Matt Kennedy, his brother, Sean, and their two cousins decided to launch Sibling Revelry Brewing after seeing a scarcity of craft breweries on Cleveland’s west side. Now, their family's burgeoning beer company is another successful business venture for its holding company, TruWest Cos.
“If we see an opportunity in the marketplace to develop a skilled business, we have the resources and knowledge to do it," says Kennedy, a founder of Sibling Revelry and managing member at TruWest (both based in Westlake).
In addition to its beer business, TruWest helps create value for subsidiaries including Technology Recovery Group, MRK Technologies, River Capital Finance and River SaaS Capital. The company grew 30 percent in 2017 and hired more than 50 people last year.
“We’re looking for industries that are ripe for innovation,” says Wendy Jarchow, chief investment officer at River SaaS Capital, a TruWest company. “We’re not here to run the businesses, but we’re here to add value beyond money.”
In this week’s Dealmaker Q&A, we spoke with Kennedy and Jarchow about how to identify promising investment opportunities and position them for growth.
Why own a beer company?
Kennedy: There is something about the brewery business that everyone can relate to. A lot of people like beer, like drinking beer and like to taste different kinds of beer. Being in the brewery business opens a lot of doors for communication and conversation, which is very unique. We didn’t just jump in and do it. We did our due diligence and did some competition prospecting, and we didn’t move forward until we were comfortable. It’s a business first, but you can still have a little fun doing it.
How do you evaluate investment opportunities?
Kennedy: We look at businesses we currently run and see what’s synergistic. What can we add to create additional value, not only from a financial perspective but also a sales, marketing and operational perspective? What might be a good bolt-on strategy? Is there a business we could start or acquire that we can bring our current expertise to and create value? What value can we bring to a business? If we can’t bring value, there’s not much use in getting involved.
Jarchow: When we look at companies that we potentially want to invest in, the key component or gating criteria is the management team. How cohesive are they? How structured are they? What sort of processes do they have in place? Do they understand their roadmap to growth? Do they understand some of the obstacles they might come across? Are they coachable?
One of the things we always caution companies that we work with is to think about the culture you’re developing. Start there when you’re thinking about key people to bring on, whether it’s management or support personnel.
What are some tips for managing your portfolio?
Kennedy: It’s something we grapple with a lot. At different times, you can have different challenges and sometimes they happen all at once. It’s really leaning on the people you hire to run the businesses and the people you have reporting up to those people and getting a good foundation of management in place. You need continuous training, leadership coaching and an effort to make sure they have the tools and resources to make decisions, the autonomy to make decisions and the ability to keep us informed. We have to lean on our people to run these businesses because there are only a certain number of hours in the day.
Jarchow: We are a capital provider, but we really strive to be relationship-based and partner-oriented. Are these people we want to get into business with? Then it’s crafting a loan that is really going to help them reach their next inflection point. For each of our portfolio borrowers, we work extensively to understand their historical financials and their road map going forward. How is the money we provide going to help them achieve not just everyday milestones in terms of the cash flow gap, but really help them to scale their businesses? Each one of those is unique in terms of how we’ve gotten to the end game.
How do you assess risk in a prospect?
Jarchow: It’s a matter of relying on your network and understanding who the subject matter experts are in those areas. And then, being able to ask questions and get really comfortable with the market that the company is studying. How can it displace existing entities in that market? Is there an opportunity for them to carve out a niche? You’re leaning on the network you’ve created to understand who can help and advise you to understand what an opportunity really looks like.
