Tuesday, May 2, 2017
Matthew Teachey and James Frederick, both students in Virginia Commonwealth University’s Master of Product Innovation Program, strode onto a stage before a crowd of Richmond entrepreneurs, investors and innovators. They had a simple question.
“So,” Teachey asked, “who likes beer?”
Teachey and Frederick are co-founders of Flight, a craft beer delivery service that is working directly with local breweries to deliver fresh nondistributed beer to homes and businesses in the Richmond region.
“For the brewers, we offer much higher margins and lower volume requirements than traditional distributors,” Teachey said. “And for consumers, we offer them access to beers only sold at the brewery and the convenience of having it brought directly to them.”
Flight was one of seven promising startups selected from 152 applicants to take part in VCU’s spring semester Pre-Accelerator Program, which provides a $5,000 stipend from VCU’s Quest for Innovation Fund to support the entrepreneurial endeavors of VCU students through a three-month experience focused on guiding them through the challenging early stages of launching a company.
Each of the seven startups in the program pitched their ventures before a panel of judges and the local entrepreneurship community at a Demo Day at the Gottwald Playhouse at the Dominion Arts Center that capped the semester-long program.
Flight, Frederick explained, is up and running and is focused on both business-to-consumer and business-to-business models.
“Our business-to-consumer model is based on a $10 delivery fee, delivered to homes around Richmond,” he said. “While our business-to-business model is based on a subscription where businesses get beer delivered to their offices on a regular basis, using this as an employee perk or maybe as a Friday happy hour. Our current logistics close weekly. So every Sunday, we close orders, then do deliveries Wednesday through Friday.”
Flight is currently delivering 32-ounce crowlers of beer (a crowler is a cross between a can and a growler) from Triple Crossing Brewing Co. and Final Gravity Brewing Co. Teachey and Frederick plan to add more Richmond brewery partners in the future and have ambitions to expand across Virginia and the country.
The Demo Day judges picked Flight as the “most viable” company that pitched, praising Teachey and Frederick for identifying a well-defined target market — craft beer lovers who can’t visit Richmond breweries as often as they might like — and for effectively navigating the tricky legal and regulatory issues to present what is a new and innovative business model.
The idea of a craft beer delivery service first hit Teachey a couple years back while he was working as an engineer in Bristol, Virginia.
“There was one brewery in town and I wondered, ‘Why can’t you get beer delivered like you can pretty much everything else?’” he said. “Everybody I mentioned it to was like, ‘Yeah, that’d be awesome.’”
When he enrolled in the master’s degree program at the da Vinci Center — a collaboration of VCU’s schools of the Arts, Business, Engineering and College of Humanities and Sciences — Teachey met Frederick, and they would get together with a few other classmates each week at Triple Crossing Brewing.
“I mentioned the idea of a craft beer delivery service to the owner, just because we were there all the time, and he was like, ‘That’s an awesome idea but I’m pretty sure it’s not legal,’” Teachey said.
We’re big into trying new things, flipping old models, challenging the norm, and this idea of theirs was exactly that.
“We like to help out VCU students since I was a VCU MBA grad myself, so we definitely didn’t have an issue engaging with them in the first place,” said Adam Worcester, co-owner of Triple Crossing. “When I finally had time to sit down and chat with Matt, I loved his idea. We’re big into trying new things, flipping old models, challenging the norm, and this idea of theirs was exactly that. Most people they talked to just said, ‘No, we don’t want to do it, that can’t be legal.’ I said the same thing to Matt, but also wanted him to tell me how he planned to do it. Once he explained how simple it was I was totally sold on the idea.”
Not long after, Carrie Roth, president and CEO of the Virginia Biotechnology Research Park, gave a talk to the Master of Product Innovation students at the da Vinci Center. She mentioned she helped write Senate Bill 604, which was signed into law in 2012 and made it legal for more Virginia breweries to sell beer for on-premises consumption and in closed containers for off-premises consumption.
Teachey asked Roth if she could put him in touch with anyone at Virginia ABC to discuss the legal issues surrounding craft beer delivery. She hooked him up with ABC officials, who explained they could deliver a brewery’s beer under that brewery’s off-premises license and delivery permit as an authorized agent.
“We’ve worked with ABC since the very beginning to make sure we’re in compliance and make sure we’re not breaking any laws,” Frederick said.
With the legal issues sorted out, Teachey and Frederick decided to pursue the idea of launching Flight as their capstone project for the Master of Product Innovation Program.
The idea seemed to have a great deal of potential, given that the craft beer industry is exploding in Richmond and across the country.
“Craft beer is huge,” Teachey said. “Last year alone, an average of two breweries opened every day. I think we’re almost to 5,000 in the United States. We’re over 150 in Virginia — and, just in 2012, there were around 50 in the state.”
To make it work, however, the team knew the economics would need to make sense for the breweries. So last fall, Teachey and Frederick visited nearly every brewery in the Richmond area to conduct interviews.
“Part of the reason all of these breweries have been able to open is because they can sell beer out of their taproom where they make high margins on everything,” Teachey said. “If you buy a beer from a local restaurant and you pay $6, then the brewery may see 50 cents of that. If you buy a beer from the brewery and you pay $6, they see $6.”
The opportunity, they found, was in delivering beer that is only available at the breweries, with all of the money for the beer going back to the brewery and the delivery fee going to Flight. And by only delivering nondistributed beers — beers unavailable at grocery stores — they would not risk cutting into the distributors’ business.
“The breweries told us they make [the most] money in the taproom,” Teachey said. “So what we’re able to offer to them is that they can reach a larger market that isn’t able to make it into the brewery, while still making those high margins as if they’d been sold out of the taproom.”
In October, Flight began doing deliveries. For the next two months, the team made five deliveries, fine-tuning the business model and logistics.
“We had one partner brewery — Triple Crossing — and one geographic location — Midlothian,” Frederick said. “We did about $2,000 in revenue. And, over that time, we figured out what our logistics should look like and what our business model should be.”
In December, Teachey and Frederick were selected to take part in VCU’s Pre-Accelerator Program, which had supported in its first three cohorts 22 teams that had collectively raised $1.5 million in revenue, investments and grants and created 31 full- and part-time jobs.
The program is part of Venture Creation University, VCU’s strategy for creating entrepreneurial pathways for all students interested in launching a company or exploring an innovative idea.
“You can think of VCU’s entrepreneurial programs like a funnel. Our programs range from those focused on initial ideation — proposing innovative solutions to existing problems; to validation — testing ideas to see if they represent valid opportunities; through to acceleration — supporting development of a viable business opportunity. Depending on where a student is with an idea, they can create their own pathway,” said Nicky Monk, director of VCU Innovation Economy. “The Pre-Accelerator Program is at the tip of that funnel. It provides hands-on, structured support for students who have viable businesses or business ideas that they want to take to the next level.”
The Pre-Accelerator Program involves weekly group discussions and biweekly sessions with local entrepreneurs and innovators who serve as mentors.
For the first month, the program focuses on customer validation, ensuring that each startup understands the specific problem they’re attempting to solve, and that their company or product would solve that problem.
As part of this process, Teachey and Frederick visited Triple Crossing’s taproom early in the semester to talk with customers about the idea of a craft beer delivery service.
Steve Colvin, a Stuarts Draft, Virginia, resident who was visiting Richmond for work, told the Flight team that he would be interested in having beer delivered, but only if it was something new and interesting.
Venture Creation University
Venture Creation University is VCU's strategy for ensuring all students are exposed to innovation and entrepreneurship and have access to entrepreneurial pathways. To find out more about this effort, and to learn about innovation and entrepreneurial programs offered at VCU, visit entrepreneurship.vcu.edu.
“I would probably subscribe if there was a rotating tap list of beers that were harder to get,” he said. “But it’d have to be something different than what you can pick up down at the 7-Eleven on the corner.”
As Frederick took notes, Teachey asked a slate of questions meant to better understand their target market.
“So if you subscribed, and you paid to get three beers every week or every month or whatever it is, would you want to have those beers selected for you or would you want to choose from a rotating list of options?” Teachey asked.
“For me, I’m all over the place,” Colvin replied. “There’s not really a kind of beer that I won’t drink or won’t try. I make my own, so I like to learn all the different styles. So I would be up for whatever is new and exciting. I wouldn’t want it to be too consistent. And I wouldn’t want to think too much about it after a while — I’d like to just be excited about whatever showed up.”
During the program’s first phase, one of the program’s mentors, Nathaniel Marcus, founder of OccasionGenius, an online platform for people planning special events, gave the team valuable advice on how to find and sign up new customers.
“Flight is a great idea with incredible potential and great timing,” Marcus said. “The market size of craft beer has never been so big, and today’s generation is more used to convenience and home delivery.”
Just ‘go out and do it’
The second part of the Pre-Accelerator Program is focused on prototype development.
“They’re still doing customer discovery and customer validation, but now we say, ‘OK let’s build, let’s make sure you have something to test.’” Monk said. “We help them develop [the startup’s service or product] so that they can go out and show [it] to customers that they’ve been talking to and get feedback: ‘Is this the product that you’re looking for? Does it solve the problem? Do we need to iterate?’”
For Flight, that process involved exploring different delivery models.
“The way to prototype a service is to go out and do it. So that meant doing deliveries to homes, going to offices and doing a subscription. And then seeing how it works. We ended up nixing the subscriptions, at least temporarily, because it didn’t make sense [since] the crowlers are changing all the time and our current software doesn’t let us modify the subscribed products,” Teachey said one day in March after a visit to a Richmond business where he delivered crowlers of Triple Crossing’s Paranoid Aledroid pale ale and Oat Pale Ale, along with a couple Flight glasses.
“We got to the point where we just started trying stuff out,” he said. “It’s really easy to understand the logistics once you just start doing it. For example, we could see that it doesn’t make sense to deliver one [crowler pack] to Midlothian 20 miles away, and then have to go all the way to Mechanicsville to deliver another.”
The team also worked to refine Flight’s business models to more clearly meet what the customers want.
“This program, I think, has helped them most by helping them validate their business model. That was something they were on the path to doing when they came in, but we were able to help them accelerate that process,” said V. Lacy Spott, the VCU Innovation Economy administrative lead working with Flight. “There’s an element of their business model that they’re making accessible beers that aren’t available anywhere but at the breweries. They’ve done a great job of hammering out that value proposition to their target customer.”
‘5,000 Marks in Richmond’
The third and final phase of the program aims to hone each company’s pitch, culminating in the Demo Day event.
“[For the pitch lab], they’re still working on developing prototypes and doing customer validation, but in the weekly sessions we really focus on helping them pitch their business,” Monk said. “How to deliver a very short, succinct story about what the problem is, how they’re solving it, who else is in the market, why they’re better and why their business model is viable.”
At Demo Day, the team described their target hypothetical customer, who they called Mark, a 35-year-old father of two young children in the Richmond area.
“Like a lot of Richmonders, he loves craft beer. However, being a new dad means he’s not able to travel to breweries as often as he’d like,” Teachey said. “By the end of this year, there will be 26 breweries and cideries open in the Richmond area. That translates to well over 200 locally manufactured beers on tap at any given time. The majority of which never reach distribution, meaning that Mark may never get to try many of the beers made in his hometown.”
Flight, however, will make those beers more accessible, they said.
“In Richmond, there are about 170,000 craft beer drinkers. This equates to about a $92.1 million a year market,” Frederick said. “There are about 5,000 Marks in Richmond — that equates to a $2.7 million a year market.”
The Demo Day judges — Eric Edwards, chief medical officer and vice president of research and development for pharmaceutical company Kaléo; Joanna Pheil, program manager at Richmond startup accelerator program Lighthouse Labs; and Roth of the Virginia Biotechnology Research Park — asked the team a few questions about Flight, including: What was the biggest lesson learned from piloting the idea of craft beer delivery in Richmond?
“The big thing was learning what our consumers want but also what the breweries want,” Teachey said. “We [learned] what was popular, and that was what was only available at the breweries, so that shaped our approach. We found that not only does that make the consumers happy, it also make distributors happy and the breweries happy.”
Worcester of Triple Crossing Brewing agreed, saying Flight could boost local breweries.
“I think their model of helping small breweries like Final Gravity and Triple Crossing get their beer out to a wider market is a really solid business idea and could be huge as a franchised business across several states,” he said. “There’s a lot of competition now, especially with the news that Amazon Prime will deliver beer, but small breweries like us don’t have the infrastructure (or excess beer) to do something huge like that. So a provider like Flight is great to assist us in spreading the word about our beer to people who may not be able to get out and make the trip as often as they’d like.”
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