Healthy Living/Consumer Venture Capital, M&A and Investment Banking

How to Finance Your Consumer Products Company - December 15, 2011 outside of Boston

2011-10-18T09:07:00.001-04:00

One Day Boot Camp & Networking Event:

“Financing Your Consumer Products Company”

Natural, Organic, Specialty, Premium, Retail….

December 15, 2011; 9:00am – 4:30pm; Burlington, MA

The Natural Products Consulting Institute announces a comprehensive seminar and networking event with expert speakers to provide entrepreneurs and executives an in-depth understanding of what it takes to raise capital. Led by industry veterans Bob Burke & Michael Burgmaier, the seminar de-mystifies capital-raising terms and provides insights to improve odds for successfully obtaining necessary financing. In addition, attendees will hear directly from industry-leading entrepreneurs who raised equity capital, venture capital/private equity investors, an angel investor, an investment banker and other industry experts. This is the fifth such seminar that Burgmaier & Burke have led together; all have previously sold out. Register now to reserve your spot.

To learn more about the seminar and sign up, please click here.

Topics include:

Determining my financing needs
What is the best source of capital to align with my needs?
What's the game plan for my business and my time horizon?
Finding early-stage capital
Demystifying valuation
Angel, Venture Capital and Private Equity Financing
Socially-responsible Capital: Right for me? Where to find.
Anatomy of a term sheet
What to expect when working with a VC
Role of an investment banker
Materials (business plan, sample presentation, financials)
Creating value
Positioning for exit

Additional expert speakers include:

• Entrepreneurs Who Have Successfully Raised Capital

o Mike Adair, Founder and CEO of Red’s All Natural (angel funded)

o John Pepper, co-founder/ CEO of Boloco, a 17-unit fast-casual restaurant chain (funded by Winona Capital); founding investor and board member of b.good

• Investors/Debt Sources

o Keith Kohler, President, The K2 Group LLC, (Debt financing options)

o Scott Roman, Senior Associate, Sherbrooke Capital (funded FoodShouldTasteGood, Immaculate Baking, Adina for Life, Izze Beverage, Ciao Bella, Oregon Chai, Angie’s Kettle Corn and more)

o Bruce Nierenberg, Founding Investor/Board of Directors, Vitaminwater (Glaceau); founder B.I.N. Sales & Marketing; Founding Partner, Organic Brands LLC; experienced angel investor

o Andrew Whitman, Managing Partner, 2x Consumer Product Growth Partners
(funded gDiapers, Orabrush, Tasty Bite and more)

Michael Burgmaier is an investment banker with Silverwood Partners where he leads M&A and private placement transactions in the food & beverage/consumer products sectors. He has raised capital for numerous companies and clients, written business plans, prepared fundraising materials, facilitated exits and served on boards of venture-backed companies. He has an MBA from the Tuck School at Dartmouth.

Bob Burke is co-author of The Natural Products Field Manual and The Sales Manager’s Handbook. He is a consultant who specializes in bringing natural, organic and specialty products to market across all channels since 1998 and former VP of Sales and Corporate Development at Stonyfield Farm. He has prepared numerous business plans, assisted in fund raising, advised clients on growth and exit strategies and has helped a number of companies reach a successful exit. He serves on the board of directors of Stonyfield Farm, EcoFish, Nutrabella, and American Halal. He has an MBA from Babson College. For more info, please see: www.NaturalConsulting.com;

This seminar is sponsored by Silverwood Partners, Ignite Sales Management, MEI TradeInsight, Nutrition Capital Network, Pure Branding and The Volkman Group.

Capital Market Success: What Matters? (Article Published in Beverage Spectrum)

2011-09-14T12:14:00.000-04:00

I wrote the following article which was published in the September 15, 2011 issue of Beverage Spectrum Magazine. Click here to see the electronic version.

Capital Market Success: What Matters?

BY MICHAEL BURGMAIER

In the last year, hundreds of beverage companies have found themselves either looking for capital or a buyer. Neither is easy. What should they do to improve their odds of success? When raising capital of selling a company, what matters to the parties with the cash? To get to that “Promised Land”, what should entrepreneurs and their boards keep top-of-mind when handling key strategic decisions? All companies require capital at some point and investors need a return on their investment, likely through selling the company (the famous “exit”) or other methods like paying dividends and going public. In the last year, Silverwood Partners, where I work, has concluded multiple successful exclusive advisory engagements in the sale of beverage companies (Function Drinks to Sunsweet Growers) and capital raises (Zola, Maverick Brands/Sunkist Naturals).

As an investment banker focused on the consumer sector, the two primary professional activities that I spend my time with include assisting companies as they raise capital, and mergers and acquisitions (assisting companies in finding buyers or in finding businesses to buy). I am certainly not the only person qualified to talk about what investors and buyers look for, but as the deals above indicate, when it comes to beverage deals, our firm is in the thick of the market’s activity.

Here are some thoughts on what helps guide us. Through our experience, we have identified several identifiable traits of companies which assist in successfully raising capital or selling – and doing so at attractive prices. In this article, I’ll discuss a few of those traits and relate them to successful transactions. The process of raising capital or selling a company creates a situation with multiple would-be investors and buyers poring over, assessing, and scrutinizing every data point, every strategic choice, and dissecting the company’s marketplace performance. A good buyer leaves few stones unturned and few areas of weakness unexposed. Every investor and buyer looks for one reason to say no. Don’t give them one. Focusing the strategic attention of the board and management on some of the key areas below could help sell the vision of what a company can become under new ownership or with new capital.

1. Go Deep, Not Wide

In our view, one mistake often repeated by companies is the sense that a product needs to be everywhere overnight (a “land grab”). But distribution takes money. Building a brand takes time. And one of the most important pieces of data in any capital process is how fast a product sells off the shelf, sometimes referred to as velocity or same-store sales. Creating velocity requires time and effort – demos, guerilla marketing, creative merchandising, and other things, but if a brand can’t show same-store-sales growth over time, it is a brand in decline. Overall sales may go up because the product enters new distribution, but it’s the quality of those sales that matters more. Companies that are able to concentrate on creating a story of same-store growth are companies that also create a story that investors imagine they can replicate. So perhaps start by succeeding in limited markets, with key retailers to create a growth story.

2. Leave Holes

The corollary to not having flooded every distribution channel and geography is that major growth opportunities remain for the buyer or new investor. Items that can be sold in multiple channels with many doors, such as salty snacks and beverages, are often the ones that fetch the highest valuations. If a product can be sold in C stores, club, grocery, coffee and sandwich shops, etc… then a buyer knows they can easily ramp by turning on their sales and distribution power – if they see success in one or more channels or geographies, they can more easily see the path forward.

3. Capital Efficiency

In the current economic environment, accessing capital can be difficult – sometimes extremely difficult. Successful companies attractive to buyers and investors are often those that present the least amount of perceived risk. One way to minimize risk is to minimize the capital required to grow. The goal is to lessen the dollars required (paid-in capital) to achieve revenue. Simply put, often the lower the ratio of paid-in capital to revenue, the higher the value a company can achieve. Companies with high ratios may be heading towards down rounds (future rounds at lower share prices) or the inability to raise capital. For example, which company should get a higher valuation, the one where $1 million of investment achieves $1 million of sales or the one that can grow to $5 million with the same capital?

4. Had One, Want Another

Products which can be consumed quickly often lead to higher velocity and stronger sales. Companies can assess their current product lineup to see if there are ways to increase consumption patterns. Can a single-serve package (or convenient multi-single serve packages) be created? Can markets for new usage occasions be found? No one wants to be the product that stays in the refrigerator for six months; weekly replenishment creates more sales.

5. Making Money Matters

Simply put, EBITDA (earnings before interest, taxes, depreciation and amortization) matters. That means that gross margin matters. Startups may not have scale, but that does not mean that negative margins should be acceptable – at any stage. Margins can improve over time, but many of the best businesses are those that are designed to make money quickly (remember capital efficiency?). Companies are expected to lose money at first (see next point below), but the path to profitability must be clear.

6. Fuel the Growth, Don’t Fill the Hole

As stated above, every investor expects and knows that early-stage company will experience losses. This time period, often described as the “Valley of Death,” requires companies to invest in product development, team, inventory and more ahead of revenue. It’s that process that describes the plunge into the Valley – and more and more, institutional investors have become reticent to fund that plunge; instead, they want their money to fuel growth, not fill a large hole of losses. Many of the points above (capital efficiency, velocity) are intertwined with this point, but the importance of this in today’s capital markets to institutional investors cannot be overstated.

7. Create Permission

For branded products, part of selling a growth vision is demonstrating where a brand can go. Management may not have all the answers yet in this regard, but the best brands are those that have strong market permission and the ability to extend into adjacent product areas (Honest, Kashi, Odwalla, Bear Naked, Rising Moon Organics…). Again, sell the vision and don’t create one that is overly limiting at the outset.

8. Been There, Done That

The right team minimizes investor/acquirer risk, and that team is typically a complete, domain experienced group that has already made money for investors. In addition, investors tend to like humble, experienced entrepreneurs who know what they know and also know what they don’t know. Making money for investors the first time can be the easiest ticket towards raising money for the second go-round. Those investors need to invest their returns somewhere…why not back with you?

These are just a few of the characteristics of companies that are more likely to conclude successful capital market transactions. Others include market leadership (strong number one or solid number two), customer diversification, and product price point relative to competition and company size. If you can keep the numbers looking like they’re going in your favor, you’ve got a chance. But as you can see, there’s a lot of work to be done when it comes to making the process come out in your favor.

Michael Burgmaier is a managing director at Silverwood Partners, LLC.

Why Isn't My Company Worth Five-Times Sales?

2011-06-09T09:16:00.001-04:00

Below is a recent article I co-authored with Bob Burke from the Natural Products Consulting Institute that was published by Investors' Circle. Click here to go to the original article.

Why Isn't My Company Worth 5 Times Sales?

By Michael Burgmaier and Bob Burke

Trying to bridge the gap between what you think your company is worth and what investors think can be difficult and frustrating. As a general rule, entrepreneurs overvalue their companies. Who wouldn’t? Entrepreneurs are optimistic– that’s one of the main reasons we like working with them. And investors who decide to deploy their capital in a company do so because they believe in the promise of the company as well, but there is one major difference between investors and entrepreneurs: Investors better understand the risks they are taking with their investment.

If every idea was great and every company deserved capital, then banks would be lining up. Equity capital exists because equity is high-risk capital, and returns data plays this out. In general, one in three venture capital investments end up in a complete loss, one-third get back about what was invested, so a fund must typically make all of their returns/profits on the remaining third. For a fund then to make a respectable (and expected) overall return, those “winners” need to provide outsized returns. Investors know these numbers and the risk-reward game with which they are engaged, so they must price (value) their investments anticipating that most will fail. When valuing companies then, they must take a portfolio theory approach, or their winners will never perform enough to cover the losers.

Typically, a professional investor will tell a company what the valuation and terms of a deal will be. They know the market. On the other hand, angel investors often ask entrepreneurs what the terms of a deal are (pricing/valuation) – unless the angels’ investment is large enough to dictate terms. Angels often get involved with higher-risk deals as well – often pre-institutional capital. And the numbers play this out as well. A 2008 SBA study showed that close to half of all angel investments end in complete capital loss; only 7% end in returns in excess of ten-times the original investment – most likely a number well below the percentage of the deals funded that projected such returns.

Each year, Bob Burke and I run two seminars and networking events called “Financing Your Consumer or Natural/Specialty Products Company;” the next seminar will be May 19 in San Francisco. At our seminar last November in Boston, an angel investor talked about how he prices deals – he prices anticipating losses. In fact, out of the ten deals he makes, he expects to lose all his money on seven, make one-times his money on the eighth, five times on the ninth and 12 times on the tenth. That equates to an average cash-on-cash return of 1.8x and a 13% IRR. Not great, but it beat the stock market….

Entrepreneurs need to understand that investors need to price in risk. To the extent that a company does not present the “ideal” situation on all business risk terms (team, IP protection, gross margin, legal, market, competition, future financing capability…) and stage (later-stage and profitable), these risks are assumed by the investor and must be priced into the deal.

To learn more, consider attending the May 19 seminar. We have a terrific line-up of content and speakers, including entrepreneurs Keith Belling, Founder & CEO, PopChips; Sheryl O’Loughlin, Co founder & Chief Mom, The Nest Collective; and investors/debt sources such as Keith Kohler, President, The K2 Group LLC; Susie Lee, Principal, TBL Capital; Bill Shen, Vice President, Encore Consumer Capital; Tom Simone, Angel Investor, Chairman Emeritus of United Natural Foods, President and CEO of Simone & Associates; and Andrew Whitman, Managing Partner, 2x Consumer Product Growth Partners.

Bob Burke and Mike Burgmaier lead popular seminars and networking events on “Financing Your Consumer or Natural/Specialty Products Company”, the next one being in San Francisco on May 19, 2011. Click here for more information.

Bob Burke is co-author of The Natural Products Field Manual and The Sales Manager’s Handbook. He is a consultant in the natural and specialty products industry since 1998 and former VP of Sales and Corporate Development at Stonyfield Farm. He has prepared numerous business plans, assisted in fund raising, advised clients on growth and exit strategies and has helped a number of companies reach a successful exit. He serves on the board of directors of Stonyfield Farm, EcoFish, Nutrabella, and American Halal. He has an MBA from Babson College. For more info, please see: www.NaturalConsulting.com www.NPCInstitute.com

Michael Burgmaier is an investment banker with Silverwood Partners where he leads M&A and private placement transactions in the consumer product space, a speaker/event organizer with Royal River Associates and former venture capital investor in the food & beverage/consumer products sectors, where he helped lead four deals in the space. He has raised capital for numerous companies, helped facilitate successful exits, written business plans, prepared fundraising materials, has served on boards of venture-backed companies and speaks frequently on this topic. He has an MBA from the Tuck School at Dartmouth. Contact at mburgmaier@silverwoodpartners.com.

Whole Foods Still has a Sense of Humor

2011-04-01T14:10:00.001-04:00

A few years ago, I posted a blog on April 1 when Whole Foods Market had a great April Fools website, selling "Organic Air" (click here to see that post).

Today they did it again. This is my favorite part of today's homepage:

SPEED UP YOUR CHECKOUT
Starting April 1st, you can set up a direct deposit account to have your whole paycheck automatically converted to a Whole Foods Market gift card. It's the fastest and easiest way to pay.

And here's an image from the site today (it's only around like this for a day...)

Final Speakers Confirmed for May 19, 2011 "How to Finance Your Consumer or Natural/Specialty Products Company" Boot Camp & Networking Event Confirmed

2011-02-18T10:55:00.002-05:00

On May 19, 2011 in San Francisco, Bob Burke from the Natural Products Consulting Institute and I will lead a jam-packed one-day session with tips on how to get your company financed. We have an incredible group of guest speakers confirmed for the day. For more information and to sign up, go here. Sign up now while the "Early Bird Rate" still exists and we have room. Capacity is limited.

Special Guest Speakers:

•Entrepreneurs Who Have Successfully Raised Capital

o Keith Belling, Founder & CEO, PopChips; (funded by TSG Consumer)

o Sheryl O’Loughlin, Co founder & Chief Mom, The Nest Collective (funded by Catamount Ventures, Catterton Growth, Prolog Ventures, Bridgescale Partners and Atlas Advisors); former CEO/President, Clif Bar and Company

•Investors/Debt Sources

o Keith Kohler, President, The K2 Group LLC, (Debt financing options)

o Susie Lee, Principal, TBL Capital, (funded CleanFish, Gaia Herbs, Numi Organic Tea & more)

o Bill Shen, Vice President, Encore Consumer Capital (funded Aidells Sausage, Ciao Bella Gelato, Tarte, Zuke’s, MyChelle Dermaceuticals, Isopure and others)

o Tom Simone, Angel Investor, Chairman Emeritus of United Natural Foods, President and CEO of Simone & Associates

o Andrew Whitman, Managing Partner, 2x Consumer Product Growth Partners (funded gDiapers, Orabrush, Tasty Bite and more)

Sponsors of the event include:

Silverwood Partners, in investment bank with deep expertise in consumer products
Hanson Bridgett, LLP -- legal services with domain expertise
Volkman Group, LLC -- retained executive search for healthy living companies
Flannel -- brand development and creative services
Nutrition Capital Network -- holds events to facilitate the flow of capital to wellness companies
Ad Infinitum -- promoting healthy lifestyles with intelligent brand strategies

Financing Companies: Speaking Sessions At Natural Products Expo West, Stonyfield Institute and BevNET Live coming up

2011-02-17T08:43:00.001-05:00

I will be speaking at a panel at the Natural Products Expo West on Thursday, March 10 in Anaheim, CA, titled "Financing and Raising Capital." The panel is hosted by my good friends at the Nutrition Capital Network (NCN); they host an educational session each year at Natural Products Expo West, the country’s premier trade show for the healthy products industry.

Warning: The event is not easy to find on the Expo West website, go here and the click on "education and events search." A new window will pop up -- scroll down on that page and click "Thu, March 10" and go down to "Manufacturing Track: Financing and Raising Capital" at 3:15pm.

This session is of value to entrepreneurs; manufacturers launching a new product; manufacturers looking to break into the natural products industry. Moderated by Thomas Aarts, Principal of Nutrition Capital Network, Managing Director of Nutrition Business Advisors LLC, co-founder of Nutrition Business Journal, Founder and Co-Chair of The NBJ Summit.

Presenters include:

Me (Michael Burgmaier), Managing Director with Silverwood Partners
Nicole Dawes, CEO of Late July; and
Michael A. Bush, VP Business Development with Ganeden Biotech.

Other Speaking Engagements Coming Up:

I'll also be speaking at a few panels at Gary Hirshberg's Stonyfield Entrepreneurship Institute on March 24 and 25, 2011 in New Hampshire. Click here to view the agenda and register.

On June 6/7, I'll be speaking at BevNET Live in New York City.

Next Financing Seminar & Networking Event Date Set: May 19 in San Francisco

2011-01-07T08:25:00.001-05:00

Bob Burke from the Natural Products Consulting Institute and I have set the date and are in the final stages of arranging speakers for our next Boot Camp and Networking Event on "How to Finance Your Consumer or Natural/Specialty Products Company." It will be Thursday, May 19, 2011 in San Francisco. This will be the fourth time we've done the seminar/boot camp. Confirmed so far are:

Bill Shen, Vice President, Encore Consumer Capital (funded Aidels, Ciao Bella, Ispoure, Mychelle and more...)
Sheryl O'Loughlin, Co-Founder, President & CEO, Nest Naturals (looking for acquisitions)
Andy Whitman, Managing Partner, 2X Consumer Growth Partners (funded Tasty Bite, gDiapers, Orabrush and more)
Keith Kohler, K2 Group (specializes in debt placement for consumer companies)
Michael Burgmaier, Managing Director, Silverwood Partners (investment banker in the consumer and healthy living space; former VC)
Bob Burke, Principal, The Natural Products Consulting Institute (all around guru in the space)

Other high-profile industry expert speakers will be announced soon.

For an agenda, see the flyer from the Boot Camp we did in Boston this past November here.

Financing Your Consumer or Natural/Specialty Products Company

2010-09-28T14:54:00.001-04:00

One-Day Boot Camp & Networking Event Announced

November 9; 9-4:30pm in Burlington, MA. Click here to sign up and learn more.

Led by industry veterans Bob Burke & Michael Burgmaier, the seminar de-mystifies capital-raising terms and provides insights to improve your odds to successfully obtaining the financing you need.

In addition, you will hear directly from industry-leading entrepreneurs who raised venture capital and then grew and sold their companies, investment bankers, investors and other industry experts.

Other Speakers confirmed include:

• Investors/Debt Sources

o Cory Comstock with Sherbrooke Capital (funded FoodShouldTasteGood, Immaculate Baking, Adina for Life, Izze Beverage, Ciao Bella, Oregon Chai and more)

o Keith Kohler, President, The K2 Group LLC, (Debt financing options)

o Bruce Neirenberg, Vitaminwater (Glaceau) former Board member; founder B.I.N. Sales & Marketing; experienced angel investor

o Andrew Whitman, Managing Partner, 2x Consumer Product Growth Partners (funded gDiapers, Orabrush, Tasty Bite and more)

• Entrepreneurs Who Have Successfully Raised Capital

o Tyler Ricks, CEO, Yumnuts Naturals; former General Manager with Bear Naked

o Joe Whinney, Founder/CEO, Theo Chocolate

Topics Include:

How do I determine my financing needs?
What is the best source of capital to align with my needs?
What’s the game plan for my business and my time horizon?
Finding early-stage capital:

Friends & Family
Banks/Loans/Debt
Angel Investors/Groups
What terms should I expect?

Demystifying valuation

Methodologies
Understanding equity
What matters/what doesn’t?

Venture Capital Financing

Who do I approach? And how?
Anatomy of a term sheet
What to expect: Working with a VC
Control, veto rights, dilution

Other Private Equity…
Do I go alone or get professional help?

Role of the investment banker
Terms, fees
Materials (business plan, sample presentation, financials)

Creating value

Distribution
Brand Building
Building out the team

Positioning for exit
Strategic buyer or financial buyer

Radio Silence

2010-07-06T12:50:00.000-04:00

My apologies for the long delays between posts recently. It's been a busy few months. I recently left the VC firm CEI Community Ventures (for the past 15 months, I had been both a VC investor and an investment banker with Silverwood Partners) and moved from Maine back to the greater-Boston area. A bit of sadness in leaving beautiful Maine and our friends there, but also excitement in getting back to Boston and joining Silverwood Partners full time (and having only one job!) as a Managing Director. As fas as I know, we are the only investment bank whose ownership also created an organic CSA on the same property. So we're actively engaged with the Healthy Living trends right here at the office...

If you want to reach me at Silverwood, my email is mburgmaier "at" silverwoodpartners.com.

As a reminder, this blog is in no way affiliated with Silverwood Partners -- for more information, please see the disclaimer below to the right.

Great line-up for Nutrition Capital Network 6 in NYC: April 27

2010-04-21T14:40:00.003-04:00

I have been to all the the Nutrition Capital Network ("NCN") events over the past few years. They are terrific. Great networking and a look at some of the great companies in this sector, either looking for capital or thinking about selling. The next one is in New York City on April 26-27, 2010.

At the 1-day meeting, NCN will present a select group of 20+ nutrition and health & wellness companies seeking capital, strategic partners or exits (see snapshots below). Companies will present in 10-minute intervals with the afternoon reserved for one-on-one meetings. Individuals or angel investors may qualify for a special rate. Registration can be sent by email on info@nutritioncapital.com.

Snapshots of Confirmed NCN6 Presenters as of 4/19/2010

$70-80 mil natural product/supplement distributor, retailer, branded manufacturer
$30-35 mil in all natural snack foods
$20-25 mil in healthy energy drink mixes
$15-20 million in all natural, fresh pet food
$10-20 mil in organic food production and processing
$10-15 mil patented steam-cooked frozen meals
$10-15 mil in dried fruits and high-value food ingredient supply
$5-10 mil coconut water leader in Europe
$5-10 mil branded satiety beverage with unique fiber ingredient
$3-5 million in superfruit and chocolate snacks
$3-5 mil fruit sweetener from New Zealand
$3-5 million organic beverage brand
$1-3 million in branded wellness centers and wellness corporate programs
$1 mil bean-to-bar specialty chocolate manufacturer
<$1 mil in natural skincare and cosmetics with proprietary encapsulation
<$1 mil in all-natural baking mixes for mass retail distribution
<$1 mil functional pet food treat
<$1 mil in fruit-based condiments, juices and superfruit supplements
Patented technology for on-site ice cream production without freezing

Expo West: Win a one year subscription to SPINS Specialty/Gourmet channel!

2010-03-05T23:07:00.003-05:00

My good friends at Sherbrooke Capital are hosting the “2nd Annual Entrepreneurship Awards” at Expo West next Saturday night (March 13) in Anaheim. in Sherbrooke's words, "Sherbrooke Capital is pleased to announce the 2nd Annual Entrepreneurship Awards to recognize the unique achievements and catalytic ideas of companies within the Health and Wellness market."

Event Details

Saturday, March 13, 2010
6:30 - 9:00 p.m. PST
Marriott Anaheim Hotel
700 West Convention Way
Anaheim, CA

ExpoWest Exhibitors are welcome.

An application submission is not required to attend.

Please RSVP to info@sherbrookecapital.com by 3/8/10.

To apply, go to www.sherbrookecapital.com and download the application form. Deadline for submissions is Monday, March 8, 2010. Applications will be judged by Sherbrooke Capital. Winners will be announced at the awards presentation on Saturday, March 13, 2010 at 6:30p.m. PST at the Marriott Anaheim Hotel.

Awards will be presented to privately-held companies demonstrating:

A: Most unique or best new product (for companies with sales between $5 - $20mm).

Award: Access to leading consumer marketing research firm Affinnova's cutting-edge optimization technology; the same technology utilized by leading CPG companies to optimize everything from product packaging and design to marketing messages.

B: Most unique or best new product (for companies with sales less than $5mm).

Award: A one year subscription to SPINS Specialty/Gourmet channel. SPINS is the only provider of comprehensive service offering including retail measurement, consumer measurement, content-based reporting, and consulting services.

Sherbrooke Capital has been a leading investor in the Health & Wellness market for over ten years. Our investments have included Oregon Chai, IZZE Beverage, Immaculate Baking, Adina For Life, Ciao Bella Gelato, and FoodShouldTasteGood. We are excited by the level of ingenuity and vision demonstrated by entrepreneurs in this market, and we want to highlight and reward that creativity with this annual event.

Contact Information:

Kerry Muse at muse@sherbrookecapital.com

Recent Healthy Living Deals

2010-03-01T11:54:00.005-05:00

The Healthy Living/Natural Products sector continues to be a busy one, with several deals having closed over the last few months. I’ve been involved with a few of them and have a few more in the works that I hope to be able to blog about in Q2….stay tuned.

If you’re a company looking to raise capital, my good friend Bob Burke and I are putting on a comprehensive one-day seminar titled “Financing Your Consumer/Natural Products Company” on April 15, 2010 – early bird registration rates end on March 22. We held a similar seminar outside of Boston in Oct. 2009 for roughly 25 senior level (CEO level) executives that went over well. Some sample comments:

"I thought I knew a lot about funding, but this really helped me understand the lay of the land" - CEO, Natural Product Co.
"Great day - touched on a lot of issues without spending too much time on specific issues perhaps alienating part of the audience" - CEO, Natural Product Co.
Excellent. Well divided without significant overlap" - President, Natural Product Co.

Bob Burke and I will lead the seminar, but will have some great guest speakers:

Apu Mody, CEO, The Brand Accelerator (new fund looking for deals…)
Chris Cuvelier, Founder /President, Zola Brazilian Superfruits (funded by Emigrant Capital)
Wayne Wu with VMG Partners (funded Mighty Leaf Tea, Kind Snacks, Pirate Brands & more)
Janica Lane, Principal, Partnership Growth Advisors
Andrew Whitman, Managing Partner, 2x CONSUMER PRODUCTS GROWTH PARTNERS (funded gDiapers)
Meredith Lincoln, Co-President, NutraBella (funded by Generation Equity Investors)

Now, some deal news….

Otter Creek Brewing Company, home of the Otter Creek and Wolaver’s Organics brands, was sold to Long Trail in early January. I was involved in the transaction through Silverwood Partners. We were retained by Otter Creek as the exclusive financial advisor.

Rustic Crust recently acquired the license for American Flatbread frozen pizzas. Rustic will continue the great Flatbread tradition of authentic, wood-fired organic flatbread products. Rustic Crust is the leading brand of all-natural/organic pizza crusts in the United States. In taste tests, they continually top the competition…. I was involved in this transaction through my work with CEI Community Ventures. I also was involved with Rustic’s recently announced successful private placement.

Castanea Partners (a later-stage fund based in Newton, Mass.) is set to build a new supplements platform. They invested in two direct marketers of branded nutritional supplements: Health Resources (Hueytown, Ala.) and Vitamin Research Products (Carson City, Nev.). Castanea says the two will vertically integrate. I’ve always liked the Castanea team and believe they will do well this one.

Madonna invests in Coconut Water! In 2009, the big deal news was coconut water (Zico and O.N.E.). This year, coconut-water deals continue, with mega media star Madonna investing with some friends in Verlinvest-backed Vita Coco.

In big deal news, Shiseido announced an acquisition of Bare Escentuals for $1.7 billion in cash, landing the Japanese cosmetics giant one of the biggest players in the world of mineral makeup.

In December, Tree of Life, Inc., one of the largest U.S. distributor of organic, natural and specialty foods, sold to Kehe Food Distributors, Inc. for $190 million in cash. Tree of Life is a subsidiary of multinational food giant Royal Wessanen NV and stated they expected the transaction to close in Q1 2010

In Oct 09, natural ginger ale leader Reed’s Inc. announced a $250K acquisition of the Sonoma Sparkler brand. It was an earn-out deal, paid in cash from gross profits generated from sales of the Sonoma Sparklers brand over the next two years, according to Reed’s.

Also in October, my good friends at The Sea Change Investment Fund announced the formation of The Food Collective, Inc. The company was formed as new holding company to house the merger between two popular health food brands – Helen’s Kitchen and The Organic Bistro.

“Add-ons” and mergers are a big trend these days in the food and beverage industry. Another add-on was announced in Jan. 2010 by venture-backed Attune Foods. Attune (probiotic chocolate bars) acquired two long-standing natural brands: Uncle Sam and Erewhon cereals, from U.S. Mills, LLC. Uncle Sam is a very old (1908!) natural, high-fiber cereal with. Erewhon is a natural, gluten free cereal brand.

In Dec. 09, Kraft sold Balance Bar to Brynwood Partners. Brynwood is a private equity firm that likes turnarounds/buyout opportunities.

iPhone app maker GoodGuide announced closing $5.5 million of new vc equity in late 2009. The app scans barcodes to provide impartial health, environment and social responsibility ratings of products and companies. Here’s a link to a good article on GoodGuide from the New York Times.

Blue Horizon Organic closed $2.5MM of new equity in late 2009 as well. Insiders and new investors (good friend Adam Borden from Bradmer Foods and Renewal2--also a new investor in the latest Rustic Crust round), participated in the funding.

Look for many more deals in the first half of 2009 – several of which I plan to be a part of through my investment banking work at Silverwood Partners. At Silverwood, I work with Nick McCoy to lead M&A advisory transactions and advise companies on private placements. I’ve created a proprietary database with well over 300 investors (venture capital, private equity, family offices…) involved in the Healthy Living/Consumer space.

Stonyfield Entrepreneurial Summit:: Registration Deadline March 12

2010-02-25T16:35:00.004-05:00

On March 25 and 26, I'll be helping lead two sessions at an important gathering of company founders, entrepreneurs, investors and industry experts at the Stonyfield Farm Entrepreneurship Summit.

Registration is available until March 12, and can be done at this webpage. The Agenda is jam-packed, including sessions on:

* Finance 101: Projecting Your Cash Needs (led by Gary Hirshberg)

* Finance Panel (me, Andy Whitman and Bob Burke)

* Entrepreneur Panel (me and Rustic Crust President, Brad Sterl)

* Finance (Bob Davis, Joe Carelli, John Hamilton and Adam Borden)

* Marketing (Howard Brodsky, Katie Paine, Erik Drake)

* Rapid Fire Case Studies (Carolyn Benthien, Bob Burke and Andy Whitman)

It's a bargain to attend and a great experience. This will be the third time I've attended and participated on panels and sessions.

See you there.

-Mike Burgmaier

New Seminar & Networking Event: Financing Your Consumer/Natural Products Company - Coming this May to the Bay Area

2010-02-24T13:04:00.017-05:00

Finding capital for your business is frustrating, confusing, time consuming and difficult. Last November in Boston, I co-led a seminar with my good friend Bob Burke on How to Finance Your Consumer/Natural Product Company. It was a first-time seminar, but we had tremendously positive feedback from the attendees (see some comments below). We also had a lot of people request that we do the next one on the west coast, so we are happy to announce that we are holding the next all-day seminar/networking event in May 2010 (exact date to be announced soon) in San Mateo, CA, conveniently close to the San Francisco International Airport.

I'll blog more on the seminar soon, but the initial flyer can be seen here. If you are interested in becoming a sponsor, let me know. You can email m to sign up for the sponsor, or just follow the directions on the flyer at the bottom of this post.

We'll also have an all-start cast of guest speakers, including:

• Janica Lane, Principal, Partnership Capital Growth Advisors

• Apu Mody, CEO, The Brand Accelerator (new fund looking for deals…)

• Wayne Wu with VMG Partners (funded Mighty Leaf Tea, Kind Snacks, Pirate Brands & more)

• Andrew Whitman, Managing Partner, 2x CONSUMER PRODUCTS GROWTH PARTNERS

• Meredith Lincoln, Co-President, NutraBella (funded by Generation Equity Investors)

Topics to be covered include:

How do I determine my financing needs?
What is the best source of capital to align with my needs?
What’s the game plan for my business and my time horizon?
Finding early-stage capital (Friends & Family; Banks/Loan; Angel Investors/Groups; What terms should I expect?)
Demystifying valuation (Methodologies; Understanding equity; What matters/what doesn’t?
VC Financing (Who do I approach? And how?; Anatomy of a term sheet; What to expect when working with a VC; Control, veto rights, dilution
Other Private Equity…
Do I go alone or get professional help?
Role of the investment banker (Terms, fees; Materials (business plan, sample presentation, financials)
Creating value (Distribution; Brand Building; Building out the team; Positioning for exit; Strategic buyer or financial buyer)

I'd also like to thank our sponsors:

- Silverwood Partners (Investment bank with whom I work on consumer deals)

- Nutrition Capital Network (great events for companies looking or capital)

- Volkman Group LLC (headhunter in the natural space)

- Merritt & Merritt & Moulton (law firm with strong consumer experience)

- Brand Engine (strategic branding and design for consumer products)

Please contact me at mike@royalriverassociates.com if you'd like to become a sponsor for this or future seminars.

Natural Products Field Manual: 10% off through Jan. 31 when you mention this blog!

2010-01-07T20:08:00.011-05:00

My good friend Bob Burke has extended an offer for 10% off the new fourth edition of The Natural Products Field Manual. When you order the book, you need to mention "Mike Burgmaier's blog" on the order form to get the 10% discount.

Click here to go to the order form.

The manual, written by Bob Burke and Rick McKelvey with over 66 industry experts was completely updated, revised and expanded in April 2009.

The manual has a wealth of information and was one of the first things I purchased when as a venture capital investor I began to have serious interest in the natural products sector. We ended up buying them for our portfolio companies as well (and then hired one of the authors -- Rick McKelvey -- to run one of the companies!).

Some highlights:

	Complete, comprehensive, 44 Chapter, 4 volume guide on “how to go to market"
	CD-ROM with natural products stores, directory of natural buyers in mainstream grocery stores, directories of brokers and distributors, budget models, distributor programs and new item forms, PR Media list and customer logos.
	Comprehensive "do it yourself" chapter on public relations includes complete media list with contacts
	Practical, proven, best practices shared and illustrated
	Rich, insightful “guest editorials” by notable buyers, brokers and CEO’s
	Ideal for preparing a business plan and launch strategy
	Additional commentary by industry experts in their area of specialty
	$15,000 worth of coupons on services you can use!
	Installment plans available for smaller companies and start-ups
	Includes half-day consulting by Bob Burke

Comprehensive Chapters on:

Industry Overview;
Mass Market Natural;
Consumer Promotion;
Private Label;
Natural Consumer;
Broker Management;
Consumer Advertising;
Organics;
Sales Organization;
Strategic Planning;
Off-sites and Meetings;
Margins & Pricing;
Budgeting & Planning;
Database Marketing;
Financing;
Contract Manufacturing;
New Product Intros;
Trade Promotion;
Events Marketing;
Branding;
Natural Retailers;
Trade Funds Mgmt;
Category Mgmt;
Canadian Mkt;
Natural Distributors;
Trade Organizations;
Market Research;
Exporting;
Food Service;
UK Market;
Trade Shows;
Co-packers.

Also, exclusive interviews with leading natural and mass retailers

Testimonials

Gary Hirshberg, Stonyfield Farm Yogurt, President/CEO/Chairman

"The single greatest cost that any entrepreneur incurs is the “Learning Curve”. It can make you, break you, or sentence you to a slow, tortuous death. Bob’s and Rick’s Natural Products Field Manual will absolutely cut this cost in half, if not eliminate it altogether. I only wish I’d had a copy 19, or even 2, years ago."

"If the Natural Products Field Manual doesn’t save your firm tens of thousands of dollars, or garner you many more thousands in revenues, then save yourself the trouble and close your business. The problem lies with you, not the authors. This compendium is an invaluable gem."

-- Gary Hirshberg, March 19, 2002

Dan Atwood - Senior Vice President, United Natural Foods, Inc.

"I can't think of a company in the industry that wouldn't benefit tremendously from the Natural Products Field Manual ."
--- Dan Atwood, Senior Vice President, United Natural Foods, Inc.

Users of the

Natural Products Field Manual

	Tom's of Maine
	Snyder's of Hanover
	Choice Organic Teas
	Quebec Delegation in New England
	New Hope Natural Media
	Power Bar
	Stonyfield Farm
	Oregon Chai
	Chino Valley Egg Ranchers
	Annie's Homegrown
	Northeast Coop
	United Natural Foods
	Adams, Harkness, & Hill
	Fairfield Farms Kitchen
	Health Business Partners Consulting
	SPINS
	Advantage/Sunbelt Sales & Marketing
	Organic Trade Association
	The Wizard's Cauldron
	Natural Health Magazine
	Equal Exchange
	No Pudge!
	Original Juan's Specialty Foods
	Natural Specialty Sales, Inc.
	Presence Marketing
	B.I.N. Sales and Marketing
	Recycline
	Pulmuone USA
	The Switch
	Yachana Gourmet
	Agrisystems International
	Pac-Rim International
	Rhino Naturals
	Florida Crystals
	Guayaki Yerba Mate
	Kettle Cuisine
	Clairvest Group Inc.
	Volkman Group
	Oregon Fruit Products
	Tofurky
	Uncle Matt's Organics
	New England Natural Bakers
	Nutrassociates, inc.
	Nelson Bach USA, Ltd.
	Absolute Aromas UK
	Cedarlane Natural Foods
	Nutrition Business Journal
	Insight Out of Chaos
	Organic Valley/CROPP Cooperative
	Seeds of Change
	Nate's/Elena's Specialty Foods
	Egg Innovations
	GeniSoy
	Enzymatic Therapy
	Vitalicious
	Egg Innovations
	Herbal Spectrum
	Garden Spot Distributors/Shiloh Farms
	Bay Valley Group
	Wholesome Sweeteners
	Wildwood Harvest Foods
	Maple Grove of Vermont
	Enjoy Life Foods
	Montana Legend Natural Beef Co.
	Terra Nostra Organic Chocolate
	Kraft Foods/Gavalia Coffee
	Bushes Beans
	Kohinoor Basmati Rice
	Mambo Sprouts
	Ethnic Gourmet Foods
	Organics of Oz, Inc.
	Orchard Spring
	Ideal You/Orafti NA, Inc.
	Oregon Ice Cream Company
	Natural By Nature
	Full Spectrum Marketing
	Rocky Mountain Presence
	Regional Manager at Large
	Goddess Granola
	Crum Creek Mills
	Nantucket Offshore
	Redco Foods/Salada Teas
	Solgar Vitamin & Herb
	Finlandia Cheese
	Immaculate Consumption
	Van Dyks Health Juice Products Ltd.
	Stone Ground Mills/Stone-Buhr
	Artemis International, Inc.
	Morton & Basset Spices
	Overseas Game Meat Export PTY Ltd.
	Cedar's Foods
	Applegate Farms
	Happy Planet
	Kim Ridgeway
	Lafrancol USA
	Queenies
	Ingy & If, Inc.
	To Grow Wise
	Tara Estabrook
	Coomb's Family Farms
	Marshall School's IBEAR MBA Program, USC
	Green Mountain Coffee Company
	Global Access, Inc.
	Vision's Sown
	Life Science Labs
	CC's Jersey Creme
	Greyston Bakery
	Pharmavite, LLC
	Bay Shore International Group
	Devita International, Inc.
	Bob's Red Mill
	Smoke & Fire Natural Foods, Inc.
	Ringo Foods
	Dr. Bronner
	Healthy Handfuls
	Tasty Eats
	Quebec Ministry of Agriculture
	EnergyAid
	San-J International
	Lesser Evil
	Maplewood Bake Company
	Metz Fresh
	Natural Choice
	The Grain & Salt Society
	Environne
	Seattle Chocolates
	Drew's All Natural
	African Shea Butter
	Vermont Gold
	Nutritech
	Pure Barnyard
	Old Mother Hubbard and Wellness Pet Brands
	Pharm East Hawaii, Inc.
	Voss USA
	Fizzy Lizzy
	Bake N Joy Foods, Inc.
	Au Currant
	Dancing Deer Baking Co.
	Nature's Peak
	CEI Community Ventures
	Gagas Sherbetter
	Lollipop Tree
	Innovative Nutrition
	Earthscape Organics, LLC
	Tribeca Kitchens, LLC
	Gleukos, Inc.
	A Perfect Pair
	Arico Natural Foods
	Stacy's Pita Chip Co.
	Blake's Chicken Pies
	Gak's Snacks
	Neshama Gourmet Kosher Foods
	Snikiddy Snacks
	jojoBAR
	eBio Express
	Fuelers Cookies (Pacific Foods Inc.)
	Tea and I
	Zebra Mix
	Mighty Leaf Tea Company
	FermaHealth
	Food Should Taste Good
	Sustainable Sourcing
	Wild Blue Yonder Foods
	Nexzt Gum
	Nelson Bach, USA
	Helen's Foods
	Morrison's Maine
	S.C. Johnson
	Malt-O-Meal
	Makers Baker
	SC Gourmet Foods
	Gilbert's Gourmet Goodies
	Allegretto Ventures
	All I am
	Maker's Baker
	Gilbert's Gourmet Goodies
	Takaokaya USA, Inc.
	Jacqueline's Bakery
	Tamcor Mexim USA
	Merrimack Valley Apiaries
	Nature's Path
	Divine Chocolate
	Bio Active Pharma
	Pierce Brothers Coffee
	Hubbel Peanut Company
	LacPro
	Austrian Trade Commission
	Agro-Farma
	Kashi Company
	Organic Farm Marketing
	OraMedix, Inc.
	Integrity Nutraceuticals
	Campbell, USA
	Suhki's Gourmet Indian Foods
	Technology Commercialization Corp.
	Tea Forte
	Palcha Products
	Ayrshire Farms
	Lowell Foods
	Hail Merry
	Stonehouse 27 Spice Co.
	Flavrz
	Vermints
	Whole Foods Market, Inc.
	The Healthy Pantry
	Global Recruiters of Madison
	Dakota Prairie
	Wild Meridian
	American Halal, Inc.
	Better Together, Inc.

How Angel Investing has Changed in 2009

2009-11-04T14:12:00.005-05:00

The New York Times recently had an extremely well-done article called "The New Rules of Angel Investing." I agree with everything in it as it accurately portrays what I am seeing in the market.

Here's are some snippets from the article:

Angels are still financing deals, but at lower valuations and with more specific milestones. They have grown more picky and less tolerant of risk.....There has been a sea change in risk sensitivity; the more self-sufficiency a company demonstrates, the less risky it appears.....Entrepreneurs should find ways to finance their own growth: working without salary, moonlighting, seeking grants, running lean operations and focusing on an aspect of the business that can generate revenue.

Over the past year, I have also noticed the changes the article points out. Angels will still invest, but more and more, only at realistic valuations and when they see a clear path to profitability. Many angels have been burned over the past year through the economic meltdown in their private company investments. Valuations went down; cram-down rounds occurred; VCs went pay-to-play...it got ugly at times. That said, many investments that were made are still good and above water. Capital efficient companies that have weathered the storm by conserving cash and/or getting to (or close) to profitability are doing well and are likely to be rewarded. And those that are still early-stage, loss-making companies can still get funded and are getting funded....but the rules (and valuations) are not what they were a year or two ago. Passive angels (what's the price?) are more and more becoming active (I'll tell you what the price and terms are). For angel returns, this is not a bad development. For companies, reality may not be a bad thing as well. We all know, that above everything, cash is king and capital is good.

Comprehesive One-Day Seminar on Financing Natural and Specialty Products Companies & Networking Event

2009-10-13T16:02:00.007-04:00

Early Bird Reduced Rate expires on Oct. 27th

Royal River Associates and The Natural Products Consulting Institute have organized a comprehensive one-day seminar on Financing Your Natural or Specialty Products Company to be held on November 10, 2009 in Burlington, MA.

Getting your company capitalized is perhaps the most difficult, time-consuming and frustrating part of building a business. This full-day workshop will serve to demystify the terms and process, while providing insights and tips on how you can improve your odds of successfully obtaining financing.

You will hear directly from industry-leading entrepreneurs who raised venture capital and then grew and sold their companies, investment bankers, venture capital investors and other industry experts.

Topics include:

Determining your financing needs;
Expected presentation materials (PPT, model, business plan);
Structuring deals and negotiation tactics;
Understanding term sheets;
Issues and trade offs with Friends and Family rounds, angel investors, debt and venture capital;
Working with investment bankers;
Building value in your company;
Valuation methodologies;
Exit stratiegies;
and more....

The seminar Will be led by Bob Burke and Michael Burgmaier.

Bob Burke is co-author of The Natural Products Field Manual, and The Sales Manager's Handbook. Bob is a consultant in the natural and specialty products industry and former VP of Sales and Corporate Development at Stonyfield Farm. Michael Burgmaier is an investment banker in the food & beverage / Healthy Living sectors.

Special guest speakers will be:

Pete Lescoe, Founder and CEO, FoodShouldTasteGood
Nancy Rosenzweig, former CEO, The Natural Dentist
Nicolas McCoy, CFA, Managing Director, Silverwood Partners Investment Bankers;
David Thibodeau, Managing Director in Canaccord Adams' Investment Banking Group; and
Andrew Whitman, Managing Partner, 2X CONSUMER PRODUCTS GROWTH PARTNERS.

The seminar will be help on November 10, 2009 at the Hilton Garden Inn in Burlington, MA.

The specialty introductory rate is $599.

If you register by Oct. 27, 2009, take the early bird discount and save $100
Additional discounts are available for additional people from the same company.

For more information, please visit: http://npcinstitute.com/Financing%20seminar.htm to see the registration form. You are also welcome to call 978-975-9902 or email Bob Burke.

Nutrition Capital Network next week in San Francisco

2009-10-13T10:24:00.002-04:00

The pre-eminent bi-annual gathering of companies looking for capital in the nutrition/Health & Wellness field and investors (venture capital, private equity and strategic) is next week in San Francisco (Oct. 20/21). This is the fifth full Nutrition Capital Network Event (or "NCN V" in the shorthand); I've been to the previous four and the event is always well worth it. It's a fantastic networking opportunity for both the companies and investors. This fall's line-up looks outstanding:

Snapshots of Confirmed NCN V Presenters

$80-100 mil natural & organic packaged, prepared foods and snacks
$30-50 mil in natural packaged snacks
$15-20 mil bar manufacturer and international brand
$15-20 mil in green convenience restaurants
$10-15 mil in acai juices, smoothies and shots
$10-15 mil unique product delivering nutrients and flavors through straws
$8-10 mil in calorie controlled meal delivery service and brand
$8-10 mil in organic flour and gluten-free baking supplier
$5-10 mil in branded meats preserving heritage breeds
$5-10 mil in natural sauces and spreads
$5-10 mil organic & vegan casual restaurants & catering
$3-5 mil in gluten-free snacks and baking mixes
$3-5 mil in premium organic coffee
$3-5 mil in natural lo-cal soda
$2-3 mil healthy lifestyle food and supplement brand for Hispanics
$2-3 mil sports nutrition brand
$2-3 mil in organic and artisan breads
$1-2 mill in gluten free snacks and cookies
$1 mil in patented sunscreen and skincare products
Clinically proven supplement for atherosclerosis
Herbal supplement targeted for immunity, energy & jetlag
Technology for unique frozen fruit & vegetable confection

Expo East Reflections - My Winners

2009-09-29T13:39:00.018-04:00

Last week was all Boston…a Board meeting on Tuesday, Canaccord Adams Healthy Living conference on Wednesday, and walking the floors of Expo East Thursday, Friday and Saturday. Today I thought I’d provide some reflections on what I saw at Canaccord and Expo. First, everyone was talking about how much smaller Expo was than previous years. Sustainable Food News reported today that traffic was down 20%, to 21,000 people and there were 1500 exhibiting booths. In March, Expo West reportedly had 53,000 attendees. Some companies said that they had great shows while others said that the show was a relative disappointment for them. Some of the notable missing companies included Hain Celestial Group, Nature’s Path, Amy’s Kitchen and Annie’s Homegrown. In fact, with Amy’s not there, one of my portfolio companies, Rustic Crust, seemed to become the de-facto in-house restaurant. While half the booths serve food, there’s only so many cookies, raw honey, chips and drinks you can sample, so as a VP of Marketing from Stonyfield Farm put it to me, “Rustic had the only food of sustenance” at the show. It showed….Rustic sampled over 650 pizzas – about twice the normal amount. Company President Brad Sterl reported “the show traffic was good in our aisle. We had a lot of independents come by but very few chain accounts seemed to be attending. Without Amy’s at the show, we were the feeders.” Let’s hope that those who survived on Rustic for a few days (which embarrassingly included me!), turn that into purchases. It’s really good pizza…

Here are some of my favorites from the show:

FoodShouldTasteGood -- The current rock star of the industry. Founder and CEO Pete Lescoe has a terrific product, an A team, amazing growth and has stayed real to boot. My family has been buying a bag of these chips each week for almost two years….I can see that we are not alone. The chips are great (all flavors too -- mean that), but my favorites are Multigrain, Sweet Potato and The Works. Forget the Everything Bagel, The Works FoodShouldTasteGood chip is the wave of my future. Sherbrooke Capital led the company's Series A round....a home-run in the making for John Giannuzzi.

Solixir – On Saturday, I spent about an hour talking with Solixir founder Scott Lerner. Solixir is a line of all-natural, sparkling botanical beverages. The three Solixir’s I tasted (awaken, relax and restore) had 50-60 calories/12 oz can and tasted great. Solixir started earlier this year with a national launch in Whole Foods Market. I like Scott’s approach to building this brand and company – keep an eye out for this one.

Red’s All Natural – while there was a lot of focus on the

star power of Brendan Synnot whose Burrito Investment Group acquired/invested in Phil’s Fresh Food to create a new frozen burrito company (Evol -- great branding, by the way), I think the best burrito on the floor belonged to Mike Adair’s Red’s All Natural. This was the first frozen burrito I ever had that could give joints in San Francisco’s Mission a run for their money. I can’t wait until they get some distribution near me (requested it this morning…). If I have to eat in the office five days a week, there better be five Red’s burritos in my freezer….

Cell-nique – The King of the Green Drinks: 95% organic; 31 superfoods and botanical herbs. Founder Dan Ratner has a winner here. Whole Foods Market is rolling out at $3.99 (I hear that big chains tend to be in the $3.39-3.99 range, with some smaller stores at $4.99) – at the-premium end, but so worth it....my wife and I are thinking about incorporating a daily dose of Cell-nique into our regimen and for our kids….time to start buying by the case... I didn’t realize that I drank around $40 worth of Cell-nique at the show…thanks Dan. Now to begin the payback….and which flavor to choose….there were all so good….

thinkThin – When I studied for the GMATs back in 1998, I remember that my bar of choice those days was Think (it may have been a subconscious self-threat – “think already…can’t you get this right?”) But for some reason, they disappeared from my diet….distribution? Packaging? New competitors? Well, I just happened to try the thinkThin bars at the show and was very impressed: great-taste, nice re-branding, low sugar….a stand out in the bar crowd.

Putney Pasta – The new Chicken Pomodoro skillet meal is amazing. All-natural, antibiotic-free chicken, bowtie pasta, mozzarella and broccoli in an incredible marinara sauce. Outstanding. And a complete value – Whole Foods sells these skillet meals for two for $8.99. That’s only $4.50 for a true, restaurant quality meal. I’d pay $20 for an adult serving of this easily at a restaurant….and come back. This stuff is great.

Blake's All Natural -- This to me is "the Amy's Kitchen with meat" (meaning how

most of the country eats). Blake's had some great new mac n' cheese and turkey products and Chris Licata also unveiled a strong new re-branding look. This is frozen comfort food done right.

Late July – I saw CEO Nicole Bernard Dawes present at the Canaccord Adams event – this is a great growth-company story and the products are terrific. You can see the passion for organic, healthy and tasty products for children in Nicole and the brand (nothing is better than Late July on Cape Cod…). These packages will continue to show up in the back seat of my minivan for years to come….

Sweetriot – I’ve seen sweetriot at shows for years, but this was the first time I really tasted the product. You could eat an endless amount of chocolate at a Expo show, but sweetriot stood out for me. They have great-tasting products and strong merchandising. I was a big fan of the "unbar."

Guru – As they say “100% Natural..100% Crap Free.” Nothing like telling it like it is. Guru is a mainstay in the all-natural energy drink market. Now they’ve created four new SKUs – and they are good-tasting with a nice look. I particularly liked the Green Tea Iced Tea.

One Day Seminar: Financing Your Natural or Specialty Products Company

2009-09-22T22:59:00.006-04:00

Getting your company capitalized is perhaps the most difficult, time-consuming and frustrating part of building your business.

On November 10, Bob Burke and I will be leading an important one-day seminar on how to raise capital for your natural or specialty products company. It will be a packed, full-day seminar from 9am-4:30pm in Burlington, MA (easy shuttle from Logan Airport in Boston). We'll have a lot of important content to share and we're putting together an impressive group of speakers, including industry-leading entrepeneurs who raised venture captial and then grew and sold their companies, investment bankers, investos and other industry experts.

Confirmed speakers as of 9/22 include:

Pete Lescoe, Founder and CEO, FoodShouldTasteGood (funded by Sherbrooke Capital)
Nancy Rosenzweig, Former CEO, The Natural Dentist (funded by Burrill & Co., and others)
Nicholas McCoy, CFA, Managing Director, Silverwood Partners Investment Bankers
David Thibodeau, Managing Director in Canaccord Adams' Investment Banking Group.
Andrew Whitman, Managing Partner, 2x CONSUMER PRODUCTS GROWTH PARTNERS

WITH MORE TO BE ANNOUNCED SOON….

To sign up, please go here.

Topics to be covered include:

How do I determine my financing needs?
What is the best source of capital to align with my needs?
What’s the game plan for my business and my time horizon?
Finding early-stage capital (Friends & Family; Banks/Loan; Angel Investors/Groups; What terms should I expect?)
Demystifying valuation (Methodologies; Understanding equity; What matters/what doesn’t?
VC Financing (Who do I approach? And how?; Anatomy of a term sheet; What to expect when working with a VC; Control, veto rights, dilution
Other Private Equity…
Do I go alone or get professional help?
Role of the investment banker (Terms, fees; Materials (business plan, sample presentation, financials)
Creating value (Distribution; Brand Building; Building out the team; Positioning for exit; Strategic buyer or financial buyer)

Led by industry veterans Bob Burke & Michael Burgmaier, the seminar will de-mystify the terms and the process and provide insights and tips on how you can improve your odds to successfully obtaining the financing you need.

Conference/Show Week; Expo East & Canaccord Adams' Healthy Living

2009-09-21T09:16:00.008-04:00

This is a great week for the Natural Products/Healthy Living industry in Boston this week, and I'm excited to be there. This Wednesday, Canaccord Adams is hosting their annual "Healthy Living Conference," which consists of public and private company presentations. Putney Pasta President Rick McKelvey and I will be giving a presentation on The Natural Pasta Co. d/b/a/ Putney Pasta. We'll be talking about our market-leading all-natural skillet meals. The new Chicken Pomodoro item makes its debut at Expo East this week -- if you are there, try it at the booth. Last year, Putney won "Best New Product" from New England with their Chicken Alfredo Skillet (which is now the #1 all-natural skillet meal in the entire category!).

Thursday through Saturday is the Natural Products Expo East (Boston Convention Center). I'll be there with multiple hats on: representing CEI Community Ventures' companies The Rustic Crust & Putney Pasta and working on some current investment banking deals (sell side and private placement) with Silverwood Partners. The two Expo shows (East in the Fall and West in the Spring) are terrific shows - companies display their products for buyers, and every year, more and more industry consultants, bankers and investors also walk the show, looking for clients and the next big thing....

Here are some of the companies presenting at Canaccord Adams conference:

Calavo Growers
Diedrich Coffee
Green Mountain Coffee Roasters
Hain Celestial Group
Health Fitness Corp.
Herbalife
Inventure Group
Jamba Juice (I lived off of these when I lived in the Bay Area)
REED's Microbrew
Schiff Nutrition
Smart Balance
United Natural Foods (UNFI)
Whole foods Market
Attune Foods
Charter Baking Company, Inc.
Colorscience
Corazonas Foods, Inc.
FoodShouldTasteGood, Inc.
Late July Snacks, LLC
MonaVie
Putney Pasta
Sunflower Farmers Markets
The Natural Dentist
Van's Natural Foods, Inc.

I'll write about what I see at the show and conference in then next few weeks....

If you're going to be at Expo or the conference and you'd like to connect, drop me an email at "mike" followed by "@royalriverassociates.com" ....

How to Approach a VC

2009-08-06T11:35:00.009-04:00

Everyone always wants to know how to access venture capital:

Can I just call?
Should I submit my plan through a website or via email?
Should I use a banker?
Should I get a referral?

Just cold-calling is unlikely to work. Most calls are screened and if the VC doesn't know who you are, they are unlikely to pick up. Just like you, VCs are stretched for time. Talking to Joe I Don't Know doesn't fit into the schedule unfortunately. And if you do get through, the VC (again, like almost anyone), will likely be looking for a good segue to end the call, referring you to someone/something else. Over the transom business plan submissions also rarely do anything. Referrals are very helpful (lawyers, portfolio CEOs, LinkedIn connections...) and bankers (see below in detail) can also be a good path. I rarely punt to other blogs, but Mark Suster from GRP Partners has a great post on how to approach VCs. I suggest reading it.

I have been a VC since 2004 with CEI Community Ventures. The fund was an extremely small fund -- $10MM. We could only invest up to $1MM in any one business -- and that was over the life of our investment. That meant that our initial investment was anywhere in the $300-600K range, with the balance reserved for potential follow-on investments. We invested in very early-stage companies (pre-revenue up to trailing twelve month sales of $1MM). We did nine deals and led eight of them. That means that we priced, structured and syndicated each company's Series A round. As many of these companies did not have expertise or experience in raising capital, we often got involved with putting together the materials:

Investor Deck (Power Point)
Business Plan
Executive Summary
Financial Pro-Forma Model

As any entrepreneur knows, this is a lot of work. Then when we had the materials ready, we went to work on syndication -- in some case looking for angel investors to invest alongside our fund and also looking for other, smaller funds to co-invest with us. As the companies grew and it came time for Series B, we would update the materials and head back to the market again. Depending on the company's growth, we'd be out again looking for angels/small funds or larger funds, if the growth and capital requirements warranted it. For a portfolio company, this is a no-cost huge value add. And at times, raising capital for portfolio companies became a full-time job (ask my wife, she knows...).

One of the most-overlooked paths is using an investment banker. As a VC, I often even over-looked this option. Although no one liks to pay fees, the value from those fees (getting capital, often at one of the best-possible valuations) is huge. As I am also now an investment banker (through Silverwood Partners -- no affiliation to this blog though), I can readily see how this makes raising capital much easier for companies. When I talk with companies, they typically may know 5-10 potential funds that fit their needs. Natural products companies know Greenmont Partners, Sherbrooke Capital, Encore Consumer Capital, VMG Partners and perhas a few more...then their well begins to run dry.

Over the past five years, I have developed a database that now has over 200 organized funds, family offices, and "pass-the-hat" investment groups that invest in consumer-based businesses; and when I work on private placements, the list often grows by another 10 or so... Of course the database has capital sources with many areas of focus: early-stage, late-stage, food & beverage, natural products, apparel, health services...so the first step is to widdle down the database to match the company's criteria and needs. But the point is that a banker will know vastly more potential sources of capital than the average entrepreneur.

Bankers also do a good job of making a market. Entrepreneurs are busy, and raising capital almost always falls into the lap of the CEO, who also has 75 other day-to-day responsibilities. As a result, raising capital can never receive the attention it requires to do the best job possible. I've seen too many capital raises take a very long time. Initial inquiries to various funds may stretch out over a two-to-four month period. But after time, any deal will start to look old -- and no VC likes an old deal...why is it old? Because no one likes it? What do others know that I don't know? Bankers will create a market. We'll first create the list of capital sources to contact and then we'll do it all at once -- everyone knows the pressure is on to respond and act, or the opportunity will pass the VC by. We also know how to talk to VCs ... many entrepeneurs will often say the wrong thing that could kill a deal from the outset (outragous valuation expectations....I will run the company no matter what....I don't want a partner, I just want money...).

Another important point is that relationships matter. As a VC and a banker, I talk with other VCs on a peer level. I've known many for years and have developed (I hope!) a good reputation in the market. VCs in this space are good friends of mine. I like calling them and seeing them. If I pitch a deal to them, I'm also catching up with an old friend -- or making new ones.

VCs or Angels? Sometimes early-stage entrepreneurs will ponder whether they should take capital from a VC (at a lower valuation) or from angels. One often overlooked reason to take money from a VC is the networks that open up for capital raising for the current rounds and future rounds. As a VC, I work for our fund's companies. I do whatever I need to do to make them succeed. And I can use my networks that I use in my banking work to help raise capital for portfolio companies.

Real trends and Real Beneftis: Green Tea and Gluten Free

2009-07-10T08:19:00.015-04:00

Science and food. Health and food. Functional benefits. Disease prevention. Disease avoidance. These are all key phrases with food today. Today's post quickly focuses on two big ones in this arena: Green Tea and Gluten Free.

My green tea obsession continues to get validated

I've written in the past of my obsession with green tea. Studies keep coming out around the benefits....I'm not stopping my 3-4 cups a day as green tea can:

Help prevent cancer as it is packed with antioxidants. A study based in Arizona is being conducted to see if a certain green tea extract can prevent cervical cancer (June 2009;

Lead to weight loss;

Promote healthy skin;

Enhance mental focus (I'm putting this to the test as I just downed cup before engaging on writing today);

Boost immune systems and destroys the bacteria that cause strep throat and cavities; and

and much more...

Gluten free is here to stay for the long run

I've also touched on gluten free (GF) in the past as I live in a gluten free house and continue to learn about more and more gluten free (GF) people. These trends are also real.

A new study released last week says that Celiac disease may now impact 1 in 100 people in the US -- a quadrupling since the 1950s.

Also last week, Betty Crocker (General Mills) announced a new gluten free line of mixes (see WSJ article). Wow.

Here are my thoughts on some of the best gluten free brands/products out there:

Pizza crusts: Hands down, the winner is Rustic Crust. These are fabulous -- two to a pack, shelf stable, affordable and taste great. You can buy them direct on Rustic's website and at more and more retailers across the country.

Cake/Cookie Mixes: Cherrybrook Kitchen takes the top spot here. This company has premium products that are both allergen-free and gluten-free. When it comes time to make cookies or a cake for a birth day party (in school or at home), every parent -- whether they have a GF child or one with a food allergy -- should be using a product like Cherrybrook. How is it fair for someone to bring in cupcakes from home that some kids in the class can not eat? Be inclusive and fair and use a product like Cherrybrook.

General baking mix: Pamela's gets high marks here. We use it to replace flour and it works well.

Other interesting brands and products out there include: Kind Bars (while not marketed primarily as gluten free, they are...and they are a huge hit in my house -- also a very high-profile recent investment by the private equity group VMG Partners-- a very competitive deal that earned a hefty valuation -- I bet they do well on the deal); Mary's Gone Crackers (the crackers and 'twigs" are great with hummus and salsa -- funded by the venture capital fund Greenmont Capital Partners); Arico Foods has had a nice growth story - see "40 Under 40" story in the Natural Foods Merchandiser; Sami's Bakery has the best gluten free bread in the market -- frozen all the way from Florida (9/9/09 UPDATE: I am sad to report that Sami's bread is not gluten free; although it is sold in the gluten free sections of many retailers, it is clearly not gluten free and people with gluten sensitivities may be best served by staying way form this bread)....; Bakery on Main has the best cereal -- their granola is far and away the best on the market -- even my 1-year old likes it.

There are obviously many more gluten free brands out there: Gluten Free Pantry -- can't get a better URL (they are funded by the Claridge Food Group) ....., and Kinnikinnick from Canada is a clear leader in the space -- although their overall branding/packaging could use some upgrading. Their recent frozen doughnuts are a huge improvement (and taste great). If you think I've missed some big ones, please let me know.

Growth is Good: New Natural Products Industry Data Released

2009-06-12T09:10:00.009-04:00

There is great new industry data on the natural products industry available in the June 2009 Natural Foods Merchandiser. You can download the industry data overview, by clicking here.

Some interesting highlights:

Natural products were a $68 billion category in 2008 -- up $6 Billion (around 10%) from 2007.

People are finally beginning to understand (in a big way) the need for Vitamin D -- sales in 2008 were up 94%. There has been a lot published in the science about the many beneficial effects of Vitamin D over the past few years and it is taking hold. I take 2000 IU / day religiously. I live in Maine, maybe I should be taking 20,000?

Sales via the internet were up 22% to $1.4B. Still a small overall part, but great growth. And for companies that can sell direct -- nice margin impacts.

The anti-aging and personal care category was flat.

Beer was up 11%, with 22% of the category now organic. A shout out to my friend Jon Cadoux from Peak Organic (also based in Portland, Maine) -- Peak makes some great organic beer. US craft brewing is a $6.3 billion industry, up 10.5% over last year. I'm also a big fan of Geary's, which is also based in the craft brewing capital of the world, Portland, Maine. Maybe that's also why we need so much Vitamin D....we're inside drinking beer too much....

NFM states that private label sales were - up only 5% and forecasts 7% growth in 2009. This is much smaller than I thought, given the economy and what I've seen elsewhere. Milk makes up 31% of natural private label sales with other dairy accounting for 29%. I guess a cow is a cow -- that's 60% of all natural private label sales. Private label salty snacks were a mere 2% of overall private label sales. Despite what some people say, brands still matter immensely.

Energy bar sales continue to grow: up to $61 million from $57 in 2007. Although Clif Bara and Lara Bars are #1 and #2 respectively in the category, I'm a big fan of Kind bars (recently invested in by VMG Partners, a private equity/venture capital firm in the Bay Area) and a newer entrant, Kardea. Kardea's bars are very interesting. They taste great, and through plant sterols, have beneficial health effects. Functional foods are very much the path of the future.

Gluten Free was up an amazing 28% to $1.6 billion. I can believe this easily. We have turned into a gluten free house. We don't have a celiac in the house, but someone in our family has a thyroid problem directly related to the intake of gluten. I meet a new person every week that is gluten free, it seems. One of our portfolio companies, The Rustic Crust, has an amazing Gluten Free Pizza Crust. Check out Rustic's new profile on Facebook and sign up to get a coupon. You can also order Rustic's crusts direct via their website.

This is a great, growth industry. Nice to avoid the doom and gloom out there everywhere else.

Recent Healthy Living Investment News

2009-05-18T09:49:00.007-04:00

Venture capital markets remain tight, but the health and wellness/health living trends are real, and the opportunities for solid businesses, first-movers, science-based products and strong brands remain.

Here is some news from some recent deals in this space:

Espresso Fitness (supplier/developer of interactive cardio systems) received $14 million in debt and equity (announced Dec. 2008). The round included debt from Silicon Valley Bank and equity from Sierra Ventures, Physic Ventures and Enterprise Partners Venture Capital.
Lifefactory Inc. completed a $750,000 round of seed funding from Greenhouse Capital Partners in March 2009 to support designing and manufacturing of green consumer products, such as BPA-free baby bottles.
Plum Organics became part of Catamount Ventures' Nest Collective in Feb. 2009. Plum markets and distributes processed food products to the infant and kids segments.
Sweet Leaf Tea landed $15.6 million from Nestle for a 35% stake in the company. My personal bet is that we see a radical brand redesign soon....just a guess. I found the following summary on this transaction and space from a 3/31/09 Nutrition Capital Network newsletter: "Last year Sweet Leaf Tea completed a round of funding from Catterton Partners, which committed $18 million of growth capital. Ready to drink teas, including organic, green and rooibos, have been a focus for big food and beverage companies seeking to expand their health & wellness offerings. In February 2008 Coca-Cola acquired a 40% interest in The Honest Tea Company, a niche manufacturer of certified organic RTD teas. Last summer, PepsiCo and Unilever announced a licensing agreement to manufacture, market and distribute Starbucks' premium RTD Tazo Tea."
Phil's Fresh Foods received an investment from Brendan Synnott's (Survivor/Bear Naked fame) Burrito Investment Group (BIG). From what I can tell, the company has been quickly re-branded as Evol. Again, NCN further reports: "BIG has secured the right to fund an additional $2 million to finalize the first tranche of the transaction. Additionally, BIG has the right to fully fund a second tranche. Phil's Fresh Foods, which was founded in 2001, increased sales 33% to $1.6 million in 2008 and has a 2009 goal of $6 million as the company plans mainstream supermarket expansion, according to a newspaper article posted on its website."