Coolhaus acquisition marks one of Backstage Capital’s first “true exits”
Ice cream startup Coolhaus’ recent exit is yet more proof that building a company with a diversity-first mindset is a competitive advantage.
The Urgent Company, a sustainable food brand, recently acquired Coolhaus for an undisclosed amount of money. As part of the deal, Coolhaus co-founder and CEO Natasha Case became the Senior Vice President of Brand Experience at The Urgent Company. Under The Urgent Company, Coolhaus will also begin to use animal-free dairy rather than traditional dairy in its products.
“It was truly a complimentary win/win for both companies,” Case told Backstage Capital’s Green Room. “We have a beloved brand with a social mission and loyal fans, and The Urgent Company has the resources, capital, sustainability, and food tech to expand on our mission alongside their other brands. We can empower one another to achieve our goals.”
For other founders who may be considering selling their companies, Case said it’s important to think about what the new role would be, or not be, at the acquiring company.
“I’ve seen many founders in the new-to-them position of going from a hundred miles an hour to almost zero,” Case said. “Suddenly not having focus can make people feel purposeless and you can have an identity crisis. And think about what you’re doing this for, because there’s obviously a financial side, but having purpose is so important too. You want the brand to be able to live on in a way you’re proud of. In my experience, when you have a strong purpose, the money comes. Lead with that.”
Case founded Coolhaus in 2008 with her now-wife Freya Estreller. Coolhaus’ big vision, beyond making delicious ice cream products, “was about bringing a much more diverse perspective to how a brand could be created, both in who actually creates brands and who the brand is for.”
Ultimately, Backstage is for the founder. — Arlan Hamilton, Backstage Capital managing partner
In 2009, Coolhaus found its big break at Coachella. It was a bit of an ordeal (Case and Estreller had to get their engineless postal-turned-ice cream truck towed to and from the festival) but the visibility at Coachella resulted in 10,000 new followers on Twitter within a day.
Coolhaus went on to launch a number of trucks across a variety of cities and open up brick-and-mortar scoop shops. Today, Coolhaus is sold in more than 6,000 stores across the U.S.
“We have accomplished a lot and built so much with that diversity-first mindset,” she said. “We still have a long way to go to become a household brand for our generation, but now we have a better and more powerful shot at it because of the platform and resources of The Urgent Company. We’re also so excited to be able to have a much bigger sustainability mission than we’ve ever had.”
Backstage x Coolhaus: The cherry on top
Prior to the acquisition, Coolhaus had raised $20 million from investors, including Backstage Capital. In February 2021, Backstage invested $50,000 in Coolhaus as part of a special fund, called LDH Fund 1. The fund has just three limited partners: Backstage Managing Partner and founder Arlan Hamilton, Foundation PDX founder and CEO Holly Levow and Diana DiMenna, a Broadway producer.
Coolhaus brought on Backstage as an investor, in part, due to the strong similarities in the company and firm’s respective missions, Case said.
“A lot of founders go through the experience of ‘who should I accept money from?’ There are even less investors of diverse backgrounds than there are founders, so it was really important to me to have an investor like Backstage that was standing for diversity,” Case said. “Arlan and I hit it off and there was good synergy there. They provide tremendous value by creating an ecosystem for their founders. They typically invest in smaller companies, and I found myself needing a lot of the same resources that early-stage companies need when they invested earlier [last] year and it was so helpful to have that level of support.”
For Backstage, Hamilton said she was attracted to Case and Estreller’s story and operations.
“There was an obvious love for what they do, and who they were trying to reach,” Hamilton told Backstage Capital’s Green Room. “Really strong numbers for the limited amount that they raised. Their ice cream is delicious, and their partnerships were/are clever and thoughtful.”
Hamilton didn’t have an exit on her mind when she first decided to invest in Coolhaus, she said. But over time, she began thinking about how Coolhaus might be able to sell to a larger food conglomerate or beverage company. Ultimately, Hamilton is pleased with Backstage’s return on its investment in Coolhaus.
“It’s always good when a company returns more than you put in,” Hamilton said.
While Coolhaus’ sale to The Urgent Company only returned about 1/7 of the fund, according to Hamilton, Backstage Capital still “received a bit more than we put in, in a remarkably short amount of time.”
Statistically speaking, most companies don’t return anything to a fund, Hamilton said. And if they do, the return is oftentimes less than 1x the original investment.
“Ultimately, Backstage is for the founder,” Hamilton said. “So if a founder thinks it’s best to sell at a lower amount than venture norms because it’s life-changing money for them, and they think it gives the company the best chance for growth or the next step, we are happy to support that.”
For Reg CF investors and other stakeholders, however, the Coolhaus deal does not immediately affect them “since the exit didn’t return a full fund yet,” Hamilton said. Those stakeholders will make money once Backstage returns the full fund, “namely, if/when there is profit over the original 1x investment,” Hamilton said.
But the acquisition of Coolhaus, one of Backstage Capital’s first “true exits,” marks an important milestone and indication of what’s to come, Hamilton said.
Just this month, education tech startup Career Karma announced a $40 million Series B round. Backstage Capital made an early investment in the startup back in 2018, and made an additional investment in its latest round.
“The Coolhaus acquisition, Career Karma’s recent $40M raise, and other stealth outcomes yet to be announced, are all proving out our thesis,” Hamilton said. “Remember that just five years ago, people were saying Backstage ‘should be a non-profit or a hobby’ because of who we were investing in.”
Over the next decade, the exits from Backstage Capital’s portfolio companies “will be like popcorn, with an exit here, then a few weeks later, there, etc.” Hamilton said.
And as more portfolio companies start to return capital to the firm, Hamilton said, Backstage Capital will get “closer and closer to having upside for our stakeholders and ourselves.”
