2-min read
Before we get into it — whether you’re for dairy milk or for not-milks you’ve got to hand it to MilkPEP for some laughs (spoiler alert: bon appétit didn’t like it)
And if you think managing farming operations is hard, take a listen to Tim Hammerich and I interview a Denver couple that decided to buy a farm in Cameroon to grow their own cacao B2B, but then decided to start a brand, Bibamba. How did they overcome all of the many challenges of creating this full value chain from scratch? Listeners get a coupon code! Use Futureofag20 for 20% off some seriously excellent chocolate.
Now back to it.
A common stumbling block I find when talking to brands about their fundraising woes is that investors are seeking more validation from brands before they will commit the funds. What this means is the brand has not yet completed the startup phase and the investor is already looking for growth.
The growth phase is between product/market fit and maturity – it starts when a business is scaling and can last through acquisition.
Are you struggling to close on growth phase funding?
You can’t fund the growth phase until you prove product/market fit. You think you can’t reach product/market fit without funding. So you look for investors to fund your growth phase but no one is biting.
This is because you are not actually in your growth phase.
Pressure to grow before you’re ready is a death knell for most brands. Skipping steps in product/market fit is the risk investors inadvertently put brands under when they ask for certain topline numbers.
Funding the Startup Phase
I really wanted to title this post funding the startup phase but I knew you wouldn’t read it because most of you already have startup funding. If you’re still seeking funds and having trouble, after reading I think you’ll agree you need additional startup funding. Needing more capital until you’ve achieved product/market fit is what will secure growth stage funding.
The key metrics for product/market fit are growth rate and retention. These are independent metrics but what matters is the relationship between the two: sales growth through repeat sales orders and proven sell-through in same store sales. (You are familiar with this metric in D2C, which is the customer retention metric – the % of customers who make repeat purchases).
I get it – you don’t have funds to achieve these metrics. Think small. Validate product/market fit in a local chain – that counts. What you are saying to investors is: here’s what can be achieved and I’ll replicate this on a larger scale with funding.
Show the data. Once you’ve proved product/market fit, then you’ll be ready for growth stage funding.
All my best,
Jennifer
NEWS
CARE: AN ALTERNATIVE WAY TO RAISE RISK CAPITAL BY ELLIOT BEGOUN.
This is something I’m just getting acquainted with and want to learn more about. Elliot explains it is a choice for those building great brands and businesses grounded in good fundamentals — the CARE offers investors a structured exit. It is self-liquidating. That means a subsequent equity round or acquisition is unnecessary for the investor to see a return.