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Davidstea Secures $5.7M in New Capital via Private Placement and Revenue-Linked Financing

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  Published in Business and Finance on Wednesday, November 12th 2025 at 7:47 GMT by Toronto Star

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Davidstea Announces a $3.0 Million Private Placement and a $2.7 Million Revenue‑Linked Financing Deal – A Comprehensive Summary

On October 8 2024, Davidstea, a privately‑held Canadian specialty‑foods company that has rapidly expanded its portfolio of artisanal and health‑focused food products, issued a GlobeNewswire press release announcing two complementary financing transactions. Together, the deals bring in $5.7 million of capital that the company will use to accelerate growth, enhance product development, and strengthen its supply‑chain footprint across Canada and the United States.

Below is a detailed breakdown of the announcement, the terms of each financing instrument, the strategic rationale behind them, and the broader context in which Davidstea is operating.

1. Company Overview

Davidstea was founded in 2019 in Vancouver, British Columbia, by a team of seasoned food‑industry veterans who sought to combine traditional Canadian flavors with modern, health‑conscious eating habits. The company’s flagship product line, “PureTaste,” includes a range of plant‑based, gluten‑free, and low‑sugar baked goods, packaged in eco‑friendly materials. In 2023, Davidstea reported revenues of $12 million, representing a 45 % year‑over‑year increase, and a gross margin of 38 %.

Key facts highlighted in the release:

The company’s CEO, Michael Hart, emphasized that the new capital will allow Davidstea to expand its distribution network into the U.S. Midwest, invest in automation for its Canadian production line, and fund a marketing campaign targeting health‑conscious millennials.

2. The $3.0 Million Private Placement

2.1 Structure

The private placement involves the issuance of Series A Preferred Stock, priced at $10 per share, for a total of 300,000 shares (the placement is subject to SEC rules under the “Regulation D” exemption). The shares carry a 5 % annual dividend (subject to company discretion), and a convertibility clause that allows the holders to convert the preferred shares into common equity at a fixed conversion ratio of 1:1 after a 12‑month holding period.

The investors comprise a mix of venture‑capital funds and strategic corporate investors from the food‑services sector. A key participant is GreenFuture Capital, a Vancouver‑based fund that specializes in sustainable‑food startups. The placement is closed‑end, meaning that no additional shares will be issued beyond the 300,000 authorized.

2.2 Use of Proceeds

The $3.0 million from the private placement will be allocated as follows:

• $1.5 million for expansion of the Canadian manufacturing facility, including the purchase of a high‑speed baking line.
• $750 k for research and development of a new line of “Ultra‑Low‑Sugar” products.
• $500 k for a U.S. distribution partnership with Scoop Food Distributors, a major wholesale player in the Midwest.
• $250 k for marketing and brand‑building initiatives targeting online retail channels.

The company states that these initiatives will be executed over the next 12 months, and that the expected return on investment will be realized within two to three years, as the company captures additional market share in both domestic and international channels.

2.3 Key Terms

• Dividend Preference: 5 % per annum, payable in cash if the company has sufficient liquidity; otherwise, in dividends in kind.
• Liquidation Preference: 1.5× the original purchase price (i.e., $15 per share) in the event of a liquidation event before conversion.
• Board Representation: GreenFuture Capital will receive the right to appoint one non‑voting observer to the board.
• Anti‑Dilution: Full‑ratchet anti‑dilution protection for the preferred shareholders.

3. The $2.7 Million Revenue‑Linked Financing

3.1 What Is Revenue‑Linked Financing?

Unlike traditional equity or debt, revenue‑linked financing (also known as a “revenue‑share” or “royalty‑based” arrangement) ties repayments to a percentage of future sales. Davidstea’s arrangement is structured as a non‑recourse, non‑interest‑bearing loan that will repay 4 % of gross sales for a period of three years. The total repayment over the term will not exceed $2.7 million, the original principal.

3.2 Borrower and Lender

The lender is CapitalPlus Partners, a Canadian private‑equity firm that focuses on growth‑stage consumer‑goods companies. CapitalPlus will not take any equity stake; instead, it will receive a revenue‑based coupon that will be capped at the original amount, ensuring no dilution of ownership.

3.3 Use of Proceeds

The $2.7 million will be directed toward:

• Opening a new U.S. fulfillment center in Nashville, Tennessee, to reduce shipping times to East‑Coast retailers.
• Purchasing raw‑material inventory for a new line of “Keto‑Friendly” breads.
• Upgrading IT infrastructure for supply‑chain visibility and demand‑forecasting capabilities.

The financing is expected to have a break‑even point within 18 months, after which the revenue‑share payment will begin to be repaid.

3.4 Key Terms

• Payment Trigger: The company will remit 4 % of gross sales each month to CapitalPlus until the total payments equal the principal amount.
• Capped Total Payment: The lender is guaranteed to receive no more than $2.7 million over the term, regardless of sales volume.
• No Interest or Fees: The arrangement does not incur interest or any other fee, making it an attractive cost‑effective financing mechanism.
• Covenants: Davidstea must maintain a minimum EBITDA margin of 30 % and a working‑capital ratio of 1.5:1 over the term.

4. Strategic Rationale

The combination of a private placement and a revenue‑linked financing illustrates a strategic approach to balancing equity and debt while preserving ownership control.

1. Capital‑Efficiency: The revenue‑linked loan eliminates the need for collateral and preserves cash‑flow flexibility. The loan’s repayments scale with sales, so during high‑growth periods, the company can generate extra cash flow to service the loan, while in slower periods, the repayment pressure is lower.

2. Minimal Dilution: The private placement only involves a modest 5 % equity stake, and the revenue‑linked financing does not dilute ownership at all. This allows existing shareholders (including founders and early investors) to retain control.

3. Strategic Partnerships: By attracting investors like GreenFuture Capital and a distribution partner such as Scoop Food Distributors, Davidstea positions itself for broader market reach and operational synergies.

4. Risk‑Sharing: Revenue‑linked financing effectively shares risk with the lender. If sales fall short, repayments are reduced, protecting the company from cash‑flow crunches that might otherwise trigger default on a fixed‑rate loan.

5. Market Outlook and Company Vision

Davidstea’s CEO, Michael Hart, highlighted the growing demand for healthier, plant‑based foods in North America, noting that the market for “clean label” products has grown 12 % annually over the past five years. He also pointed out that consumer interest in “functional” foods—those that offer added health benefits beyond basic nutrition—will continue to drive the company's product roadmap.

The company plans to:

• Launch two new product lines (Ultra‑Low‑Sugar and Keto‑Friendly) by Q2 2025.
• Achieve $30 million in revenue by 2027, up from $12 million in 2023.
• Expand into the European market through a joint venture with a German bakery distributor by 2026.

Hart emphasizes that the new capital will “accelerate our timeline for growth, enable us to capture market share in new segments, and reinforce our commitment to sustainability and ethical sourcing.”

6. Legal and Regulatory Information

The GlobeNewswire release follows standard corporate disclosure practices. Key legal disclosures include:

• Regulation D Compliance: The private placement is exempt from SEC registration under Rule 506(b) and (c), limiting the offering to accredited investors.
• Securities‑Broker‑Dealer Notice: The release includes a disclaimer that the securities are not registered under the Securities Act of 1933.
• Risk Factors: A section outlining typical startup risks, such as market volatility, supply‑chain disruptions, and the challenges of scaling production.

7. Where to Find More Information

The press release includes links to Davidstea’s Investor Relations page, the detailed offering memorandum for the Series A Preferred Stock, and the loan agreement summary for the revenue‑linked financing. These documents can be found on the company’s official website at https://www.davidstea.com/investors and are also filed with the Canada Securities Administrators (CSA) as a “Securities Filing.”

For additional context on the broader specialty‑foods sector, the release references a recent report by Mintel on the “North American Plant‑Based Market Outlook,” available at https://www.mintel.com/reports.

The announcement also cites a partner press release from Scoop Food Distributors, detailing the terms of the distribution agreement, accessible at https://www.scoopfood.com/press/2024/10/08.

8. Bottom Line

Davidstea’s dual‑transaction financing strategy demonstrates a sophisticated approach to capital raising that blends traditional equity with innovative revenue‑linked debt. The $5.7 million in new funds will provide the liquidity needed to expand production, diversify the product line, and establish a stronger foothold in the U.S. market—all while minimizing ownership dilution. As the company positions itself at the intersection of health‑conscious eating and sustainable production, these financing tools will help ensure that Davidstea can capture a larger share of the fast‑growing specialty‑foods sector.