Ditch the bag! Tea Drops raises $1.9m in seed round led by AccelFoods

By Elaine Watson contact

- Last updated on GMT

Tea Drops raises $1.9m in seed round led by AccelFoods

Related tags: Tea Drops

Tea Drops – which specializes in bagless, organic, pressed tea ‘drops’ that ‘disintegrate in your cup’ - has closed a $1.9m seed round led by New York-based early stage venture fund AccelFoods and supported by Halogen Ventures and Cue Ball Capital.

The brainchild of tea enthusiast Sashee Chandran, Tea Drops​ are finely ground tea leaves compressed into tablets that can be dropped into boiling water for a cup of tea. The tea disintegrates in the water, but as it is not 100% soluble like instant tea, some sediment is left in the bottom of the cup (as with matcha tea), which can be swallowed or left in the bottom of the cup.

Each ‘drop’ contains organic cane sugar, finely ground tea, and organic spices, dried fruit, rose petals or other natural ingredients, and is sold online and in around 1,600 bricks and mortar retailers from Wegmans and Publix to hundreds of independents.

I come from a really tea-centric household - My Mom is from China and my Dad is from Sri Lanka - and I love to drink loose leaf tea," ​Chandran told FoodNavigator-USA.

"Teabags are just not the same – you’re not getting the true flavor and aroma of loose leaf tea.

“So I’d be there at my desk at work with the kettle and the strainer waiting for my tea to steep for three to seven minutes and by the time it was ready I’d be off for my next meeting and I never had the time to really enjoy and savor the tea​,” said Chandran, a former eBay digital marketing executive who quit the day job in 2015 to focus full time on tea.

Sashee_ChandranFounder_CEO_Tea Drops
Sashee Chandran: “Our target consumer is that busy working Millennial female, a Mom on the go, that mostly shops online."

“I wanted something that was quicker and easier that would taste just like loose leaf tea, with no teabags and no fuss, without sacrificing quality, and that’s where the tea drops came in.”

The fun factor

As the surface area to volume ratio is greater (the leaves are finely ground), the tea steeps more quickly, added Chandran, who first packaged her drops in a wooden tea-chest-style box she designed herself and sold them online and in specialty stores.

But there’s also the fun factor. I wanted to make loose leaf tea accessible​. People were buying the gift boxes and then going into the website and buying in bulk ​[shoppers can buy 10, 20, 50, or 100 individually wrapped drops without the box]. Most of our customers are buying this way because this is a repeat purchase and something they are enjoying every day for that moment where they can have a pick me up. Tea is very ritualistic.

“Since them we’ve also developed compostable boxes that are more mainstream grocery retail-friendly with a more accessible price point. We want to be the household tea brand for the Millennial generation.

Our target consumer is that busy working Millennial female​, a Mom on the go, thatmostly shops online."

Tea-Drops-gifting

$1.9m cash injection

The $1.9m cash injection will be used to help the Los Angeles-based firm build its direct-to-consumer business, support its new functional Tea Sprinkles line – unsweetened, dissolvable organic tea and adaptogen powders - and launch new products, said Chandran.

“There’s a lot of capital involved in standing out in the tea category in mainstream grocery because it’s a low velocity category and there are lots of slotting fees and demos and so on," ​said Chandran.

"So we’ve really focused on gaining brand recognition in niche markets and online, so we've done well on [gifting/craft] platforms such as uncommongoods​ which is a high performing channel. We have a pretty diverse set of channels and multiple entry points for people. 

“But now we have the capital, we’ll pursue​ [the] grocery​ [channel] more aggressively in 2019 and 2020 and drive the Tea Sprinkles line, as there is so a real demand for more functional products that are about health but also about mood. I think the Sprinkles line could account for 30-40% of our business next year. There’s also a lot of potential in foodservice – whether it’s cafes or restaurants or offices.”

Aside from cash, lead investor AccelFoods​ – founded by two women: Jordan Gaspar and Lauren Jupiter - was able to provide advice about how to think more strategically about the business as well as offer operational and practical advice from people that have been there and done that, she said.

She added: “We’re a woman-owned business andI saw somewhere a statistic​ that female founders only got 2% of venture capital dollars in 2017 and that was egregious to me. It’s really important to me that the majority of this raise was from female investors or female led funds, as that’s the only way you can change the narrative.”

Tea Drops tea Sprinkles
Tea Sprinkles 'mood teas' include ingredients such as turmeric, ginger and matcha

Connecting the dots

The process of talking to investors – and taking part in endless pitch slams – helped her think more strategically, and know which numbers mattered, she said, but it also helped her think more about why she set up the business in the first place, said Chandran.

“It really helped me connect the dots. I started sharing more about this whole journey with my parents and found out my Dad was actually born on a tea estate in Sri Lanka. It surfaced so many things I didn’t know about my history and my parents’ history.”

"Having been early partners with Sashee since 2015, we couldn't be more excited to support her in this next phase of growth as she continues to disrupt the tea market​,” said AccelFoods investment professional Hannah McCain, who will join Tea Drops’ board of directors.

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