Spinn, the maker of a grind and brew coffee machine that uses centrifugal force to extract brewed coffee, is currently raising money via Wefunder to fund ongoing operations.
The company, which we followed closely in the past to determine when and if they’d finally ship their product, looks like it’s shipping lots of machines nowadays, albeit at a fairly significant loss per unit. And now, with the company’s disclosures via WeFunder, we have a pretty good idea of the company’s current sales volume and its overall financial picture.
Here is some of what we learned:
The company sells a decent number of coffee machines. According to their disclosure, they had revenue of $9.375 million in the calendar year 2022, which translates – at an assumed $800 per machine – about 11,718 or so coffee machines sold last year. The number is probably slightly lower since the company also makes revenue selling coffee to its customers.
The company’s sales were a significant leap over its 2021 number when it had annual revenue of $4.1 million, and it forecasts $13 to $17 million in sales in 2023.
The bad news for Spinn is it is still losing a lot of money. According to the disclosure, Spinn had a net loss of $8.95 million in 2022, compared to a loss of $12.3 million in 2021. The company says it had a 22% gross margin in 2022, which is the total left over after the cost of the machines and related services. Where it’s going deep into the red is with the operating expenses, which led to a negative 95% net margin (derived by dividing the profit or, in this case, loss by revenue). In short, in 2022, their total cost of doing business was almost twice as much as their annual revenue. In other words, the company would have needed to make over $18 million in revenue on the same overall expenses to break even.
According to the company, as of May of this year, their burn rate is currently $657 thousand per month, which translates to about $7.9 million annually.
With that kind of burn rate, the company needs to keep lots of cash on the books, something it has managed to do for the last couple of years via a mix of venture funding and debt.
In 2021 the company raised two venture rounds: $24 million (May 2021) and $12.5 million (October 2021). Last year, the company secured $10.5 million in debt financing from Silicon Valley Bank and Triplepoint Capital. They also secured an additional $2.85 million in SAFE financing, a form of convertible note that is later converted to equity.
But while the company has managed to raise a lot of money, it looks like the till is starting to get a little low. The company had about $1.3 million cash on hand as of May 2023, or roughly two months of money to fund its current burn rate. This short runway makes the company’s recent efforts to raise via WeFunder critical, and the good news is they have raised about $3.55 million via small equity investments via the platform as of today.
The company says they are also currently raising another venture round of $15 million, of which they claim that they have $6-$7 million “soft-circled,” which means they have that much in soft commitments from potential investors but have yet to nail down final terms or issue a term sheet.
Other Interesting Data Points:
- 11M+ servings made & 65,000 active users – I assume the 65 thousand users are total user profiles and not machines sold, but still, that’s a decent number.
- Ninety thousand bags of coffee sold & 120+ local roasting partners – at about $20 a bag, that’s about $1.8 million (cumulative) in coffee sales.
So Will They Make It?
That’s the big question. The company has some decent sales momentum, but ongoing sales demand depends heavily on continued spending on marketing and selling machines at or below their current price points of $800 – $999 per machine.
To reach profitability, the company will need significantly higher sales volumes so its accumulated gross margin can overtake its somewhat more fixed operating expenses. Spinn’s management thinks they can do it in 17 or so months, but to get there, they’ll need to raise enough new financing to fund their ongoing burn rate in the meantime.
Another complication is they also have to pay back their lenders in 2024. Unlike equity funding, the company’s debt requires that it be paid back by the maturity dates, which are March and August of next year. If they can’t pay it back and fail to renegotiate new terms with the lenders, the banks can seize the company’s assets.
The bottom line is it looks like the company is currently in a race against the clock to ramp up sales, which means its survival will depend almost entirely on how they do this holiday season when the company does the bulk of its business.
As a Spinn owner, I hope they can make it. I paid for my Spinn way back in 2016 (it was finally delivered in 2020) because back then, I felt plastic-based pod machines were pretty horrible for the planet, and grind and brew was the future of single-serve home coffee. I still think that, and while Spinn has a lot more competition nowadays than it did back then, I still think if it can scale its manufacturing and get over the financial hump, it could be an interesting company to follow well into the future.