How a farm-centric company built a profitable business using investor capital
They began the business by crowdfunding their seed money on Kickstarter, and in 2013, became the highest funded hot sauce business in Kickstarter history, raising more than $53,000.
Their unique value? They actually grow the food for their product. Which proved to be a blessing and an obstacle to growth.
After their 2013 Kickstarter success, they were featured on MarthaStewart.com and many other media outlets which led to an opportunity to sell their hot sauce in Whole Foods, but they needed enough capital to produce and bottle the orders—a challenge that sinks many beginning enterprises. So they started researching how to raise capital.
I'm re-posting the story here because growth capital is a huge need among most of the businesses I work with. This story clearly demonstrates the power of finding the right resources to support growth not just in the moment, but for the long-term.
This is the key to what Slow Money is all about nationally -- patient capital to support sustainable food and farming.
Full disclosure: I'm a proud board member and co-chair of Slow Money NYC.
How did you choose the right investors?
Knowing that choosing the right investors would be critical to their future success, Robyn looked for investors with a farm and sustainability focus. She wanted someone who understood their product, how it’s different from every other product, and most importantly wanted financial partners who mirrored her values.
She turned down one investor group because they weren’t aligned with Homesweet Homegrown’s values and the offer was not a good deal, financially, for the farm. So they kept looking.
They interviewed 4 angel investor groups before choosing Foodshed Investors NY in 2014.
In February 2014, she approached Foodshed Investors of NY (through Slow Money NYC), and, after two pitches in 6 months, she had 6 investors on board for a $90,000 convertible note, maturing in November 2017.
How did you prepare to pitch the investors?
Robyn knew the importance of good books, clear projections and succinctly telling the story of how you envision the path of growth and profitability will make or break a pitch. “I have a lot of spreadsheets,” she says. She was able to pull up all her numbers and share them with the potential investors.
But, for a good partnership, it’s not just about the numbers. The investors also came out to visit the farm, “which was exciting” to “show the farm and share it with a group of environmentally and sustainably-minded investors who saw our vision”.
What has raising capital done for the business?
The money raised allowed the farm owners to dive in, run the company full time and explore every business growth opportunity at full throttle for more than year.
Homesweet Homegrown demoed their product at Whole Foods for a solid year, they did markets every week, and their farm was able to grow.
In 2017, they had over 1,000lbs of peppers turned into hot sauce, and their product is distributed worldwide.
With the money they raised, Homesweet Homegrown was also able to open a cafe in Kutztown, which is doing really well. It has a very Brooklyn warehouse feel, and most of the food is harvested from the farm. But most importantly, it provides daily revenue — which has allowed Robyn’s husband to join her to work in the business and helped stabilize their growth.
What is your relationship like with your investors now?
Every 6 months, Robyn does a break-even analysis and compares it with their books to see how close they are. She’s very benchmark and goal oriented which keeps the business on track and makes her investors very happy.
They have investor calls about once a year, but their contact isn’t confined to that. Robyn also talks with the investors individually based on company needs and the investor interests and skills. For example, they had a distribution deal and teamed up with one of the investors to help get on that deal. Another investor helped them with patent advice.
Robyn calls on them for mentorship or to look over the paperwork. Her investors always give their time—and they often come down to the farmstand to just hang out or say hello. It’s a comfortable relationship.
“As investors, they’re long term partners for us.”
What have you learned through this process?
Stay focused on growing the business. We’ve had to adapt to keep growing; and to generate enough profit to support the family.
Projecting what you want to do to grow is an invaluable exercise for any business owner.
Outsource your bookkeeper and accounting. It’s important to get that part right, and not waste your time on it.
Find the right partner; and the deal that is right for your business. Don’t take the first offer if it’s not right.
Do not OVER raise, and be comfortable with the money you raise—terms and partnerships.