Not Gonna Talk About SPACs
The Business of Food
by Jennifer Barney
Not Gonna Talk About SPACs
3-min read
I lied. Sort of. I am going to talk about why all this money is going to more, more valuable, and earlier deals in food and ag, of which SPACs play a part.
But first, I heard from many of you about . If you want to hear more about my personal startup story, check out this podcast hosted by the amazing co-founder of Kween, Ali Bonar
I’ll let you in on a conversation I had with Bill Harrison, Managing Partner of Harrison Co., an independent investment banking firm advising companies in food, ag and ag-tech, which started with SPACs and ended with something much more interesting: all the options today, particularly for family owned and operated entities.
Bill has advised mergers and acquisitions such as stone fruit Gerawan’s (Prima) merger with Wawona Packing, cherry grower Warmerdam Packing's sale to Canadian fund Fiera Comox, grass-fed beef Strauss Brand’s sale to Insight Equity, and frozen food brand Tattooed Chef’s SPAC merger.
Me: When should someone in our industry come to an investment banker for advice?
Bill: You should have a conversation with an investment banker early on. When I first started in investment banking in New York 26 years ago the solutions and opportunities to family owned businesses were much fewer. As time goes on the alternatives available to owners getting liquidity has increased and it’s impossible to stay on top of them and the pros and cons. I don’t charge to sit down and walk through the potential strategic alternatives available.
Me: What if you’re really small?
Bill: Our firm has taken on companies doing less than $10M in revenue pro bono. There is no obligation to us and I have found by helping family businesses in the small ag community that good deeds are rewarded. Our firm wants to do our part making sure family-owned businesses do not make strategic decisions or take on financial partners that create longer-term burdens negatively impacting valuation or financial flexibility.
Me: What if someone doesn’t know the questions to ask. Can you give us some thought starters.
Bill: There are some typical scenarios:
Transition of ownership
Liquidity options when net worth is tied up in equity
Liquidity options via a sale – who might buy the company? What’s the competitive landscape?
Who may be the logical investors, buyers, strategic partners? Who are the international players who may be interested?
How to be more effective taking in capital
Food and ag has entered an era of venture capital on par with any other industry. Different types of investors are emerging. I talked about increasing PE involvement last week, but within venture it’s changing too.
Founders are now looking beyond venture capital institutions to sector-specific individual investors, like ex-founders Peter Rahal, Rohan Oza, Shazi Vizam, and of course Mark Cuban and the like.
These investors are coined “nontraditional” VCs.
And then the emergence of SPACs.
SPAC makes IPO go faster with less hassle. (I’m not going to get into it because we’ve all read about the warnings to retail investors and how the early investors make all the money upfront yada, yada.) I will briefly interject a message to businesses from Bill Harrison who has done a number of these: he said that what is lost is that you are going public … with all the operating and legal expenses of being a public company (at least $2M annually) plus all the financial compliance and the hassle of investors calling you all the time.
SPACs are just one enabler of all this liquidity because as exits happen, there’s more flowing into the investment community. Coupled with easy money (low interest rates) and market volatility, there is more interest in startups and more money pushing down to the earlier stages, making them more valuable.
AgriFoodTech startups raised $26.1 billion in 2020, a 15.5% year-over-year increase
Food and beverage companies raised $5.9B in equity funding, up 82% from $3.2B in 2019.
The takeaway here for founders is there’s never been a better time to seek funding!
All my best,
Jennifer
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I'd love to hear from you - get in touch at jennifer@3rdandbroadway.com