Liquid Death is just one of many VC-backed beverage startups ready to disrupt Coke and Pepsi


On March 11, a fizzy startup announced that it had raised $67 million at a $1.4 billion valuation and reached $263 million in sales in 2023. Did you guess that this startup is Liquid Death, a canned water company?

Liquid Death has now raised more than $267 million in venture funding despite sitting in a category that doesn’t interest many investors. Beverage is a tough industry for VCs because it’s capital intensive; requires a knack for picking companies that will sell well on retail shelves or other direct-to-consumer methods; and inspires repeat customers as opposed to just one time.

Science Ventures’ managing director, Michael Jones, told TechCrunch that his firm wasn’t interested in getting active in the beverage sector but backed Liquid Death because of its potential to disrupt legacy players like Pepsi and Coke.

“We were in the market for culturally relevant companies with better-for-you products that redefined a tired and old category,” Jones said. His investing team considered Liquid Death to be “a super disruptive brand.”

Cutting through the fizz

Some of the new venture-backed beverage startups are hoping to upend the industry by creating new drink categories. This is akin to what technology companies often do, said Dan Buckstaff, chief marketing officer for retailer data company Spins.

“You may think you can’t squeeze another category in here, but instead you approach it differently,” Buckstaff said. “You take inspiration from others or maybe there’s a new technology that allows you to do it, or data, that does lead to companies that can create hundreds of millions in ARR.”

He said Liquid Death drew from beer’s marketing and shelf placement to find success not only on grocery store shelves, but also at events, bars and restaurants — even at conferences. Liquid Death could not be reached for comment by press time. In fact, while at the consumer packaged goods conference Expo West recently, Buckstaff hosted a Liquid Death party, and his room ended up looking like “we had a real binge.”

He took an informal poll from people who attended asking how often they ordered beer or wine just to be thought of as social. Half of them said they did. That made him realize the enormous possible market for companies like Liquid Death that have alcohol-inspired brand names and packaging but are healthier alternatives.

“For those people, these non-alcoholic brands are well-positioned for that, and there is a massive potential,” Buckstaff said. “And not just at a social event, but just at home — people kicking back and having a beer. Instead, there’s a lot of alternatives now with mood setters or relaxers.”

Not Beer is one of those taking a nod from these early companies. Founder Dillon Dandurand is bootstrapping the new company, which is making a premium sparkling water brand launching April 9. He said his brand was created for consumers opting to drink less alcohol.

“Gen Z drinks less than any of the generations before them,” he said. “These people still want to have fun, but they are realizing they don’t need to drink alcohol to have fun or they don’t need to drink as much alcohol to have fun. In fact, getting a nice buzz but not getting wasted is probably more fun.”

Getting in front of the noise can be tough, though. There are two attributes that consumers care about, which presents an opportunity to set a brand apart from the competition, according to Dandurand: taste and the brand.

With so many options out there, brands have to sell on why their drink is better than a similar one in the category, and also sell why the drink is better than another category.

“That is a tough battle,” Dandurand said.

Who else is popping?

Water isn’t the only category attracting startups and VC cash, often from celebrity angel investors. Drinks that feature vitamins, minerals, supplements and botanicals are also a burgeoning area.

For example, companies like Odyssey, which raised $6 million in venture capital in February from an investor group that includes Richard Laver from Lucky Beverage Group. The company is infusing into its drinks lion’s mane and cordyceps mushrooms, known for their cognitive clarity and increased energy effects.

Other beverage startups attracting VC dollars include better-for-you soda startups like Olipop (backed by Finn Capital Partners, Melitas Ventures, and celebrity angels like Camila Cabello) and Poppi, backed by Electric Feel Ventures, Rocana Ventures partners and angels. Each raised more than $50 million in venture funding. Healthy lemonade alternative Lemon Perfect has raised more than $70 million cash from a long list of VC firms, athletes and celebrities like Beyoncé.

Poppi — which has CAVU Consumer Partners and a bevy of celebrity investors, like Russell Westbrook from the LA Clippers, the Chainsmokers, Olivia Munn and Nicole Scherzinger — has grabbed about 19% of the beverage market share since launching about four years ago. Forbes reports that is 1.5x higher than Coke. It also rose to be the 11th fastest-growing beverage brand in the last month, besting brands like Monster Energy, Gatorade and Liquid Death.

The brand is seeing success from “strategic marketing to become a part of culture, with an active and loyal following” and “filling a gap in the industry by providing a delicious better-for-you option,” Poppi CEO Chris Hall told TechCrunch via email.

VCs are chasing some of this category’s blockbuster returns. Coca-Cola bought celebrity-sponsored coconut vitamin water BodyArmor for $5.6 billion in 2021. BodyArmor had raised $36 million in venture capital. Back in 2016 Bai, maker of drinks infused with antioxidants, sold to Dr Pepper Snapple Group for $1.7 billion after raising a little more than $10 million in venture capital. Smaller deals happen, too. In April 2023, NextFoods bought tart cherry beverage Cheribundi for an undisclosed sum after a $15 million investment round in 2020 led by Emil Capital Partners, Food Dive reported.

While these startups make great acquisition targets because legacy companies often prefer to buy versus developing new products of their own, some may do well on the public market, Alex Malamatinas, founder and managing partner at food and beverage-focused Melitas Ventures, said.

“Obviously what is happening in tech and AI is amazing, [but] at the end of the day, everybody needs to eat and drink every day, they are very large markets with significant TAM,” Malamatinas said. “Despite everything that has been going on, the best performing stock [over the last 30 years] is Monster beverage, not a tech stock.”

That’s a bit of hyperbole. Monster is up about 16% over the last 12 months at a respectable $63 billion in market cap, while the most valuable companies in the world are Microsoft, Apple and Nvidia, each worth multiple trillion. But the point that its market cap is higher than many tech companies is valid. For instance, only 7 out 100 companies on Bessemer’s Cloud Index are more valuable.

New innovation cycle for beverages

Buckstaff also noticed the food industry’s largest trade show, Expo West, booming with more new exhibitors. “It leads me to believe that maybe we’ve entered a new innovation cycle,” he said.

Jeff Klineman, editor-in-chief of food and beverage-oriented media company BevNET, certainly thinks so. Beverage startups remaining resilient despite a tougher fundraising market is a story of “haves and have-nots,” Klineman told TechCrunch via email.

“In the past couple of years funds have had more trouble raising, strategics have cooled off their acquisition plans and lending has been tighter,” Klineman said. “CPG funds have been deploying more slowly while there’s more competition for brands that are actually growing and doing well.”

Though, beverage startups are having their difficulties fundraising in the touch VC environment as well. For those that haven’t hit “the sweet spot” of consumers making repeat purchases, that aren’t seeing channel expansion, or that are showing a path to profitability, the market is challenging, Klineman said.

For investors, figuring out which brands will last and which ones just play into a fad is hard, Malamatinas said. He cited the trend of CBD beverages a few years ago that temporarily blew up but has been much quieter since. The firm avoided them, he said, probably thankfully so, as the research on whether low-dose CBD beverages work is mixed.

“There are going to be several big outcomes in the years to come,” Malamatinas said. “I think the main reason people shy away from the space is it requires a certain level of expertise. We have experienced operators. There is a certain level of know-how and skills for these businesses to scale.”

For investors willing to put in the work and the time to find those long-lasting brands, the category looks likely to produce strong returns. It worked with Bai. Olipop and Liquid Death seem well on their way. Now let’s see who’s next.

This piece has been updated and corrected to show that Russell Westbrook is with the LA Clippers, not the Chainsmokers. 


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