Building networks, understanding the capital needs of your business and being flexible to deal with the unexpected are critical components for success in seeking investors in a start-up company.
These were some of the key messages from a panel of agriculture technology and food entrepreneurs who shared their advice learned during the Farm Bureau Agriculture Investment Summit on Jan. 7. The summit, held during the American Farm Bureau Federation’s 2017 Annual Convention & IDEAg Trade Show, connects ag entrepreneurs with investment associates from venture capital funds, accelerator programs and Rural Business Investment Companies, which allow the Agriculture Department to facilitate private equity investments in agriculture-related businesses.
Justin Renfro of Kiva moderated the panel, which was comprised of Michael Koenig, president of ScoutPro, Inc.; Stuart McCulloh, ScoutPro’s director of customer success; Janette Barnard, founder and CEO of The Poultry Exchange; and Dane Kuper and Dustin Balsley, founders of Performance Livestock Analytics, Inc.
Commenting on how he and McCulloh raised capital in the company’s early years, Koenig said, “If you have something to talk about, investors will reach out to you. Never discount the value of a cold call.” He said he kept a spreadsheet to keep track of all the connections they made, which proved extremely valuable in helping them build a network to launch the business.
Barnard emphasized the importance of networking with the best companies to build your contact base and solicit advice.
“When you find an investor, there are usually 10 more [within that network],” she said. In building her company, she sought advice from a former CEO of a large chicken company. “It was validation early on,” she said. “He could see the need, and he understood the pain points. Also, as an advisor, he could provide perspective.”
Panelists said an important consideration in seeking investment capital is finding an experienced investor who realizes there will be challenges along the way.
Said Barnard, “A seasoned start-up investor will understand that your plan will often play out differently than you projected and will expect course corrections.”
And while there will be setbacks in building and launching a start-up, Balsley says these often test your mettle as an entrepreneur.
“Any time there are struggles, that’s where your creativity and innovation really shine,” Balsley said. “Those pain points create innovation, and they make you better in the long run.”
Koenig said the best advice he could give to aspiring entrepreneurs was to expect the unexpected.
“Whatever time you think you need, double it,” he said. “I wish someone would have told us that in the beginning. The same goes for legal fees. To do it right, legal counsel is key to your business. We all need help from other people, and our legal counsel was some of the best money we ever spent.”
One of the most important considerations of seeking capital is considering how much equity you are willing to trade in order to grow your business.
“Funding is only relevant to the extent that it helps you build a better business faster,” said Barnard. “You’re inherently giving up part of your company when you take on investors, so you should find a way to fund your growth through profits if possible. But not at the expense of growth.”