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The Key to Growth Without Compromise: Finding the Right Financing
September 9th, 2013
Wild Planet Foods, a provider of sustainably caught wild seafood, grew from $2 million in revenue in 2008 to $20 million in 2010 and $60 million in 2012 — without compromising its mission. How did the company do it?
A key factor for any sustainable business is getting financing right. That means not only choosing the right mix of financing — equity, debt, nontraditional alternatives — but also choosing funders that understand opportunities in your sector and support your mission. The following examples show how three mission-driven companies have used this strategy successfully.
Wild Planet’s Mix: Sea-Savvy Investors and Asset-Based Financing From Mission-Aligned Lenders
Wild Planet’s mission is to provide the finest-tasting sustainably caught seafood while supporting conservation of wild marine ecosystems. The company’s case for investment: it saw a market worth $30-100 million for relatively affordable sustainable canned tuna. In 2008, the premium segment of the $3 billion packaged tuna market consisted of companies with less than $5 million in revenue, selling tuna for $6 to $8 per can — three times the price of big-brand products. Wild Planet made the case that it could grow and thrive by selling premium tuna in the $3 to $4 range.
Wild Planet CEO Terry Hunt advised fellow entrepreneurs attending a re:think event at New Resource Bank last fall to look beyond Wall Street and big banks to organizations that work in their area. “They’ll understand you, and you’ll be mission-related for them,” Hunt said. Wild Planet went to Sea Change Management, a private equity firm supporting sustainably sourced seafood; White Road Investments, which funds only ventures with an organic or sustainable mission; and New Resource, which considered the company’s mission and was able to look beyond initial cash flow to see the value that would accrue six months ahead. New Resource in turn introduced Wild Planet to RSF Social Finance, which provided additional financing.
Hunt also suggested looking for creative ways to solve funding challenges rather than defaulting to standard paths. “Instead of taking on more equity investors,” he said, “we had investors who could provide shareholder loans as a bridge to funding from bank loans. Shareholder loans come at a high rate of interest, but for a growing company, few things are more expensive in the long run than issuing equity.”
Farm Power Northwest: Turning Manure Into Clean Fuel With Loans, Offsets and Grants
Farm Power Northwest turns a problem into a solution. The Skagit County, Washington–based company, founded by brothers Kevin and Daryl Maas, is on a mission to help dairy farming communities thrive and to produce sustainable energy locally. Farm Power Northwest’s anaerobic manure digesters produce clean fuel along with nutrient-rich fertilizer and a pathogen-free fiber that farmers can use as bedding for their cows. In Tillamook County, Oregon, its digester generates almost a megawatt of electricity — enough to power 600 to 700 homes.
The company’s approach to funding is equally multifaceted. It has a loan through New Resource, which has expertise in local and national energy grants, and it worked closely with the bank to take advantage of carbon offsets, tax credits and the USDA Rural Energy for America Program (REAP), which provides financial support for agricultural energy projects via loan guarantees and grants.
Finding a funder with an interest in the end product was key, says cofounder Kevin Maas, who recalls that discussions broke down over ownership of the land. “They aren’t interested in the end product; they just want to know they can take the land if something goes wrong,” he says.
Cowgirl Creamery: Financing Sustainability and a Healthy Business Community
Much has changed since longtime friends Sue Conley and Peggy Smith started Cowgirl Creamery in 1997: the business has grown from one small cheese-making room to two full creameries, three retail stores, and products sold in more than 700 shops and restaurants nationally. But their vision has remained the same: make great cheese and promote artisan cheese-making while supporting local organic agriculture and sustainable practices (the company’s creamery in Point Reyes Station is solar powered, for example).
Again, funders that understand the company’s vision have supported its growth. Cowgirl built its second creamery, in Petaluma, with financing from New Resource and RSF, which supports social enterprises in food, textiles and agriculture, among other areas. Next, Cowgirl hopes to open a dairy-processing center with Straus Family Creamery. The facility would house the expanded operations of both businesses and serve other small dairy producers. “The whole sector is growing,” Conley says. “If we’re going to stay small and still be competitive, we need to work together by sharing infrastructure and knowledge in engineering, food safety and finance.”