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Investment Updates

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Investing in Upside: Financing to Help CPG Brands Grow

M13 is co-leading $10.5 million in seed funding for Upside, the future of financing for the CPG industry.
By Karl Alomar, Mark Grace

Last Updated: November 17, 2021

Published: November 16, 2021

Upside

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When we first connected with Nick Mares in early 2021, he was wrapping up his tenure as a co-founder at Kettle & Fire. Having lived the challenges of managing his company’s supply chain and associated cash flow, it was clear that he wanted his next step to involve helping CPG brands scale more easily.

The landscape of non-dilutive financing options for consumer brands has proliferated over the past few years, providing brands with financing avenues outside of traditional equity and debt structures. While a step in the right direction, Nick realized that these solutions were missing the mark. There were few available solutions for brands to finance one of their largest cost centers: their inventory.

What followed was a six-month sprint for Nick and his co-founders in setting up the vision and infrastructure for Upside Financing—the go-to CPG bank.

A new way for CPG brands to grow

Whereas we use one or two digital products for most use cases in our online lives (i.e., Netflix for content, Lyft and Uber for ridesharing), the physical product world is much more fragmented. In fact, small and medium brands comprise 45% of CPG sales. All the more, even with COVID-19 shifting much of commerce online, 85% of retail sales occur offline in brick and mortar channels.

Upside has focused on the relationship between CPG brands and their co-packers, of which there are 37,000 in the U.S. (a $75 billion industry). In solving the financial constraints between these stakeholders, Upside has created a win-win outcome that benefits all parties.

CPG brands have an inherent disadvantage in scaling relative to their digital peers. With inefficient working capital cycles, it is not uncommon for brands to owe payment on inventory purchase orders (POs) 60 days before they sell their goods. Add in the difficulty of accessing traditional loans and lines of credit, they often resort to raising excessively dilutive equity rounds to finance their growth. The challenges of setting up a new business have decreased—leading to the growth of long-tail CPG brands—but the costs of scaling still remain.

Upside solves this with an off-balance financial product that:

Affords CPG companies the needed time to convert inventory into cash. This gives brands significant breathing room to enjoy a negative cash conversion cycle and minimize their need for more expensive external investment, which in turn can be used to focus on growth initiatives (instead of inventory).

Allows co-packers to even out collections with their brands. This helps co-packers gain better insight into their own cash flows.

What we consistently found as we spoke to potential stakeholders on either side of these transactions was a core need and excitement for this offering. The market clearly needs this solution and that is evidenced by Upside’s early success right out of the gate. We couldn’t be more excited as Upside introduces this product to market.

A CPG entrepreneur by training, Nick understands this pain point deeply, and he has surrounded himself with an equally impressive team. His COO and CFO Co-founder Eric Boudreaux has experience in ops and manufacturing from his time at Nike, and CTO Co-founder Justin Tormey is an early-stage developer, most recently at Blockchain where he joined at the time of its Series A.

Fortunately for us, we have the opportunity to partner with Upside by co-leading $10.5 million in seed funding alongside our friends at Infinity Ventures. We are excited to join an amazing roster of investors that include Matrix Partners, Upper90, R-Squared Ventures, and Deep Lake Capital.

Nick, Eric, Justin, and the rest of the Upside team—welcome to the M13 family! We are looking forward to the road ahead.

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