People have been drinking alcohol for centuries and while we’ve been good at mixing and developing new drinks, when it comes to the streamlining and distributing, we haven’t clicked the update button in a long while. Developed by industry veterans, SevenFifty has modernized the distribution chain for the alcohol trade. The online wholesale platform maintains the human aspect while also introducing technology, making the whole process 100% more efficient.
Today we sit down with cofounder and CEO Aaron Sherman to discuss how the company came together and the company’s newest round of funding.
Who were your investors and how much did you raise?
This was a Series A round of $8.5 million led by Formation8, with participation from additional investors including Pritzker Group VC. As part of the investment, Drew Oetting from 8VC joins SevenFifty’s board.
Tell us about your product or service.
SevenFifty is an online platform modernizing and streamlining the wholesale alcohol supply chain, providing specific value to buyers, distributors, and suppliers. There are two sides to the platform. For buyers, SevenFifty improves product discovery by offering a comprehensive and standardized database with search capabilities for available wines and spirits, organizational tools for improved tasting events, and a simplified credit application process. On the distributors’ end, we provide robust educational and CRM tools and the means to share complete portfolios with current and prospective buyers. Ultimately, we’ve increased exposure on both ends, and have added transparency and accuracy to overall communications between the tiers of the supply chain.
What inspired you to start the company?
I was a sommelier for years and beverage director for several restaurants across New York and Los Angeles. My cofounder and SevenFifty COO Gianfranco Verga was no stranger to the liquor business either, having had his own substantial experience in the bar and restaurant industry, for example managing operations and development at Tippling Bros, a beverage consulting firm that curates spirits portfolios for buyers and distributors, and working under Domaine Select Wine Estates. Then we met cofounder and SevenFifty CTO Neal Parikh, a technology veteran and former analyst. With our complementary backgrounds, together we set out to build a digital backbone for the wholesale alcohol industry.
We’ve spent years in the industry and so we experienced first-hand an inefficient wholesale alcohol supply chain. Our frustrations with the antiquated, pen-and-paper process in our day-to-day operations grew, and we realized there was a clear technological void in the industry that needed to be filled. We launched SevenFifty in 2012, and have since established an online database that has fundamentally changed how the wholesale alcohol industry operates by bringing new efficiencies that help businesses at each stage of the supply chain.
How is it different?
SevenFifty is the only one of its kind in the industry. We’re dragging alcohol distribution and sales out of the Dark Ages and innovating on an industry that virtually hasn’t changed since Prohibition ended. By digitizing a business that has been traditionally carried out over pen and paper, we’re enabling industry professionals to use their time and resources more efficiently, so they can focus on better serving and educating consumers, and running their business more effectively.
What market you are targeting and how big is it?
By looking at liquor license applications, the addressable market hovers around 200,000 businesses nationwide. We currently work with 700 distributors representing roughly $20B in combined annual sales, a large percentage of the ~$50B annual sales between wholesalers to retailers. SevenFifty covers about 60% of the addressable distributor market, and on track to hit 100% of this market. On the other end, we work with about 30,000 buyers across 30 states. While the addressable buyer market is constantly growing and shifting given the opening and closing of restaurants, bars and retail locations, there is a long tail of potential users. We see SevenFifty as something that will touch on the entire supply chain.
What are the milestones you plan to achieve in the next six months?
With our current round of funding, we plan to expand our team overall, with a special focus on extending the engineering team. We’ll also be releasing new tools specific to restaurants, retail buyers and distributors and more capabilities to streamline the ordering process.
What’s your business model?
Retailers can access the platform for free and need only show a liquor license verification to register. Distributors pay a monthly rate for the ability to publish online portfolios for the trade, advertise tasting events, and keep a record of products brought to specific accounts. They can even use the content we collect about brands to create sales and educational materials for tasting and tech sheets.
What was the funding process like?
This was our first time approaching institutional investors for SevenFifty so we obviously learned a great deal. Overall, it was a strongly validating experience that also helped provide insight into some of our long term thinking about the business. So much of the process was focused around discerning which investors would make truly great partners. On that basis I think we were enormously successful by bringing on Formation8 and Pritzker, who both share our vision and understand the enormous long term potential in addressing a market that hasn’t seen true innovation in nearly a hundred years.
What are the biggest challenges that you faced while raising capital?
I’d say the biggest challenge was in providing sufficient context around the complexity of the U.S. beverage alcohol supply chain. A lot of what we’re building is quite nuanced as a result of a rather arcane and byzantine system of regulation, so understanding some of the regulatory and business practices in the industry are key to understanding our strategy and approach.
What factors about your business led your investors to write the check?
The background of our founding team which combines extensive experience on all sides of the beverage alcohol industry as well as strong technical expertise, was absolutely a factor. The tech and wholesale alcohol spaces don’t traditionally have much overlap, so the combination of our perspectives is difficult to recreate. As a result, we’ve had a fairly cohesive long term strategy that we’ve been executing on since day one with rather little deviation, and investors appreciated that.
What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?
Stay focused and don’t let the noise from outside your organization knock you off track. Time and money can easily be squandered by exploring new directions that are premature or take your eyes off of your ultimate goals.
Where do you see the company going now over the near term? / What’s your vision for the next chapter of the company?
Our vision is for SevenFifty to be an essential daily resource for industry professionals at all three levels of the supply chain. Our platform has simplified access to product-level data and is standardizing the way distributors and buyers communicate about product. In the near term, we are focused on further fine-tuning our platform, and achieving full distributor penetration in the 30 states in which we operate, as we look to create an even more seamless user experience for buyers and sellers.
Where is your favorite bar in the city for an after work drink?
This is a constantly moving target, but at the moment my go-to bar has been Maiden Lane in the East Village. They’ve built an impressive and eclectic beverage program that covers beer, wine, and cocktails, as well as a unique menu focused on premium quality canned seafood from around the world that they import themselves.