Vol. 127 - NO. 39

Blog Startup CPG

SINCE 2019

Fundraising 101

American Provenance manufactures natural personal care and wellness products for men. The company was founded by Kyle LaFond and inspired by his time as a middle school science teacher. While in the classroom, Kyle noticed that his students used all kinds of very popular name brand cosmetic products that contained a wide variety of harsh and noxious chemicals. This led to a realization that a need existed for better, more natural alternatives to conventional products. American Provenance was then launched from a renovated machine shed on Kyle’s fourth generation family farm in mid-2015. Today you can find American Provenance products on over 4,000 shelves nationwide including at Whole Foods, Hy-Vee, Giant Eagle and Natural Grocers Vitamin Cottage. Popular eCom channels include Amazon.com, Target.com, Walmart.com and Kroger.com.

As a general caveat, the information and insights shared throughout this article are based solely on my own experiences. Fundraising is different and unique for every business and the intent of this message is to share general ideas and considerations. Strategies that work for one kind of business may not work for others.

Fundraising is a job unto itself. It takes an extraordinary amount of time and effort to identify potential investment partners, determine the best way to facilitate an introduction, to build relationships, and ultimately broker agreements. Many founders become full-time fundraisers once an investment strategy is developed. If you don’t have the capacity to commit to thorough fundraising activities, seeking investment from outside sources may not be suited for you and your business. Founders need to be realistic and understand that fundraising is very challenging even in the best of circumstances. Timelines need to reflect not only where the business is at, but also where it may be in months and years to come.

Q1 – Is fundraising right for me?
One of the very first things that you should do as a founder is determine what kind of business you want to have. This means deciding if you want to build a legacy brand that you can transfer to a partner, relative, or designee or if you want to build a business that you intend to sell. This is a very important decision. If you choose to build a legacy brand, outside investment may not be in your best interest. Investors will always want a return on their investment and most investors will not invest without a shared exit strategy in mind. If you’re looking to build a brand and sell it, outside investment will accelerate that process.

This is not a decision to be made lightly. Founders need to weigh the pros and cons of both approaches before pursuing investment or considering other options.

Q2 – What types of investment funding is available?

Friends and Family

Most businesses start the fundraising process by soliciting friends and family. Some people are very fortunate to have a “rich aunt or uncle” to lean on for either a gift, loan, or investment. However, most of us are not in that situation. Before deciding to seek funding from friends and family, an entrepreneur needs to carefully consider both best and absolute worst case scenarios. Best case, everyone does well and has a financial windfall sometime in the future (3-15 years). Worst case, things fall apart and everyone loses their investment with nothing to show for the effort and contribution. This can ruin relationships and make for very uneasy conversations around the dinner table during the Holidays. I’ve always advised other founders to utilize their own resources before bringing on others. Lots of founders mortgage their properties, pull from savings, leverage retirement accounts, or cash out their own investments to fund a business opportunity.

Public/Private Groups

Many states now have hybrid investment vehicles that have been created through legislation to partially fund investment groups to encourage business activity. These models often include a contribution from the State that is either matched or expected to be exceeded by contributions from private investors. These groups are actively looking for deals based in the state where these types of funding vehicles have been created. Most of these efforts are focused on investment during the seed stage to provide businesses the funding they need to get off the ground. I always advise founders to look for these types of groups as there is a shared interest in growing business opportunities. Don’t be afraid to ask for introductions from within your own network or to introduce yourself at conferences or events.


Many new businesses rely on Angel investment to either launch or scale. Angels are accredited investors with an assumed level of sophistication. Some angel investors work independently while others form groups to invest in business ventures. Those that work in groups tend to form syndicates or Special Purpose Vehicles (SPVs) to combine resources and invest in either a greater number of companies or at higher levels. Angels are a great source of funding and can provide a wealth of insight and experience as many angel investors are entrepreneurs or former startup founders themselves. Finding the right angel can change the trajectory of a new business. There are many ways to meet angels. Again, don’t be afraid to ask for introductions from those within your own network. There are also a number of popular angel websites that provide background information and investment preferences for angels throughout the United States and beyond.

Family Offices

Family offices are located throughout the World and can be great investment partners. Family offices may work independently or as a collaborative group to make investments into startups. These offices primarily manage generational wealth and have an interest in making investments to both continue their legacies and enter into new markets or industries. Most family offices are industry agnostic and will invest in any opportunity that they feel can garner a significant return. Most family offices are well connected and can provide meaningful introductions to help a business grow.

Venture Capital

Venture Capital groups exist to invest in high-growth companies. These groups are charged with making significant and timely returns for their investors. These groups perform rigorous due diligence and vet the companies they invest in. Most startups aren’t ready for Venture Capital until they reach a certain inflection point. This inflection point usually has something to do with traction in the form of users, sales, or both. Venture capital groups make significant investments and expect returns on those investments in a relatively short amount of time. Once venture capital dollars are committed to a deal, the clock starts running to realize a return.


Equity based crowdfunding platforms have become increasingly popular among both investors and startups. Popular platforms include Republic, Start Engine and Wefunder. These platforms provide an opportunity for both accredited and non-accredited investors to invest in companies throughout the World. This is an appealing option for many startups as it provides a way to both achieve marketing goals and to raise capital. Investors may be people that are familiar with the founder and business, or complete strangers who are newly introduced.

Q3 – What are the most important things I need to know about fundraising?

Fundraising isn’t for everyone. Before you make the decision to take on investors, you need to determine if it is right for you and your business. It’s crucial for founders to understand the following points:

Fundraising takes extraordinary time and effort and can take a toll on founders.

Once you take on investors, they will have a reasonable expectation of a return.

Once you start fundraising, it won’t stop until the company either fails or is acquired.

Not all investment dollars are created equal. Some come with networks and connections to help accelerate growth.

Vet your investors. Make sure they are the right partners for you and your business.

Q4 – Should I pursue crowdfunding?

Crowdfunding has both benefits and drawbacks and it’s important to understand these considerations before launching on any platform.

Crowdfunding sites are not “free” and all of them have associated costs.

Most crowdfunding sites have upfront fees to cover their own costs. These fees typically range from $3,000-5,000. Additionally, all crowdfunding sites will take a portion of the money raised as part of their fee arrangement. This is usually 4-7% of the total amount raised. Last, most sites will also take a percentage of the equity issued to investors. This usually equates to 1-3% of the equities issued.

Crowdfunding sites also require rigorous due diligence. This means that you simply can’t build a campaign and start collecting money from investors. Every platform has to conform to SEC rules and regulations and this necessitates transparency and thorough review. Before you are approved to run a campaign on any platform, you will need to provide a plethora of information regarding your business operations and finances. This is necessary to ensure that you are providing accurate information to potential investors.

Q5 – How much equity should I be prepared to give up?

As a general rule of thumb, most founders don’t give up more than 20% in any single round. Additionally, if an investment partner owns 20% or more of your business, then they are required to sign off on any kind of banking transaction, limiting the entrepreneurs ability to make most financial decisions.

Q6 – What advice would you give to anyone considering fundraising?
I would generally advise talking to as many other founders as possible to learn from their experiences, successes, and mistakes. Most founders are more than willing to talk about their fundraising experiences and provide insight and guidance. This is a great way to learn about those who are willing and able to cut checks, what type of structure particular investors prefer, and to manage expectations ahead of a financial commitment.
I would also advise anyone considering fundraising to acknowledge how much time and effort it will take. Raising money from investors is never easy and should not be treated as a trivial pursuit. Fundraising requires commitment and dedication. I generally believe in the rule of 3. You’re probably going to need 3x as much money as you think, and it’s going to take 3x as long to raise it.
Good luck!

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