Jim Slama
For small and emerging brands, it's a tough time to raise capital. There just aren't any one-size-fits-all solutions to business financing. And this is particularly so now when investor wariness is severely restricting the flow of capital. Our goal today is to help emerging brands better understand debt and equity financing options, particularly those that are under the radar and less risky.
Elliot Begoun
I just want to encourage you to look at this as the start of an exploration and begin to question what you're doing as entrepreneurs. You're well equipped to be innovative disruptors, to think differently. And there's absolutely no reason that shouldn't carry through how you fuel your business.
We've spent a lot of time in this industry focused on building brands, not businesses. This is a time where you can really focus on building both.
The typical way we go out and try to raise capital, we jump all the way to the structure and the terms and we show up with a typical pitch deck and we say we're raising X amount of dollars... I want to encourage everyone listening here today to be a contrarian and do this differently, and instead start with the outcome. What is it that you're trying to fuel? What's the outcome you want?
That's the benefit of being an entrepreneur. You get to design the place you want to go to work every day. You get some say in the way you want to structure your business. So start with the outcome that you want, not the outcome the industry is telling you or people are suggesting...
Have the conversation with the investor, what kind of outcome do they want? What are they looking for in terms of return and risk, tolerance and mitigation and time and all of those kinds of things? And then step back and go, Is there alignment? Are the two outcomes aligned? And if so, how do we build a structure and the terms around that, and that's really the starting point.
What are we as a business and a brand? Are we a rocket ship, okay? And there's only about 1% of you that are. Rocket ships are truly disruptive. They're meeting a category at that magic moment with a product, a brand and a time and a place that allows for real disruption and quick, incredible speed to ubiquity... But the majority of the businesses being built in this space are Toyotas. And there's nothing wrong with a Toyota, Toyota's are reliable, dependable, they get you from point A and B, they're efficient. But you wouldn't put rocket fuel in a Toyota. Because all that will happen is the Toyota will blow up.
Power law venture has been incredibly important to the success and the growth of our industry and will remain so, and I'm a big fan of it. But I'm a big fan of it when it's aligned and funding rocket ships, not Toyotas... For those of you don't know...it's a select few investments that yield larger returns by a significant magnitude of than all the others... Just a few investments are going to yield returns larger than all all the other investments combined...
At TIG, the tardigrade is our antithetical mascot to the unicorn. These are the majority of the brands in the natural products industry. They're not truly power law venture bankable, they don't have a 10x potential. And the question is, why do we keep funding them that way? Well, it's just because that's what we do. It's what we've learned, it's what we've been indoctrinated and trained to do until recently. And until recently, you were still able to find angels and seed funds and angel groups willing to do this. But now that's harder and harder to do. They're recognizing that misalignment...
When you take money or you try to attract money from power law, when you when you are a Toyota and you're trying to pretend and dress up like your trick-or-treating for Halloween as a rocket ship, what you wind up doing is trying to grow for the sake of growth, and that that's a very, very expensive thing...
Structured exits are different from what we see in in the more traditional ways that we invest in equity investments. So typically in an equity investment, we need a liquidity event, we need an exit, we need a transaction. Structured exits are investments that design a desired return without a reliance on that exit...
It is not an an easy thing to be a contrarian, it's not easy to try to one, go out and seek investment while also trying to teach investors to invest differently and two, to show up at their door with a completely different conversation and a completely different approach. You are putting yourselves up against some challenges there. But if you are resolute about it, if you're committed to doing it, you have a much better chance of showing up differently, which just makes the evaluation different. And you have a better chance of building your capital to fuel your journey in a way that's going to allow you to build the kind of business you set out to build.
William Hayden, Bags
We founded Bags almost four years ago. What we were thinking about is a lot of what Elliot is thinking about.
We saw a lot of negative outcomes for brands that were raising from venture capital, things like a board kicking an entrepreneur out of the company and leaving them with nothing, things like a company that has a really loyal audience failing to meet that demand because of cash flow restrictions and a lack of profitability. And what we saw was an opportunity to both de-stigmatize and de-risk debt as a primary path to achieving strategic growth.
Our key is that we are solving inefficiencies. The first one is loan discovery. Google doesn't help you find the right loan for your business. It doesn't think about your business data. The other one is loan preparedness: 80% of lender underwriting is just re-formatting accounting data. So we take on full bookkeeping, accounting and tax filing responsibilities so that the founders of brands, who are put on earth to bring their brand to the world, don't have to be finance gurus to get away with it.
Tonya Donati, Mother Kombucha
We built our business with the belief that what is good for you should also taste delicious, and that your business should be used as a force for good both in your community and beyond. We are a certified B Corp...
So far, we have bootstrapped our growth with a combination of an angel round, patient debt and crowd funding... We are always continuing to raise and never quite have enough to maybe get to exactly where we want to go. But it's always enough to stay afloat and continue to grow and build our business. And by functioning lean, I think that it's made us grow a much sturdier and sustainable business.
Emily Griffin, Lil Bucks
We sell crunchy snacks and toppers made from sprouted buckwheat, which is a nutrient-dense fruit seed that we source directly from regenerative organic Midwest farms.
I've always had a pretty big vision of being the Quaker Oats of buckwheat, despite having no idea what I was doing. I come from, not a family of entrepreneurs, I come from the design and digital marketing ad agency world. So certainly not a background in finance...
I came in at 25, not knowing anything and being surrounded by the Rocket Ship thesis and all these brands raising 2 million out of the gate and nobody profiting… So lots to learn
Kyle Koehler, Wildway
We're focused on championing smallholder farmers and organic supply chains and bringing those outcomes to consumers through better breakfast and snacks. We manufacture everything in-house here in San Antonio, and have grown sustainably and profitably over the past decade...
We've chosen to grow profitably and grow through various debt channels over the course of the years... Business to me was always about growing a really good business, not necessarily about achieving a race to the top in terms of sales or a race to the bottom in terms of pricing or ingredients or supply chain. And so that's how we’ve run our business so far.
Kelly Perkins, Spinster Sisters
We are a plant-based skincare company based in Golden, Colorado. When we first started, we were a much more traditional skincare company, but did have shampoo and conditioner bars. We saw some really big growth over the pandemic, and decided to take a new path with our company...
I learned over the years that the personal care industry generates 120 billion units of plastic every year, and it's mixed plastics, so it's even harder to recycle. So I wanted to take a bite out of that.
And in November 2021, we launched our plastic-free lines. All of our products are in bar form or in paperboard tubes, and printed with soy- and algae-based inks. All plant-based ingredients. So they are home-compostable and biodegradable… Consumers were looking for brands that could help them reduce their environmental footprint.
