He started Crushpad in 2004 in his garage as a way to prove that ordinary folks can make their own special private label wines. It has blossomed into a successful business that combines wine-making passion and Web 2.0 techniques. Now he has raised a new round of $9 million — but not from venture capitalists. Instead, he raised it from 120 of his best customers.
“We had a venture deal with a better valuation,” he said. “But we’re a unique business. The customers have money. Originally, we were going to raise $5 million, then we raised it to $9 million and the deal was still oversubscribed. We figured this was better because these people are spreading our gospel.”
Just as Starbucks learned that coffee is an experience, so did Brill. Customers can learn about wine on Crushpad’s site, design their own wines to their tastes, come to Crushpad’s headquarters to sort grapes after harvest, and help make the wine which carries their own custom labels (see the one-of-a-kind bottles below). The company is one of the smartest new businesses that combines technology with the newfound love affair that the world has with wines, which are blossoming just like microbrewery beer.
Crushpad appeals to the upper crust of wine lovers who know a lot about wine and are itching for the chance to make their own. Since the users contribute their own efforts in the wine design, it’s like CafePress, the web site where you design your own T-Shirt, said Brill. The experience around harvest time, best described as crisis mode, is so fun that some customers come as part of their vacations.
“It’s built around the idea that anybody can make wine,” Brill said. “What we’re catering to is people who like the wine-making experience.”
The customers are passionate about the wine-making process. And now their investment will allow the San Francisco company to help expand its operations. Brill could have taken an easier route with seasoned venture capitalists, but he chose to embrace the passion of the company’s fans. A couple of the more serious fans will join the board of directors.
Part of the money will go toward CrushNet and building a software team to enhance the long-distance experience on the web site. The company may open more locations as well, including the south of France. Some big retailers are also interested in picking up Crushpad’s wine-making box kit, FuseBox.
To date, Crushpad has raised $12.5 million, none of it venture money. The advantage of not using VC money, Brill said, is that there are no preferred shareholders who might have different interests at heart. On the other hand, Brill acknowledges that he will miss some of the expertise that VC board members can bring when it comes to expanding a business.
Some of the investor-fans will be present at a members-only “Good Wine, Good Friends” Churchill Club event on Wednesday evening at Crushpad’s headquarters, where Brill will moderate a panel dubbed “Old World Meets New World.”
Customers include Tyler Florence, creator of the Food Network; Guy Riedel, producer of the film “Wedding Crashers,” billionaire Billy Getty; Intel Capital chief Arvind Sodhani; and an unnamed presidential candidate.
Walking around in his 30,000-square-feet winery, Brill pointed to the different lots of barrels and cases ordered by his 5,000-plus customers. The place is a big warehouse with no frills except some couches and tables where customers can sit and browse through catalogs or look at the racks of private label wines. He’s got another 20,000-square-feet place in another part of town to help handle the company’s fifth harvest. Stacks of special Ermitage barrels, ordered from the finest European barrel makers, line the walls.
Brill expects his customers will make 40,000 to 50,000 cases of wine this year. There are about 800 different varieties, many of them custom-designed by customers. In Japan, Crushpad Japan has opened. Pretty soon, grapes will begin arriving from 50 different vineyards. Roughly half of all the clients will schedule time where they can come in and help with the wine-making tasks.
The minimum order for Crushpad is a barrel, which ranges in price from $5,000 to $9,600. You can get about 300 bottles from the 25 cases in a barrel, so many of the customers band together as a group. Companies come in as a kind of team-building entertainment. Some can watch from afar, pointing the web cams inside the warehouse and making comments via instant message.
About half of the wine is resold commercially, with some customers relying on Crushpad Commerce services to take of the legal paperwork for that. But Crushpad isn’t trying to go after thoses who want to become big winery magnates.
“We’re focusing on wine quality,” Brill said.
The big Napa vineyards and wineries are competitors, as are the cheap bottles at shops such as Trader Joe’s. The City Winery in New York is a kind of hybrid event-winery business, but it doesn’t truly compete with Crushpad. Still, events such as the Churchill Club event are becoming more common at Crushpad.
Revenues were $6.7 million last year and are doubling every year. The recession hasn’t hurt so far.
“Good times or bad times, people like booze,” Brill said.