How a Beer Entrepreneur Found His Partner in a Family Office
Before Brian O’Connell founded Denver-based Renegade Brewing in 2011, he had a good job in stats analysis at the University of Colorado. He liked the people. “But I just wasn’t excited to go to work. I was spending all my free time on beer — making it, reading about it, going to home brew clubs.”
His lightbulb moment came when he skipped out on a conference in D.C. to drive to the Dogfish Head brewery in Delaware. “Now I was blowing off work to do beer stuff. It was a moment of realization.”
It took Brian two years to scrape together $350,000 from savings, friends, and family, but in 2011, he quit his job and Renegade Brewing opened in a 3,000 square foot facility. The name reflects Brian’s brewing philosophy. “Our slogan is ‘offensively delicious.’ Our beers are intentionally very flavorful. We don’t necessarily care if everybody likes them or not. It’s a take-it-or-leave-it attitude.”
The first year in business was slow enough to make Brian wonder if “leave it” might be the customer consensus, but things soon picked up. By 2015, Brian was looking for outside capital to help him execute on his growing vision. Eventually, he connected with Silver Fox Partners, a brand-new family office founded by former Xerox CEO/Chairman Anne Mulcahy. Silver Fox invested an undisclosed amount in the company in November 2017.
Silver Fox Principal Michael Mulcahy on the Initial Connection with Renegade
“For us, being a new family office, it was about at-bats — how many deals could we see to get a sense of what the marketplace is doing. Joining Axial made sense because we knew the network would help us figure out what kind of opportunities might be available in the lower middle market. Our team comes from more enterprise backgrounds across the board and Axial became our guide to finding partners we could work with. We initially narrowed our search on Axial to technology with a focus on business services and light manufacturing with a focus on consumer goods and food and beverage.
Reg McGaugh, a banker from Auctus Group, sent me a deal for a queso fresco factory in the Midwest. That was a larger business and it just didn’t feel like it was the right fit. I didn’t think we could add a ton of value given the dynamics of the space and the speciality food category.
I provided that feedback to Reg, and he called me right back and asked what we were looking for. I was able to give him not only the financial criteria but also the intangibles, what’s important to us in a business, why we’re looking to invest. He said he was working with a client in Denver, a craft brewing company in the super early stages, that he thought might be a good fit for us. He asked if I was interested and I said absolutely.
That ended up being Renegade. From a new family office perspective it definitely brought home the importance of having a thorough follow-up with brokers and intermediaries. I know not every family office — and I’m guilty of it too — is good about making sure that you have those conversations with folks even if the particular opportunity isn’t a good fit. But how fortunate that we took the time because it provided Silver Fox with an opportunity that I don’t think we would have seen otherwise.”
Looking Beyond the Bank
“Breweries in general are very capital intensive businesses,” says Brian. “When you’re making a $100,000 investment here and a $200,000 investment there, you can bootstrap things, take cash and put it back into the business. But the company started growing to a size where we needed half a million or million-dollar investments. That’s really hard to do through cash flow.”
In particular, Renegade was looking to expand their sales and marketing capabilities and make investments in advertising and branding. “A bank understands when you need steel. If you go out of business they can take the steel back and sell it to someone else. But it was difficult for banks to wrap their heads around the types of investments we were looking to make.”
Even before meeting Silver Fox, Brian had a feeling that a family office might be a better fit for his business than a traditional private equity firm. “I had no plans to exit. I built Renegade from the ground up and I wanted to work with someone who cared about it and could help me execute my vision in the long term. I didn’t want to go through a constant cycle of changing hands and trying to meet a new investor’s profit expectations.”
Connecting with the right investor wasn’t easy. Brian worked with two investment banks — “I met a lot of people who just weren’t the right fit” — before signing on with Auctus Group, a bank based in Chicago. Two months later, they introduced Brian to Silver Fox, a family office looking to make its first investment.
Silver Fox was immediately interested in the opportunity. They asked Auctus to set up a meeting, and within two weeks, the Silver Fox team was in Denver. “We’re big about not wasting anyone’s time,” says Michael Mulcahy, Principal at Silver Fox. “That early face-to-face meeting helped us get questions answered in a much more authentic way, and to see how Brian thinks and does business.”
Silver Fox wasn’t scared off by Renegade’s brash branding. “Listen, Renegade’s website says the beer is ‘f—ing delicious.’ That’s someone not every investor could get behind,” says Michael. “But we saw a core DNA to the company that was really strong and that with the right investments and attention and partnership we could amplify it to make a bigger, better company.”
Silver Fox offered a hands-on, collaborative approach. “We made really clear up front that we weren’t looking to take over his business, or just look for a preferred rate of return over a certain time period,” says Michael. “In my mother’s experience at Xerox and being on the board at Target, she’s gone through growth cycles. She knows the importance of maintaining open and direct dialogue with key suppliers. She understands how to think about a holistic marketing budget. In a more traditional PE setting, you may have an LP put someone in charge as a monitor for the business. In our case the person making the investment is also the person who’s going to sit in the room with you and make those tough choices on how best to deploy that capital to grow.”
The no-B.S. attitude and personal touch resonated with Brian. “When I met Silver Fox, they were immediately excited about the company and they had the right experience in the areas we were lacking. I was really excited to take advantage of their knowledge.”
But the moment that sealed the deal was when Silver Fox brought up Tap4Tap — a Renegade initiative where they donate one day of clean drinking water to a person in need for every gallon of beer they sell. “One of my fears with bringing on an investor was that they would only be about the bottom line. But Silver Fox said Tap4Tap was one of the reasons they were here and they wanted to make it a big part of the marketing strategy moving forward. At that point I thought, ‘These people get it. They’re here for the company, not just to make a dollar,’” says Brian.
The deal closed in late 2017. Since then, Silver Fox and the Renegade team have been working together to improve efficiency and operations.
“Right now, we’re focused on compiling an actionable data set and seeing where we can improve before we make too many big changes,” says Michael. “Trust takes a long time to build on both sides and we’re spending time doing that up front so that when we have to make choices, good or bad, we feel confident that everyone feels comfortable dissenting, agreeing, or offering other opinions.”
Redefining Brian’s role is another key project. “Prior to the investment, I was a one-man band,” says Brian. “Writing the production schedule, driving the forklift if I needed to, paying the bills, whatever needed to be done, I did it. Now we have a team in place to do those things. We’ve hired a controller and a director of marketing. We’ve promoted internally a director of sales and a director of brewing operations, and hired employees beneath both those people. My role is coordinating the team and setting up the structure of the business and getting things out of my head. The rest of what I’ve done is long-term planning and talking with Silver Fox about the opportunities out there, and the vision for Renegade down the road.”
Change management isn’t always easy. “I’ve been the leader of the company since day one. Sometimes you have to take ownership over things that we could have been doing a hell of a lot better, and say, ‘Alright, well, let’s start doing it better now.’” In addition to reckoning with his own role, Brian has had to help his employees understand the reasons for redistributing responsibilities and hiring new people. “Change is hard within an organization, and it can be challenging to make sure people understand the reason for change. But the upside is, you change something and you start to get the new process going and people start to say things like, ‘Wow, this is working a whole lot better. Or wow, that change really did improve the beer.’ People start to understand the reward.”