How better financial decisions fueled 818 Tequila's hypergrowth

When most people think about a brand like 818 Tequila, they think of Kendall Jenner running flashy promos on social media, of crisp DTC branding, and in this very specific case, of some pretty damn good tequila. Nobody thinks about what’s behind the curtain. But maybe they should, because that’s where the real—and dizzyingly complex—magic happens.

The magician in question is Scott Clark, who leads finance at K5 Global: a venture capital firm that runs its own incubator. Now, if you went to his LinkedIn, you’d see VP of Finance and Operations. Which is true. But Scott isn’t the layman’s idea of a finance person, buried in Excel and writing SQL queries for 14 hours a day (not that there’s anything wrong with that).

Scott, who fell in love with startups while consulting decades ago for a 200-employee Facebook, is an operator at heart. “Half of my job is running a VC firm,” Scott said, “but the other half is running a studio. So now I get to work on finance at 10 different startups, instead of just being dedicated to one.”

And 818 Tequila is one of K5’s breakout success stories.

From the outside, you might think running finance for a company like 818 isn’t all that complicated. There are just a few SKUs—how hard could it be? As it turns out, the answer is very hard. “We have to make decisions fast,” Scott said, “and we have to answer a lot of specific questions.” Unfortunately, legacy finance tools failed in almost every regard.

Fighting with legacy finance tools at 818 Tequila

Finance, as Scott puts it, “makes every other function of the business successful.” And as a finance executive at K5, Scott’s job with early-stage startups is to build a financial engine that works—so everything else can. The process involves a movie montage-like series of work: rolling up his sleeves, opening a blank spreadsheet, starting from square one, and building the models and systems that will enable the business to scale profitably and efficiently.

With 818 in specific, finance basically involves understanding changes in revenue and cash. Scott was working backwards from answers to questions like:

1. How fast is inventory being depleted?
2. How much raw material do we have to purchase?
3. How much cash do we have left?

These seemingly simple questions became complex when Scott added the other dimensions 818 worked with: like size, distributor, and retailer location. At a basic level, it was about understanding which products were selling, how fast, and where, and how profit changed across those dimensions.

But when Scott tried to build out these models in existing software, implementation became a nightmare. “We don’t have a team of people that can spend 40 hours a week implementing a clunky system,” Scott said. “We have to move fast.” Most tools on the market weren’t designed for that, though—they required a heavy, unnecessary lift to set up.

Worse yet, building models proved nearly-impossible in the legacy software that Scott had been optimistic about before starting the project. “We couldn’t even get our models to work,” Scott said. The data coming in was in theory sufficient to answer all the questions 818 needed answered to stay profitable and increase margins, but the software they were using was not.

Going from 0 → Runway in a matter of weeks

Frustrated with what he was currently using, Scott dove headfirst into Runway.

Not only was he able to get up & running in weeks—much faster than any tool available—but he realized that he had a new kind of visibility into 818’s operations. “The forecast formulas that we were able to build, and way the drivers were put together, was so intuitive.” Scott was able to build out all the specific formulas he had been dying to build out before, and better yet, he was able to do it quickly—without having to spend 50+ hours a week in spreadsheets.

With reporting in Runway, Scott began getting answers to questions he “wished he had time to report on” before. “It became as easy as a couple of clicks to get insights about specific SKUs, distributors, and more.” In other software, Scott found building these kinds of models to be “almost impossible, or at minimum very time-consuming.”

Today, when 818 has a new product launch or a new SKU within their inventory, the model is “so much quicker to adapt.” Scott finds himself asking questions like:

• If we want to sell the company for $X,XXX, how do we get there?
• What does growth look like if we increase marketing spend by $X?
• What if we want to increase margins on X specific products?

In spreadsheets and legacy finance products, getting these answers “takes forever, is sometimes impossible, and requires a bunch of ‘Save As’ commands and risk of manual mistakes.” In Runway, it’s as simple as just asking the question.

Kicking things into high gear for K5’s other projects

One of the reasons Scott loves K5 is because he gets to work on a bunch of different companies at once. And since Runway’s been such a hit at 818, Scott has plans to use it with a new, exciting project in the Jenner drink universe: Sprinter. (For the uninitiated, Sprinter is Kylie Jenner’s new brand—a K5 project currently selling vodka drinks in 4 different flavors.)

In many ways, Scott said, Sprinter is more complicated. “The margins are razor thin—smaller than they are with tequila,” he said, “which means that, for example, a 1% or 2% difference on something like shipping matters tremendously.”

Good news is, Scott feels great about Runway’s ability to handle this added complexity. With the ability to quickly get clear answers across a number of dimensions—like distributor, location, SKU, and more—Scott thinks that “Runway might actually be even more powerful for Sprinter."