A fast-growing CBD startup has secured fresh capital from investors.
Louisville-based Cornbread Hemp, one of KY Inno's Startups to Watch in 2022, closed on nearly $1.7 million in new funding, according to a recent Form D filing.
Jim Higdon, co-founder and chief communications officer, said the company also will seek a little over $300,000 via a new Wefunder campaign to bring its total seed raise to $2 million. It is raising that capital at a pre-money valuation of nearly $10 million.
"We were only anticipating raising $1.5 million, but at Render Capital's urging, we and our investors decided to oversubscribe to $2 million to allow the Wefunder community a chance to come on board," Higdon said in a recent interview.
As I previously reported, Cornbread Hemp, founded by Higdon and CEO Eric Zipperle in 2019, was the first Louisville-area startup to successfully raise on Wefunder. Regulation crowdfunding allows anyone, not just accredited investors, to invest in the company via a convertible note.
In 2020, Cornbread Hemp closed its last Wefunder campaign with nearly $400,000 from 900 investors in a pre-seed fundraising round. That note will convert with the completion of this latest capital raise.
In addition to Render Capital, local developer Gill Holland is another local investor in Cornbread Hemp. It also received $100,000 from an angel investor prior to this most recent raise.
Gregg Rochman is the lead investor in the current Wefunder campaign, contributing $6,500.
Cornbread Hemp more than doubled its net revenue last year, Higdon told me, growing from about $1.9 million to $5.5 million by the end of 2022. The company, which sells CBD products with the most hemp-derived THC allowed by federal law, brought in nearly $1 million in net revenue in November 2022 alone.
"It's Black Friday, and it's the only time of the year we do a buy-one-get-one-free sale," Higdon said. "A lot of the game is [acquiring] new customers all year long, meeting a whole bunch of new customers in November and then retaining those customers."
Higdon said Cornbread Hemp has strong customer retention rates. Of all supplement brands on Shopify, he said the company is in the top 25 percentile in customer reorders within 90 days, and within 180 days, its customer reorder rate is nearly 40%.
That's important because due to customer acquisition costs, Cornbread Hemp only breaks even on customer's first orders — it makes money by retaining those customers over time.
"By retaining those customers, it speaks to the quality of the product and our ability to communicate to customers in a way that benefits everyone as well," Higdon explained.
Cornbread Hemp started 2022 with about six employees and has grown that count to 30 employees, largely because the company acquired its Lexington, Kentucky-based production lab in October. It has a marketing and fulfillment office on Data Drive in East Louisville.
Team building will be a big focus for the company in 2023, Higdon said, due to the recent growth. Cornbread Hemp also intends to launch four new products this year, and hit a lot of expos, trade shows and events.
"We've gotten to a point now with our team size that we're not a flat hierarchy anymore and we've got people in spots," he said. "We're in our teenage years, in terms of company size, and we need to be really focused on how the body of the company grows this year in order to make sure that we're a healthy company once we're out of our teen years."
