82Labs raises $8M to create a better hangover recovery drink [TechCrunch]

While taking some time off to travel before his next gig, Sisun Lee spent a lot of time in Korea — where he found himself drinking alcohol pretty much every night and then getting rolling the next morning, regardless of hangover status.

He also found that there were popular local herbal hangover drinks that everyone kept raving about. So he brought a bunch of them back to the U.S., handed them out to friends, and generally got interested in the drink as a thought experiment. After reaching out to scientists in academia about the herbal drinks and finding no one had really commercialized it into a product in the U.S. — and that there might actually be something behind the idea — he decided to start 82Labs and roll out the Morning Recovery drink. The startup has also raised $8 million in new financing from Altos Ventures, Slow Ventures, Strong Ventures and Thunder Road Capital.

“My friends would go to work the next day and they would swear by these hangover drinks with an herbal base,” Lee said. “In many ways that was almost when I was first inspired by it. That was at the back of my head. It turned out it was a massive market, it wasn’t one major brand — all the CPG companies had their own brand. It’s like the energy drink market. I did some research, and [people in academia] might be really passionate about something, and give you this conviction that this is the next big thing, but they wouldn’t commercialize it. They didn’t know how to get going.”

The drink is based on a flavonoid component of popular herbal medicines called DHM. The original concept for the drink was also based on research on DHM from USC, where Lee had gotten in touch with the scientists working on it to see if the idea was actually worth pursuing. That’s then bottled with other components like vitamins, electrolytes, milk thistle and some others which are known to have some detoxifying components. 82Labs initially launched in August, but at the time was literally handing out white powder in little bags — something Lee wasn’t particularly thrilled about. But as more and more interest came in after handing it out to area friends (and product managers) throughout the course of an unscientific experiment, they decided to roll with it and try to turn it into the kind of market you’d find abroad.

Lee and his friends decided to create a website to start sending it out for free for anyone who was interested in signing up. They made a few hundred bottles, gave it a flavor, and put a sign-up sheet online where they would ship it to you. Naturally, however, this is Silicon Valley, so the site ended up going viral and they got so many requests that they needed to figure out what to do next because larger bottling orders came in the tens of thousands. After some work figuring out how they could actually get it to market abiding by rules and regulations by the FDA, the team ended up making an Indiegogo campaign, which raised more than $250,000

“Because of our margins, every user we onboard is profit we generate,” Lee. “But we’ve had to learn a lot really quickly. The big thing for us last year was a big production mistake and we were always supply constraint every order. Sometimes we had compliance issues, quality issues, or mistakes on timeline. everything has been around putting out fires and making sure customers are happy, or giving them refunds December was the first month we had inventory and started to sell during holiday season when people are drinking a lot. We really never had time to think and go, “holy crap, what are we actually doing, what’s the goal here, what’s the mission here.”

Lee said that while Morning Recovery, which costs $30 for a six-pack of the 3.4-ounce drink, is their first drink they don’t want to just stop there. After all, getting a successful beverage to market — even if it turns out there’s plenty of work to do on the science side — requires getting into retail outlets and into the hands of consumers. But if that’s successful, that could easily build a brand and help the company start thinking about the next product that they should make. That direct-to-consumer approach has been increasingly popular amid the success fo companies like Dollar Shave Club and others.

But that also means that 82Labs will likely face a lot of challenges, especially if it starts to get traction and larger companies start to take notice of it. Since the market is popular internationally — Lee says it’s a few hundred million dollars annually in countries like Korea — it wouldn’t take much for a consumer packaged goods company with beverage experience to try to produce something similar. So the goal will be to build up enough traction before that happens in order to continue growing.

“If big companies take notice, while they can’t make the exact same product as us, I’m sure they can figure something out,” Lee said. “We have the advantage of a couple months — once we get to at a threshold in revenue companies will probably notice us. We thought we could keep growing slowly, but if any of these pharmaceutical companies or CPG companies do something, we’re gonna be crushed. Or, we thought we would raise money to front-load expansion purely on growth.”