Dear Kua Coffee Drinkers,
In July, while we shared our instant coffee idea with you (see the July letter) Darcy and Bri were pitching the same idea to potential investors. We spoke with most of Australia’s venture capital community. Feedback varied but in the end the verdict was the same:
‘We love what you stand for, but we are going to pass on this one ’.
Some of the feedback to our pitch:
- Lack of defensibility (meaning competitors could easily steal Kua customers or product ideas).
- Kua won’t generate venture-scale returns (meaning Kua may not be able to scale to 100 times it’s current size).
- Supply chain risks (belief that sourcing ethically will eventually cap growth).
- Lack of strategic alignment (investors scaling back their investments/priorities).
We all believed in Kua Instant as a vehicle for growth, impact and change. We’d also spent much of the last 8 months working very hard to prepare our business for Kua Instant (see the May letter). No investment meant bringing these dreams back down to earth. Time to reflect and focus on our core business.
We’ve learnt valuable lessons in the process. We know many Kua coffee drinkers also work in the social enterprise sector, so we’ve shared some of our learnings below:
1. Don’t put your eggs in one basket. As a young social enterprise, going for investment is always a risk. It’s important to have a backup plan.
2. Your team and your vision are extremely important to investors. We always scored very well in this area.
3. Your numbers must stack up. In our case, the way we source our coffee, the structure of our business and our unit economics are a double edged sword. They may mean great impact and good pay for our coffee farmers, but they also mean we can’t (and intentionally didn’t) promise the kind of returns that another business might (for example, a tech company).
4. Any social enterprise that gets serious funding or reaches global scale deserves a solid pat on the back.
We hope that while the investment community didn’t take a gamble on us, they did on another social enterprise or business striving to do good. We also want to say thanks again for all the support. Kua Instant may be on the backburner, but at home and at work more people are drinking Kua coffee than ever before, so that’s wonderful.