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Your Food Business’ Capital Needs Change Over Time

Getting proper financing for growing food businesses is one of the most challenging obstacles food business owners face. This is 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. This food funding ecosystem is diverse, with many funders having differing expectations about business outcomes and the business owner’s responsibility or obligation to them as a funder.

Many of the entrepreneurs we work with get hung up or overly focused on the “ends” of the food funding continuum. For example, some entrepreneurs are hesitant to take on outside capital or only want to take on small amounts via channels like crowdfunding platforms. This is often because they are afraid if they approach banks or investors they will lose control of their business or they won’t be able to trust that funder to reflect their values. While these are legitimate concerns, unfortunately, not working with outside capital often limits their growth potential and leaves them undercapitalized, to the detriment of their business. Other entrepreneurs want to skip right to large infusions of outside capital like significant equity investments because they want to see their business grow rapidly and get profitable more quickly. However, these businesses often need to raise funds on a more modest scale, at least initially, to generate enough sales to make a partnership with a significant equity investor make sense. And, it is important to remember: even established food companies need loans or lines of credit from banks to finance seasonal swings in cash. The need for outside capital never goes away – it just changes as the business changes.

Because of these experiences navigating a funding landscape that can be complicated and confusing, food entrepreneurs often find that their path to the right combination of capital sources does not immediately jive with their existing perceptions of that landscape. Thus, they don’t think the right funding partner is out there for them. We want to assure those entrepreneurs – the money is there, if you show up with the right stuff and know where to look! On our most recent podcast interview with Joel Solomon, author of The Clean Money Revolution and founding partner of Renewal Funds, Joel talked about how there is a disconnect between early stage entrepreneurs’ perceptions of available money for their venture and the sheer volume of individuals and funds looking to invest in the space at various stages. He talked about that continuum of capital and how friends and family funding often precedes angel funding which precedes other capital sources and requisite business growth. For example, Renewal Funds, because of its size as a venture capital firm and how it can best serve entrepreneurs, only invests once food entrepreneurs reach a certain size in terms of annual sales. Those entrepreneurs have to be on a path that aligns with the mission and business needs of Renewal Funds.

The sources of capital for growing food businesses change as those food businesses mature and have different competitive market realities. To finance and grow profitable food businesses, entrepreneurs need to be able to navigate the expectations of these capital sources and understand at what stage they could be most useful.


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

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