A Hawaiian Cattle Rancher Raised $5m for an “Elevated” Meat Company. Here’s How He Did It.
The investing world wasn’t quite sure what to do when Jack Beuttell walked through their doors on behalf of Kunoa Cattle Company. A meat company that sold itself as a social, environmental enterprise? And one based out of Hawaii?
Not exactly the sort of thing in a VC’s comfort zone, but Jack hoped they’d see the bigger picture.
Jack moved to Hawaii in 2014 when he realized the islands were primed to pivot to beef. Agriculture infrastructure in Hawaii had shifted away from sugarcane and pineapple production, while consumers were starting to value organic, grass-fed meat.
But ranchers in Hawaii were accustomed to sending animals to the mainland for processing and shipping.
Jack and his friend Bobby Farias, a third-generation rancher from Kauai, saw this as an opportunity. They built a vertically-integrated company right on Kauai, complete with animal processing facilities and the whole branding and packaging machine.
Ranching has an ethical element for Jack, too. He believes cattle ranching can be done in a way that helps fight climate change.
“We’re trying to change a system that is dysfunctional. It has all kinds of negative externalities and perverse incentives,” Jack says. “When the market is controlled by four huge companies, you can’t expect that to happen overnight.”
Overcoming ‘archaic industry’ stigma and finding their herd (of investors)
So how exactly do you convince people to invest when you’re selling revolutionary beef instead of the newest, flashiest app?
“We’re not in a business where all the VCs are glomming onto us because we have this amazing technology,” Jack says. “We’re in this sort of archaic industry and a weird place in the world. We don’t have this critical mass of investors to build that perceived pressure and urgency, so we had to approach [fundraising] a little differently.”
Jack and Bobby leaned into leveraging their personal networks to gain meetings with anyone who might be interested in their business.
And they came up with… nothing.
“VCs would pat us on the back for doing something cool in Hawaii, but they wouldn’t take more than a 15-minute phone call,” Jack says.
So Jack decided VCs and angels might not be the best option for them. He looked for people who were interested in grass-fed beef, impact investing, climate change or even just Hawaii in general.
Jack thought he was starting out with a pretty deep book of possible investors but went to connections from both the business and environmental communities.
“We ended up succeeding primarily with high net worth individuals, fund managers and grocery CEOs who have some kind of connection to our work,” Jack says.
Kunoa closed their first round of funding after a year. They still had far less than they’d hoped to raise, but it was enough to get started.
“We were using what little capital we had gotten incrementally to buy the animal harvesting facility, upgrade it, hire people and start to develop products,” Jack says.
Know who you’re dealing with
One thing Jack learned through his first round of fundraising is that it pays to do your research about investors’ reputations.
Jack and his team thought they’d met the perfect group of investors. They were successful entrepreneurs, they were all related to agriculture in one form or another, they operated an industrial bank, and it seemed like they loved Kunoa. Jack spent weeks talking with this group before finally flying out to the Midwest.
“I tried to pitch the business, but they really wouldn’t even let me pitch,” he says. “It was a very odd meeting. But by the end of the afternoon, they had verbally committed to funding our entire A round.”
“So, we walked out of that meeting with huge smiles on our faces and high hopes,” Jack recalls.
“Unfortunately over many, many months, they strung us out,” Jack says.
“They tried to recut the deal two or three times. They tried to get me fired, and they had a very odd investment structure, which was different from our initial offering. They put us in a really terrible corner and we didn’t quite know how to get out of it.”
So instead of having their whole funding round covered, Jack found himself having to come up with enough money to pay off what was essentially an earnest loan. Ultimately, Jack and Bobby were able to use the money from those investors to generate interest among other investors. They paid off the initial group while maintaining full control over their business.
“I think we probably could have done more research on the group to understand its reputation in the community,” Jack acknowledges. “It’s certainly an argument to diversify your investor pool, so you’re not putting all your eggs in one basket.”
Moo-ving forward and following up
Despite that challenging experience, Jack refused to be cowed (#sorrynotsorry). He continued chasing down every potential investor his network could connect him with.
“It was just a needle-in-a-haystack kind of thing,” Jack says.
He asked friends and business contacts if they knew anyone who might be interested, and he would set up another round of meetings. Even if those connections weren’t interested, they would usually have a few more names for Jack.
He kept at it, raising $5 million across two and a half rounds. With the funding, Kunoa had enough staff that Jack could focus fully on fundraising through a series B.
“I can’t tell you how much this has helped the process in terms of coming up with a fundraising plan, identifying the tools that I need and more than anything having the time to follow up on conversations,” Jack says.
“It’s so easy to start conversations and generate initial leads, but I’d forget about them. I wouldn’t circle back. So with a little more structure, I think we can be more effective.”
Nathan Beckord is the CEO of Foundersuite.com, a software platform that has helped entrepreneurs raise over $1 billion in seed and venture capital since 2016. This article is based on an episode of Foundersuite’s How I Raised It podcast, a behind-the-scenes look at how startup founders have raised capital.