#146 ReCraft Beer

I’m Josh Muccio, this is The Pitch, where startup founders raise millions and listeners can invest. The pitch for ReCraft is coming up right after this. And if you’re not following the show already, hit that subscribe button and turn on notifications. 

[clap] Recraft

One of the quarantine hobbies I picked up was homebrewing. Yes, I am one of those humans who makes beer in his garage. And I’m actually quite good at it! According to my friends.

So a few months ago, when Dean Eberhardt pitched me on a new technology that could revolutionize the beer industry. It was like two of my favorite things in the entire world collided. Beer and startups. 

And for the first time on this show, I may know more about what’s being pitched than any of the VCs. I brought this one on for me.

It’s time to turn an IPA into an IPO.

Jesse: I can't wait to go to VR school. 

Charles: It's day and night. 

Dean: Hello. Dean. 

Today, Dean is pitching Cyan Banister

Cyan: Cyan.

Dean: Nice to meet you. 

Cyan: Nice to meet you. 

Charles Hudson

Charles: Hey, Charles. Nice to meet you, Dean. 

Dean: Dean. 

Elizabeth Yin

Elizabeth: Elizabeth, nice to meet you. 

Dean: Hey Elizabeth. Dean. Nice to meet you. 

Mac Conwell

Mac: Mac. 

Dean: Mac, nice to meet you. How's it going? 

and Jesse Middleton

Jesse: Hey, Jesse. 

Dean: Hey, Jesse.

Jesse: Nice to meet you, Dean.

Dean: How y'all doing? 

Elizabeth: Great. How are you? 

Dean: Really good. My name's Dean. I'm the founder of ReCraft. And we have developed a new way to make beer that's 30 percent more efficient. Eight years ago, I took a month off of drinking. I just really missed that craft experience. And so I developed the most forward thinking products the beer industry has seen in decades. So that brand, Hoplark, has generated over $45 million in total revenue to date. While I was scaling Hoplark, I realized that we had created the world's most advanced hopping technology that was usable in the beer industry. So we spun off Recraft to go ignite a revolution. Hops are inherently problematic with beer. When you add them to finished beer, they absorb up to 40 percent of the liquid. And then when you remove the hops, they take a bunch of that liquid with them. With our process, none of that happens. There's zero waste at that step. So we have a bunch of consumer traction with Hoplark over the years. But we also have a partnership with Brooklyn Brewery where we're adapting all of their products to this technology and that should hit shelves later this year. So we're raising two and a half million dollars to scale this. Who wants to recraft the beer industry with me? Thank you. 

Elizabeth: So just to clarify, you are proposing a process, right? 

Dean: Yes, so we have a process, but it integrates super easy. So basically at the end of a beer brewing process, instead of dry hopping, which is like the last step, they just actually add our juice, effectively, at the end of it, and it allows it to all be way more efficient and it works just like the regular beer process. 

Elizabeth: But you're not making a new consumer beer brand. Is that correct? 

Dean: That's correct. 

Elizabeth: Okay. 

Dean: Yeah. And we've used like a similar process in Hoplark for the last six years. 

Elizabeth: Yeah. Yeah. Understood. Yeah. 

Mac: Uhh, full disclosure, at RareBreed, we have a no vice clause, so I'm not allowed to invest in anything involved with alcohol. 

Dean: I understand and I appreciate that. 

Mac: So for that, I'm out, purely just for a clause that my LPs forced me to have.

Dean: No, totally understand. And I mean, I've been running a non alcoholic business for the last six years, so I get it. 

Mac: Would love to taste it. 

Dean: So on your left is a traditionally made West Coast IPA, and on your right is a West Coast IPA that's made with our technology. So we completely deconstruct the dry hopping process in a couple of different dimensions, which allow us to reconstruct it in basically whatever we want. We can make it effectively identical, or we can make it "better" depending on what the brewery is looking for. We can make it brighter. We can make it juicier. We can make it sweeter. Like there's all these subtleties that we can pull out of it. 

Charles: They're both really good. This one, the left one has a little more creaminess to it, like slightly, but they're both very good. 

Dean: Thank you So just to be clear, the product on your left is a traditionally made, dry hopped, had the 30 percent yield loss, the product on the right is with our technology. 

Elizabeth: I actually think I like yours better. 

Dean: Thank you. I mean, it's a little more balanced, maybe a little more complex, but I'm a huge flavor nerd, so I geek out on all this stuff. 

Jesse: So, I was curious if you can share a little bit about sort of the changes that one might have, whether it be in shelf life or anything else that changes in the output, or is it sort of all equal? 

Dean: Yeah. The Hoplark products have dramatically improved shelf life characteristics over beer, and we believe that hop flavors derived from our process will have dramatically improved shelf life characteristics for beer. And IPAs, if anyone's familiar with IPA sitting on a warm shelf, like, they'll get pretty nasty pretty fast. Unfortunately, it's like a challenge with the industry. We believe we can extend that pretty dramatically. So it's not just a cost savings; it could be a pretty dramatic up value. 

Jesse: With all of that depth in this industry, I'm curious, can you walk us through just high level, like the business itself? I mean you're buying hops, you're producing something, you're storing it, you're transporting it. Like how does all that fit together? 

Dean: Great question. And this is kind of the magic. So brewers are - really care about their craft and what they're able to make. And so what we do is we allow them to still utilize their own hops, their own products, their own craft. So what we're thinking about doing is bringing in the brewer's hops, processing them, and then selling a service fee for that processing. So there's no inventory. It's really just charging for the value of what we're generating and then we'll ship them the finished product. 

Jesse: Got it. 

Charles: How does it compare on a cost basis to their current methodology? if you put aside the waste piece just from a production like price comparison. 

Dean: Yeah so we can save up to 30 percent of the total COGS of the beer. Because we are able to extract more than what a traditional process does. We're able to save all that wasted beer. And then at the end of our process, as we've pulled all the juicy, delicious aromatics and flavor off of it, we're actually able to reuse those hops for the bittering side of the equation. Whereas a brewery would be using two different sets of hops, we only use one. So, we're able to replace 100 percent of the hops, in a brewer's system, which is dramatically more efficient for what they're trying to do. 

Mac: Let's say I'm starting a new craft beer today, and I want to work with you. Are you telling me I could essentially set up a brewery that's probably slightly smaller with less storage space because I don't have to hold the hops anymore?

Dean: Yeah and also skip some steps at the end as well. And dry hopping takes a lot of time, whereas ours is relatively instantaneous. Which is a bigger deal than the hop storage. You can condense how much tank storage you need. Or if you're an existing brewery, you can dramatically increase your throughput because if you had a choke point on the tank side, you could run a lot more batches through. 

Charles: I was just going to ask you, like, given how concentrated InBev - some of these huge, I imagine they have internal R&D teams that are probably thinking about every element of the process. And how do you think about working with, like, Big Beer, for lack of a better word? 

Dean: Well, I think that , a) we're working on a suite of patents, We believe that we're going to get a tremendous amount of protection on it. Because of the kind of left field nature of creating these products, like we do believe we have a really big head start, and it's pretty complicated how to get to success here. So we, we believe the moat's pretty strong. We're excited to work with a lot of them. 

Charles: Okay. 

Dean: For sure.

Charles: Cool. 

Elizabeth: What is your background prior to starting your non alcoholic beer company?

Dean: So my story is, I graduated college and five months later my dad passed away super suddenly, and I got thrown into the family business, which I wasn't really planning on doing. I had a deal with my dad, we were driving down the road and when I was - I was about 21 and he turned to me and was like, do you want to run my company some day? And my answer was no, I want to do my own thing, but I got thrown into it. So I've been helping manage and guide an innovative plastic recycling company in Chicago for the last 17 years. And what happened over time is I have an amazing executive team there. I've learned how to be a chairman role and coach a team and have the team operate. I live in Boulder. It's in Chicago. They're doing awesome. Like there's been a lot of amazing business skills. My business coach tells me I'm 41 going on 61 in business years. But um, but for me, like launching Hoplark was really - in some respects, it was the start of my career because it was like the first time I was doing something that was truly me and truly something that, like, felt authentic to what I wanted to create in the world. 

We’ll be right back, after the hot break.

Elizabeth: So basically, if I were to summarize, after college, you ran the family business and then at some point you were able to kind of make sure to hand things off to your exec team to start Hoplark. Is that right? 

Dean: That's correct. Yeah. 

Elizabeth: I mean, in terms of discovering this process, was that you or a team member? 

Dean: Yeah, it was -

Elizabeth: Do you have a science background? 

Dean: Yeah, I'm an engineer. I've come from a family of entrepreneurial engineers. We built probably like the world's coolest homebrew setup to develop the Hoplark products. So we were in the garage, it took, it probably took a hundred batches. And then I've been working over the past couple of years on essentially an amped up version of that process that'll work for this beer application. 

Cyan: Did you just kick off your fundraise? Or have you - do you have commitments.

Dean: Yeah, we just, we just kicked it off. 

Cyan: Okay. 

Jesse: Look, I think it's super interesting. This is totally a business outside of, like, my wheelhouse. For that, like, I'm not the right fit in this, but I'm fascinated by what you're doing.

Dean: Yeah. Right on. I appreciate it. Thank you. 

Cyan: For me, I, I'm just the wrong partner at the fund and I just, I'm outta my wheelhouse too. I don't drink beer at all, and I don't really like hops because of a previous beer incident when I was younger. I can't even smell it. But I do have a partner who did - he made Kettle & Fire and he brought in Surely, which is de-alc-ed wine. And he's really into this space. And so I would really love to run this past him. 

Dean: That'd be amazing. Thank you. 

Elizabeth: I think similarly, I - I'm very impressed by you and I'm just generally curious about things I know nothing about. But I think, along the same vein, I am personally out of my element, but I think you are amazing. So thank you.

Dean: Thanks Elizabeth. Appreciate it. 

Charles: What would a successful outcome for ReCraft look like for you? Like how do you, how do you think about the end state? 

Dean: Super cool question. I love creating. The reason I build businesses is to create. Building a business to a successful outcome allows me to go do a bunch of other cool stuff in the world. So that's my key motivation. There's a clear exit to one of these conglomerates. It just almost makes too much sense given how much opportunity there is for savings. So we're like very much keyed in on that. But while we do that, building a very nice EBITDA business in the short term, is not a bad thing. So there's a lot of opportunity in what we're doing for that. But effectively, at the end of the day, we're looking for a large exit to a conglomerate. 

Charles: I think I'm out for - we have like an internal thing about science things, that we're not science people at Precursor. But I do have two family offices I've gotten to know really well that are both in the brewing business. And they're always asking me if you ever meet anything interesting in the world of beer, please introduce us. 

Dean: I appreciate that. 

Charles: And I, maybe I'm the only person on this, but I actually really do like beer. And I really do like pale ale, and I have to say this is a really well made beer. 

Dean: Thank you. 

Charles: I think you're going to be very successful. 

Mac: Dean, I know I said I'm out and I can't invest from the fund. But I wrote down here, I love this company. Like, the process you developed is only going to come from somebody who's not in the beer industry. Like somebody in the beer industry who wouldn't even ever think to try what you did to create what you did, because it probably doesn't make sense to them.

Dean: Exactly. 

Mac: It's been done for the same way for so long. They're trying to make incremental changes. 

Dean: Yep. 

Mac: You wanted to do something completely new. You fit the exact founder profile that I love, and it is killing me right now. 

[laughter] 

It’s killing me too Mac, I can’t take this much lager. We’ll be right back.

Mac: You fit the exact founder profile that I love, and it is killing me right now. That I can’t make the investment.

[laughter] 

Mac: I want to help you one way, somehow, some way.

Cyan: I think all of us want to open up our Rolodex.

Mac: I want to see this -

Jesse: Yeah. 

Jesse: He really did just write down, I love this company. 

Mac: Yeah. It's right here. You're amazing. And the other thing is you kind of have a clear chip on your shoulder. You've been running successful businesses since the day you graduated college, basically. And, for whatever reason, still not enough. 

Dean: Yeah. 

Mac: I love that. Because when I ask a founder, what's their number? They're like, I don't know, go bigger. That's music to my ears. And you're that type of founder. So, like, this hurts. But, man, I see you being a winner, for sure. 

Dean: Thank you. 

Mac: Just wanted to say that. 

Dean: Yeah, I appreciate that. Thank you. 

Cyan: And who knows who's listening. 

Charles: Yeah. [laughter] 

Mac: Thank you, man. 

Dean: Thank you all.

[thank yous]

[laughter]

Dean: Thanks. I really appreciate it. 

Mac: I'm gonna be buying some hop - This is pretty good. 

Jesse: This is very good. 

Mac: I'm a sour. 

Jesse: I'm always looking for things to keep in the fridge at home, non alcoholic, because we're wine collectors, so like, everybody comes over to drink really great wine, and then I'm like, what do I have? Just a collection. 

Josh: I'm so excited about this technology. 

Charles: You're the home brewer. 

Jesse: Are you investing? 

Josh: I would love to. Like, so here's my question. I understand the beer process. I know what he's doing is legit. And the fact that those two beers taste close, and he didn't put actual hops in the beer, is incredible. And he actually told me, we can actually reduce some of the off flavors from hops that you don't want. And I noticed that like his actually tastes cleaner. But he's like, we can actually make it taste the exact same if you want. I mean, it's technology that's like foundationally different. It could completely change an industry. 

Cyan: I think if the round gets priced, you do it. 

Jesse: Yeah, I think, it's a hard business to imagine a) it being a stand alone business at scale. Because he's not making the beer, the big beer company is - big beer would like, they would want this, right, or they're gonna find a way to do it themselves, not infringing on the patent, you know, they're fine. So just to me, that's a tough profile as like a venture return. I could be wrong, but like, that's harder for me to see.

Mac: I don't know about that. Cause we have a company in our portfolio that's created a technology in a beverage space that's not alcoholic where there's three major suppliers for what they do, and their technology is so transformative that those three suppliers are, like, falling over themselves to figure out who can be exclusive with it. And so, because of that, it's driving up the price of the licensing. And it's only because of how innovative that technology is. 

Jesse: Yeah, that's fair. 

Mac: I'm willing to bet that he has a network where he can get in front of the right person where somebody brings their R&D team and their eyes pop out of their head and they're like, Yeah, we'll give you, you know, a million a year for this. And you're gonna be like, no, you're gonna give me 50 million a year. 

Jesse: But I guess my point there would be at 50 million, I think they're asking for exclusivity, which means you got one 50 million contract and now you're like, what do you do? So it's like the - that's my challenge.

Cyan: I think it might make a great angel investment. 

Jesse: Yeah. And it's certainly not a category I know well, so I could be totally off. Like he may - this may be the most innovative thing to touch beer for 2000 years. In which case, it could be worth more than AB InBev. Like, that would be one bet that you take. They're going to go buy up every beer company because they can do it at 30 percent less the cost and they're going to go find a financial partner to help them buy up every group, you know, like.

Josh: Yeah 

Jesse: That's called leverage, right? 

Mac: That's an interesting idea, actually. 

Jesse: Mac, your comment at the end, I'm so glad you said this to him because I - his passion for this and his like - 

Cyan: He's so super cool.

Jesse: Oh man. It's awesome. It's awesome. 

Mac: He's made money. He doesn't need the money. He's run businesses. He doesn't need the experience. He just has a chip on his shoulder. Like I want to do something different. Something big.

Elizabeth: Something that's his. 

Cyan: Something that's his.

Jesse: Something that's his. I love that. 

Mac: Granted, he already has one. And that wasn't big enough for him. 

Josh: And your fund is going to look at it, or just a partner at your fund?

Cyan: My partner at the fund, who does angel investments in this space, might be interested. 

Josh: Yeah. I would love to hear his opinion on it, too. Just cause, this isn't the typical pattern matching VC investment. So I'm trying to learn, how do you look in outside industries like this where it's like -

Jesse: As an angel, it's different. So it depends on if you're thinking about it that way. Like as an angel investment, I think pattern matching is like, this guy is A plus in a massive industry. Like, sounds super unique. You can get underneath that quickly. But like if you don't have to return 45 other investments, that's just different math. Depends on if you're thinking as an angel versus out of a fund. 

Josh: Yeah. Well, I guess I was thinking from the fund, cause he's talking about being able to save a hundred million dollars a year on a given customer at scale.

Jesse: Yeah. 

Charles: You might only get one customer though. 

Jesse: Yeah. 

Mac: I completely disagree. If this is as innovative as he says it is, this is a fund returner. There is a big company somewhere in here. Now granted, he did not give us the full playbook on that. But that chip on his shoulder tells me he wants to go big. 

Elizabeth: Part of what I'm worried about - I mean, he's great, but what I don't know, because this is not my space, is I don't know what the competition looks like. I don't know what synthetic biology company is coming at this with a different angle, right? I don't know any of that. And so we see one company in isolation, great founder, it sounds amazing. We don't get to compare it against 10,000 other people trying to do something. 

Josh: Yeah. 

Siri: No problem. 

Elizabeth: Siri thinks it's no problem.

Cyan: No problem.

Josh: That's a wrap. 

Mac: That's a wrap. 

Elizabeth: Alright. 

Jesse: Thank you.

Josh: You guys all coming to the dinner? 

Jesse: Yeah. 

Elizabeth: Yeah. 

Charles: Think so.

Jesse: Are we doing -

Mac: I'm riding with you. 

Jesse: There you go. 

Josh: I don't have a car. 

Jesse: I'm taking a ride with whoever else is going. I don't know. The -

Josh: Did anybody drive here?

Elizabeth: Actually, I drove.

So while the VCs didn’t get it. Or couldn’t evaluate it properly. I have a sneaking suspicion there’s some beer nerds listening who’d be very interested in this new beertech.

If that’s you, reach out to me. Seriously! I bet you’ll love what Dean’s been brewing up since the show.

Dean: The design is that we would still own the machines in the facilities and they would operate them. as opposed to trying to hold it all ourselves and do all the funding and all the raising and all the shipping and everywhere and all that.

Josh: So instead of doing the fishing, you're teaching the guy how to fish.

Dean: Yeah, or supplying them with the rod and we own the rod. 

Josh: This makes the business more scalable?

Dean: More scalable, less capital intensive, and allows us to go faster

Will Dean get an investor to price the round before our season finale? Find out at 7pm on December 11th at our season finale watch party. The founders will be there, answering you questions in the chat. You can register right now at pitch.show/party

No offer to invest in ReCraft is being made to the listening audience on today’s show, but LPs in The Pitch Fund do have access. You can learn more and invest in our debut fund at thepitch.fund

Fund I closes to the general public on December 15th.

Next week on The Pitch … 

Virginia: We are the operating system powering the experience economy. 

Ben: What validation do you have that these customers will be willing to pay those amounts of money?

Virginia: I've been in the industry for 16 years. They're the brands I've been working with. we actually have a $47 million pipeline for year one 

Cyan: This seems like a no brainer if - if it is what we think it is. 

Mac: You had three businesses. You did over $100 million in events. COVID is over. The world's opened up. Why do this? 

That’s next week! Subscribe to The Pitch right now, and turn on notifications so you don’t miss it. 

Applications are now open for season 13 of The Pitch. So if you’re raising a pre-seed or seed round for your startup, apply to pitch! We’re recording January 14th-16th in Miami, FL. Learn more at pitch.show/apply

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This episode was made by me, Josh Muccio, Lisa Muccio, Anna Ladd, Enoch Kim, and Jackie Papanier. With deal sourcing by Peter Liu and John Alvarez.

Music in this episode is by The Muse Maker, Breakmaster Cylinder, FYRSTX, Boxwood Orchestra, and Joey Cantor

The Pitch is made in partnership with the Vox Media Podcast Network.