Three-year-old aperitif startup Haus is trying to sell itself after a recent funding round fell through, underscoring the difficult fundraising environment e-commerce startups face right now.
Founder Helena Price Hambrecht broke the news on Twitter Monday afternoon, disclosing a “Haus update that’s not fun to share.” According to Price Hambrecht, “Our lead investor recently declined to move forward with our Series A that we were in the process of closing. Without them, we do not have the cash to support continued operations at this time.”
Now, Haus is looking to go through what’s called an ABC, or Assignment for the Benefit of Creditors. It’s an alternative to bankruptcy in which the business transfers its assets to a third-party trust that’s responsible for selling off the assets, and puts the business through an accelerated sales process, with the proceeds from the sales being used to pay off creditors. Price Hambrecht said that Haus will continue to stay operational during this process — meaning, it will continue to sell and ship product.
According to Price Hambrecht, the hope is that at the end of the process a third party will buy Haus, and can continue running the brand in its entirety. It’s also a possibility that some of the assets of the business, like its trademarks, will be sold in parts. Or, that the brand will still ultimately shut down at the end of the ABC.
In an interview with Modern Retail, Price Hambrecht said that she learned about ABCs from her business coach, “who went through a similar experience years ago.”
“When you get to a place where you can’t find investment and don’t have cash to continue operations, there are different paths you can go down,” Price Hambrecht said. “An ABC is a way to keep the business going for a short time longer while butting the brand through an accelerated sale process, in order to maximize the return for investors and creditors.”
Haus’ pitch when it launched in 2019 was that it had found a clever workaround that allowed it to sell online without a distributor, unlike many other spirit brands. In the United States, a three-tier distribution system (consisting of producers, distributors and retailers) limits how spirits are sold, and preventing them from being sold online direct-to-consumer.
Haus marketed its product as, essentially, a wine-based spirit with 15% ABV (compared to the 24% ABV that most spirits have), that was better for shoppers and could be sold direct-to-consumer. In early 2020, the company announced that it had raised $4.5 million, from 100 individual investors as well as a few funds.
Raising money from venture capitalists has been a challenge for Haus in its entirety, given many firms’ so-called vice clauses, which prevent many of them from investing in certain types of businesses, including alcohol.
“Many VCs cannot touch alcohol, and those who do wouldn’t consider it within their thesis or realm of expertise,” she said. Price Hambrecht acknowledged that “in four years of fundraising, we never found a lead investor,” — though the business thought it had finally solidified one.
“The cooling markets were perhaps the final nail in the coffin,” she said, referring to the fact that some venture capital firms are putting new investments on hold ahead of a potential recession. Price Hambrecht also acknowledged that the pandemic, increased supply chain costs and Apple’s recent iOS 14 update — which made it more difficult for brands like Haus to target customers with digital ads — made running a CPG business more difficult over the past few years. “I feel for any CPG business that launched in the last few years,” she said.
“Winding down businesses is unknown territory for most founders,” Price Hambrecht added. “If any founders are against a wall and don’t know their options, I hope my experience will be helpful to them in some way.”