Tea Drops, a California-based startup that offers a line of bagless, dissolvable tea blends, has raised a $5 million series A funding led by BrandProject, with additional participations from its previous investors AF Ventures, Cue Ball Capital, and Halogen Ventures, as well as new investor Siddhi Capital.
This round brings the company’s total funding to $8.4 million, which is expected to help expand Tea Drops from its current direct-to-consumer model to an omni-channel business, according to BrandProject’s partner, Hayden Williams, who notes how their products provide a convenient way for people to enjoy freshly brewed tea instead of using traditional tea bags.
Siddhi Capital’s cofounder and General Partner Melissa Facchina, who recently invested in diary-free cheese dips brand LOCA Food, also stresses how tea deserves to share the “hero spotlight” with coffee, and how the Siddhi Capital team will primarily support Tea Drops on the operation side of its business.
“Because we’re a crew of deep operators within the CPG landscape, it’s critical for us to align with founders and management teams who are rooted in scalable foundations,” Facchina said, “Siddhi Capital simply knew that passing on this investment was not an option.”
‘Bath Bombs Of Tea’
Founder and CEO Sashee Chandran created Tea Drops in her own kitchen after realizing there has been little innovation in a category that’s projected to reach more than $13 billion in U.S. retail value, according to Statista, while tea has always been a staple in her Chinese and Sri Lankan household.
“We are thrilled to continue pushing the boundaries of tea innovation and further our mission as a self-care first experiential brand,” she said. “With this new round of capital, we’re bringing on an incredible first-class team of e-commerce and operational strategists in both BrandProject and Siddhi Capital.
“We are so grateful for the new partnerships and the continued support from our existing partners. Together, we are modernizing a sleepy category and making tea accessible and fun for all.”
Having already manufactured seven million product units in 2020, Tea Drops was named one of the fastest growing direct-to-consumer brands on Shopify with a 350% annual growth rate.
The company has also launched an unsweetened line through an exclusive retail partnership with Costco, and is expected to produce 10 million Tea Drops by the end of 2021.
Ramping Up Subscription Model
Tea Drops is a “strategic fit” for BrandProject, according to Williams, as it recently closed a $54 million fund that’s expected to further help the investment firm support online consumer businesses, especially those with a subscription component.
BrandProject has previously invested in personalized nutrition company Gainful — also an AF Ventures’ portfolio brand, Daily Harvest, and Freshly, which was acquired by Nestlé for $1.5 billion, and it expects to help Tea Drops ramp up its subscription service alongside other investors in this round.
However, Williams notes how not every consumer brand is suitable for a subscription platform to retain customers, “sometimes, it ends up annoying them, which is the most common reason for churn,” he explained.
“But tea is not just a habit; it’s a tradition that so many people have, and it brings friends and families together to enjoy, which makes it perfect for subscription,” Williams said.
“When you build a subscription business, you also want to build forecast consumption, and you don’t want to be a really heavy product that’s expensive to ship.”