Stories of modern business.

Courier Weekly Friday 6 November 2020

Courier Weekly Friday 6 November 2020

Courier Weekly

Nicole Crentsil, CEO of Black Girl Fest, talks about partnering with Ada Ventures as an angel investor, what she’s looking for in an investment, and her advice for business owners looking to raise cash. Plus, Josh Lachkovic from wine subscription company The Wine List explains new areas in wine to watch. 

DANNY GIACOPELLI: Hey guys, Danny here, Courier's editorial director. You're listening to the Courier Weekly. Today on the show, with Josh Lachkovic, the founder of wine subscription company The Wine List. A bit later on, Josh and I talk about new areas in wine to watch, the pros and cons of subscription models, and how global warming might change the game in a big way. But first, I'm with a cultural curator, creative consultant, entrepreneur and investor, Nicole Crentsil. Nicole is the CEO of Black Girl Fest, a platform for black women, girls and non-binary people. And she's the founder of Big Sis, which is all about supporting the personal development of creative working women. But she's also just been made an angel investor, as part of the angel programme of Ada Ventures here in London. Over the next year, Nicole is looking to invest £50,000 in startups. So I thought we would talk about the angel investing community, what she's looking for in an investment, and any advice she has for would-be business owners looking to raise some cash right now. Here's Nicole.

NICOLE CRENTSIL: I never really saw myself as an angel investor. I always felt very far removed from that whole ecosystem, being from my background, where I'm from, and the fact that I don't have any immediate family or friends who are angel investors. I've always felt like it was this exclusive club, who only invited people with a high net worth, who had all this money to spend on businesses and to invest in founders. What's really great about Ada Ventures and the work that they're doing – not just through their scout programme, but through their angel programme – is that they're making a lot of this far more accessible to people like me. They support and they fund under-represented founders and markets, and I feel like I am both that person: from that under-represented industry, or as a black woman navigating the space. 

Even as the tech industry and the investing space are trying to become more diverse, the same conversations keep coming up and keep us going in this weird repetitive spiral of needing to invest in more diverse founders and needing to have more black VCs. Things just keep being talked about over and over again, but what's really great about Ada Ventures and what they're doing with their angel programme, is that they're actually putting action to those words. They're actually saying: if we can train, support and nurture a bunch of new angel investors to be a part of the system, to give them the capital to make those first investments, then we're changing the system, we're changing just from having the same conversations over and over again to putting action to those words. 

There are lots of other amazing VC firms who are doing exactly the same thing. Just from where we were many years ago, there are now incredible people, firms, an entire new generation who are really trying to push the conversation further in order to see that new change; that are making it possible for people like me, who didn't think it was possible to participate in angel investing, to actively do so. What we'll hopefully see more and more of are people who have never even heard of this space being welcomed into the industry.

DANNY: Yeah, I read a stat that said 90% of angels in the UK are men, and even more, like 93% to 94% are white. It just makes business sense, right? What on earth does a 60-year-old white guy know about a 20-year-old black woman's consumer demand? What kind of things are you looking at? And what do you want to invest in? What sectors, what brands, companies and founders? 

NICOLE: I'm really interested in working with founders who are black, brown and based in London, but also across the UK. I'm looking into Generation Z founders and those who come from LGBTQ+ communities, and also those who come from a socio-economic background that isn't common for founders who are building. First-time founders who are pre-seed, but definitely those who are navigating either the beauty industry, consumer-based industries, definitely. But I'm definitely more interested in beauty, food, tech, or anything that is community-focused or involves community building. 

The one thing that I learned from Andy's Angel Investing School, which we took part in, is the role of an angel investor. How and what angels who have loads of capital to put on that big ticket can offer to founders in terms of advice and knowledge and networks. Many angels obviously sit on boards, they advise and work closely with founders – that attribute really aligns with who I am personally, in that I love supporting my community and helping and guiding founders anyway. Being able to do this from an angel perspective is really exciting and it means that I can offer whatever skills or access or networks I have to founders that I'm really passionate about working with. 

It's also realising that you're in it for the long haul. You're in it for as long as the founder’s in it for. You go on that journey with that founder to help them build this incredible business. So I'm looking for founders who are in it for the long haul, who want to work and are eager to get stuck in. Founders who were really passionate about the markets that they're navigating, who not only understand it, but also know how to navigate through it. I think that's the most exciting thing. I will honestly say that I'm not really interested in fintech, because I don't really understand it. It's important to say what you are interested in because you understand that industry, and what isn't really of interest to you because it kind of just goes over my head. I have an amazing network of angels that I'm now meeting who I can share different deal flows with. That's kind of my main interest right now.

DANNY: What advice would you give to an early twentysomething founder, who has a really great idea but not that much access to capital, maybe not many mentors? They're new to the entrepreneurship game, yet that shouldn't stop them and hold them back. What would you say to them? What advice would you give them and tips? How do they wow you as a potential investor?

NICOLE: When you're starting up, there's so much eagerness to raise as much capital, get as much money as possible. Often with founders who have failed or whose businesses haven't been that perfect unicorn, they always say that they shouldn't have raised so quickly, they shouldn't have asked for that much. They grew too quickly, they couldn't manage and missed loads of steps. The absolute dream for a lot of young budding founders is to launch business and, next thing you know, you're high flying. 

I always try to reiterate that it is not a race, it's a marathon. You have to be in it for the long haul. To have a really successful business, it's not to raise and exit as quickly as you might think it is because that doesn't happen for everyone, it really doesn't. It only happens to the really, really special unicorn businesses. It's to enjoy the ride, to build networks, to find a community of people, of other founders who you can rely on if you're just a solo founder. I've always found that to be very helpful, people who I can share things with and just get advice from, mentors are also great. Sometimes speaking to other founders really, really helps understand alternative routes to raising investment. Why VC? Why angel investment? Why not bootstrapping? Finding out what works best for your business, as opposed to going down the route that you think you should just go down traditionally is another thing that I think founders should definitely think about. 

One more thing as well, I know that a lot of founders sometimes think about this, but sometimes it goes over their head when when they're approaching VCs and they're approaching people like me, is that you have to really think about your why. As big as the market is and as big as the markets are, as profitable as your business could be, why do you think your product or your service is necessary? What does it really add to an ecosystem that's already got so much happening inside it? That will answer a lot of the questions for the way that you want to work. It will always challenge you to think why this? Why this product? Why now? Why this market? It'll definitely challenge you to think slightly bigger and change your approach and the way that you're speaking to grants or VCs or angels or wherever you're receiving that investment from. 

I think it's a combination of all those things, but I guess for every founder it's different. You have various different ambitions and sometimes you are sitting on that unicorn and you do want it to go be successful really quickly. But it's like being on a roller coaster that is way too fast, that has no brakes and you've got a whole bunch of people behind you throwing up and then the roller coaster ends, and then all of a sudden it's time to get off. It's crazy – nobody really enjoys it. It's just the thrills, right? So it's about remembering to enjoy the ride.

DANNY: That was my chat with the business owner and investor Nicole Crentsil. Next, as promised, we turn to wine. Josh Lachkovic is the founder and CEO of The Wine List, which launched just over a year ago in August 2019. It's a monthly wine subscription service with an educational slant and it really took off during lockdown. It's been doing so well, actually, that Josh is now raising money and hiring for five new roles on the team. We catch up on everything from canned wine – which he says is a growth area to watch – to global warming. But first, I wanted to know what he thought about the pros and cons of the direct-to-consumer model. Here's Josh.

JOSH LACHKOVIC: There's definitely been a backlash on the DTC side. I can't remember who it was in America, but there was a big piece about the DTC ‘blands’, as they called them, where everyone had pastel colours and huge blocky serif font logos.

DANNY: Yeah, it was a big Bloomberg piece.

JOSH: Exactly. There's definitely some parts of that backlash, but it seems to be cordoned off to the tech community. Our customers don't seem to kind of care about that sort of thing.

DANNY: What about the financial implications of having customers on a subscription basis? The rise and fall of incoming revenue – what does that mean for your bottom line? Is it sustainable?

JOSH: My background is basically in subscription marketing. I was at Pact years ago and then Thriva just before The Wine List. Both of those companies use subscription services. The huge benefit of subscription is recurring revenue. Wine is a very competitive space, the margins aren't as big as they would be for quite a few other things which you might sell online. They're far, far lower than spirits. You could have a strict e-commerce store with spirits and probably break even on your first purchase. If you're really smart, you're advertising with something like wine that's far harder to do and so you rely on that subscription revenue to break even after that first purchase. 

There's lots more modelling involved in how to work out what you can spend. Broadly speaking, subscription does have that really good benefit that you will carry on getting revenue from it. I also think that subscription boxes as well are starting to have a bit of backlash to them. But if you look at the big products which we use in our life – Netflix, Amazon Prime – they are built on subscription models, we just see them as different from a physical subscription or a gift. There's still longevity in them, you're going to have to be smarter. You can't just stick a nice brand online and put ‘recurring’ on a button at the bottom.

DANNY: The backlash is more about whether you really need a subscription for your toothbrush, right? You just go to the local store for that. It's these quirky, single-product items that you don't want to have 60 subscriptions for individual consumer packaged goods to your house. Nobody really wants that. Wine, though, I imagine that's one of the things where maybe your local Tesco doesn't have the wine that you want, and it probably doesn't. So, a subscription, it might be an interesting thing.

JOSH: Yeah and we are a wine course as well. It makes a lot of sense for us to be a subscription, because we send out modules every month. The notion of a wine club is probably one of the oldest subscription models in modern consumer goods. They've been around for decades already. I think it suits it, but I can definitely see why a lot of smaller goods might have a backlash against them.

DANNY: Do you think your company is one built on the pandemic? Do you think the company could have been what it is now, without the past six months of coronavirus?

JOSH: We have definitely benefited. As you know, our growth was accelerated because of it. But it's not the reason we are where we are, and it's not the reason we will succeed. It was lucky timing. If you look at what we are as a product and a service, we are £39 a month. As part of that you get a couple bottles of wine, you get parts of a wine course. If all you really wanted to do was get some nice wine sent to you, there are cheaper ways of getting that done. We're trying to improve the service side of our offering, we're trying to improve the core side of our offering and that's where the value comes in. You probably could have built a very successful pandemic driven business, which was just cheap wine delivered to you quickly. The reason customers buy from us is much more wide-ranging than that, which is why ultimately we'll have longevity to us even when the pandemic goes to boost.

DANNY: I think I asked you this half a year ago when we caught up last, but do you see any other opportunities in the e-commerce wine space that you're not fulfilling right now? Or that maybe other people could? Whatever you can think of, whether it's a physical product, or it's a way of selling?

JOSH: What I've discovered probably in the last six months is that there's a lot more going on in wine than what's understood. Once you know the landscape a bit better, you notice when new entrants arrive and it's an incredibly competitive space. There's lots of things going on either as side projects or with wine shops which have put a subscription on top of the pandemic. 

But there's also a lot of innovation, too. One of the more exciting areas where it hasn't been done quite right yet is in canned wine. We all buy wine in bottles, even though glass is a pricey and un-environmentally friendly way to ship wine around. Glass is heavy to transport and also the cost of recycling is not insubstantial. For canned wine, it's far better for the environment. I can't remember what the exact percentage increase is, but there's a much higher percentage increase, the cost to getting it into the country can be lower because you can import huge containers and then re-can it yourself. There's a few canned wine companies emerging at the moment. They all have reasonably good wine to them, but I think it'll almost be a brand which breaks out of that mould. Maybe an e-commerce brand. There's not a dominant brand at play yet there, probably in the next year or so. 

DANNY: Does the established wine world look down on such a development with horror? Not that it matters. 

JOSH: Almost all wine is made to be consumed, realistically, within a year or so of it being produced or bottled. The arguments against bag and box or can and screw cap, going back a couple of decades, was that they don't age well. Corks are useful because they help slowly oxidise wine over years, which is useful for old-school big red wines which need ageing, but that's not true for all wines. You definitely still get the cohorts of people for whom the idea of selling wine that's everyday drinkable wine, why bother with it? Those people are sceptics. On the broader side, it is a very innovative industry. It takes a while to realise that. You have to really step inside it to see that innovation, and the receptiveness to new ideas. 

DANNY: The last couple months we saw a huge backlash against a few particular natural wine brands that were proven not have the most ethical supply chain. Some of these brands are ones that you'd see at your local bottle shop, really Instagram-friendly brands. Natural wine, is this going to just keep growing and growing and growing? Or is this just a fad that you think will blow over in a couple of years?

JOSH: I think natural wine was always operating along that curve of things which tend to hit a huge level of popularity and then go back down until they adjust to their true points. We've probably hit the first inflection point for natural wine, and there's going to be an adjustment of what it is. Lots of people have already heard about it more, lots of people outside of the early adopters have probably heard of it now.

DANNY: Every new wine bar you see is now small bites and natural wine. It's not even old-school wine; everything is natural wine now, at least in big cities.

JOSH: Yeah, exactly. If you're used to drinking conventional wine, you're probably not going to like natural wine, because a lot of them are going to taste funky, or they're going to smell like nail varnish. They don't have to, but a lot of them do. That's going to put people off. I remember the first natural wine I ever had was at The Anchor & Hope about eight years ago. And as I ordered it, they prefaced that it was probably going to taste a bit different than usual. It was the perfect introduction to it because I was set up to understand that difference. Whereas now we're in a state where you try natural wine and there's a disconnect between it being different and what we're actually having. There's probably an adjustment going on at the moment. Ultimately, we'll be here to stay. The shift towards more sustainable agriculture, sustainable farming and sustainable methods in a winery are wholly good things that can't forfeit the quality of the product at those things' expense. I think it's here to stay. The adjustment will be in regards to its place and understanding within popular culture. In the long term, I'm long on natural wine.

DANNY: What about global warming? I know it's affecting a lot of vineyards all over the world. Will that shift production to certain countries in any way that you can predict right now?

JOSH: It's a tricky one. If you look at 2018 in England, we had our vintage of a century. That was because of global warming. We've had hotter years, but we also get far more variability to them. We had frost in May this year, which is a very late time to get frost. And frost, once the buds have already burst on the vines, is terrible for them. Lots of people had crops affected and would have had lower yields. It's not a stable heat.

If you look at Napa Valley and Australia at the start of the year – two of the bigger wine producing regions – they have had huge fires affecting them. The other side to global warming is with established areas which won't be able to grow wine, or will have higher risks to them in the future. I think it's going to make everything harder. From my perspective, and it sounds bad to take a positive from it, but it will create new regions and people who previously did not have sustainable livelihoods will be able to build them because of better grape yields. For hotter countries, they'll have to adapt. The taste of wine will probably change in all these different regions. Bordeaux won't taste like the Bordeaux that we knew 10 years ago.

DANNY: Do you think those brand owners are becoming activists to prevent global warming? Are they becoming activist entrepreneurs? Or are they rolling with the punches and just saying the wine is going to change, there's nothing we can really do about it?

JOSH: I don't know. I have seen that the Bordeaux Council has allowed, for the first time in their history, new grapes to be planted that have never been in that mix before. You also have some more forward-thinking winemakers starting to experiment with grapes which you might previously have only seen in Spain or Italy being grown in Bordeaux. There are winemakers out there who are trying to adapt to the times, but then there are others who put their feet in the ground and say, ‘Nope, I’m not changing at all.’ 

DANNY: I Imagine the French would not be so amenable to having some foreign grapes planted on their soil. No offence to the French. I can say that, my wife is French.

JOSH: There's definitely always gonna be pushback, but it's definitely not black and white. It's one of the exciting things about the wine world in general, it's definitely not a black and white industry and there's innovation to be found everywhere. 

DANNY: And that's it this week, make sure you tune into our new six-part podcast series that we've just launched. In partnership with Instagram. It's called Looking Up. Every week we meet founders across six cities in the UK to find out how they've been adapting during Covid. Just search for Looking Up on Apple podcasts or Spotify. And make sure as ever to hit me up with any questions or comments. You could get me at [email protected]. Courier Weekly is back again next Friday. We'll see you then. 

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