Fundraising Guide P.2 | Finding CPG-focused investors and building a market landscape
This is part 2 of our guide with Amrit Richmond and Indie CPG to help F&B brands raise capital in 2023. You can find tips on building a market landscape, where to find CPG-focused investors, the types of investors & VC personas, and how to reverse diligence potential investors.
What’s in Part 2 of Our Fundraising Guide
- Building a Market Landscape
- Where to Find CPG-Focused Investors
- Types of Investors & VC Personas
- How to Reverse Diligence Potential Investors
Building a Market Landscape
Make a list of your direct competitors, similar brands (e.g. like-minded, better-for-you products), brands in your grocery aisle, and brands aligned with a hero ingredient or diet that your company celebrates. Ideally, this list will help you pinpoint which investors are active in your space and which you shouldn’t pitch because of a portfolio conflict or lack of expertise in your category.
Some funds are CPG agnostic - e.g. they invest in anything F&B, some invest at a specific stage, and some only invest in beverages or plant-based foods. This list will also help you understand what % of brands in your market are funded and how much capital has been deployed in your sub-sector.
The more targeted you get with this list, the better your conversations and pitches will be, you’ll receive more thoughtful and informed feedback, and less time wasted in pursuit of fundraising!
When you send a note to investors, reference the portfolio alignment you see, like “I saw you invested in these other two vegan brands - we admire their distribution path and think you’d understand our vision based on your experience working with those teams.”
Where to Find CPG-Focused Investors
Take the list of brands in your market landscape and annotate it with a list of their investors. Add notes about where the fund is based, which Partners or investment team members focus on your sub-sector, and which stages they invest at - this last one is very important so you don’t pitch a fund way too early!
In another post, we’ll talk about how to get in touch with investors, but for now, note if you are connected to any of their portfolio companies for potential intro paths. We recommend using Airtable - make one column for brands and one for investors, then connect them with the magic Look Up feature to build your own little database.
- Ask your Friends - Start by talking to your industry peers and community members about which investors they recommend or admire. They’ll know who is actively investing right now.
- FABID - Discover hundreds of investors and venture-backed food & beverage brands.
- FirstLook - A subscription box to reach active angels and early-stage consumer investors.
- LinkedIn - Many CPG angels and advisors list the brands they work with on their LinkedIn profiles. Once you make a list of your competitors and complementary brands, cross reference the list on LinkedIn to see the individuals that support them.
- Crunchbase - More tech and eCommerce focused than FABID, helps you identify the next tech trends and new companies in your target industry.
- Pitchbook - Empowers capital market professionals around the globe with market intel. Best for later-stage fundraising and identifying CVCs (corporate investors) to pitch.
- Search Engine - If a database doesn’t make sense for your needs, Google the brand name with fundraising keywords like Investors or Raises to find their past press releases and interviews about their fundraising milestones that usually mention their key investors too.
Once you have a list of brands and investors in your space, look closely for any signals that you should or shouldn’t pitch them.
Should: They have a clear focus/thesis about healthy brands, with past investments in similar stages and sub-sectors as your brand. They’ve already partnered with a brand or two you admire that have a growth path similar to what’s upcoming for your brand in 2023-2024.
Shouldn’t: One or more clear competitors in their portfolio. Or they don’t have enough CPG investments because their core focus is eCommerce-only brands or technology for brands. Maybe they opportunistically invested in a beverage but don’t plan to invest in CPG again.
What kind of investors do you want at your stage of growth? These are some of the personas you might meet along the way.
- Customers - If you go the equity crowdfunding route, activate your customers into investors.
- Friends & Family - People who trust and believe in you, not always within the CPG industry.
- Angel Investors - Industry leaders (founders, operators, agencies) writing $1k-$100k checks
- VC Funds - Seed to Series B investors taking a minority stake in your business. Also look for localized funds and grant programs in your city and state.
- Private Equity - Series B+ investors that become significant stakeholders in your brand.
- Family Offices - High-net-worth families looking to invest in people and ideas they believe in.
- CVCs - Retailers and corporate VCs that can help with retail, R&D, and supply chain.
Investor Personalities - Mix & Match For Your Dream Cap Table
- The Connector - This person is 1-2 degrees away from key introductions you need and likely grows their network with brands in mind. They enjoy being helpful, connecting people who should know each other, and keeping their network warm.
- Key connections: Other investors, service providers, like-minded brands.
- Investors trust this person to only send them brands that are aligned with their investment thesis, stage, and that are not a conflict with their current portfolio.
- The Sales Machine - Sometimes also The Connector, this partner opens doors to retailers and transactional strategic partnerships.
- Retailers trust this person to only send them brands that are ready to launch on the shelf. This included having product market fit and inventory and/or runway.
- Partners trust this person to surface brands that are ready to scale through strategic partnerships, like co-branded products or licensing agreements.
- The Former Founder - They sold their last brand or made significant sales progress that you can learn from. They are eager to teach you how to scale a brand.
- The Coach - Ideally Coaches are founders (past or present) who can advise on leadership development, HR, sales strategy, product roadmap, scaling sustainably.
- Coaches might also be able to help you with retailer and investor introductions.
- Sometimes The Coach could be a senior operator who reported to founders.
- The Operator - Complements the Coach to help your brand think through marketing, sales, operations, supply chain, and partnerships. They are likely working in-house managing a department at a high-growth brand and might aspire to start their own company one day. Advising and angel investing help them work toward that goal.
- The Career VC - This investor has been in VC for 10-20 years and has seen brands at every stage of growth from pre-seed to IPO. They're likely investing out of an established fund, allowing them to be patient, with a strong team who can help you.
- More established funds often have portfolio-only resources available like mentors, a talent network or recruiting support, vendor referrals, board member lists, and key introductions - similar to The Connector and The Sales Machine.
- This type of investor can be helpful with negotiating term sheets at various stages of growth, getting backchannel references and intros to like-minded investors, exit strategy and evaluating an M&A offer, and preparing to IPO.
- The Thesis/Specialist VC - They know your slice of the industry well because they either previously worked in it or are connected to the best brands in your sector by way of networking and being a deal flow magnet. They don't waste time looking at deals that are not aligned with their thesis, like plant-based foods or beverages.
- They already know who your competitors and complementary brands are, so you will have to do the least amount of unit economics and consumer demand education with them. They are likely a leader in the sector that other investors follow, so their co-investor network will be strong.
- You can't hide your market position from them, so be prepared to discuss how you stack up on the shelf. They only invest in the TOP brands in your sector, so the barrier for investment is high across strong team, traction and distribution.
- The Industry Veteran - This person can save you time, money, and headaches by giving you a Disneyland tour of how your industry sector works. They enjoy mentoring the next generation and want to see you succeed. They are ideally humble and collaborative, and might be hard to find (likely not on LinkedIn) so ask around.
- The Service Provider - Sometimes you can negotiate part of agency agreements to be paid in equity and work with a service provider long-term as an advisor. Finance, co-mans, factories, ingredient suppliers, public relations, branding, design, R&D and market research.
- Before taking on a partnership like this, vet them the same way you would an investor: Understand their strengths, talk to brands they've worked with, and spend time with them to see how they operate when they are not being compensated with money.
- Also make sure they have the capacity to be your advisor and set expectations for what your working relationships will be — like quarterly brainstorms, introductions in between, hands-on strategy, or design work?
- Their support services might be amazing, but do you really need them right now?
How to Reverse Diligence Potential Investors
Be wary of investors who over-index on ego and equity compensation before proving their value. Remember, they should be pitching YOU too to show that they’re a strong growth partner.
- Make a list of your non-negotiables in a VC to reference when you do due diligence on potential investors. For a sample list, see Amrit’s post on Vision, Value & Values.
- Ask them for references of founders they helped in the past as an advisor, angel, consultant, partner, or friend. Don't just rely on the list of written references they provide to you, talk to those people about the person's follow through, unique network, skillset, and communication style. Talk to brands they've worked with, both that are successful and ones that have failed.
- If the deal looks too good to be true before you get to know the fund, it probably is
- Ask them for a short list of introductions they would try to make if you were in their portfolio. They don’t have to make the intros before a check, but you should have a sense of the depth and value of their network before going into business with them.
- Keep a list of areas where you need input and guidance from investors in the next 3-18 months alongside your larger company goals. As you build out your cap table, align your investors' networks and skillsets with those needs.
- If they can't help with all of your asks, then they should know someone who can like an advisor, co-investor, mentor a consultant/agency to introduce you to.
- Find clever ways to brainstorm on a sample project (that’s timely for your brand) with potential investors to get a sense of how they think and work, and if their expertise and insights are aligned with your vision for where your brand is headed next.
- Start with an audit of your brand. Make a list of similar businesses to help you pinpoint active investors in your space.
- Based on your list of similar brands, create a targeted list of potential investors and those you should not pitch to because of a portfolio conflict or lack of expertise in your category.
- Think about the type of investors you need/want in your corner. Consider their background and the brands they've already invested in.
- Researching and evaluating potential investors can give you a better understanding of their investment goals and preferences, as well as their track record and reputation. Making a more informed decision about which investors to pursue and how to tailor your pitch to each investor's needs.
- Find Part 1 of our guide here.