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Grants, Loans, Investments…Welcome To The Food Funding Ecosystem!

Economic Gardening, from the Edward Lowe Foundation

While food businesses are developing their big, brilliant idea (and hopefully executing on it), it can be easy to forget that they are one actor in a larger entrepreneurial ecosystem. This ecosystem includes other entrepreneurs, suppliers, farmers, co-packers, funders, accelerators, incubators, consultants, retailers and consumers.

Some actors in the ecosystem, like Amazon, have an outsized influence in the marketplace because of their size and the nature of their business model, causing some brands to rethink how they relate to and get their products to their target consumers. Consumers, en masse, have been demanding healthier, more transparently produced food and that has caused large food companies to acquire brands and retool their supply chains, affecting all of the actors along the chain.

Different funders of the food entrepreneur ecosystem work with certain parts of that ecosystem. For example, some investors only work with rapidly accelerating national brands, using their capital to grow the top line sales of the company for an exit so they can recover their money with a premium. Their time horizon might be different than an established food company looking to innovate through acquisition of a portfolio of brands that they can leverage for the long term.

What stage a food business is at can affect the actors in the ecosystem food businesses might interact with. For businesses that are just starting out, visiting their local SBDC consultant or SCORE mentor for help honing their business model might be a better move than immediately going out and seeking investment from funders. Having some sales and an idea of their target customer might precede participating in an accelerator, which might then lead to more connections with other actors in the ecosystem.

Different funders often expect other sources of capital – for example, an owner’s investment as “skin in the game” – to be present in some form before investing, lending or granting money. As Jim Gage points out on our podcast this week, Value-Added Producer Grants (VAPG) are never the main source of financing for farm businesses but rather incentivize farm entrepreneurs to show prospects for expanded sales and future investment before applying. In other words, the grant application process causes these businesses to consider that they will interact with other people in the ecosystem, including other funders, and that these connections are essential to the success of the business.

To come up with a realistic strategy for action and growth, food entrepreneurs should make efforts to understand this entrepreneurial ecosystem and whether grants, loans, investments or a combination of capital sources makes sense to fund their growth. Only then can food entrepreneurs plant the seeds for a profitable and sustainable food business.


And now, our roundup of the best food and beverage finance news, events and resources from around the web…

Food and Beverage Business Models

Business Model Insights

Raising Capital

Raising Capital

Grocery Store Shopping

CPG/National Brands

Grocery Store Produce Section

Market Trends

 Regenerative Agriculture

Farming and AgTech

Mergers and Acquisitions

Deals/M&A

Events

Industry Events

Categories: Insights Newsletter