Access to high quality financial technical assistance is the biggest gap in accelerating the growth and success of more good food and beverage companies. Companies can transform, grow and thrive when they have access to this kind of assistance and when the founders surround themselves with the right people, including technical assistance providers.
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Seeded with a 2012 challenge grant of $3.75 million, the Fair Food Fund, the impact investing arm of Fair Food Network, has attracted a total of $6.4+ million in grants and program related investments from more than 20 funders. Since then, the Fund has provided more than $3.6 million in financing and business assistance to over 80 enterprises across 9 states.
Because food businesses tend to grow in a stairstep function rather than incrementally, most food businesses need to raise outside funding to be viable and profitable. Investor due diligence can help entrepreneurs to mature their businesses into viable enterprises because the process forces them to get clear and articulate about how they make money.
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Golden Angels Investors advise entrepreneurs to focus on building their sales and getting as much customer feedback as they can before they risk too much with the business. This, as well as the identification of competitors, helps validate that the business has some traction in the marketplace in the eyes of investors.
Getting proper financing for growing food businesses is one of the most challenging obstacles food business owners face, due in large part to the high bar for fundraising and financial communication when growing a food business. And, there are often many sources of capital that need to be brought together to adequately fund the growth of these food businesses.
Most entrepreneurs start out with friends and family funding (essentially people they know who will take a risk with them) or else they “bootstrap” their company, self-financing from the owner(s) and free cash flow. However, in food, this doesn’t get you very far – food businesses need outside capital, usually from a variety of sources, to compete.
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There is a disconnect between perceptions of available money for food business and the sheer volume of individuals/funds looking to invest at various stages. And, natural food investors are starting to look at even earlier stage companies now that there is so much competition at the product, retail and investment levels of the food business ecosystem.
The founders of Stonyfield were running a nonprofit organic farming school on a small New Hampshire farm when they began what became Stoneyfield farms. After starting with seven cows, now Stoneyfield sells hundreds of millions of dollars per year in dairy and other products in supermarkets, natural food stores and colleges across the country.
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ReGrained launched their product at scale in January 2018 after multiple iterations of their product (in the crowded bar category) and now are working with other businesses to help them produce/co-brand new products using their production facility and the expertise embedded in their proprietary process.
Median on-farm household income has been negative for the past 20 years, with many farms keeping their cash flow positive by increasing their debt load. Finding new business models that allow farmers to be profitable while meeting changing consumer demand will require high-quality technical assistance and coordinated effort from multiple actors.