There are a myriad of options available to the entrepreneur for seed funding or financing the expansion of your food or agriculture business. Yet not all of them are best for your needs.
How do you know which one is right for your business?
Options — Traditional options to fund a young food or agriculture business usually include debt or investment. On the debt side, you can self-fund through credit cards or borrowing from your savings. You can ask friends and family to loan you money or you can take out a small business bank loan with your property as collateral. On the investment side, you can raise money through providing ownership (equity) in your company — if you have an idea that is attractive for this kind of investor. Equity investment for startups is most often done by asking for seed funding from angel investors. If your business is a little more mature and has the business markers (sales, user numbers, etc.) that attract capital, you can raise larger amounts of money through venture capital. Alternatively, if you are a nonprofit enterprise (501c3), you can also ask for grants from foundations or tax-deductible donations from individuals to support your mission-driven work.
While all of these traditional routes can be useful, there have been some recent innovations in the financing space, including Program-Related Investment (PRI), Slow Money and Crowdfunding that create new opportunities for entrepreneurs.
Opportunities —The newest forms of capital raising for food and agriculture startups or business expansion involve hybrid models, like Program Related Investment, Slow Money or Crowdfunding. For nonprofits that have earned income streams, Program Related Investment (PRI) is often a good opportunity. Some foundations underwrite PRI loans or equity investments. These investments provide you a low or no interest investment (essentially a loan, guarantee, linked deposit and even occasionally, equity) in return for the cash investment in your nonprofit enterprise. Foundations like this form of giving because it better leverages their donation and also provides incentives for the nonprofit to become financially self-supporting through its commercial activities for charitable purposes. Nonprofits with charitably-oriented commercial enterprises like it because it often allows for a larger investment than a typical grant. When done well, PRI loans and equity investment also naturally create deeper mutual long-term commitment to success between both donor and "grantee".
Until recently, however, the options have been more limited for profit-based food and agriculture businesses. There are a very small number of highly competitive government grants available for beginning farmers or small businesses that meet a larger governmental policy goal, like healthy food or economic development. These can be very difficult and competitive to attain and they sometimes require matching funds. Slow Money models are another new capital access opportunity for food and agriculture businesses. The various chapters of Slow Money differ in the exact way they create and disburse their loans, but in all cases, Slow Money loans are designed to create a direct relationship between an investor and a food business, and on terms that are mutually agreeable. This is a different model from a traditional bank loan where interest rates are set by factors far removed from the community and entrepreneur.
No matter which option you choose, however, seed funding for beginning food businesses is a challenging undertaking, especially because in order to attract any funds at all, even from your family, you have to demonstrate a viable idea.
While you are raising money, which can be a full time job in itself, you are also supposed to be making a product, as well as publicizing it and selling it! Investors, grantors and anyone who provides capital for your business will require that you demonstrate that your business is viable in the long-term, which means you must show sales, community engagement, user numbers...whatever the markers are that will demonstrate a market for your idea and products.
Crowdfunding, particularly rewards-based crowdfunding on Barnraiser, helps you hit at least two of those investment goals with one easy to use tool, whether you are a for-profit business or a nonprofit.
Barnraiser is a rewards-based social and crowdfunding platform, designed specifically for food and agriculture and related enterprises to be able to raise money, publicity and long-term customers for their products, farm or projects. Barnraiser was founded by food, agriculture and technology veterans who have created a platform that showcases the beauty, impact and depth of the food movement through the stories on the pages, the campaigns in each community and the donors who support these projects in small and large amounts. Barnraiser has simple tools that campaigns can use to get up and running easily, and even a team of marketing, public relations and food entrepreneurs to help you, all of whom who are as passionate and dedicated to your success as you are. Running a successful campaign on Barnraiser will provide you with much needed money. Even more importantly, you will grow your skills as a marketer and you will gain new friends, customers and partners who will be as invested as you are in the long-term success of your enterprise.
As a recent entrepreneur on Barnraiser said, "The money from my Barnraiser Campaign will eventually be spent, but the relationships I gained with new customers and my community will stay with my business forever."
By Margaret Gifford, Watervine Impact
No reproduction without permission from the author. © 2015
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