What Do Investors Look For From Plant-Based Startups?

Managing a successful plant-based start-up isn’t just a numbers game, say Cliff Johnson and Simi Valecha Johnson, co-Founders of plant-based start-up investment and support specialists Johnson Resolutions
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Startup life is never stress-free (Photo: Adobe. Do not use without permission)

Startup life is never stress-free (Photo: Adobe. Do not use without permission)

These days it feels like the sky’s the limit when it comes to growth opportunities in the global plant-based sector, just look at the record-breaking success of Beyond Meat’s recent IPO. 

But for the entrepreneurs behind plant-based startups, the journey is rarely - if ever - a straight upwards arrow of stress-free, exponential growth.

Challenge

Let’s take a step back. Imagine you’ve developed a great plant-based product, you’ve settled on a compelling brand name, set up the business structure and you’ve just sold out of your first manufacturing run. You’re starting to get interest from bigger buyers, and you’ve got to scale up rapidly to meet demand.

Suddenly success turns to a challenge almost overnight, and now you need investment to help you grow, but you don’t want to lose control of your business. At the same time, this roller coaster ride is starting to take its toll - you’re working all hours, putting your own well being secondary to your business, and starting to fray around the edges.

Golden rules

We’ve seen this scenario play out time and again. Here are our four golden rules for attracting investors, preparing for an investment round, and maintaining your value as an entrepreneur at what can be a very stressful time:

1. Take care of your most important asset - you: A 2019 study from weare3sixty found that nine out of 10 of the 270 entrepreneurs surveyed reported signs of Mental Health strain, with 86 percent reporting work-related physical or mental distress.

Investors back people, not just balance sheets. The mindset of you and your team will shape the success of your business. Prioritise your well being as an entrepreneur, because too often this falls to the bottom of the pile. Take a break before you break.

2. Get a strong handle on your finances: To make yourself attractive to investors, it is essential to know how to determine your burn rate and profitability. Get a professional pitch deck and a transparent business plan together, and get an independent pair of eyes to review it - you cannot over prepare.

Cashflow management is key, so limit your fixed expenses in the beginning, track and monitor all spending and keep on top of invoicing. Create a model and make projections within budget. It’s not rocket science but it is a discipline - it’s not enough to do it well once or twice, consistent, thorough oversight is key to having a handle on your financial situation from your initial pitch deck to your first day of trading.

3. Know your market and your USPs: You cannot gather too much market data, you need in-depth knowledge of your target market. What price are people willing to pay for your product? How does this compare to your unit cost?

Go strong on your USPs, what makes your business different is what will make it successful. To build your profile and brand, streamline your messaging, know your audience, and get your brand out there consistently on social media and in the press. There are simple ways to do this yourself, but stay authentic and be honest.

4. Investors have to be attractive to you as well as you to them: Get a handle on the funding options available to start-ups, and know from the outset what percentage of the equity you want to keep. If you want to crowdfund, understand the commitment this entails, and research your platform carefully.

This is YOUR market, so think carefully about the type of investment and investor you are looking for - and what the expectations are from both parties. Work on getting positive relationships with investors, and always get legal advice before you sign anything.

The way you tackle these golden rules can make or break your start-up. The momentum behind the plant-based movement is strong and the scale is global - there are entrepreneurs at the start of their journey right now, with fantastic products that will help change our world for the better.

But while finding an investor that will directly fund your start-up feels like an incredible achievement, it is just one part of the puzzle. It is critical to find partners that have real ‘skin in the game’, and not only share your ethics but can also support your start-up in a collaborative way - scaling the business and supporting the entrepreneurs behind the innovation.

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