Seth Goldman founded Honest Tea in 1998, targeting at the fast growing “ready to drink” tea market in US. He differentiated Honest Tea products from other bottled drinks by addressing its organic ingredients and healthy benefits. Give high-quality products and compelling brand image, over the past three years, both its bottle products and its whole leaf tea bags have been well welcomed by consumers. By end of summer 1998, Honest Tea had become the best –selling tea throughout the Fresh Fields chain and was accepted by several national supermarket chains and distributor. The growth in revenue in 1999 and 2000 further build Goldman’s confidence to aggressively enter into new market.
To achieve its success in the future, Honest Tea needs to build up a management team with right combination of sales experience and market creativity. It also needs to secure its production capability of meet the requirement of national expansion. Both of these as well as strength of its brand image nationally would require further financing.
The estimated financing is around $2m. This would cover: (i) operating loss, (ii) investment in new distribution channels, (iii) capital of hiring national sales force, and (iv) materials necessary for manufacturing.
In the past, Goldman and Nalebuff, with the shared concern that outside investor would have been a distraction, approached families and friends, consumers who expressed interests in growing the business, and later on a venture group for financing. We believe for the early stage Honest Tea, they were right investors to secure Honest Tea’s brand image.
The previous financings were structure with warrants issued by Honest Tea (Please refer to Exhibit 1 for details of structure and investor information). The nature of warrants that no real stock guaranteed and no dividends eligible have enabled Goldman to operate Honest Tea constantly