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IdeaXchange

Natural products founders need the right funding to fuel their brands

elliot begoun ideaxchange
Just as a driver wouldn't put rocket fuel in a Camry, most growing natural brands don't need venture funds. Instead, look for small, earmarked investments.

In growing a business, most natural products entrepreneurs are not launching a rocket ship into orbit. In other words, you are not gunning to be a $100 million brand within the next five years. It’s more like you are driving a Toyota Camry on a long cross-country road trip.

Continuing with that metaphor, let’s say you’re cruising down the highway in your trusty Camry. The gas light illuminates—the tank is near empty. Do you start looking for rocket fuel? No. Rocket fuel burns hot and fast, so if you put it in your Camry, the car would sputter and die. Instead, you look for cheap unleaded gasoline and a bathroom.

Yet when building a brand toward its first $10 million in revenue, founders often search for rocket fuel when their business runs low on cash. And by rocket fuel, I mean venture capital. VC money is fine for spaceships, but for a Camry? Not a great fit.

With most venture funds, less than 10% of their portfolio returns 90% or more of their upside. That means if you get funding from a VC, you’re putting your Camry on a launchpad and sending it hurtling into the sky—regardless of whether or not it can fly.

This practice needs to stop. It doesn’t work for either the VC or the natural products entrepreneur. Maybe someday you’ll build a rocket, but until then, stay off the launch pad.

The navigation system of this industry keeps directing brands to Cape Canaveral, and we need to fix that as well. Most investors get excited about the moonshot—and there is nothing is wrong with that, as someone needs to fund the dreamers. But our industry also requires investors willing to maintain the service stations along the highways that provide cheap unleaded gasoline and clean bathrooms.

Both entrepreneurs and investors will make money along this highway. Small, earmarked investments, with the correct terms and structures, will help propel brands down the road and make all the difference in them reaching their destinations. And upon arrival at the opposite coast, founders can dip their toes in the sands of choice. Here, they can choose to build a rocket, sell the Camry to a collector or keep on driving it in a new direction.

Let’s build service stations along the entrepreneurial highway. If you’re interested in seeing more founders find their feet in those sands, invest in the TIG Venture Community. I love a good moonshot, but I’ll put my dollars on the driver of a Camry any day. Join me!

Click here if you are interested in learning more about the TIG Venture Community and our rolling fund on the AngelList platform. You can also reach out to me directly at [email protected]

Elliot Begoun is a 30-year industry veteran, author, podcast host, founder of TIG Brands and champion of Tardigrades. 

Have some big ideas or thoughts to share related to the natural products industry? We’d love to hear and publish your opinions in the newhope.com IdeaXchange. Check out our submission guidelines.

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