Spinn Coffee is cash-strapped, but says it will turn a profit as it raises more capital
Spinn, the maker of a coffee grinder and brewer that uses high energy to extract roasted coffee, is currently raising money through Wefunder to fund ongoing operations.
The company, which we have followed closely in the past to determine if and when it will ship its product, seems to be shipping more machines today, even though it is losing heavily per unit. And now, with the disclosure of the company through WeFunder, we have a better idea of the company’s current sales volume and its overall financial picture.
Here’s what we learned:
Selling
The company sells a decent number of coffee machines. According to their disclosure, they had a revenue of $9.375 million in the calendar year of 2022, which means – at an average cost of $800 per machine – about 11,718 or more coffee machines were sold last year. The number is probably slightly lower as the company also makes money by selling coffee to its customers.
The company’s sales have been a significant step in its 2021 value when it has annual revenue of $4.1 million, and predicts sales of $13 million to $17 million in 2023.
Costs
The bad news about Spinn is that it is still losing a lot of money. According to the disclosure, Spinn had a net loss of $8.95 million in 2022, compared to a loss of $12.3 million in 2021. The company says it had a 22% margin in 2022, which is the amount left after the cost of equipment and related services. Where it gets into the deep red is about operating costs, resulting in 95% net income (which is obtained by dividing the profit or, in this case, the loss by the revenue). In short, by 2022, their total cost of doing business was almost double their annual revenue. In other words, the company would have to incur more than $18 million in all the same costs to break even.
According to the company, as of May of this year, their burn rate is 657 thousand dollars per month, which means about 7.9 million dollars per year.
Financing
With that kind of innovation rate, the company needs to keep a lot of cash on the books, something it’s been able to do over the past few years through a combination of equity financing and debt.
In 2021 the company raised two business rounds: $ 24 million (May 2021) and $ 12.5 million (October 2021). Last year, the company received $10.5 million in debt financing from Silicon Valley Bank and Triplepoint Capital. They also received an additional $2.85 million in SAFE financing, which is a type of convertible note that is later converted into equity.
But even though the company managed to raise a lot of money, it seems that the tar is starting to slow down. The company had about $1.3 million in cash as of May 2023, or about two months of cash to fund its current burn rate. This short runway makes the company’s latest fundraising efforts through WeFunder critical, and the good news is that they have raised nearly $3.55 million in small equity investments through the platform as of today.
The company says it’s also currently raising another $15 million round, of which it says it has $6-7 million “in the round,” meaning it has soft commitments from potential investors but hasn’t firmed up final terms or released a term sheet.
Some interesting data points:
- 11M+ transactions and 65,000 active users – I think the 65 thousand users are full user profiles and not machines for sale, but still, that’s a decent number.
- Ninety thousand bags of coffee sold & 120+ roasting partners – at about $20 a bag, that’s about $1.8 million (combined) in coffee sales.
So Will They?
That’s a big question. The company has some decent sales momentum, but continued sales demand is heavily dependent on continued spending on marketing and selling the machines at current price points of $800 – $999 per machine.
In order to achieve profitability, the company will need very high sales prices so that its gross profit can exceed its more fixed operating costs. Spinn executives think they can do it in 17 months or so, but to get there, they’ll need to raise enough new capital to fund their current burn rate.
Another problem is that they also have to pay their creditors in 2024. Unlike equity financing, corporate debt needs to be repaid on the due dates, which are March and August of the following year. If he can’t pay it back and fails to renegotiate new terms with creditors, banks can seize the company’s assets.
The bottom line is that it looks like the company is currently in a race to increase sales, which means its survival will depend almost entirely on how it does during the holiday season when the company does most of its business.
As a Spinn owner, I hope they can. I paid for my Spinn back in 2016 (finally delivered in 2020) because at the time, I felt that plastic based pod machines were the worst in the world, and grind and brew was the future of disposable home coffee. I still think so, and even though Spinn has a lot more competition today than it did back then, I still think that if it can scale its production and break even financially, it could be an interesting company to follow well into the future.
