The Hyde Park Angels “New Investment Series” profiles our most recent investments by examining the investment process and the individual company’s future trajectory from two perspectives: the portfolio company’s CEO and the HPA leader who made the deal happen. This edition focuses on Tiz.
We recently invested in Tiz, which makes online ordering for bars, restaurants, and hotels easier. We spoke with Tiz CEO and Co-Founder Taylor Katzman and HPA Leader and new Tiz Board Member Corey Ferengul about how the company, how the fundraise came together, and what’s in store for the future.
Taylor, first off, tell me a little bit about Tiz and what it does.
Tiz is a technology platform connecting on-premise accounts, distributors, and suppliers in the beverage alcohol industry. After prohibition, the United States created three tiers in the alcohol industry in which suppliers like Jack Daniels had to sell to middleman logistic companies. These distributors were ultimately responsible for the direct sales to liquor stores and restaurants. This system continues today.
Through this system, distributors are given exclusive rights to sell particular brands. For restaurants, that means they have to order from eight to fifteen different distributors each week to stock the inventory they want for their bars. The ordering process in general is extremely archaic with accounts placing multiple orders per week through text message, email and phone calls. Ultimately, there are $4B in orders placed each week through broken communication channels that we are planning to fix.
How did you first get involved in Tiz? Did you identify with the problem it was trying to solve?
I have been in the alcohol space for the last four years. My wife and I moved from San Francisco to start Rhine Hall, a distillery in the West Loop focused on apple brandy. During the day I was running business development for a consulting firm and by night my wife and I were meeting with bar and restaurant accounts to sell the product. We really didn’t know how archaic the system was before jumping into the distillery business. For the last two years I was the regional manager for Drizly, running the operations for our five markets in the Midwest and doing everything from liquor store activation, partnerships with distributors and partnerships with suppliers.
I was connected to my partners Parker and Adam Newman who were running Ezra’s, a curated website shipping craft spirits across the country. They created the first prototype of Tiz to manage Ezra’s ordering process from the more than twenty distributors they were using. We were connected at a few industry events and saw a huge opportunity to expand the software out to the market, eventually teaming up to launch Tiz in June of 2016.
What motivated you to seek out capital? What were the main advantages and disadvantages you saw?
My partners and I initially self-funded Tiz for the first five months. Given the nature of our business (which falls more on the marketplace model and tends to take longer to become profitable) and the size of the industry [which is $230B in size], we knew we were going to have to seek outside investment partners to help scale.
There was a disadvantage, though. Fundraising is incredibly time-consuming and takes away from doing what you set out to do to grow your business. Still, the capital would give us an opportunity to scale our team and technology. We also knew that the majority of investment firms want to help provide resources, knowledge, and introductions to ensure success. For example, through HPA we are working with extremely smart and successful individuals like Corey Ferengul, John Lewis, Andy Bokor, and Jon Chait, who are helping look at the business opportunity for Tiz.
How did you first connect with HPA’s Corey Ferengul? What does he bring to the Tiz team?
Hyde Park Angels made the introduction to Corey in October when we were going through the diligence process. We couldn’t be more excited to have Corey on the board of Tiz. Corey is an incredibly strong business leader with experience growing large businesses in San Francisco, Chicago, and New York City. Corey also has direct experience in our industry as the CEO of the adtech company Undertone. We are also working with Corey on internal business decisions like business development, marketing, and hiring in preparation for profitable growth and future investment rounds.
Corey, from your perspective, what about Tiz appealed to you as an investor?
Every industry progresses at a different pace. However, every industry will eventually get online and that will introduce additional automation and improved services. I have a real interest in finding laggard industries, those that have a need but haven’t yet taken the plunge in getting online. I saw right away that Tiz was hitting that spot on. The market they serve isn’t going anywhere. People will continue to socialize at bars and restaurants and will continue to consume alcohol while there. The ecosystem that serves these establishments has not done a great deal to get connected online, though.
I also saw that it would be hard to solve the problem. I like when it’s a hard problem because that’s a way to provide real value. It explains why others may not have attacked it. Finally, I saw expertise. Taylor knew the market, how it worked, the players in it, and how the offering fit in a complex value chain including all the regulations that govern alcohol distribution. Top that off with fast progress, and I was very interested to get involved.
How do you plan to work with Taylor and Tiz going forward?
We have already hit the ground running. I plan to help with standard things, like providing input and guidance on the best steps and best ways to use their resources. I’m working with Tiz on regular reporting on their key performance indicators and also analyzing results to see what we can learn. Tiz has the potential to have tens of millions of dollars running through its system in a very short time. We need to prepare for that likely scenario and start thinking through how to onboard and support that volume of customers.
Taylor, shifting back to you, what is the biggest lesson you learned from raising capital that you think other entrepreneurs would benefit from learning?
This was my first time raising capital and will say it was more difficult than I initially expected. Looking at my notes, we pitched 93 angel groups and venture capital firms. In the beginning, we would schedule meetings with anyone that wanted to hear our story. Looking back, many of these meetings were unqualified and were never going to amount to an investment. Obviously, the meetings and follow-up were time-consuming as well as distracting to the business but definitely were important in the beginning to perfect our pitch and value proposition.
Some of the core lessons I learned from the process were:
- Cultivating resilience
The majority of people are going to tell you “no”, especially in the beginning, which can become disheartening quickly. 87% of our meetings ended with investors telling us they were not interested. Keep at it.
- Finding a lead or notable investor
Fundraising becomes exponentially easier once you have a respected lead or notable investor commit to investing. In our case, we were able to schedule additional meetings and secure additional investment once Ludlow Ventures signed on.
- Asking for introductions
Especially in a smaller startup investment community like Chicago where most people know each other, always ask investors if they know anyone else that would be interested. Generally, investors are extremely well-connected and want to help, even if they are not interested in participating. This is actually how we were connected with HPA.
- “No” is better than “maybe”
In the beginning, it’s difficult to consistently hear “no”. But frankly a “no” is a blessing in disguise. We spent an outrageous amount of time following up with investors that would not fully pass on us. These follow-ups created a lot of false hope. The best thing possible is to get an indication from an investor whether they are interested or not.
Finally, Corey, from your perspective, what is one thing you would tell entrepreneurs to do when they start fundraising
The more progress you can demonstrate the better, and clarity is critical. If an investor leaves with lack of clarity on your value proposition, differentiation or ability to execute, the less likely you are to have an interested investor.