BUSINESS INTEL
Making a Match For emerging bakery brands, compatibility is key in seeking the right investors. BY TH O MAS MALEN GO, B R AN DJ ECTO RY
The baked goods segment of CPG has been attractive to investors over the past few years, including legacy acquisitions. From an investor or acquirer perspective, these companies have the capabilities to deliver ingredient mix (grain/gluten-free, nut-free, allergenfree, dairy-free, etc.); on the shelf or frozen; decadent; nostalgic or nutritional products to a diverse consumer set. That offers the investor or acquirer several lines of vision as to how the brand can grow, be successful and bring to the investor a healthy return on their investment. The first step for emerging brands and small businesses to attract investors is establishing strong business fundamentals. While there are many strategies that will indicate a founder has established such practices — from managing costs and operations to managing people and marketing — managing cash flow and having a weekly analysis meeting with your team and/or advisors is essential. Cash flow is, of course, a critically important factor. Reviewing cash flow on a weekly basis provides the opportunity to investigate those key indicators to keep your business solvent and growing: revenue growth, cost margins and cash runway. This gives an indication of how long the current cash in the bank will last at the weekly cash burn rate, indicating when additional funds will be needed. Additional funding into the business could be needed before this point, to fund and support new distribution, increase capacity or develop new products to stay competitive. So, when it comes to finding investors, the rule is to start now. Depending on the size and type of the
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company and investment, this could take many, many months. Do online research of trade publications and news sources to find those investors interested in your segment. Network with other brands and co-founders, as well as third-party providers like distributors and co-packers, to get names of possible investors. For smaller companies, local angel groups and grant foundations may be available, though these can be overly bureaucratic and slow. There are many organizations and people that offer long lists of possible investors. Many of these can be discovered on LinkedIn and other online providers. Be mindful that these lists are very often not scrubbed or targeted, so they can be cumbersome and time-consuming to use, with little reward. Ideally, your best contact is always a referral, so the bottom line is to network. Finding the right investment partner is like finding any other partner in business and life: seek compatibility, agreement on long-term goals, and an environment of open, honest and thoughtful communication. The earliest investors from friendsand-family rounds, crowdfunding or angel investors will likely not provide much expertise or support to the business. As the business grows and investment stages and sizes become larger, and the investors become more sophisticated, they will seek more involvement and control. While these investors will perform a detailed due diligence on your business, a founder should also perform due diligence on the investor; this is,
COMMERCIAL BAKING
