Angel investing · Food and beverage

Where can I find investors interested on the food industry?

Gisela Macedo

June 25th, 2015

I'm starting my business in the food industry and even though I have an amazing product, a business plan and financials that work yet being conservative, needing little money to put everything together. Thing is, I cannot find angels interested in the food business! Does anyone know any resources for this?

Sonal Banka

June 25th, 2015

Give a try to food accelerators, these accelerators focus on only food related ventures. You can also try to crowd source the initial funds.

Accelerators:
gust.com/startups
I hope it helps.

Chris Carruth VP/Director. Strategy | Business Development | Operations | Product | Solutions

June 25th, 2015

Have been in your situation. What I have to say is both encouraging and discouraging. 

First, early stage investment in food, in reality, applies to those situations where "the product is done, is on the shelf and has been generating revenues for awhile". Because food typically cannot be patented and the market is controlled by multibillion conglomerates who can take all kinds of marketing actions that can sink a startup, no one is really investing in food startups in the very early stages.The days of what most think of as Angel investing, in this business sector specifically, are virtually over.

The good news is that if this is something that you can produce in your own kitchen or by renting a small commercial kitchen to produce it, there are retailers very open to entrepreneurs, like Whole Foods. Virtually all of them will require you have liability insurance but at levels of coverage they require. They will also generally want to approve packaging. And, of course, they product has to fit with their target consumer. Labeling has to comply with government standards, including nutritional content.

Most early stage food investment companies, like Consumer2X for example, don't get serious until you have at least $500,000 in sales or EBITDA, and for most companies that interest starts at $1M versus $500k. These companies are looking for a concept that is proven and in reality provide capital for growth, not early stage as they position themselves to be. Funding needs up to this point are either FF&F, home equity loans, bootstrapping with organic growth, 401(K) withdrawals or some other non-outside source. There are exceptions, like one company who found a college professor willing to write a $180k check to get them started, but in my experience these situations are far and few between.

Glad to talk offline..been where you are..

Sarah Hoffman founder of "a loving spoon nut butters"

June 25th, 2015

I have found this thread highly valuable, as my food product has already launched, and we just won a grant from Whole Foods to take it to the next level!

Leo PhD Product development executive, serial entrepreneur and Angel Investor

June 26th, 2015

Gisela,

Congratulations on the popular candy and your success so far. It's great to see. My company is also in the food space (sous vide, consumer electronics). We were initially crowd-funded. We set the record for the food category in 2013 on Kickstarter.

My personal experience also included fundraising for my previous startup in medical software and fuel cell; and I do due diligence for a few Angel groups.

I agree with Chris above, that getting funding for "food" is going to be very difficult. Besides the patent issue, remember that most Angels would invest in early stage companies that already have good revenue and can show traction (and a market size). The days of "taking big risk on ideas" is basically over.

The other problem with the food category is that generally food products don't enjoy explosive growth. It's almost always fairly organic. Unfortunately, most Angels are looking for 5X minimum return (some set the minimum at 10X) in under 5 years. That translates to consistent 38% growth of the company's valuation per year. That's very difficult to do for consumer products/food because you most likely would run out of cash at that rate (and that's why you would need investment!). It's a dilemma.

Your exit strategy is most likely going to be an acquisition, so what you should be thinking is how you can make your company attractive to potential buyers (consumer base & branding), and who those buyer are. That said, acquisition in the food space is not exactly very active.

If I were you, I'd try to find as much non-diluting funding sources as you can (like Kickstarter or friends & family, or line of credit) to build up as much value for your company as quickly as possible. After that, with a good pitch, and a lot of networking, you may be able to find investors. I can tell you that there are investors in the food space, I know some, they are all former CEO/COO etc. of other food companies and they understand the space. You may be able to find them on LinkedIn; just reach out. Many are happy to help food-related entrepreneurs, just don't expect to hear from all of them when you reach out to them. But I am quite positive, that if you have a good pitch of your product and a show of traction, some will reply.

For food, you are right, if you have celebrity chef/personality backing, the chance of you getting high growth would be higher. But the publicity must be continuous.

Best wishes!

Chris Carruth VP/Director. Strategy | Business Development | Operations | Product | Solutions

June 26th, 2015

@Leo, would like to connect..send me an invite on LI if you can...thanks.

Peter Kestenbaum Advisor, Investor, Mentor to Emerging firms

June 25th, 2015

Many Investors like to stay in their comfort zone...  So look at similar companies and call and ask their founders who funded them...   Also you might try companies that are in the food business and have enjoyed some success ( like Melissa's cupcakes ) and might want to dive into the investment world ( and you might even find a first client or two ).   Sounds like you are still in angel mode and looking for tens of thousands...  a new successful entrepreneur are good profiles for that investment level.   Lastly get into the community.    Not sure where your product fits but shows, celebrity chefs et al are always worth calls...     I had one startup who actually got approached by a VC at a food show...  ( he had a unique item... a special brazilian dessert )...   hope that helps

Pamela Marrone Experienced entrepreneur focused on changing agriculture by bringing effective and safer natural products to the market

June 26th, 2015

As someone who has raised more than $150 mil in capital for the companies I founded and who is now helping a food/ingredient company raise money, I suggest Slow Money, Ag Funder, Nutritional Capital Network, Golden Seeds, Springboard/Astia. Depending on where you are, what your product is there is DSM Ventures, Physic Ventures (Unilever), Mars. Happy to continue the conversation.....

Alan Clayton Roaming Mentor @ SOSV

June 25th, 2015

Try www.fodd-x.net

Gisela Macedo

June 25th, 2015

Thank you all for the answers!
I make the most popular Brazilian candy and got appraisal from American Food Celebrities!
Currently I have some friends back home that are very interested in investing on my product. And also I'm shooting my video for Kickstarter....
Either way these answers and contacts helped me a lot. Again, thank you all!

Gisela Macedo

June 26th, 2015

Agree @sarah! I'm learning so much!