RateBeer's Confusing Partnership with ZX Ventures
So, as you may have heard, RateBeer has sold a minority interest to ABInBev's “global disruptive growth group,” ZX Ventures.That's where the usual craziness for company acquisitions in the beer industry ends. This one gets better as you dig deep.Good Beer Hunting initially broke the surprisingly old story, which they came upon while investigating a story on beer data. In a surprising revelation, they found a post on LinkedIn where a product manager of ZX mentioned a merger with RateBeer. I won't even get into how shady it seems that GBH keeps breaking all of the ABI stories. (GBH guys, either you've got your finger on a different pulse than anyone else, or you're just that good. Good on you either way.)Author's note: GBH does get hounded on social media all the time about their purported connections to ABI—they give as good as they get—but since I don't know any more than you do, I'll just leave it at that.Something about this merger/minority acquisition/investment seemed amiss. So I dug into things a little bit.I pulled the LLC registration from the California Secretary of State website, I could see Joseph Tucker initially registered the LLC in 2005, with a few amendments of the address over the years, but a line item stuck out like a sore thumb. There's a conversion dated October 21, 2017.Converting the existing California-based RateBeer LLC to a foreign LLC based in Delaware (Foreign refers to a state other than California, not another country) seemed odd for a company only selling a minority stake to an investor.Down the rabbit hole we go.If Good Beer Hunting's timeline holds true, that would put the ZX minority purchase right around the time they were granted the conversion. In the second page of the application for a foreign entity, it appears RateBeer LLC was formed on October 14, 2017 in Delaware.So why would a small company who just sold a minority investment go to all the trouble of registering a new LLC, converting their existing LLC, instead of just keeping their previous registration since 2005? What other powers were at play? And why did RateBeer wait so long to announce, if it indeed was just a minority investment? Could "minority" really mean 49%?So many questions...If you look at how Delaware treats their corporation registrations, a possible answer emerges. Delaware protects the stakeholders in each corporation more than other states do, not charging income tax for companies who do business outside Delaware. According to Harvard Business Services Inc, "More than 65 percent of all Fortune 500 companies and more than half of all U.S. publicly-traded companies are incorporated in the state of Delaware." A quick search for "Anheuser Busch" results in dozens of corporations registered in Delaware, including Anheuser Busch InBev USA. ZX Ventures is also registered in Delaware, but headquartered in NY. If RateBeer were looking to keep stakeholders somewhat ambiguous and lower the company taxes, it could do so by registering in Delaware. I could be dead wrong, but it is certainly interesting they've gone this direction.So ambiguous corporate registrations aside, why would ABI ultimately want RateBeer? My hypothesis: Big Data.It could be why they waited so long to say anything at all.Look at how the industry has reacted to previous ABI investments, not to mention their outright acquisitions. Homebrewers even didn't take kindly to news that Northern Brewer/Midwest Supplies was now ABI owned, so it's not unfounded that a large community of faithful beer reviewers would react negatively, ultimately throwing off the engagement and big data that RateBeer could offer ABI. According to GBH, the wait was to help "prove the value of the partnership" and not to deceive users, but I'm not sure if they accomplished that. RateBeer claims to have 20k unique visitors every day, so they have to be gathering staggering amounts of data about who visits. Maybe they couldn't keep up, so they brought in ZX?Caution: speculation ahead.In years to come, ABI could use the data from RateBeer to inform their brewery purchasing decisions based on factors they've mined from RateBeer. Again, this is just speculation, but if I can dream it, they probably already have.So where does this leave us? Honestly, I don't know. If ABI is truly gathering tons of big data to ram their High End products down our throats, we suggest doing what the New Yorker says:
Upon encountering a piece of information, in any form, ask, “Who is telling me this? How does he or she know it? What is he or she trying to sell me?”
When a major corporation known for making value-adding acquisitions buys into a company with a product more intangible than not and presumably relocates the LLC to a tax haven state, it makes me wary of what's to come. We shall see what comes of this partnership.