Raising Capital? This Investor Wants To Hear Your Story.

0:10Hey folks, I'm Ray Lateef and you're listening to the number one podcast for the food and beverage industry, Taste Radio. This episode features an interview with Andrew Marinoff, the founder of early-stage investment firm Dispact Ventures, and the co-founder and CEO of passion fruit-based liqueur, Chinola. If you're visiting a spirits-related trade show and walking the floor with Andrew Marinoff, be prepared to stop often. Based on firsthand experience at the 2023 Bar Convent, Brooklyn event, I can tell you, the man draws a crowd. The 33-year-old investor and entrepreneur is a well-known and well-regarded figure in the business of beverage alcohol, and is seemingly connected to everyone from early-stage entrepreneurs to industry captains.

0:56A cynic might say that investors often draw crowds and attention, but the pleasantries and short conversations that Andrew shared with attendees had an authentic quality about them. He was genuinely interested in hearing about their brands and businesses. For him, every experience is an opportunity to learn and expand his understanding of what's next in beverage alcohol. And that's the crux of his perspective on investment. It's not enough to know what you're interested in and what you perceive to be a worthwhile funding opportunity. He wants to know what is and what might be on the horizon. In the following interview, Andrew spoke about his family history in the spirits industry, how he attempts to identify trends before they become relevant, the key factors in his investment strategy, and how he's navigated his first few months as the CEO of Chinola.

1:45Hey, folks, it's Ray with Taste Radio. Right now, I'm honored to be sitting down with Andrew Marinoff of Dispact Ventures and Chinola, the founder and CEO of both. Andrew, great to see you. Hey, I appreciate you having me on today, and I'm looking forward to chatting here at BCB. Absolutely. We are at Bar Convent, Brooklyn and Industry City here in Brooklyn, New York. Is there another Brooklyn that I'm not aware of? Not that I'm aware of, and I'm only resting here for 20-something years, so it'll stump me. You've been in New York, so you grew up here. So I was born in New York City and moved to Jersey, Vermont, Colorado, and lived kind of globally.

2:18So I don't know if I had called home until about 15 years ago, but my passport reads New York. Your passport, it says, well, if your passport says it, it means you're from New York. That's what I like to say. Yeah, yeah. I think that would be kind of interesting information if your passport said what your profession was. Oh, God. I think by the amount of pages that are stamped in it, some people can guess pretty quickly as it is quite full on a regular basis. Well, Vine Pair described you as both a venture capitalist and a serial entrepreneur. And I think they started with serial entrepreneur and then said venture capitalist.

2:48Number one, did they get both right? Number two, did they get the order right? Honestly, 20 years ago, I probably didn't know what either of those meant at the time. So I think we're still living and learning. I think there are times I wear the hat of an investor and a lot of the times you're an entrepreneur And I think that's just more of an excuse of saying we need funding. So we've been or I've been at BCB, Bar Convent, Brooklyn for, I don't know, 45 minutes. In the time we walked over to this little space where we're recording this interview, I think you were stopped by at least 15 people.

3:19And you are very well known in this industry, in the spirits industry. And I think, correct me if I'm wrong, it's something where you do want to be deeply involved in as many aspects of this industry as you can. And I'm reading from your bio on LinkedIn and Instagram, which says, someone told me not to bite off more than I can chew. I said I would rather choke on greatness than nibble on mediocrity. I guess what I'm asking is, are you trying to put as many fingers into as many pies as possible? Because that's the best way to really understand and get a comprehensive look at where the industry is and where it's going.

3:59Oh, and I think it's an amazing question with several parts to it. I think there's a few things. And in order to be in this industry, it's not just understanding hospitality, but partaking into it. And partaking in hospitality really means knowing who the players are, being there to help them and learn from all brands. So whether I want to invest in every brand is different than if I want to know every brand and the players behind it, which I think is really important. And I was able to put myself in a lot of people's shoes, which is important when building something because you now know what the person on the floor goes through, the person in the restaurant, the person in the liquor store.

4:33And understanding those disciplines has helped me build a foundation that I use to really establish Dispac Ventures. Yeah, I definitely want to talk about Dispac Ventures in a more broad way. Let's back up a second and talk about your background. Your family has a long history in the spirits industry. How much does that impact your interest as an investor and as an entrepreneur? Yeah, I mean, it's pretty well known. My family goes back four generations on mom's side to the Hiram Walker dynasty, making whiskey in Walkerville, Canada, shipping in the U.S. during Prohibition, where my dad's side of the family was bootlegging it.

5:08And, you know, it's a sensitive history that we have, but it's one that we are pretty ingrained in. I think that from an early age, when most of my friends were going to sport classes or whatnot, I was driving the forklift in the warehouse. I was working in restaurants, working in the bar scene, opening up restaurants on the marketing side. And I realized from early on, it was zero pressure. In fact, it was the opposite. Try to do something outside that industry. Never wanted to. I wanted to be staging in a restaurant. I wanted to be working or staying in the back of house, the front of house.

5:37And so I think that although it helped put me in the right rooms, it was really a love and passion of mine from an early age. Where do you stage? I went to 11 Madison Park as the first mini stage. I was 13 years old and my dad put me in the kitchen for an eight hour shift. And three days later, I begged them to hire me. That was the first real time in a kitchen. And I didn't do anything important. Peeled carrots, peeled potatoes, but I fell in love. I was in culinary school by seven. I was teaching the children's class by nine and I was in the adult class by 11. And so I think I found a love for cooking.

6:10And then I found an opportunity to be our guest restaurants with Steve Hansen back in the day. And they opened up a concept called Dos Caminos. And I said, open up a Mexican restaurant. This sounds great. And they threatened me with long hours, seven days a week. I thrived off that. I enjoy hospitality, and it really helped. And having the family in was a key bonus for me. I'm shocked that you staged at 11 Madison. You worked there, and you didn't open your own restaurant. It was funny. They put me there to make me never want to be in another restaurant again. and it had the opposite effect, I fell in love with the kitchen.

6:41I fell in love with beauty, but then again, the other kitchens have their simplicity. And it really had a nice blend to understand what three Michelin stars takes to what fast casual and high volume takes. Working at 11 Madison, what kind of doors did that open for you? And I mean, I guess, how did you make that transition from saying, I'm in love with fine dining and cooking to, I'm in love with cocktailing and the spirits business? Yeah. Funny enough, you know, a 24-hour stage doesn't seem very impressive. But when you're 13 and your friends are at a party that night, then it changes the dynamic of everything.

7:15And what I realized was more important to me is being in a kitchen, doing teamwork and trying to deliver something that the world loved more so than being at the party, not being the life of the party. How do you build a party? And it was something that was really key to me early on. And I started to look at less about the, I wouldn't say quality, but how high end the food was and more about the service they provided, which led me to the bar. And when I made my first mocktail at a very young age, I realized there's a lot more to it than a bartender. There's a bar back, there's a dishwasher. It is a true team.

7:45There's the front of house, the back of house. And until I learned how to understand and put my feet into everyone's shoes, I didn't really know the industry at all. Well, I think if you're distilling down what you said into a single sentence or a couple, it speaks to the mission and vision of Dispact Ventures. And I want to read what your mission is from your website. It says, disrupting industries through impact investing. You invest in more than just spirits. You invest in food, spirits, tech. That being said, a cynic might say, well, there are other VCs out there that have a similar mission, a similar vision.

8:20How do you see Dispact as differentiated from those other funds and firms? Yeah, and I think it's less about differentiation because I feel like a lot of funds have to define themselves because they report to investors. When I first started Dispac, the mission was I was in technology before that. I'd sold off a few ventures. I wanted to invest in a lot of different things. I wanted to not do it from holistic 100 ,000 feet up, from 30 ,000 feet up. The reason there's technology, like seven rooms in the fund, is I understand data habits on dining. And we did data analytics. When you look at certain technology companies, Is it a technology company or is it a data analytics tool to understand your consumer?

8:57And for our listeners who are not familiar with Seven Rooms, Seven Rooms is? Seven Rooms would be a CRM platform that restaurants use to make better hospitality easier. And it's done so in the fact of you understand your guests, their dining habits, when they eat, when they don't, their average spend, making the reservations. And what's funny is the one restaurant was hard to win was Oriel. Because the father-son duo said, we're here every single night. We know all of our customers. but is it possible to do that at the scale of a Nobu when you have 28 restaurants and people want to feel welcome back?

9:29How do you make guests feel welcome back? We saw you were in our restaurant in New York. Welcome to Malibu. We know that you like this. Can we offer you this free welcome drink and this favorite appetizer of yours? And to me, that's hospitality. How many investments have you made to this point? How many companies are in your portfolio? So we're in about 19 companies operating in about 70 plus countries around the world with home bases and 12 of them. And so we have expanded quite widely. And there are some things in there that weren't meant for everyone. And the reason that Dispect as a fund doesn't take, from a holistic standpoint, large investment from outside investors is every deal to me is individualistic.

10:04So it's not when I'm asked, how many deals need to get done this year? I don't have a number. I have one of the right deals to get done this year. And I have friends that want to only invest in tech, some in Spirit, some in RTDs. So every time I go for fun, if they need to raise$3 million, we might only put half a million dollars or a quarter million dollars into it. But what we're doing is finding the rest of the better investors to come side by side with us so they can go deal by deal. And we can get the controls and powers we need to be very hands on investors. Because if I'm investing you, assume that I'm on your calls.

10:35I'm an advisor. I'm there with you the day to day in the trenches. What is your investment criteria? Again, you operate in a lot of different industries. you evaluate categories and industries, I would think in a similar kind of way, but maybe I'm wrong. What is your criteria for investment? Yeah, I think the first part goes back to the idea of disruption. And I wouldn't be going in nothing against the vodka space. It's a space that I'm not interested in because I couldn't compete in it. And rum is really tricky until Coconut Cartel rum came along. And the idea behind that was the world's first rum cut with coconut water instead of flavor.

11:09To me, that's disruption. Impact. I think that if you look at Great Jones Distillery in New York City, when we went to build it, it's a farm distillery that uses local New York State agriculture. That is the impact and the disruption behind it. But the biggest one happens to be Chinola passion fruit liqueur, which, as I mentioned, I'm the CEO and co-founder of. And we started this with the idea of actually going to the Dominican, creating our own fruit and growing it. And what we realized is three Americans going to the Dominican Republic to take away farming jobs from locals is a terrible idea.

11:39So we pivoted very quickly. And the idea was, how do you leave a place better than you found it? You go to the local farmers, you buy the fruit back at a premium, get the right principles in place, and then support local economies, local agriculture, because they say, you know, one tide raises many ships. Down there, we help build the road, the power, the water, and education. And now we have a sustainable ecosystem there that helps benefit the passion fruit brand. Do you think about return on investment when you're doing all those things? Or is it You just have to create a foundation first before you do anything.

12:10I think spending money is only stupid if it's done incorrectly. So by building a foundation of a local community that vouches for the brand, that when we have tourism come down to visit, are proud of it. And at the end of the day, they actually see some ROI themselves. It's worth the investment. I think a lot of people are caught up on investing behind the wrong things. And I think that leaves no impact for future generations or future brand building. Every one of my companies and in the last two, three years, I've only had a handful of companies walk in and I ask them, what's your goal? Tell me that they want to give a dividend check versus a three to five year exit.

12:44The day that you start to build means you're building inorganically. You're looking at a metric of what acquisition looks like and you're building into it. I want to build for profitability, for sustainability, and that my cases aren't being discounted. I think the second piece is perception. You walk into a bar, you see a tequila brand that's all over the menu. How did they get there? without knowing the story, and normally it is they pay to play, or I discounted it, or I had a friend here, you kind of get this FOMO, the fear of missing out aspect of it. And then you start to do things that are rational for your brand.

13:15So when I'm looking at investment, was the growth done organically? Is it done sustainably? And is there a path to profitability is more important to me than top line revenue, case volume and acquisition within three to five years. So would you say you're more of a long term investor than a short term investor? I think that it depends on the space and, you know, we'll go into trends. But I do have no fear in any of my companies holding them for five, seven, ten years. In fact, I like to build sustainable businesses on time. It's not always the case. There are TDs like the long drink where, hey, we've seen extreme growth.

13:46Eventually, you hit a pinnacle where you need to sell before you're too expensive for someone to buy you. So I think there's different sectors of that. But me, I love the idea of holding this company and being around for a while to watch it grow. But aren't you at least curious about the idea of selling to a spirits conglomerate? I mean, some of the exits we've seen in the last five years have been extraordinary. And that doesn't even include one that may be coming soon in Terramana, which did exactly what you said earlier, which is they sort of got the product into as many places as possible, perhaps discounted the tequila itself, and are now doing a million cases a year, which is unheard of.

14:25So when you see these kinds of success stories, I mean, wouldn't you say to yourself, well, I can probably do the same thing in a relatively short amount of time with a pretty remarkable exit? Yep. I think that's a great question and a great point. If you want explosive growth, you should have explosive capital. And the space I like to play in is built slowly, sustainably. But yes, I think that we have certain brands, a long drink backed by Kygo, Miles Teller, type RTD. We've seen it. We've seen it. It's supposed to go. Teramina was the fastest growing spirit in history. The Rock went behind it.

15:02They backed it. They came with the right amount of funding. So if I'm meeting with someone in a room and they say, I'm raising half a million dollars, I want to be the next Teramina, it's impossible. But if you say, I'm raising$12 million,$15 million, here's the celebrity, here's the distributor, that's a whole different animal to me, which is a space that I normally don't play in. Because if you're raising$10 and$12 million, you've got to be valued three, four times that. It all of a sudden outscales where I kind of want to be as a brand. That's not saying that's the future of Dispact. That's the foundation that was built on to start.

15:32What is your average check size for Dispact? So we range, it depends how early pre-revenue it might be. I think there are checks written and just to get me through the door of$50 ,000 to$100 ,000. And that's, I'm going to be with you for the heavy lifting. I think that we can do checks$250 ,000 to$500 ,000, and for follow-on rounds, up to$1 million. But those are companies I've been with from day one. I think, to your point from earlier, there are five big exits that happened the last few years. Ten years ago, it was more of a supplier game. The last five years, brands have been killing me with their crazy valuations that are unattainable.

16:07And it's not about the evaluation of the time. It's that my biggest pet peeve is a down round. And as a strategic investor, if you come to me and say, I'm worth$30 million because the market landscape now, I'm going to come back to you and say, I've spent the last 10 years building brands and companies. And when I bring to the table, it makes me worth$15 million. So meet me in the middle. And it doesn't always have to be done in a lower year valuation. It could be done in a sweat equity. But I think a lot of brands in the last two and a half years that have raised at these very high valuations are going to down rounds and going to have trouble because at Dispact, my companies don't raise capital.

16:39They raise strategic capital. The way you described it sounds like you could be an angel investor, you could be a C capital investor, you could be investing into Series A. When you are getting those pitches and when you are hearing from founders, you're seeing the investment decks, you're meeting the founders, you're looking at their brands, you're probably tasting their products as well. What typically moves the needle for you most? I don't think that companies and brands and founders need to have 100 % of what it takes to build success. I think they need to have certain core fundamentals. I can replace team members.

17:11We can improve on products. It's the willingness to adapt and learn. And if you're coming to me with eight SKUs, I say get rid of four of them. I think there's a few key things founders miss. An example is an RTD brand that comes out to market and says, I have four flavors, but I'll have eight by the end of this year. They don't understand the ways of working capital. I can teach working capital, or we're going to spend as much on marketing and these events. We don't need to do that. We can dial it back. So a lot of the companies I'm looking for is, are they going to take the right advice? Do they have the right game plan?

17:42Are they pre-revenue? Because then I'm going to go in less. Is there a proof of concept? I'm happy to go in a little more. And then making sure we're kind of off the beaten path. And we understand that there is a route for expansion that does not require replication. It requires innovation. So you are betting on the jockey more than you are the idea or the brand itself. The founders are really crucial to me. The idea is really crucial to me. And people that learn and are willing to adapt are the most crucial to me. My colleague, Farah Insalnikar, did a great profile of you and Shinola and I think Dispect Ventures.

18:14It was all kind of built into one story. And as part of the story, you had mentioned that identifying trends before they actually happen is a really key piece of my portfolio. Okay. I think everyone listening and those not listening want to know how you identify trends before they happen? No, and it is a really great question that comes with a few different aspects of it. I think you have to look at what you're building, what the marketplace is. People think they need to be in 35 countries all once. The U.S. is where liquor brands specifically and beverage brands are built. But I do not believe the U.S.

18:54is where trends and flavors start. As I mentioned the joke about my passport earlier, I am in Asia, Africa, Europe, Central, South America. And the question is, what flavors are there? The second piece of it, and you need to tie these in together, what does the industry want? And why that's important to understand that is it's not just educating the consumer. It's getting the trade to want to sell it. Because as a consumer, you're going to go home, you're going to make six, eight drinks, 10 drinks a week. Us industry people make a lot more. but a bartender or a liquor salesman in a store is going to make or sell five to 10 ,000 cocktails a week.

19:28So they need to be able to adapt to it. I think the last piece of it is the acceptance of what our next generation wants. I think that's visibility, transparency, and to know that we paid fair wages. So I think when you look at trends from a whole, is it screwball, peanut butter, whiskey? No, it's the flavored whiskey. But now the ones that are coming out are done in a more traditional style with old world techniques, which means, again, they come back to being a little more natural organic. So I think looking at a trend is difficult unless you understand from 100 ,000 feet up down to the boots on the ground that are pushing that trend.

20:00And it happens by looking into markets outside of New York City, LA, Miami, go to the Midwest, go to Central South America, go to Copenhagen, where Noma is, where we built Empirical Spirits, see what they're drinking, see the flavor profile, start to design it now, launch in the U.S. And by that time, you're ahead of the curve because we've been following them forever. Japan will probably be the most trend-lating places in the world. Go take a visit there. You're going to see brands that will probably be successful here in the U.S. in the next five, 10 years. And I'm excited for Empirical to make their way out here to New York City.

20:32When is that happening, by the way? They will be here in a few months. They're actually inside BCB right now with two of their products. Mark and Lars are building. Mark and Emil and Lars are here? Mark, Emil, and Lars. I know Lars is in New York City at the distillery doing the build-out. Mark will be here next weekend. I know that for a fact because he's coming to join me next weekend. Their new space looks beautiful. The tasting room is going to change the way we look at spirits. Like I said, if you talk about cutting edge, empirical, Chinola, I mean, that is the cutting edge of where our spirit direction is going.

21:01I'm going to be a little nostalgic for the past, though, because I interviewed them in Copenhagen at their distillery, and it was all amazing. I mean, they have just an incredible brand and their products are just remarkable. Andrew, you talked about trends from around the world, but I wonder about the scalability of those trends. How do you consider scalability when you are looking at opportunities like those that you mentioned? So there's two parts of trends. And to your point, you can be a Taramino, which I have nothing against. Of course, I want to sell a million cases of tequila. Or where do you see the future going?

21:36And I think scalability is different than consumer education and education to trade. So it's only how fast you can skew something to get into that sector. For instance, with Genola, we did it in two, four, six states. And then we expanded to eight and to 10. And what we did is we built trade advocacy. Trade advocacy can naturally build a trend when done at scale in the right pathology. So if I were talking to someone right now looking to build an RTD, I would avoid not to. RTDs aren't losing the race at 100 % scale across the US. They're losing it in every market one by one. And so I think if you're going to be able to scale a trend, raise the right amount of capital, do not become a fundraising company, don't look to have to raise money every five, six months, because then you're distracted half the time.

22:22At the same time, Screwball Whiskey was built in five states. And it just sold for speculation of$300 to$500 million. It is a peanut butter whiskey. And the number you mentioned has not been reported. It's not, it's not been published. It has not been published. Thankfully, I work with a lot of the banks that are saying, speculatively, this is what they think it was at. They also did some discounting. They did something along the way for scale. But seven years ago, if you told me peanut butter whiskey was going to take the US by storm, it would have been a miss of mine. Liquid death was a miss of mine.