I worked at tech startups for the past 15 years — Drugstore, Allrecipes, nPost, and Blue Box Group to name a few. But last year, I opted to take on a different kind of startup: The capital-intensive manufacturing business of legally, legitimately making booze.
In 2008, the Washington State Legislature passed HB 2959 and, for the first time since prohibition, it was legal for craft distilleries to distill spirits and sell directly to the public. For the “craft” business license, at least 50 percent of source material must come from within our state’s borders (so you see a lot more wheat- and corn-based products like vodka and whiskey, as opposed to rums and mescals). As basic economics would predict, the market flooded with applications for craft and commercial distilleries, and there are now 85 and counting in Washington State.
But the question remains: Can a capital-intensive manufacturing business be a lean startup?
I believe so. Having been part of many lean startups and bootstrapped companies, here’s how:
2bar Spirits officially launched in October of 2012 with two products: 2bar Vodka and 2bar Moonshine. My goal from the beginning was to launch inexpensively, quickly, with great product!
This type of business is exceptionally capital intensive versus say an iPhone app. (Do you know the price of a ton of grain?)
But there are still key approaches that do favor the Lean Startup methodology.
For the first time in more than a decade, I’m making a physical product. As many entrepreneurs who have transitioned into hardware know, this is crazy different from software. However, just like in tech, my goal was to get a quality product to market as quickly as possible.
I started with a limited amount of capital, engineering efficiencies into every aspect of the manufacturing process and even the physical building.
While I was still conducting market research, I visited some of the first distilleries to open their doors. What I saw was gorgeous equipment: copper stills, stainless steel mash tons, and marble countertops in the tasting room. Our stills cost a fraction of what other distilleries are using, for the same production volume. They may not be as show-worthy, but their output is top notch.
Because of our physical setup, we can iterate quickly, improving on every batch that we make.
We collect all the data we can; from the temperature of the mash to the pH of the wash, every aspect of distillation, to the bottling and labeling of our products. Systematically capturing and analyzing this data has allowed us to increase production and ensure product quality.
We are tracking how one run did versus another, the flavor from one day to another, the consistency, and just about anything else we can think of. Our goal is not to simply collect data, but to collect data that can help us improve. We are investigating adding temperature, humidity and barometric sensors to our bourbon barrels so that we can correlate that with the final product.
By tracking every step and focusing on what that data means for us, we have been able to consistently improve the product and increase our production.
This is where we are pretty similar to a software startup. We can make a vodka and moonshine quickly and up to 365 times a year. Wineries on the other-hand only have one chance a year to make their different wines.
So, here’s what I’ve learned. The lean startup methodology works exceptionally well with product companies. The limiting factors are different, but the process is the same.
Not only that, but I get to make booze. How cool is that? With that I am off to make the next batch!
Nathan Kaiser is a former tech guy, who recently founded 2bar Spirits, a local craft distillery located in Seattle’s SODO neighborhood. 2bar, which makes Bourbon, Vodka and Moonshine, is dedicated to being 100 percent handmade from local grains. You call follow them on Twitter @2bar. The 2bar name comes from the Kaiser family ranch in South Texas, which has been in the family for five generations. Rumors of Moonshine on the ranch can still be heard.