Quick Memo: Greensbury Market
I am currently participating in SeedInvest’s “Auto Invest” feature which allows you to invest a minimum of $200 each in ten startups, with the caveat that SeedInvest chooses which startups you invest in and automatically enrolls you as an investor. SeedInvest allows investors to opt out of each investment for a given time period. While my choice of investments are limited to a selection from the greater SeedInvest offering, I am able to reduce my minimum buy-in from $500 to $200, enabling me to invest a more diverse portfolio of startups without stretching my bankroll too thin.
I have now found myself having to decide whether to opt out of two investments — one of which is Greensbury Market — by the end of the week. I decided to write up a miniature Deal Memo on my decision taken in this limited time that I have been able to commit to it.
The Company
Greensbury Market is a direct to consumer e-commerce company that delivers high quality meat and seafood to customers, similar to others such as Blue Apron, Hello Fresh and Butcher Box. The company is currently raising a Series A round at a $6,000,000 pre-money valuation, with a Regulation D (accredited only) and Regulation CF (for non-accredited investors) side by side. The company has seen 70% sales growth in the past year (first six months of 2016 vs. first six months of 2017), maintains over 50% of its sales from repeat customers, and has shipped over 6,200 orders in the past year. The company claims to have sustainable, positive growth margins.
The Product
The company prides itself on a high quality products and is marketed to busy professionals in urban areas willing to pay for quality. The selection includes beef, chicken, pork, turkey, lamb, salmon, halibut, cod, tuna, scallops, lobster and shrimp. The company has been successful selling via Williams-Sonoma.com and other online channels. The company claims this wide selection makes them unique among the competition. The company boasts that they do not rely on a subscription model yet has high customer retention.
The Team
Greensbury was founded by Todd Horowitz and Brad Harrison and is led by CEO Ted Hopper, who holds a MBA from the University of Maryland and was notably VP of business development at Blackboard from 2008–2015, according to his Linkedin page.
Strategic Advantage
Greensbury has a strategic equity partnership with a large food supplier, Rastelli Foods Group, which the company claims provides a benefit of economies of scale that other start-up companies would struggle to attain. This does seem like a good strategy, at the same time I do not see why another start-up cannot strike a similar deal with another food supplier.
Key Risks
Going through the company’s own disclosures on the Seedinvest website, I found that the risks are quite substantial. As I mentioned above, the company’s strategic partnership with Rastelli seems quite replicable across the industry. The company is in the second year of a three year strategic investment operating agreement with Rastelli, and has extended this by another five years. At the same time, I am wondering why Greensbury has racked up $81,657 in high interest credit card debt if they have such a close financing partner. I appreciate a company bootstrapping and using credit cards to keep the business operating, but it does not seem prudent for Rastelli to let Greensbury waste its limited resources paying down credit card interest. This Series A round will partly go towards paying off that bill.
Another risk I see in this investment is whether the company has been vetted properly. SeedInvest prides itself on vetting the startups it hosts on its platform thoroughly. However, Bradley Harrison is a board member of both SeedInvest and Greensbury. This casts a lot of doubt on the legitimacy of the vetting process by SeedInvest for this deal.
While this space is sure to grow, there are already well established players in the market. Blue Apron is already a public company and quite well known. Amazon, with its recent acquisition of Whole Foods and experience delivering products to customers’ door step is an enormous threat to anybody in the grocery delivery business.
Best Case Scenario
I really do not see anything here that makes this company unique or exceptional. They probably can run a decent business, and make some profit. As a seed investor, I want to make bets on many companies that have long odds of success, but could be wildly successful and really scale up if they really do succeed. I do not see any unique technology, team, or business model that will disrupt what Blue Apron and others are already doing.
My Decision
I am going to opt out of the investment in Greensbury Market. I might be missing out on something here, but with the limited time I could put into this decision I see a lot of risks, potential red flags, and an intimidating competitive landscape. I might, however, put in an order for their antibiotic-free pork breakfast sausages which look quite delicious.
