Word-of-mouth and rosé gummy bears grew Sugarfina’s candy shop into a projected $50 million business.
This is the latest piece in a series about the nitty gritty of entrepreneurship, for which Moneyish asks tried-and-tested founders of successful startups how they got funded. Read more here.
This candymaker has never been shy about asking for a little sugar.
And that’s how luxe sweets shop Sugarfina, infamous for its rosé gummy bears that sold out in two hours last year with an 18,000-person waiting list, has pulled $50 million in total funding since launching with just $60,000 five years ago.
Sugarfina’s not afraid to put its mouth where its money is. “You’ve got to get over that shyness factor, and recognize that there’s people out there looking for exciting opportunities that they want to invest in,” Rosie O’Neill, 37, who co-founded Sugarfina with her now-husband Josh Resnick, 50, in 2012, told Moneyish.
“You’re not reaching out and asking them to do you a favor,” she added. “You’re reaching out and saying to them, ‘Hey – I have this exciting business opportunity. Would you like to be invested in it?’”
And even as Americans are cutting back on sweets, Sugarfina managed to sell shoppers on gourmet goodies like champagne gummy bears, tequila cordials and milk chocolate pearls for $8.50 to $20 a pack, perfectly presented in chic cubes and bento boxes tied off with ribbon that are just begging to be Instagrammed. Sugarfina made $25 million last year – and is on pace to hit $50 million this year.
“Josh and I were watching ‘Willy Wonka & the Chocolate Factory,’ and we had this brainstorm: Why is candy only targeted for kids? Where is the beautiful, high quality, high-end side of candy in the U.S.?” O’Neill said. “And even as people are getting healthier, the desire to treat yourself isn’t going away.”
So they kicked in $30,000 apiece from what O’Neill calls their “prior lives” – she was Mattel’s director of marketing for Barbie, and he launched a video game studio that was bought by Electronic Arts (EA) – which they used to fund their products, packaging and website.
They wanted to prove people would buy luxury candy before asking for outside investors. “It’s really hard to sell an idea,” said O’Neill. “You need to have something concrete that people can react to, and see that there is a market for this – that people really will buy this service and this product. Sell your product at the local farmer’s market, do a pop-up at a fashion trade show, whatever your idea is, find that early opportunity to get it out there.”
And Sugarfina was an instant success. O’Neill recalls one customer who received a box of candy as a gift – and then put in his own order of 100 boxes to give as holiday gifts. (In fact, gifts make up two-thirds of their sales today.) Then Facebook tapped them to be a featured brand in its new in-app gift service alongside Apple and Starbucks. “We still to this day have not done a marketing campaign,” said O’Neill. “We do a lot of social media and we have a lot of press just come out of the interesting product launches we do.”
Those buzzworthy goodies include the Whispering Angel rosé gummy bears. Sugarfina is hungry to recapture that viral success with their Pressed Juicery green juice gummy bears – “the most L.A. thing, ever,” O’Neill laughed – and new candies and chocolates infused with Casamigos, the tequila brand that George Clooney sold for $1 billion in July.
Sugarfina has opened 24 freestanding stores across the globe, including the Westfield Westfield World Trade Center mall in Manhattan and the Prudential Center in Boston, and their chic confections are also sold inside Nordstrom, Neiman Marcus, Bloomingdale’s, Saks Fifth Avenue and Sur La Table boutiques, and on ShopBop.com and PaperSource.com. Celebrity sweet tooths such as Oprah, Chrissy Teigen, Leonardo DiCaprio and Justin Bieber are regular customers.
Sugarfina started its first seed round for outside investors in mid-2014, about a year and a half after they launched, and did a series A round last year, and took in $15 million because they asked everyone, everywhere.
“Josh and I are in the class of entrepreneurs who are always selling – not in an annoying way, but you never know who could become a future partner,” O’Neill said. Many investors were customers, friends, family and former colleagues, but they also tapped people that they worked with, like their head of real estate. They had four or five investors who gave hundreds of thousands of dollars, as well as individual contributions of $25,000.
“You have to go pretty broad to get the resources that you are looking for,” she said. “Stay in touch with people that you worked with in your ‘prior life,’ and constantly explain what you’re doing, and ask if they know anyone who would be interested in investing in it.”
They go to four or five trade shows a year, where brands present their products and share their stories, to scout for new investors. “Those conferences are a nice forum where we’re able to keep potential partners updated on our story and what we’re working on,” she said. “Try setting up meetings around the conventions – ‘hey, let’s grab coffee, I’d love to update you guys on what we’re working on’ – to keep that conversation going.”
That’s how they just roped in that huge $35 million investment from Great Hill – by keeping the firm posted with their progress over the past few years. “We started talking to them a couple of years ago, when we were still way too small for them [to invest in],” said O’Neill. “And we kept in touch with them all of the time, so when this Series B round came around, we were the right size for them, and now we had a great relationship with them.”
This new windfall is going to continue building their e-commerce and mobile channels, as well as expanding their retail presence into the Middle East and Asia. They’re opening 10 to 12 more stores by the end of the year.
“It’s really hard to raise money when you can’t show that you have a marketing opportunity,” O’Neill added. “We have been fortunate that we can say, ‘Hey, we launched with very little funding, and we’ve grown to this size based solely on word-of-mouth,’ and that was something really intriguing to investors.”
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