Adapted from a presentation with Nutrition Capital Network’s investment banking partner Whipstitch Capital, Grant Ferrier shares the eight common traits of companies that have successfully raised capital or sold to strategic investors.
1) Go Deep, Not Wide
Build a regional success first, then show how it can be replicated in other regions. Resist adding too many products or stock keeping units in the early stages but show you can build sell-through at the same stores.
2) White Space
Show where the investor or acquirer has room to grow with options for brand extension or logical adjacent product categories.
3) Capital Efficiency
Create a business that requires less cash to grow and prove it by showing lift during and after promotions and demos, and creating a clear path for marketing return on investment at scale.
4) Had One, Want Another
Products that can be quickly consumed lead to better velocity. Avoid products that can sit on a consumer’s pantry shelf for months.
5) Making Money Counts
Gross margins on products are key for early-stage companies—demonstrate the path to improved gross margins with scale, and remember your overall earnings before interest, tax, depreciation and amortisation are more important for companies past $5 to 10 million in sales.
6) Fuel Growth, Don’t Fill Holes
Show how new cash enhances growth, not cover losses—use of proceeds in detail is important for any investor.
7) Been There, Done That
A team with success in the past is easier to fund. Past the angel level, most investment committees have several members, often with multiple partners enjoying veto-power.
8) Entrepreneurial Zeal and Mission
Authentic passion for the product and your company's business and social goals makes an appreciable impact. Ambitions of making millions is perfectly fine but should be balanced with other motivations.