5 Top Tips for Food & Drink Businesses Seeking Investment

Edward Carstairs took part in a panel discussion titled “Preparing for Investment: Business Assets” at Bread & Jam Festival 2019, the UK’s first food founders’ conference dedicated to emerging and scaling food and drink brands. He was joined on stage by Philippa Stuart, a solicitor with particular expertise in the food & drink industry, at Joelson, Kara Rosen of successful vegan drinks business Plenish, and serial food & drink entrepreneur John Stapleton.

Here are the panellists’ top tips for food & drink businesses seeking investment.

  1. Build the right team, define your purpose, and plan effectively

Make sure you build a team of driven individuals that buy into a clearly defined purpose. Early stage companies with a compelling story and a team that has bought into it tend to be more effective in securing investment. Remember, investments made at this stage are based on emotional, as well as rational, decisions. With your team and purpose in place it is imperative that you develop a comprehensive business plan, ensuring IP (intellectual property) is a core component. Being able to demonstrate your understanding of the IP landscape in your sector –  and being able to show that you have taken steps to protect your own brand – will help establish trust and credibility with potential investors.

  1. Understand what kind of investment you are looking for and what is required at each stage

When seeking funding, it is important to understand what type of finance you are after. Are you looking for equity finance, where you give away a portion of your company in return for investment? Consider how this will affect future rounds of investment. Do not risk becoming a minority shareholder of your own business during later funding rounds by handing over too much early on.

Do you understand what different types of investors will be looking for in your business? Angel investor expectations vary considerably to those of venture capital and private equity investors.

Be aware that if you are considering crowdfunding, many of the platforms will require that you already have a significant proportion of the funding in place before they will list you. In other words you will have had to do a lot of the legwork yourself so think carefully about whether the reward is going to be worth that effort.

In addition to equity finance, do your research into available grants and incentives – don’t leave free money on the table!

  1. Be aware of potential IP pitfalls

Don’t let IP be the reason an investment or sale does not go ahead. With some simple scoping work you can satisfy investors that there is a clear road map in place to give them the confidence in your business.

You might think that you own your own brand but if the logo and website for example have been created by an external consultant the law says they will own the related rights unless there is a contract that says otherwise. Make sure you tie this up earlier because it gets much harder (and more expensive) later down the line particularly if figures attached to the value of your business are in the public domain. You might find the asking price to transfer the rights goes up dramatically.

When you have selected a name for your business or new brand then make sure you have run freedom to operate checks. This will save time, money and stress dealing with an infringement action from a third party, which could be fatal.

Make sure you register your IP. A registered trade mark is a business asset that you can sell or against which investment can be made. If the brand is not registered, then in a world as brand driven as the food & drink industry an investor might question what it is they are investing in. After all, as John Stuart, former Chairman of Quaker Oats Ltd. said, “If this business were to split up, I would be glad to take the brands, trade marks and goodwill and you could have all the bricks and mortar – and I would fare better than you.”

Don’t stand still. Your business strategy naturally changes over time and don’t forget to stress test that against the IP rights you have in place and make sure you plug the gaps.

For more information on this, see our IP guide for startups.

  1. Conduct your own due diligence on investors

Establishing rapport and ensuring you see eye-to-eye with an investor is critical to a healthy business relationship. Ask those looking to invest detailed questions to better understand how they envisage your working relationship – will they be hands-on or leave you to it? Will they likely become too involved and drain your time? Will they add value by contributing expertise and introducing you to their contacts – known as “smart money”; or are they simply investing financially? Managing expectations and setting boundaries early on can save you significant problems down the line.

  1. Know your worth when seeking investment

There is no “right” answer when it comes to the value of your business. Ultimately it is what someone is prepared to pay or to invest. However, you can do some research when valuing your business.

Get information from investment banks as to what similar businesses have been valued at and ask people in your network – there is no shame in asking these questions, particularly in the food & drink industry which is generally more supportive than others.

Also consider your own business plan as to what you want to achieve by when and consider the costs involved to get there. This includes what is needed to run freedom to operate searches and to register your brand in the relevant markets. Those figures are relevant when it comes to seeking investment.

Overall a good rule of thumb is: potential x evidence x momentum = value

Investing in your IP at an early stage gives investors confidence in the business because there is tangible evidence of value they can use when assessing the overall business value.

Include all of the information you uncover in your pitch deck to support your valuation and demonstrate credibility to potential investors and make sure you are armed and ready with the pitch deck for when an opportunity presents itself. You should keep the deck brief and be able to speak enthusiastically about your brand.

To read more articles relating to intellectual property and brand protection in the food, drink and hospitality sectors, please visit our resources section here.

At GJE, we offer comprehensive IP and brand protection support for food and drink businesses, no matter their lifecycle stage. Our BrandLaunch™ service provides a unique analysis and assessment tool for businesses launching a new brand, unveiling a new product, or entering a new market. It examines where you are in terms of your business and IP, and where you want to be, drawing upon the firm’s extensive expertise in brand strategy. It delivers a clear roadmap setting out milestones on your journey to protecting your new brand or product.

For more established businesses, BrandCheckis an essential tool that will help you secure investment, prepare for international expansion, and for your preferred exit. Ideally suited for businesses with a few main brands, and registered trade marks, BrandCheck’s strength is in providing and refining a business’ existing IP strategy.

If you would like to discuss these services, or how else GJE can help you protect your intellectual property and brand, please get in touch with them via gje@gje.com or call us on 020 76500 8500.”

 

Get in touch

If you are an ambitious business and you expect an IP service provider that can understand and help you achieve your commercial objectives, then we want to work with you. Complete the enquiry form below and one of our specialists will be in touch within one working day. Alternatively you can call us on +44 (0)20 7655 8500. We look forward to hearing from you.