Anybody that has ever begrudgingly paid $20 for a 4-pack of replacement razors can tell you that shaving is big business. So big in fact that Dollar Shave Club, who cuts out retail middlemen by shipping razor blades directly to consumers, was recently acquired for $1 billion by consumer-product-conglomerate Unilever less than five years after it was founded.
But there is a growing trend that could be a thorn in the razor/razorblade business model’s side. And it’s not another scrappy startup. No, I am of course referring to the beard.
Despite some scientists claiming that we have reached “peak beard” status, millions of men (including myself) continue to ditch their razors in favor of a thick (or sometimes thin and patchy) mane of facial hair.
And with “No Shave November” just around the corner, I decided now was the time to cash in on the growing population of beardsmen. I did so by investing in Beard Balm’s offering on the inventory crowd-financing site Kickfurther.
Even when new a business experiences rapid growth, its bank account is often running on fumes. But not because the CEO is mismanaging the business or taking a hefty salary.
No, that cash crunch is almost always due to a business’s cash conversion cycle. You see, before selling their product in their store, on their website, or to distributors or other retailers, a business first needs to pay their suppliers some upfront cash to build inventory. But for startups with limited funds, they often have to wait for their existing inventory to mostly sell out before they can take that cash and reinvest it in the next batch of goods.
While some entrepreneurs are perfectly fine slowly building their business this way, others want to put their pedal to the medal by purchasing enough inventory to meet growing customer demand. Enter Kickfurther.
Kickfurther’s platform allows investors looking for higher returns to purchase a percentage of a retail brand’s future inventory. Those investors will collectively own the inventory, but they consign it back to the brand to actually sell. If the brand doesn’t do a good job selling their product and fail to return their Co-Op (“consignment opportunity”) investors’ capital at the previously agreed-to time or rate, investors can vote on what to do with their inventory. Many times the best option is to just let the brand continue selling the goods (perhaps at a lower cost), but if things are going really poorly Co-Op investors can choose to liquidate the inventory through other channels.
So long as things go well, Kickfurther transactions are win-win. Businesses can buy new inventory earlier than their cash conversion cycle would have previously allowed while investors can earn rates or return that often exceed 20% on an annualized basis (many Kickfurther Co-Op’s last just 3-6 months with returns in the 8% to 10% range).
Now that you know how Kickfurther works, let’s take a look at the platform in action through my first investment in Beard Balm’s Co-Op.
Beard Balm Kickfurther Co-Op
With “beard season just around the corner,” the creators of Beard Balm, a line of leave-in beard conditioners made in Detroit from quality ingredients, wanted to manufacture a new batch of 3800 12-can cases of Beard Balm to ship to their retail partners. To help finance that new batch of balm before winter, Beard Balm launched a Kickfurther in August to raise $118,142 and in exchange promised Co-Op investors a 10% profit in 8 months.
As a beardsman myself, I immediately recognized the value of Beard Balm’s product and liked the idea of a 15% annualized rate of return. Having done a bit of research about Kickfurther investing though, I wanted to make sure the Co-Op checked off all of my investment criteria boxes before I invested. Those criteria were as follows:
Product Quality: The gating task for me before analyzing a Kickfurther inventory consignment opportunity is asking myself “would I use this product?” Even if I was clean shaven, I’ve used beard conditioners in the past and know they drastically improve the look and feel of a beard. And while I never used Beard Balm specifically, a quick google search of the brand yielded a long list of positive reviews, including over 500 five star reviews for the Original Scent product on Amazon. Product Quality: ✓.
Brand Demand: Kickfurther does vet businesses before they can launch a Co-Op on their platform, but some brands are just too early stage for me. I want to invest in (purchase) inventory that has already shown strong demand via meaningful revenues and will therefore have a higher probability of selling at the rate and price that the Kickfurther Co-Op business has projected. Beard Balm has been in business since 2012 and states in their Kickfurther offering that they had $485,000 in sales over the last 12 months. Coupled with the large number of Amazon reviews, Beard Balm definitely earns a strong ✓ in the demand category.
Kickfurther History: Naturally, most of the Co-Ops open for investment on Kickfurther will be from businesses that have never used the platform before. But whenever possible, I want to try and invest in brands that have already consigned inventory on Kickfurther and successfully returned capital and profits to investors on time. In Beard Balm’s case, they had already successfully completed one Kickfurther Co-Op in early 2016, raising $38,549 before paying investors back in full with a 9% profit in just 5 months, representing a 21% annualized return. Another strong ✓ from Beard Balm.
Strong Returns: Although Kickfurther investments are a relatively new asset class, there have already been failed CoOps. And there will be more in the future. Since investors in those CoOps will almost certainly end up losing money, I want to be compensated appropriately for that possibility when I invest. Otherwise why not just throw that money into lower risk stocks and bonds? Beard Balm’s first Kickfurther Co-Op returned 21% to investors on an annualized basis. Co-Op investors were so pleased with that outcome that many left reviews for Beard Balm on Kickfurther, saying things like “Company makes a good product, communicated clearly and often, and paid back on time.” While this second, larger Co-Op will only pay out 15% annualized if everything is paid as scheduled, given their track record I’m willing to take a slightly smaller profit in exchange for what I see as a lower risk Co-Op. Yet another solid ✓ for Beard Balm.
For those of you that are counting, that’s four check marks (✓✓✓✓) for Beard Balm. Since they hit every one of my boxes, I chose to invest. I purchased 4 of the 3800 packages of inventory available. Each pack cost $31.09, so my total investment came to $124.36. If they sell through all 3800 packs on time, I should receive 7 monthly payments from Beard Balm in the future, starting on 11/17/2016 with my final distribution of my original capital plus my profit on 5/17/2017.
Unfortunately, many other investors are looking at Kickfurther as a new way to earn decent returns on their capital as well. That means when a good opportunity pops up on the platform, investors rush in to claim as much of each Co-Op as possible. In Beard Balm’s case, all 3800 packs of inventory were allocated to investors within 6 days, meaning those of you that are now reading this won’t be able to join me as an investor. Other Co-Ops I was considering investing in sold out even faster, such as this $36,269 offering that sold out in 11 minutes for a batch of chain mail scrubbers for cast iron cookware that I use in my own kitchen.
If you are considering making your first investment in Kickfurther, here are a few tips.
1. Co-Ops go live on the platform at 5PM eastern standard time. That means if there is a good Co-Op that you want to get in on, you should be on the site as the clock strikes 5 to make sure you have a shot at investing.
2. If you really want a piece of a Co-Op though, you should use your “Kickfurther Keys.” The folks at Kickfurther realize there will always be competition from investors to get in on the best Co-Ops, so they have given each investor a few “keys” that allow them to participate in a 24-hour Pre-Sale period for each offering. During that time, up to 50% of each Co-Op is open for pre-purchase so you aren’t battling everybody right at 5PM the following day. Each investor gets 1 new key each month but you can earn more for referring new users to the platform.
3. Since time is of the essence to either get in on the 50% pre-sale or 5PM full sale of Co-Ops, I set my email preferences in Kickfurther’s settings such that I receive a new email each time a new Co-Op appears on the site. That way when a new Co-Op pops up that looks intriguing, I can be one of the first on the site looking at whether it is a good fit for my crowdfunding investment portfolio.
4. Once you get a piece of a Co-Op, you yourself can help sell through the inventory you just invested in by adding those products to your Kickfurther Store. You’ll also receive a 5% commission on any sale, further boosting your earnings. Check out the Krowdfund Kickfurther Store here.
I plan on making quite a few additional investments in Kickfurther Co-Ops in the future. I’ll probably start by investing $500 spread across a few Co-Ops before reinvesting any earnings into other Co-Ops. If you want to follow the progress of my Kickfurther portfolio and my other crowdfund investments, check out my Portfolio Page. As I start earning profits (or losses…) on my crowdfunded investments I’ll compare those returns to what a portfolio of traditional stocks in related industries would have earned me over the same time period.
And if you want to get started investing on Kickfurther, by using this link to sign up you’ll get a $5 credit to use on your first investment.
Having said all that, it’s also necessary to say this….The views expressed in this post are my personal opinions I arrived at when deciding to invest my own personal funds in Beard Balm’s Kickfurther Co-Op. Since I am not a professional & licensed financial advisor and since I do not know your unique financial situation, none of the opinions expressed on my site should be taken as personal investment advice, nor should it be considered a solicitation for investment as I am not affiliated with Kickfurther or Beard Balm (although I have chosen to invest my personal money on the platform). You should conduct your own due diligence and/or consult a professional financial advisor before making your own decision to invest.