GrapeStars is an e-commerce platform for celebrity wine. The business idea is both smart and somehow innovative. Where do you find not just any brand related to wine and spirits, but something more unique and exclusive? Specifically, where can you find celebrity wine? Thanks to GrapeStars, there’s now a mobile app for that. Does that mean you should invest in GrapeStars? Let’s take a look.
The Miami-based company’s goal is to allow enthusiasts to discover, rate and purchase celebrity wines. GrapeStars is available on both the App Store and on Google Play.
Now, if you want to invest in GrapeStars, you’re in luck. There is an active equity crowdfunding campaign on Republic. In fact, the startup’s minimum goal of $25,000 has already been reached — and even surpassed. GrapeStars has raised 215% of its initial fundraising goal. Celebrities can market and promote their wine and spirits to their followers, and there are more than 350 celebrity brands active on the platform. Through GrapeStars, these celebrities have the potential to reach over 1 billion people.
But what about management? The company was founded by brothers Jean-Jean Pelletier and Robert Pelletier, as well as their friends Stephan Fortier, Stefan Lindqvist and Charles-André Sauvé. GrapeStars has also formed several strategic alliances, with different companies and individuals including Kamal Hotchandani of Haute Living, Shareef Malnik of the Make-A-Wish Foundation and philanthropist Israel Kohn.
Invest in GrapeStars for the Market Potential
Investing is about analyzing the risks, the potential returns and making sound decisions based on facts. One of the most important factors to consider with any investment is its market potential. GrapeStars seeks to profit from three different industries — online retail, wine and celebrity endorsement. Studies have shown that celebrity endorsement affects consumers and that online brand discovery through celebrity endorsements is high for individuals between 16 and 34 years old.
In 2019, wine revenue in the U.S. came in at $47.9 billion for domestic wine. The market’s total revenue, including imported wine, came in at $72.4 billion. The wine market itself is a large business.
According to Kevin Harrington, chairman of the board and an original “shark” from Shark Tank, the prospects for GrapeStars seem good.
“Having navigated the direct-to-consumer business for quite some time, I am constantly on the hunt for true innovators in the space. GrapeStars is a company that is truly primed to disrupt a $240 billion industry and turn the celebrity marketing, endorsement and liquor industries on their heads. With direct-to-consumer liquor businesses on the rise and liquor sales up 400% due to the current landscape, GrapeStars could not hit the market at a better time.”
The Business Model
The business model is simple. GrapeStars wants to make it easier for fans to buy celebrity-endorsed brands online. This keeps consumers from wasting time to discover where these products are sold.
There are more than 200 brands from major celebrities including Ryan Reynolds, Brad Pitt, Matthew McConaughey, Sarah Jessica Parker and others. The GrapeStars application will make a 15% commission on products sold, and it expects to have $100 million in revenue in the next five years.
Now being a financial analyst, I love analyzing the numbers. Assume there are about 1 billion fans of these celebrities. Then, assume 1% of those fans use the GrapeStars app to place at least one order. And assume the average order value is $30. All together, the revenues for GrapeStars will be $45 million. With two orders per person, GrapeStars will almost reach its goal of $100 million.
Influencer marketing could work very well for sales.
What Are the Risks?
There are four main risks to consider if you are thinking about whether to invest in GrapeStars:
- There’s a limited operating history by which to evaluate the financial performance of the company.
- GrapeStars is not subject to Sarbanes-Oxley regulations and may lack the financial controls and procedures of public companies.
- Changes in government regulation could adversely impact the business.
- In a dissolution or bankruptcy of the company, purchasers will not be treated as priority debt holders and therefore are unlikely to recover any assets.
The greatest risk is that there is no guarantee of a return on an investment. This is clearly stated on the Republic page for GrapeStars’ equity crowdfunding campaign.
Should You Invest in GrapeStars?
The minimum investment is only $100. If you plan to invest this minimum amount, it should not be material to your finances, even if you lose the entire $100. Should you decide to invest more, the risks are high. This means you must evaluate the business plan and the idea.
GrapeStars seems promising, but private investing is risky, and you will have to commit capital for a long period. If the influencer marketing works well, then sales could indeed be promising. But these are only projections. Get well educated and informed about the equity crowdfunding risks before deciding to invest in GrapeStars.
As of this writing, Stavros Georgiadis did not hold a position in any of the aforementioned securities.
Investing through equity and real estate crowdfunding or asset tokenization requires a high degree of risk tolerance. Despite what individual companies may promise, there’s always the chance of losing a portion, or the entirety, of your investment. These risks include:
1) Greater chance of failure
2) Risk of fraudulent activity
3) Lack of liquidity
4) Economic downturns
5) Dearth of investor education
Read more: Private Investing Risks