What Types of Firms Qualify to Work with FI?

1/1/2019

We're kind of picky. We only want to work with firms that value positive impact on the world as much as profitability. We focus on good local food. Click "Read More" for the full list of qualifications.

If you're potentially interested in working with FI, please "self-qualify"...

For Companies seeking either advisory services or funding:

IMPACT

"Impact" businesses are described in many ways: mission-driven, purpose-driven, socially responsible, green, B-Corp, or triple-bottom-line. In general, we're looking for firms that believe in and practice "business for good".

Is the creation of positive externalities and the reduction of negative externalities built into your core business model? Are you an active participant in the regenerative economy?

Interested in assessing your current and planned level of impact? FI clients have access to our online tool Px8 ("pixate") to examine eight vectors of impact, all starting with the letter P: Planet, People, Products, Procurement, Production, Place, Pace, and Plan.

US-BASED

We only work with, or invest in, companies that are based in and governed by the laws of the United States.

LOCAL

We're really committed to helping local economies thrive and are predisposed to firms sharing that commitment.

For us, being local is:

local ownership of the business;
local sourcing of materials and services;
local employment of workers paid a living wage and benefits, with plans for local job growth;
local involvement in the community, giving back with time, money, or in-kind products and services.

"Local" can mean local to one of the Foodshed Investors offices around the country, or it can mean local to your specific community.

TYPE

Either "for-profit" companies or "non-profits" with earned income revenue streams.

SIZE

Small: less than 50 employees or $10M in sales.

STRATEGY

Management
Strong, resilient companies come from strong, resilient operators. We look very favorably on firms with the managerial skill and discipline to implement the Deming Circle (Plan, Do, Check, & Act) to rigorously create, track, and improve both business results and your specific areas of impact.

We're also big fans of "milestone-based" new initiatives, particularly associated with fundraising.

Growth
Unlike most investors, we don't demand growth. In fact, we believe the pursuit of unbridled growth and super-fast pace is potentially harmful to all involved. That said, it is natural for things to grow, but at a pace appropriate for their specific situation.

Innovation
We also don't require innovation. We think it is just fine to produce superior quality products for well-loved customers. That said, we love new ideas and creative approaches.

Profitability & Cash Flow
We strongly believe in positive cash flow. When raising capital for a milestone-based set of projects, it is expected that cash flow can go negative for short periods of time, but the plan must be to attain positive cash soon after the milestones are reached. And, of course, those cash plans must include sufficient cash flow to pay investors.

Exit
We don't require applicant businesses to have the typical exit plan of IPO or business sale. We want to see solid businesses built to last. That said, investors do like to see their capital come back at some point, so we ask applicants to be open to:

self-retiring instruments such as principal + interest notes or royalty-based financing
corporate documents allowing conditions for sale of position from one investor to another
possibility of company buy-backs
eventual possibility of public financing such as DPO or retail crowd funding.

STAGE

Our Advisory Services team is happy to work with companies at any stage, from Concept through Maturity.

For Companies seeking funding only:

While our Advisory Services team is happy to work with companies at any stage, we ONLY consider applications for Funding from firms with the following additional criteria:

STAGE

We're looking for established companies with several years of operating history, an in-place team, and a solid plan who now see ways to expand their impact on the world via reasonable, sustainable growth.

In general, we are not interested in Start-Ups. We define Start-Ups as:

Concept stage, consisting of an idea or a plan but without established products, customers, revenue, team or operating history;
Early growth stage, with tiny revenue from a first generation product or service selling to a few early customers, supported mainly by the founding team;
Any company pursuing a fast-growth, Silicon Valley style of financing that has not yet completed a Series A financing.

Exceptions: we may consider your Start-Up IF it has ALL of the following:

An outsized, substantial, game-changing impact in the regenerative / sustainable food & farm industry;
A keen, nuanced understanding of the Key Success Factors for your type of business and customer set;
A mostly filled-out operational team with significant direct experience performing on those Key Success Factors in your industry sub-sector;
A respected and very active Advisory Board of experts in the field;
A passionate, sophisticated Lead Investor who has driven a fair, mutually aligned set of deal terms.

EXEMPTION

The Securities and Exchange Commission regulates private companies raising money from private investors, which they term a "private placement".

All private placements must either be registered with the SEC (a time-consuming and expensive proposition) or fall under one of several "exemptions" from registration:

Reg D Section 506(c) allows "general solicitation", which means we can send your deal around to our Investor Network, but only "accredited investors" can actually place monies;
Reg D Section 506(b) does not allow general solicitation, which means FI can consider investing for our own account, but we can't send your deal around;
Reg CF allows most anyone to invest, and allows general solicitation, but your deal must be placed on one of many FINRA-registered Crowdfunding Portals, you can't talk to potential investors about your deal prior to it going live on a Portal, and communication about your deal after it goes live is restricted in several ways;
Reg A+ allows you to raise over $1M (which Reg CF does not);
There are other exemptions, with other rules, but these four are the ones we see used most often.

We strongly recommend that all firms raising money - that is, doing a "private placement" - engage a securities attorney to ensure you stay on the right side of the law and to represent your interests in deal term negotiations.

If you don't know which exemption your private placement falls under, you're NOT funding ready...

RAISE AMOUNT

FI looks for firms raising between $10k and $1M in total for this round; of which no more than $500k is sought from FI and/or the FI Investor Networks.

We like small deals. We like modest plans. We like mainstreet and rural-route entrepreneurs building robust local impact businesses.

INVESTMENT VEHICLE

We are open to many types of investment vehicles, including but not limited to:

simple straight debt;
preferred equity;
royalty-based financing;
"restaurant-style" claim-on-cashflow;
"demand dividend" stock buy-backs;
we've even done livestock financing, helping ranchers bring sustainable (non-CAFO) beef to market.

But we really don't like Convertible Notes. And we really, really hate SAFEs. If you're raising money on a Convertible, and you meet all the other criteria, we can talk (yes, we've done convertibles in the past) but the hurdle is that much higher. If you're using a SAFE, sorry, we're out.

FUNDING READY

We only accept applications for funding from companies that are what we call "funding ready".

Here is a another FAQ entry on what that means, but in summary it includes having:

a PPM (private placement memorandum) including an operational business plan, financial actuals and projections, and risks and mitigations or a live Reg CF Funding Portal page;
a term sheet;
definitive legal agreements for the investment;
the ability to accept funds;
a securities attorney

SORRY, BUT...

We do not accept funding applications from:

individuals, projects, or technologies - we are looking for fully formed companies;
companies that are religion-based;
purely non-profit organizations without earned income streams;
rescues. If your company is 10, or 30, or 60 days from running out of money and closing shop, and you're desperately thrashing to save it, sorry, not our kind of deal.

FINE PRINT

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Please be aware, we don't sign NDAs.