Raising Capital for US Food and Farm Enterprises
By Logan Yonavjak
As an early-stage entrepreneur, it can be difficult to navigate the capital raise process for your sustainable food enterprise. While a few companies find their way easily, others can spend a lot of unnecessary time chasing the wrong kind of investors, not knowing the steps of the process, and even getting into severe financial trouble along the way. Raising money is not as easy as it seems! There’s a lot to know.
For instance, many companies believe that going after Venture Capital (VC) is the best approach. However, the VC model is centered around selecting “unicorns” that will achieve a home run and will cover the costs of other investments in a portfolio that mostly fail. Especially for companies looking to achieve positive impact alongside a financial return, it can be incompatible for them to chase an explosive growth model as they optimize for impact. Research shows the majority of VC investments go bust, and much has been written recently about the failures of the VC approach in the cleantech space. Many of the same lessons apply to food and farm enterprises.
Clearly, raising money is not as easy as it seems! In order to orient entrepreneurs and to simplify the process, Slow Money NYC has put together a roadmap for entrepreneurs entitled, “Raising Capital for your food/farm enterprise” and a complementary database of relevant incubators and accelerators.
In this roadmap, we present an overview of various capital structures and capital sources available to early-stage entrepreneurs, with a specific focus on food and farm enterprises in the U.S.
This roadmap will show readers that before even embarking on a capital raise, it is critical to check in with a lawyer and an accountant to make sure the company’s books and legal documents are in order.
Which leads to a very important component of this roadmap: structuring a legal entity appropriately. Most companies jump straight to an LLC, or a C-corp based in Delaware, but did you know there are several other legal structures available to startups that may be more appropriate?
How you structure your company helps inform the capital available to a startup. You will also learn that there are numerous government and crowdfunding resources available to you, and that depending on how your company is structured, you may not need to go directly to private investors all.
Another critically important, but often overlooked, aspect of the capital-raising process is determining what your company’s core values are. This guide has several questionnaires that help entrepreneurs ask the tough questions that many teams don’t ask upfront.
We hope this manual brings you closer to building the company you want!
We consider both of these resources to be living documents and are always looking for feedback. Please reach out directly if you have any comments or additions to this email: info@slowmoneynyc.org.
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Slow Money NYC is a local network of Slow Money, a national non-profit catalyzing investment in sustainable food and farms. We build community, spark dialogue, and inspire action at the nexus of food and funding in the New York area watershed.
