INTERNATIONAL - As of July 27, cocktail fans can pick up some equity along with their gin martini.
After 12 years as a single, award-winning establishment, Death & Co., the famed bar in New York’s East Village, is in the midst of a serious expansion. To facilitate this, co-owner David Kaplan and his team are fundraising in a way that’s unconventional for a drinking establishment.
The bar, which was founded on the last night of 2006, and which opened a second location in Denver earlier this year, initiated its first equity crowdfunding round on Friday via the investing platform SeedInvest. It’s the first bar or restaurant to fundraise on the platform.
Investors will be able to purchase ownership stakes in an umbrella company, Gin & Luck LLC, which owns the Death & Co. bars as well as the book deals, intellectual properties, and the hospitality consulting firm Proprietors LLC.
The company is valued at $13 million.
The company’s East Village bar, named best in America in 2010 at Tales of the Cocktail, recorded $1.8 million in net revenue in 2017, up 71 percent from 2008. The newest Death & Co. location, at the Ramble Hotel in Denver, notched $313,000 in revenue in its first month of operation. Gin & Luck has sold more than 120,000 copies of its book Death & Co: Modern Classic Cocktails, which added up to more than $379,000 in royalties. Consulting firm Proprietors billed $539,000 in revenue in 2017, with clients such as Hilton, Pernod Ricard, and Bacardi USA. A third location, a standalone Death & Co. bar in Los Angeles, is slated to open next year.
Unlike a Kickstarter campaign—now omnipresent for small restaurants and coffee shops—in which people contribute money toward a project but don’t have stakes in the business, an equity crowdfunding campaign allows investors to buy ownership shares in private companies. Investors make their money back in a range of ways, including if the company is sold or goes public. Gin & Luck is offering a preferred equity note; it’s essentially a mini-IPO, but the company remains private and the original founders retain control.
Gin & Luck is aiming to raise $1.5 million, with a minimum stake of $1,000 per investor. The company is headed by Kaplan (chief executive officer) along with Alexander Day (chief operating officer) and Ravi DeRossi (chief administrative officer).
The money it raises on SeedInvest will go toward new-store growth and new hires. According to its investor decks, Gin & Luck projects $385,000 in annual profits at the East Village bar in 2019 and $697,000 at the Denver location. Five revenue streams, including three bars, consulting fees, and a retail arm, are projected to add up to $1.89 million in total annual profits in 2019, and $2.68 million in 2020 via seven projects. The company hopes to open multiple additional locations, starting with L.A. in 2019; anticipated future projects include bars in Chicago, Atlanta, and Nashville, as well as new Ramble Hotel partnerships in Kansas City, Indianapolis, and Boston.
Whereas restaurants are generally regarded as bad investments with rising rents and labor costs, bars are considered a safer bet with high profit margins, thanks in part to alcohol, which is nonperishable and easy to mark up. But whether this style of fundraising will take off with other bars remains to be seen.
“The best part about a crowdfunded project is that you have people who have a vested interest in the success of the company,” says Jim Meehan, co-founder of New York’s legendary PDT. “The worst is when you have people you don’t know walking into the bar saying they know the owner or that they own the place. Will they see themselves as owners in a respectful way? Or does it give them a sense of entitlement?”
Crowdfunded investing in small companies is a relatively new development; prior to the JOBS Act, signed into law in 2016 by President Obama, only accredited investors (who had to prove a net worth of $1 million or have an income of $200,000 for at least two years) could buy stakes in promising new ventures. Following the JOBS Act, nonaccredited investors can now buy into emerging businesses. Other companies raising money on SeedInvest include Jason Calacanis’s mobile news app Inside.com and Dash, a connected car platform. This spring, buzzy luxury denim line DSTLD raised more than $2.9 million on SeedInvest.
Death & Co. was key to the exploding speakeasy trend in high-end drinking. It’s known for ambitious, design-focused takes on cocktails, such as the Dawn Patrol, which is made with Absentroux (an absinthe herbal wine), Bowmore 12-year-old single malt, Granny Smith apple, egg white, and seltzer.
The bar has also been a launching pad for bartending talent. Notable alums include Thomas Waugh (now head bartender at the Pool Lounge at the Four Seasons); Jim Kearns (co-founder of New York’s Happiest Hour bar); Jillian Vose (beverage director at the Dead Rabbit, named World’s Best Bar); and Brian Miller (head bartender at the Polynesian, recently opened in Manhattan).