Buoyed by recent craft beverage exits, entrepreneurial investors redeploy proceeds locally, internationally - MiBiz: West Michigan Business News

Successful exits from West Michigan-based craft breweries are allowing company founders and investors to put their proceeds to work in new ways that reinforce the region’s entrepreneurial culture.
In addition to giving back to their communities through various nonprofits and philanthropic contributions, many executives are applying the knowledge they gained in the craft beer industry to invest in new ventures in the beverage sector, both within the region, nationally and now globally.
Case in point: Former Founders Brewing Co. Chairman John Green led a group of mostly West Michigan investors who successfully made a longshot bid to acquire Natterjack Irish Whiskey maker Gortinore Distillers & Co.
After struggling to generate its expected cash flow during the COVID-19 pandemic, the Dublin-based distillery entered the Irish corporate examinership process to find compromise with its creditors. One major creditor had attempted to put the company into receivership in a move to liquidate the business, according to local reports in Ireland.
Green heard about the company through a connection in the craft beverage industry, liked the branding and the authenticity of the story, and immediately felt compelled to help founder Aidan Mehigan avoid a takeover and eventual liquidation.
“I was just really impressed with the story of Aidan and the history of how the business got started and the challenges. And then this crazy little toad caught me,” he said, referring to Natterjack’s branding, which features the amphibian for which the whiskey is named.
While Green realized making a bid to save the company was somewhat of a longshot, he enlisted Grand Rapids-based investment banker Dale Grogan. The two quickly started making phone calls within their networks to raise the necessary capital, which he described as in the millions of dollars.
“From the first call to the date at which we submitted our application and gained approval, it was eight days,” Green told MiBiz. “Between the two of us, we were able to put a plan together, submit the application, raise the capital that we needed — which was a significant amount of capital in a very short period of time — and convinced the Irish authorities that we were the best application to take over and build (the company) with the founder of the business.
“We were very pleased with the outcome. It was an intense eight days.”
The Natterjack investment marked the sixth deal in the craft spirits industry for which Grogan helped raise capital from West Michigan investors over the last couple of years. It started in 2020 with 18 local investors who put more than $1.3 million into Papa’s Pilar, a rum distillery based in Key West, Fla., as MiBiz exclusively reported.
Grogan, who serves as managing partner of Grand Angels and the Michigan Capital Network, said the recent investments into craft spirits companies are a natural fit for the developing local hub of investors. Many of them have gained key expertise about marketing and distribution in the craft beer industry, which can easily translate into related sectors like craft distilling.
Moreover, the “rinse and repeat” model of starting companies, investing in growth, exiting them and using the proceeds to start or invest in other new businesses is a familiar process that’s played out locally in other industries such as manufacturing, tech or life sciences, Grogan added.
“It’s really no different from what happens in the Valley with tech. You find an idea, you put an infrastructure around it, you throw some money at it, and if you’ve got a good team, it works several times,” Grogan said. “I like the idea that we might be building a little ecosystem here, which is based on innovation, it’s based on skills. If we can do it and keep expanding that sort of ecosystem, everybody wins.”

Leveraging craft beer experience

The ranks of veteran craft beer executives who have made a recent foray into other sectors of the industry include Brad Stevenson, the former COO at Founders who in February was appointed CEO of Lyons, Colo.-based Spirit Hound Distillery.
Stevenson connected with the distillery after being contacted by Grogan, who was raising capital to invest in the 10-year-old company’s growth and now sits on its board of directors. The more Stevenson learned about the brand, the more he felt a pull to become actively involved in the company.
The timing came two and a half years after Mahou-San Miguel Group acquired a majority stake in Founders and offered liquidity for the brewery’s minority shareholders, which included Stevenson. As well, the self-described “growth guy” had steered Founders’ expansion into all 50 states and 30 international markets and felt compelled to go back to his roots.
“I’m now with a distillery that, to put it in perspective, at the ‘meet the new guy’ meeting for me, there were 17 humans in the room. We’re distributed in one state. It’s just exactly what I was built to do,” Stevenson told MiBiz. “Three partners started it 10 years ago, but they’re poised and ready to go for growth. Product excellence, they’ve got it. Passion, they’ve got it. They just needed the experience of a growth component, and they felt that’s what I could bring.”

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Currently, Stevenson commutes every other week from Grand Rapids to the distillery in Lyons, about a 45-minute drive from Denver. He said the opportunity to invest in the company and help take it to the next level spoke to him on a number of levels as a serial entrepreneur.
“I’m a systems builder and a people developer and this is putting me back into systems building and people developing roles. In any organization where you’ve had the success that Founders has, the balance shifts. You don’t need so much of that. You need more of the management and the maintenance of what exists. Those are different skill sets,” he said.
Green, who spoke with MiBiz just after returning to West Michigan from a visit to Colorado, including a stop to see Stevenson at Spirit Hound, said his former colleague and childhood friend is an example of how the hub of expertise that grew from the Founders experience is increasing its circle of influence.
“I told people all the time: I would put Brad up against any other operator in any other craft brewery around in the country. He’s just an incredible talent,” Green said. “Spirit Hound is on a great growth trajectory. You can have great branding and great liquid, but it comes down to people. People are what build the business. Brad is one of those people.”

A natural extension

With deals for Natterjack, Papa’s Pilar and other alcohol brands, a cadre of West Michigan investors may be broadening their reach beyond the region, but Grogan notes they’re also helping to establish the area as a hub for knowledge and resources for craft beverage companies.
As Stevenson noted: “It makes sense that if you have an entity like a Founders, which had a lot of success, that there would be some people that move on to other entities that can now do that and share that into other ventures.”
Grogan sees that sphere of influence growing over time and as the investors gain more success.
“We’ve got this group that’s getting bigger and bigger and bigger and getting wins,” he said. “This is part of the heartbeat of the city. It’s this innovation and we just happened to have figured out how to do craft beer well, and there’s a concentration of skills. The timing is right, and spirits are really just an extension of that.”
Randy Thelen, president and CEO of The Right Place Inc., a Grand Rapids-based regional economic development organization, said the group’s strategy is an example of the power of economic clusters.
“When a region can build out a concentration of business and talent within key economic sectors, you start to see those industries continue to expand their reach and influence,” Thelen said in an email to MiBiz. “Over the years we have seen this occur as we leveraged our residential furniture expertise into the office furniture industry, which then helped us gain a foothold in industrial design and sustainability.”
While citing other growing concentrations in sectors such as health science, finance, insurance, real estate, aerospace/defense and retail/ecommerce, Thelen said the expanding hub of craft beverage manufacturing and knowledge also helps attract and retain talent within the region.
“Top talent wants to work on exciting projects within growth industries,” he said. “Craft beverage happens to be a fun industry that appeals to many, so the cluster can be a magnet for talent which will then help develop/attract business.”

Investing in philanthropy

Another often untold aspect of the entrepreneurial cycle, particularly in West Michigan, takes shape in the charitable giving and philanthropy enabled by a liquidity event when the company sells.
Green said that was certainly the case with the Founders Brewing sale: “A lot of the beneficiaries of that outcome have given millions of dollars to our community.”
The same is also true in Kalamazoo, where Bell’s Brewery Inc. founder Larry Bell, who sold the company in December 2021, has pledged millions of dollars to causes near to his interests and passions. That includes donations of $1 million to Boys and Girls Clubs of Greater Kalamazoo, $5.25 million to alma mater Kalamazoo College, and $8 million to The Irving S. Gilmore International Piano Festival to establish the annual Larry J. Bell Jazz Artist Award for jazz pianists.
“When you live in Kalamazoo long enough, you realize that there is a history of giving here going back to W.E. Upjohn and him founding the community foundation and Irving Gilmore, who left a lot to this community,” Bell told MiBiz. “I think that kind of gets baked into your DNA. For me, there’s nobody else to leave it to. We might as well do something good for the community.
“The beer business in West Michigan was good for us, and certainly it looks like it’s being good for the communities. Everyone should be happy that we’ve had a successful industry that popped up to help support our area.”
As well, Bell is focusing his time on establishing the Larry J. Bell Library Foundation, which could one day serve to connect some of his philanthropic efforts in the community.
After initially planning to build a new building for the library, Bell pivoted when 401 E. Michigan Ave., the home of the former Food Dance restaurant, became available. The foundation closed in mid July on the $3.5 million purchase of the property, according to property records.
Bell envisions the library, which will have a vast collection of books on Michigan history and other topics, one day hosting internships for Kalamazoo College students to work on research projects, for example. Likewise, the library also will feature collections on jazz history, which could tie into efforts at the Gilmore Festival.
As a lifelong entrepreneur, Bell would consider investing in certain startups and businesses, but said he has yet to find an idea that meets his criteria. However, any investment would be outside of the alcoholic beverage industry.
“That ship has sailed for me now,” Bell said. “Here’s the thing: If you went through the era that I went through, we had lightning in a bottle. It was as exciting as it could be. I’m not sure you can go home again there.”

‘A rippling effect’

Green, the former Founders chairman, is taking a different approach. While he has not yet invested in another beer company, he’s bringing his knowledge of distribution channels and marketing to growth opportunities within other categories of the craft beverage industry.
In addition to Natterjack and Papa’s Pilar, his current beverage-related portfolio includes Libby, a force-carbonated line of low-alcohol sparkling wines that Green started with Napa winemaker Grant Hemingway, and The Long Drink Co., a line of canned, spirits-based drinks marketed as an alternative to hard seltzers.
Green was a very early investor in Long Drink, which was founded in Finland and led by one of his friends. As the company progressed, Green tapped into other Founders connections, including Stevenson and former CEO Mike Stevens, to invest and lend their expertise to Long Drink.
“I got in from the beginning and a couple years into the business when we continued to grow is when I reached out to Brad and Mike to invest, and they’ve been really helpful. It’s important not to just raise capital, but raise capital from people that can help the business, which Mike and Brad have both done,” Green said. “We’d rather see capital come out of West Michigan than come out of New York or some of these other cities.”
Long Drink, which has been sold in Michigan for about a year, shattered its Michigan sales projections of 3,500 cases in June 2022 by moving nearly 19,000 cases, which ballooned to 25,000 cases in July, he said.
Outside of the beverage alcohol space, Green founded and serves as CEO of Caledonia-based Revolution Farms LLC, a producer of hydroponically grown salad greens. He’s also an investor in and board chair of Cirkul Inc., which makes a water bottle that uses a cartridge to add and adjust the intensity of any number of flavors.
Florida-based Cirkul, which is sold in the likes of Walmart and Bed Bath and Beyond, in June completed a $70 million funding round that valued the company at $1 billion, according to a report in Bloomberg.
Green helped to bring “a number of other investors” he knew from West Michigan into Cirkul.
“When there is an outcome, that money will flow back into West Michigan and back into nonprofits and back into other businesses and help other young entrepreneurs realize their dreams,” he said. “It is a good thing.”
As well, Green said the success of these outside ventures could create other opportunities for companies within the region. For example, his investor group used Grand Rapids-based law firm Mika Meyers PLC for the Natterjack deal. Green also has tapped local marketing companies and agencies to work on some of his other projects.
“It is exciting that we have the support from our local investment community,” Green said. “We also reinvest in businesses. Some of those businesses are in the alcohol space, some are not. But for me personally, I really enjoy Revolution Farms and I can honestly tell you that business would not be in existence if we had not had the outcome we had at Founders Brewing Company. I do think that there’s a rippling effect, which is another reason why it’s important that we get West Michigan investors to participate if we can.”

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