalty toward a product or service.
The company has a history of losses, and may not achieve or maintain profitability in the future. The company has operated at a loss since inception and historically raised additional capital and borrowed funds to meet its growth needs. We expect to make significant future investments in order to develop and expand our business, which we believe will result in additional marketing and general and administrative expenses that will require increased sales to recover these additional costs. We also expect to continue to incur significant legal, compliance, accounting, and other administrative expenses. While net revenues have grown in recent periods, this growth may not be sustainable or sufficient to cover the costs required to successfully compete in the highly competitive wine market.
The company may not generate sufficient revenues to achieve profitability. The company may incur significant losses in the future for a number of reasons, including slowing demand for its products and increasing competition, as well as the other risks described in this offering circular, and may encounter unforeseen expenses, difficulties, complications and delays, and other unknown factors to expand the business. Accordingly, the company may not be able to achieve or maintain profitability and may incur significant losses in the future.
A reduction in the supply of grapes and bulk wine available to us from independent grape growers and bulk wine suppliers could reduce our annual production of wine. We rely on annual contracts with independent growers, wineries and bulk suppliers to purchase substantially all of the grapes and bulk wine we use in producing domestic wines. We obtain bulk wine to produce our foreign wines on a spot basis through purchase orders. Our business would be harmed if we were unable to contract for the purchase of grapes at acceptable prices from these or other suppliers in the future. The terms of many of our domestic purchase agreements also constrain the ability to discontinue purchasing grapes in circumstances where we might want to do so. Some of these agreements provide that either party may terminate the agreement prior to the beginning of each harvest year.
We depend on various bulk wine suppliers for the production of several wines. These contracts currently cover the 2019-2020 harvests. Extension of these contracts is not guaranteed and thus we may have exposure to the availability and pricing of bulk wine for our production needs that could increase the cost or reduce the amount of wine we are able to produce for sale in the future. This could reduce sales and profits.
A reduction in our access to or an increase in the cost of the third-party facilities we use to produce our wine could harm our business. We rely on the use of third-party alternating proprietorship wine making facilities, which means we utilize capacity at several third-party facilities to produce all of our wines, including one that accounts for approximately 35% of our winemaking capacity. Our ability to utilize these facilities may be limited by several factors outside our control, including, among others, increased processing costs, damage to the facility or temporary or permanent shutdown for hygienic, mechanical, regulatory or other reasons. The inability to use these or alternative facilities, or to quickly find alternative facilities, at reasonable prices or at all, could increase our costs or reduce the amounts we produce, which could reduce our sales and earnings.
Moreover, the company does not have long-term agreements with any of these facilities, and they may provide facility space and services to competitors at a price above what we are willing to pay, which could force us to locate new facilities. The activities conducted at outside facilities include crushing, fermentation, storage, blending, and bottling. The reliance on these third parties varies according to the type of production activity. As production increases, we must increasingly rely upon these third-party production facilities. Reliance on third parties will also vary with annual harvest volumes.
Moving production to a new third-party service provider could negatively impact the company’s financial results.
If we fail to acquire and retain new customers, or fail to do so in a cost-effective manner, we may be unable to increase net revenues, improve margins and achieve profitability. Our success depends on our ability to acquire and retain new customers and to do so in a cost-effective manner. We must continue to acquire customers in order to increase net revenues, improve margins, and achieve profitability. In order to expand our customer base, we must appeal to, and acquire, customers who have historically purchased their wine from other retailers such as traditional brick and mortar retailers and the websites of our competitors. We have made significant investments related to customer acquisition and expect to continue to spend significant amounts to acquire additional customers. We cannot assure you that the net revenues from the new customers we acquire will ultimately exceed the cost of acquiring those customers. If we fail to deliver a quality shopping experience, or if consumers do not perceive the products we offer to be of high value and quality, we may be unable to acquire or retain customers. If we are unable to acquire or retain customers who purchase products in volumes sufficient to grow our business, we may be unable to generate the scale necessary to achieve operational efficiency. Consequently, our prices may increase, or may not decrease to levels sufficient to generate customer interest, our net revenues may decrease and our margins and profitability may decline or not improve. As a result, our business, financial condition, and results of operations may be materially and adversely affected.
We believe that many of our new customers originate from word-of-mouth and other non-paid referrals from our customers. Therefore, we must ensure that our customers remain loyal to us in order to continue receiving those referrals. If our efforts to satisfy our customers are not successful, we may be unable to acquire new customers in sufficient numbers to continue to grow our business, and we may be required to incur significantly higher marketing expenses in order to acquire new customers.
We also use paid and non-paid advertising. Our paid advertising includes search engine marketing, direct mail, display, television, podcasts, radio and magazine advertising, paid social media and product placement. Our non-paid advertising efforts include search engine optimization, non-paid social media and e-mail marketing. We drive a significant amount of traffic to our website via search engines and, therefore, rely on search engines. Search engines frequently update and change the logic that determines the placement and display of results of a user’s search, such that the purchased or algorithmic placement of links to our website can be negatively affected. Moreover, a search engine could, for competitive or other purposes, alter its search algorithms or results, causing our website to place lower in search query results. A major search engine could change its algorithms in a manner that negatively affects our paid or non-paid search ranking and competitive dynamics could impact the effectiveness of search engine marketing or search engine optimization. We also drive a significant amount of traffic to our website via social networking or other e-commerce channels used by our current and prospective customers. As social networking and e-commerce channels continue to rapidly evolve, we may be unable to develop or maintain a presence within these channels. If we are unable to cost-effectively drive traffic to our website, our ability to acquire new customers and our financial condition would be materially and adversely affected. Additionally, if we fail to increase our net revenues per active customer, generate repeat purchases or maintain high levels of customer engagement, our business, financial condition, and results of operations could be materially and adversely affected.
We rely on other third parties, including transport carriers, to provide services essential to the success of our business. We also rely on third parties to provide a variety of essential business functions for us, including shipping, customer service, legal and compliance services, public relations, advertising and distribution. It is possible that some of these third parties will fail to perform their services or will perform them in an unacceptable manner. It is possible that we will experience delays, defects, errors, or other problems with their work that will materially impact our operations and we may have little or no recourse to recover damages for these losses. As a result, the value of an investment in the company could be adversely impacted by our reliance on third parties and their performance.
In particular, we rely on third party transport carriers for the delivery of our wines to our customers. State and federal laws regulate the ability of transport carriers to transport wine, and carriers may be required to obtain licenses in order to deliver wine to our customers. Changes in our access to those carriers, including changes in prices or changes in our relationships with those carriers, changes in the laws allowing third party transport of wine, or regulatory discipline against licenses held by those carriers, could materially adversely affect our business.
Delivery of the products we sell to our customers could also be affected or interrupted by the merger, acquisition, insolvency, or government shutdown of the carriers we engage to make deliveries. If the products we sell are not delivered in proper condition or on a timely basis, our business and reputation could suffer.
We face inventory risk; if we fail to accurately predict demand for products, we may face write-downs or other charges. We are exposed to inventory risks that may adversely affect operating results as a result of new product launches, changes in product cycles and pricing, limited shelf-life of certain of our products, changes in consumer demand, and other factors. We endeavor to predict accurately, based on information from our customers and distributors and reasonable assumptions, the expected demand for our products in order to avoid overproduction. Demand for products, however, can change significantly between the time of production and the date of sale. It may be more difficult to make accurate predictions regarding new products. In addition to our own marketing initiatives, we depend on the marketing initiatives and efforts of distributors in promoting products and creating consumer demand. In the latter circumstance, we have limited or no control regarding distributors’ promotional initiatives or the success of their efforts.
The company faces significant competition, which could adversely affect profitability. We compete with online direct-to-consumer wine retailers and, increasingly, wineries that ship directly to consumers and distribute their wines through third parties to restaurants and brick-and-mortar retailers. The wine industry is intensely competitive. The wines we produce and distribute compete in several premium, super-premium and ultra-premium wine market segments with many other domestic and foreign wines in these market segments. Our wines also compete with other alcoholic and, to a lesser degree, non-alcoholic beverages, for shelf space in retail stores and for marketing focus by independent distributors, many of which carry extensive brand portfolios.
As a result of this intense competition among direct-to-consumer wine retailers and wineries, there has been, and may continue to be, upward pressure on selling and promotional expenses. In addition, the wine industry has experienced significant consolidation. Many competitors have greater financial, technical, marketing and public relations resources. Our sales may be harmed to the extent we are not able to compete successfully against such online retailers’ or wine or alternative beverage producers’ costs. We cannot assure you that in the future the company will be able to successfully compete with current competitors or that it will not face greater competition from other online retailers, wineries and beverage manufacturers.
The success of our business relies heavily on brand image, reputation, and product quality. It is important that we maintain and increase the image and reputation of our existing brands and products. Concerns about product quality, even when unsubstantiated, could be harmful to our image and reputation of our brands and products. While we have quality control programs in place, in the event we experienced an issue with product quality, we may experience recalls or liability in addition to business disruption which could further negatively impact brand image and reputation and negatively affect our sales. Our brand image and reputation may also be more difficult to protect due to less oversight and control as a result of the outsourcing of some of our operations. We also could be exposed to lawsuits relating to product liability or marketing or sales practices. Deterioration to our brand equity may be difficult to combat or reverse and could have a material effect on our business and financial results.
In addition, in recent years, there has been a marked increase in the use of social media platforms and other forms of Internet-based communications that provide individuals with access to broad audiences, and the availability of information on social media platforms is virtually immediate, as can be its impact. Many social media platforms immediately publish the content their participants post, often without filters or checks on accuracy of the content posted. Furthermore, other Internet-based or traditional media outlets may in turn reference or republish such social media content to an even broader audience. Information concerning us, regardless of its accuracy, may be posted on such platforms at any time. Information posted may be adverse to our interests or may be inaccurate, each of which may materially harm our brand, reputation, performance, prospects and business, and such harm may be immediate and we may have little or no opportunity to respond or to seek redress or a correction.
The value of our brand also depends on effective customer support to provide a high-quality customer experience, which requires significant personnel expense. If not managed properly, this expense could impact our profitability. Failure to manage or train our outsourced customer support representatives properly could compromise our ability to handle customer complaints effectively.
Reduced consumer demand for wines could harm our business. There have been periods in the past in which overall per capita consumption of alcoholic beverages in the United States and other markets in which we participate has declined substantially. A limited or general decline in consumption in one or more of our product categories could occur in the future due to a variety of factors, including a general decline in economic conditions, increased concern about the health consequences of consuming alcoholic beverage products and about drinking and driving, a trend toward a healthier diet including lighter, lower-calorie beverages such as diet soft drinks, juices and water products, the increased activity of anti-alcohol groups and increased federal, state or foreign excise and other taxes on alcoholic beverage products. The competitive position of the company’s products could also be affected adversely by any failure to achieve consistent, reliable quality in the product or service levels to customers.
Changes in consumer spending could have a negative impact on our financial condition and business results. Wine sales depend upon a number of factors related to the level of consumer spending, including the general state of the economy, federal and state income tax rates, deductibility of business entertainment expenses under federal and state tax laws, and consumer confidence in future economic conditions. Changes in consumer spending in these and other areas can affect both the quantity and the price of wines that customers are willing to purchase online, at restaurants or through retail outlets. Reduced consumer confidence and spending may result in reduced demand for our products, limitations on our ability to increase prices and increased levels of selling and promotional expenses. This, in turn, may have a considerable negative impact upon sales and gross margins.
Bad weather, drought, plant diseases and other factors could reduce the amount or quality of the grapes available to produce our wines. A shortage in the supply of quality grapes may result from the occurrence of any number of factors that determine the quality and quantity of grape supply, such as weather conditions and natural disasters, such as floods, droughts, frosts, earthquakes, pruning methods, the existence of diseases and pests, and the number of vines producing grapes, as well as the level of consumer demand for wine. Any shortage could cause an increase in the price of some or all of the grape varieties we require for wine production and/or a reduction in the amount of wine we are able to produce, which could harm our business and reduce sales and earnings.
Recent examples of events affecting supply include the frost in 2008 that significantly impacted the amount of grapes harvested in Mendocino County, the frost of 2011 that had a significant impact on the crop size in Paso Robles and the widespread drought that impacted parts of the United States from 2011 to 2016, drought in Argentina, which reduced grape yields in the 2015-2018 harvests, heavy rains in New Zealand, which reduced yields in 2018, and wildfires in California which resulted in “smoke taint” in Mendocino in 2008 and Napa and Lake Counties in 2018.
Factors that reduce the quantity of grapes may also reduce their quality, which in turn could reduce the quality or amount of wine we produce. Deterioration in the quality of the wine produced could harm our brand names and a decrease in production could reduce sales and increase expenses.
Adverse public opinion about alcohol may harm our business. While a number of research studies suggest that moderate alcohol consumption may provide various health benefits, other studies conclude or suggest that alcohol consumption has no health benefits and may increase the risk of stroke, cancer and other illnesses. An unfavorable report on the health effects of alcohol consumption could significantly reduce the demand for wine, which could harm our business by reducing sales and increasing expenses.
In recent years, activist groups have used advertising and other methods to inform the public about the societal harms associated with the consumption of alcoholic beverages. These groups have also sought, and continue to seek, legislation to reduce the availability of alcoholic beverages, to increase the penalties associated with the misuse of alcoholic beverages, or to increase the costs associated with the production of alcoholic beverages. Over time, these efforts could cause a reduction in the consumption of alcoholic beverages generally, which could harm our business by reducing sales and increasing expenses.
Contamination of our wines would harm our business. Because our products are designed for human consumption, our business is subject to hazards and liabilities related to food products, such as contamination. A discovery of contamination in any of our wines, through tampering or otherwise, could result in a recall of products. Any recall would significantly damage our reputation for product quality and could seriously harm our business and sales. Although the company maintains insurance to protect against these risks, we may not be able to maintain insurance on acceptable terms, and this insurance may not be adequate to cover any resulting liability.
If we do not comply with the specialized regulations and laws that regulate the alcoholic beverage industry, our business could be materially adversely affected. The wine industry is regulated extensively by federal agencies, including the Alcohol and Tobacco Tax and Trade Bureau of the U.S. Department of the Treasury (“TTB”), as well as state and local liquor regulatory authorities, including the California Department of Alcoholic Beverage Control (“ABC”). Regulated areas include production, importation, product labeling, taxes, marketing, pricing, delivery, ownership restrictions, prohibitions on sales to minors, and relationships among alcoholic beverage producers, wholesalers and retailers. We cannot assure you that we will always be in full compliance with all applicable regulations or laws, that we will be able to comply with any future regulations and laws, that we will not incur material costs or liabilities in connection with compliance with applicable regulatory and legal requirements, or that such regulations and laws will not materially adversely affect our wine business. We rely on various internal and external personnel with relevant experience complying with applicable regulatory and legal requirements, and the loss of personnel with such expertise could adversely affect our wine business.
Licenses issued by state and federal alcoholic beverage regulatory agencies are required in order to produce, sell and ship wine. We have state and federal licenses for the production and shipment of wine, and must remain in compliance with state and federal laws in order to keep our licenses in good standing. Compliance failures can result in fines, license suspension or license revocation. In some cases, compliance failures can also result in cease and desist orders, injunctive proceedings or other criminal or civil penalties. If our licenses do not remain in good standing, our wine business could be materially adversely affected.
Our wine business relies substantially on state laws that authorize the shipping of wine by out-of-state producers directly to in-state consumers. Those laws are relatively new in many states, and it is common for the laws to be modified or regulators to change prior interpretations of governing licensing requirements. While most states permit direct-to-consumer shipping, some states on occasion have proposed legislation that would prevent the company from selling wine directly to consumers or to restrict the total amount of wine that we may ship to those states. This proposed legislation, or other new regulations, requirements or taxes, could harm our business and operating results. Future legal or regulatory challenges to the wine industry could also harm our business and impact our operating results.
The federal and state “tied-house” laws governing ownership interests in alcoholic beverage licensees may impact your ability to invest in the company. Alcohol beverage licensees and their investors are subject to state and federal “tied-house” laws which restrict certain investments between the three tiers of the alcoholic beverage industry: the manufacturing or supply tier, the wholesale tier, and the retail tier. The rules regarding such investments are different in each state and change frequently. We cannot make any assurances that investments in the company by investors are permissible in California or any other state if an investor holds other interests in alcoholic beverage licensees. It is within the purview of the California Department of Alcoholic Beverage Control to investigate our compliance with state tied-house requirements regardless of such investors’ amount of investment in the company. Investor shares may be subject to redemption. See “Securities Being Offered – Optional Redemption for Disqualifying Event.”
Increased regulatory costs or taxes would harm our financial performance. TTB and other states in which we operate impose excise taxes, and/or other taxes on beverage alcohol products, and/or on certain raw materials used to produce our beverage alcohol products, in varying amounts. TTB or other governmental bodies may propose changes to international trade agreements, tariffs, taxes and other government rules and regulations. Significant increases in import and excise duties or other taxes on, or that impact, beverage alcohol products could have a material adverse effect on our business, liquidity, financial condition and/or results of operations.
Changes to our distribution network could hurt our financial performance. We sell products for resale to restaurants and retail outlets outside of California principally through distributors. Sales to our largest distributor Verity Wine, and to our three largest distributors combined, represented approximately 8% and 17%, respectively, of our net revenues during fiscal 2018. Sales to our three largest distributors are expected to continue to represent a substantial portion of our net revenues in the future. The laws and regulations of several states prohibit changes of distributors, except under certain limited circumstances, making it difficult to terminate a distributor without reasonable cause, as defined by applicable statutes. The resulting difficulty or inability to replace distributors, poor performance of our major distributors or our inability to collect accounts receivable from our major distributors could have a material adverse effect on our business, financial condition and results of operations.
Climate change, or legal, regulatory or market measures to address climate change, may negatively affect the company’s business, operations or financial performance, and water scarcity or poor water quality could negatively impact production costs and capacity. Our business depends upon agricultural activity and natural resources. There has been much public discussion related to concerns that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns and the frequency and severity of extreme weather and natural disasters. Severe weather events and climate change may negatively affect agricultural productivity in the regions from which we presently source agricultural raw materials such as grapes. Decreased availability of raw materials may increase the cost of goods for our products. Severe weather events or changes in the frequency or intensity of weather events can also disrupt the supply chain, which may affect production operations, insurance cost and coverage, as well as delivery of products to wholesalers, retailers and consumers.
Water is essential in the production of our products. The quality and quantity of water available for use is important to the supply of grapes and our ability to operate our business. Water is a limited resource in many parts of the world and if climate patterns change and droughts become more severe, there may be a scarcity of water or poor water quality that may affect production costs or impose capacity constraints. Such events could adversely affect our results of operations and financial condition.
Natural disasters, including earthquakes or fires, could destroy the facilities we use or our inventory. We must store our wine in a limited number of leased locations for a period of time prior to its sale or distribution. Any intervening catastrophes, such as an earthquake or fire, that result in the destruction of all or a portion of our wine would result in a loss of investment in, and anticipated earnings and cash flows from, that wine. Such a loss would seriously harm our business and reduce sales and earnings.
All of our assets are pledged as collateral to our lenders. Our credit facilities contain covenants that limit our ability to engage in specified types of transactions. These covenants limit our ability to, among other things:
- incur certain additional indebtedness;
- pay dividends on, repurchase or make distributions in respect our capital stock;
- make certain investments;
- sell or dispose of certain assets;
- grant liens; and
- consolidate, merge, sell or otherwise dispose of all or substantially all of our assets.
A breach of any of these covenants could result in a default under the credit facilities and permit the lenders to cease making loans to us. Upon the occurrence of an event of default under these agreements, the lenders could elect to declare all amounts outstanding under the agreements to be immediately due and payable. We have pledged all of our assets as collateral under our credit facilities. If the lenders accelerate the repayment of borrowings, we may not have sufficient assets to repay them and we could experience a material adverse effect on our financial condition and results of operations.
We rely on our proprietary technology and data to forecast customer demand and to manage our supply chain, and any failure of this technology could materially adversely affect our business, financial condition and operating results. We rely on our proprietary technology and data to forecast demand and predict our customers’ orders, determine the amounts of grapes, wine and other supplies to purchase, and to optimize our in-bound and out-bound logistics for delivery and transport of our supply to our fulfillment centers and of our product offerings to customers. If this technology fails or produces inaccurate results at any step in this process—such as if the data we collect from customers is insufficient or incorrect, if we over or underestimate future demand, or if we fail to optimize delivery routes to our customers—we could experience dead stock or shortages in key ingredients, the operational efficiency of our supply chain may suffer (including as a result of excess or shortage of fulfillment center capacity) or our customers may experience delays or failures in the delivery of our product offerings. Moreover, forecasts based on historical data, regardless of any historical patterns or the quality of the underlying data, are inherently uncertain, and unforeseen changes in consumer tastes or external events could result in material inaccuracy of our forecasts, which could result in disruptions in our business and our incurrence of significant costs and waste. Furthermore, any interruptions or delays in our ability to use or access our proprietary technology could lead to interruptions or delays in our supply chain. The occurrence of any of the foregoing risks could materially adversely affect our business, financial condition and operating results.
Our business is subject to data security risks, including security breaches. We, or our third party vendors on our behalf, collect, process, store and transmit substantial amounts of information, including information about our customers. We take steps to protect the security and integrity of the information we collect, process, store or transmit, but there is no guarantee that inadvertent or unauthorized use or disclosure will not occur or that third parties will not gain unauthorized access to this information despite such efforts. Security breaches, computer malware, computer hacking attacks and other compromises of information security measures have become more prevalent in the business world and may occur on our systems or those of our vendors in the future. Large Internet companies and websites have from time to time disclosed sophisticated and targeted attacks on portions of their websites, and an increasing number have reported such attacks resulting in breaches of their information security. We and our third party vendors are at risk of suffering from similar attacks and breaches. Although we take steps to maintain confidential and proprietary information on our information systems, these measures and technology may not adequately prevent security breaches and we rely on our third party vendors to take appropriate measures to protect the security and integrity of the information on those information systems. Because techniques used to obtain unauthorized access to or to sabotage information systems change frequently and may not be known until launched against us, we may be unable to anticipate or prevent these attacks. In addition, a party who is able to illicitly obtain a customer’s identification and password credentials may be able to access the customer’s account and certain account data.
Any actual or suspected security breach or other compromise of our security measures or those of our third party vendors, whether as a result of hacking efforts, denial-of-service attacks, viruses, malicious software, break-ins, phishing attacks, social engineering or otherwise, could harm our reputation and business, damage our brand and make it harder to retain existing customers or acquire new ones, require us to expend significant capital and other resources to address the breach, and result in a violation of applicable laws, regulations or other legal obligations. Our insurance policies may not be adequate to reimburse us for direct losses caused by any such security breach or indirect losses due to resulting customer attrition.
We rely on email and other messaging services to connect with our existing and potential customers. Our customers may be targeted by parties using fraudulent spoofing and phishing emails to misappropriate passwords, payment information or other personal information or to introduce viruses through Trojan horse programs or otherwise through our customers’ computers, smartphones, tablets or other devices. Despite our efforts to mitigate the effectiveness of such malicious email campaigns through product improvements, spoofing and phishing may damage our brand and increase our costs. Any of these events or circumstances could materially adversely affect our business, financial condition and operating results.
We are subject to risks associated with payments to us from our customers and other third parties, including risks associated with fraud. Nearly all of our customers’ payments are made by credit card or debit card. We currently rely exclusively on one third party vendor to provide payment processing services, including the processing of payments from credit cards and debit cards, and our business would be disrupted if this vendor becomes unwilling or unable to provide these services to us and we are unable to find a suitable replacement on a timely basis. We are also subject to payment brand operating rules, payment card industry data security standards and certification requirements, which could change or be reinterpreted to make it more difficult or impossible for us to comply. If we fail to comply with these rules or requirements, we may be subject to fines and higher transaction fees and lose our ability to accept credit and debit card payments from customers, which would make our services less convenient and attractive to our customers and likely result in a substantial reduction in revenue. We may also incur losses as a result of claims that the customer did not authorize given purchases, fraud, erroneous transmissions and customers who have closed bank accounts or have insufficient funds in their accounts to satisfy payments owed to us.
We are subject to, or voluntarily comply with, a number of other laws and regulations relating to the payments we accept from our customers and third parties, including with respect to money laundering, money transfers, privacy, and information security, and electronic fund transfers. These laws and regulations could change or be reinterpreted to make it difficult or impossible for us to comply. If we were found to be in violation of any of these applicable laws or regulations, we could be subject to civil or criminal penalties and higher transaction fees or lose our ability to accept credit and debit card payments from our customers, process electronic funds transfers or facilitate other types of online payments, which may make our services less convenient and less attractive to our customers and diminish the customer experience.
Disruptions in our data and information systems could harm our reputation and our ability to run our business. We rely extensively on data and information systems for our supply chain, order processing, fulfillment operations, financial reporting, human resources and various other operations, processes and transactions. Furthermore, a significant portion of the communications between, and storage of personal data of, our personnel, customers and suppliers depend on information technology. Our data and information systems are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches (including breaches of our transaction processing or other systems that could result in the compromise of confidential customer data), catastrophic events, data breaches and usage errors by our employees or third party service providers. Our data and information technology systems may also fail to perform as we anticipate, and we may encounter difficulties in adapting these systems to changing technologies or expanding them to meet the future needs of our business. If our systems are breached, damaged or cease to function properly, we may have to make significant investments to fix or replace them, suffer interruptions in our operations, incur liability to our customers and others or face costly litigation, and our reputation with our customers may be harmed. We also rely on third parties for a majority of our data and information systems, including for third party hosting and payment processing. If these facilities fail, or if they suffer a security breach or interruption or degradation of service, a significant amount of our data could be lost or compromised and our ability to operate our business and deliver our product offerings could be materially impaired. In addition, various third parties, such as our suppliers and payment processors, also rely heavily on information technology systems, and any failure of these systems could also cause loss of sales, transactional or other data and significant interruptions to our business. Any material interruption in the data and information technology systems we rely on, including the data or information technology systems of third parties, could materially adversely affect our business, financial condition and operating results.
Our reliance on software-as-a-service (“SaaS”) technologies from third parties may adversely affect our business and results of operations. We rely on SaaS technologies from third parties in order to operate critical functions of our business, including financial management services, customer relationship management services, supply chain services and data storage services. If these services become unavailable due to extended outages or interruptions or because they are no longer available on commercially reasonable terms or prices, or for any other reason, our expenses could increase, our ability to manage our finances could be interrupted, our processes for managing sales of our offerings and supporting our customers could be impaired, our ability to communicate with our suppliers could be weakened and our ability to access or save data stored to the cloud may be impaired until equivalent services, if available, are identified, obtained and implemented, all of which could harm our business, financial condition, and results of operations.
We depend upon trademarks and proprietary rights. Any failure to protect intellectual property rights or against any claims that infringe upon the rights of others may adversely affect our competitive position and brand equity. Our future success depends significantly on our ability to protect our current and future brands and products, and to defend our intellectual property rights. We have been granted numerous trademark registrations covering our brands and products and have filed, and expect to continue to file, trademark applications seeking to protect newly-developed brands and products. We cannot assure you that trademark registrations will be issued with respect to any of the trademark applications. There is also a risk that, by the company’s omission, if the company fails to timely renew or protect a trademark, the trademark could be lost. Additionally, competitors could challenge, invalidate or circumvent existing or future trademarks issued to, or licensed by, the company.
We may not be able to fully exploit newly acquired brands. If we raise the maximum offering amount, we intend to use a portion of the net proceeds to acquire brands to add to our portfolio of wines. See “Use of Proceeds.” In our experience, not every brand deployment is successful. We may incur significant costs acquiring and promoting new brands only to have limited market acceptance and limited resulting sales. If this occurs, our financial results may be negatively impacted and we may determine it is in the best interest of the company to no longer support that brand.
SI Securities, LLC owns warrants in Winc, Inc. SI Securities, LLC owns warrants for the purchase of 6,679 shares of Series B-1 Preferred Stock (subject to adjustments) and may have interests that conflict with those of investors in Winc, Inc. These warrants were received in connection with prior offerings for which SI Securities, LLC served as placement agent. Assuming the warrants are fully exercised and only the minimum amount of Series D Preferred Stock is sold in this offering, SI Securities, LLC would have 0.0084% total ownership in Winc, Inc. on a fully diluted basis.
Start-up investing is risky. Investing in startups is very risky, highly speculative, and should not be made by anyone who cannot afford to lose their entire investment. Unlike an investment in a mature business where there is a track record of revenue and income, the success of a startup or early-stage venture often relies on the development of a new product or service that may or may not find a market. Before investing, you should carefully consider the specific risks and disclosures related to both this offering type and the company which can be found in this company profile and the documents in the data room below.
Your shares are not easily transferable. You should not plan on being able to readily transfer and/or resell your security. Currently there is no market or liquidity for these shares and the company does not have any plans to list these shares on an exchange or other secondary market. At some point the company may choose to do so, but until then you should plan to hold your investment for a significant period of time before a "liquidation event" occurs. A "liquidation event" is when the company either lists their shares on an exchange, is acquired, or goes bankrupt.
The Company may not pay dividends for the foreseeable future. Unless otherwise specified in the offering documents and subject to state law, you are not entitled to receive any dividends on your interest in the Company. Accordingly, any potential investor who anticipates the need for current dividends or income from an investment should not purchase any of the securities offered on the Site.
Valuation and capitalization. Unlike listed companies that are valued publicly through market-driven stock prices, the valuation of private companies, especially startups, is difficult to assess and you may risk overpaying for your investment. In addition, there may be additional classes of equity with rights that are superior to the class of equity being sold.
You may only receive limited disclosure. While the company must disclose certain information, since the company is at an early-stage they may only be able to provide limited information about its business plan and operations because it does not have fully developed operations or a long history. The company may also only obligated to file information periodically regarding its business, including financial statements. A publicly listed company, in contrast, is required to file annual and quarterly reports and promptly disclose certain events — through continuing disclosure that you can use to evaluate the status of your investment.
Investment in personnel. An early-stage investment is also an investment in the entrepreneur or management of the company. Being able to execute on the business plan is often an important factor in whether the business is viable and successful. You should be aware that a portion of your investment may fund the compensation of the company's employees, including its management. You should carefully review any disclosure regarding the company's use of proceeds.
Possibility of fraud. In light of the relative ease with which early-stage companies can raise funds, it may be the case that certain opportunities turn out to be money-losing fraudulent schemes. As with other investments, there is no guarantee that investments will be immune from fraud.
Lack of professional guidance. Many successful companies partially attribute their early success to the guidance of professional early-stage investors (e.g., angel investors and venture capital firms). These investors often negotiate for seats on the company's board of directors and play an important role through their resources, contacts and experience in assisting early-stage companies in executing on their business plans. An early-stage company may not have the benefit of such professional investors.
Representatives of SI Securities, LLC are affiliated with SI Advisors, LLC ("SI Advisors") Representatives of SI Securities, LLC are affiliated with SI Advisors, LLC ("SI Advisors"). SI Advisors is an exempt investment advisor that acts as the General Partner of SI Selections Fund I, L.P. ("SI Selections Fund"). SI Selections Fund is an early stage venture capital fund owned by third-party investors. From time to time, SI Selections Fund may invest in offerings made available on the SeedInvest platform, including this offering. Investments made by SI Selections Fund may be counted towards the total funds raised necessary to reach the minimum funding target as disclosed in the applicable offering materials.
Frequently Asked Questions
"The SEC has qualified this offering" means the SEC has permitted Winc to offer for sale the securities described in the Offering Circular to investors such as you. The SEC is not judging the merits, accuracy, or completeness of the offering and information in the Offering Circular.
When you complete your investment on SeedInvest, your money will be transferred to an escrow account where an independent escrow agent will watch over your investment until it is accepted by Winc. Once Winc accepts your investment, and certain regulatory procedures are completed, your money will be transferred from the escrow account to Winc in exchange for your securities. At that point, you will be a proud owner in Winc.
Preferred equity is usually issued to outside investors and carries rights and conditions that are different from that of common stock. For example, preferred equity may include rights that prevent or minimize the effects of dilution or grants special privileges in situations when the company is sold.
A convertible note is a unique form of debt that converts into equity, usually in conjunction with a future financing round. The investor effectively loans money to a startup with the expectation that they will receive equity in the company in the future at a discounted price per share when the company raises its next round of financing.
To learn more about startup investment types check out “How to Choose a Startup Investment” in our academy.
To make an investment, you will need the following information readily available:
- Personal information such as your current address and phone number
- Employment and employer information
- Net worth and income information
- Social Security Number or passport
- ABA bank routing number and checking account number (typically found on a personal check or bank statement)
Until a closing occurs, you may cancel your investment at any time, for any reason. You will receive an email when the closing occurs and your securities have been issued. If you have already funded your investment and your funds are in escrow, your funds will be promptly refunded to you upon cancellation. To cancel your investment, please go to your portfolio page by clicking your profile icon in the top right corner.
Currently there is no market or liquidity for these securities. Right now Winc does not plan to list these securities on a national exchange or another secondary market. At some point Winc may choose to do so, but until then you should plan to hold your investment for a significant period of time before a “liquidation event” occurs. A “liquidation event” is when Winc either lists their securities on an exchange, is acquired, or goes bankrupt.
You can return to SeedInvest at any time to view your portfolio of investments and obtain a summary statement.
This is Winc's fundraising profile page, where you can find information that may be helpful for you to make an investment decision in their company. The information on this page includes the company overview, team bios, and the risks and disclosures related to this investment opportunity. You will also find a copy of the Winc's Offering Circular, which has been qualified by the SEC. The Offering Circular includes important details about Winc's fundraise that you should review before investing.
This investment is highly speculative and should not be made by anyone who cannot afford to risk the entire investment amount. In addition to these risks, you should carefully consider the specific information and risks disclosed in Winc’s profile and Offering Circular.