3 Things You Need to Know when Navigating the World of Food Tech Investment

Friday 13th April

By Natalie Ord

Natalie is a partner in RSM’s M&A and Private Equity team, specialising in private company sales, fund raising and management buyouts. Natalie advises growing, entrepreneurial businesses across a range of sectors on mid-market transactions valued up to £100m. Natalie works closely with clients to help them prepare for a transaction (sometimes years ahead of the event), marketing businesses to potential buyers and investors, leading and supporting negotiations and managing deals to completion. Natalie has worked with a number of consumer businesses, including the sale of Essential Travel, a holiday extras provider, to Thomas Cook, Avantia, a tech enabled home insurance platform acquired by private equity and Camden Town on their sale to the world's largest brewer, AB Inbev.

We’re really excited to announce our partnership with finance experts RSM and will be announcing a number of activities with them over the next few months, with the first being the YFood Insight & Innovation Day! As active members of the YFood community and longtime YFood Tech Wednesdays attendees, the RSM team are passionate about Food Tech and supporting growth of the industry. First up, Natalie Ord, Partner at RSM, shares her top tips on gearing up for investment.

With Food Tech seen as a serious disruptor to the traditional food and drink operating model, investors are getting excited by the opportunities this sector offers.

And an exciting sector it is! The food and agricultural industries are worth $7.8 trillion and investment in Food Tech grew 6% year on year in the first half of 2017, with $4.4bn invested globally in Food Tech startups. As the sector keeps growing, investment opportunities will become more rigorous and competitive.

For many entrepreneurs navigating the often-complex world of finance can be challenging and as a decision that is based as much on raising funds as finding the right partner, it can be difficult to know what the options are.

Over the past few years RSM has worked with many businesses to help them find the best route forward.

Funding can often be difficult to attract at an early stage, with friends and family reserves already being exhausted.  Therefore, ensuring you know your options and the complexity of each, both now and further down the line, will ensure you put yourself in good stead for making the right choice.

  1. How much capital do you need and what is the funding for?

Capital, whether its debt or equity, comes at a cost. It’s therefore important that you understand how much you need and that the funds you raise will be used effectively – whether it’s product development, scaling up operations, staff requirements etc. Being able to demonstrate the return on investment of what you are spending will help showcase the opportunity.

  1. Why now?

This is key for an investor to understand. What is the market opportunity and why is this the right time to grow the business? What are the risks you face and how will you mitigate these to ensure the business goes from strength to strength? What does the business need that an investor can bring to the table (a black book of contacts, roll out experience, building the brand)?

Making sure a founder is going to spend an investor’s money wisely is a critical question in weighing up whether they’ll get a return on their investment. Understanding why you need the cash injection now and what has led you to this is key in helping them build a picture of the team they would be investing in and how their money will be handled.

  1. Who is the investor investing in?

When evaluating investment opportunities, investors like good businesses but it’s the people and the management teams they are backing. The concept is important but the ability of a team to execute their plan is integral to the success of any business and this is ultimately what investors are interested in. As part of presenting your opportunity to investors you need to think about who is central to delivering future growth and needs to be incentivised for the long term? Are there any shareholders who want to be bought out? These are all important things to have ironed out with any cofounders and/or existing shareholders.

Whatever your next step is, there are key considerations for an entrepreneur looking to raise capital or exit their business. Whether that is,

  • Dealing with multiple shareholders with different objectives;
  • Preparing forecasts (do you know what your business is worth?);
  • Incentivising your staff; or
  • Tax planning

As global experts in finance, tax and accounting, RSM have combined their consumer markets and technology expertise to help you tackle the challenges of being a ‘lesser known’ emerging sector. And with a roster of hospitality clients, including The Breakfast Club, Camden Town, and Ping Pong, to name just a few, they know a thing or two about the industry.

We’re excited to have RSM as official event partners and they will be hosting an exclusive opportunity for startup ticket holders at the YFood Insight & Innovation Day. RSM Partners Natalie Ord and Simon Adams will be on hand to answer your questions and highlight some of the areas you need to make sure you’ve got covered as you take your business onto the next phase. This opportunity is free exclusively for Food Tech startup ticket holders, booking is essential and spaces are extremely limited so get your tickets to the event before registration opens next week to capitalise on this opportunity! Please do book a drop-in and see them, as they’d love to meet you and hear about your journey so far.

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