For food makers like Judit Beres, founder of Neomega Nutritionals, LLC, sharing a passion for food with the Triangle community is something that brings joy every day. However, a challenge she and many small business owners face is securing enough capital to transform their ideas into full fledged companies.
Beres established her organic infused avocado oil business in 2016, and her products are sold in several Triangle stores, including Earth Fare and Chatham Marketplace. Though her business has grown over the past year, Beres still infuses the oils, fills and labels the bottles on her own.
“I can’t keep up with demand,” Beres explains, adding that she would like to bring on team members for additional bottling help if she had the financial resources.
Last week, Triangle Food Makers spent an evening at American Underground educating dozens of local food makers and business owners about crowdfunding opportunities available to them, including those now allowed under North Carolina’s new Providing Access to Capital for Entrepreneurs and Small Businesses (“PACES”) Act.
“A lot of people feel lost in the options,” explained Triangle Food Maker founder and marketing coach Jill Willett. “We want to help the food makers in the area understand what is available to them and how they can reach their goals.”
According to Forbes, at the rate crowdfunding is rising in popularity, it could soon overtake venture capital as a main source of funding for startups. But with so many funding models to choose from—including rewards, donation, equity and debt/lending models—the process can be time consuming and confusing for someone who isn’t knowledgeable, Willett told the crowd.
Benji Jones, a corporate securities attorney, led the night’s discussion, highlighting key features of the NC PACES Act and guiding the audience through two ways to do crowdfunding under PACES in the next 12 to 18 months. She kicked off her time on stage with a strong warning to the group: No crowdfunding experience is without risk, no matter the path chosen.
Jones dove into dissecting the differences between the NC PACES Offering (NCPO) and the Local Public Offering (LPO), which Wyrick Robbins recently highlighted in this piece for ExitEvent. Jones emphasized LPO as a good option for food makers because it is a revenue-driven model, permits solicitation to generate a base following and has a lower target margin of $250,000, which is a realistic figure for food startups.
Though each offering has its advantages, Jones stressed that for a company to have a successful crowdfunding campaign through the NC PACES Act, the founder needs to have a solid business plan and financials, know the desired target amount and have the enthusiasm of a crowd.
Roman Gabriel, maker of a line of sun-brewed sweet teas called Romanztea, has his eye on expansion in the next year. In order to produce more tea to meet existing demand and expand distribution in retail stores , Gabriel needs at least one more brewing barrel, which will set him back thousands of dollars.
“I can definitely see using the LPO as a source of crowdfunding to reach my goals for the future,” says Gabriel. He has also considered using Kickstarter to raise funds.
If You Have the Crowd, You Can Get the Funds
Successful crowdfunding campaigns have been completed by NC food makers before the NC PACES Act was brought to life. Sophia Woo of Pho Nomenal Dumplings raised $17,384 from 189 backers with her business partner, Sunny Lin, in a 2013 Kickstarter campaign. With the money they raised, the pair transformed an old FedEx delivery truck into a fully functioning foodtruck.
For success on Kickstarter, which lets donors receive rewards or product from a business in return for a donation to the campaign, Woo recommended companies focus on the campaign presentation to catch the attention of potential donors. Woo and Lin created a video that showcased their unique style and displayed some of their menu items.
“This is an intersection of art and business,” says Woo about Kickstarter campaigns. “You are packaging up something for someone who wants to invest in it.”
Another similar crowdfunding resource to Kickstarter is Indiegogo, which allows for both fixed and flexible funding options.
Raising Money and Community
“Money is something that you have to have, but community is natural and much easier to build,” Matthew Konar, founder of groundworkk, shared with attendees at the Triangle Food Makers event.
Konar and a group of close friends started groundworkk as a way to support each other’s projects, but it has grown into a community-wide philanthropic effort. Groundworkk raises money for businesses by hosting events that give entrepreneurs a platform to pitch their ideas to a receptive audience, each of whom donate $5 to attend. At the end of the event, the community votes on who will receive the total amount raised from attendees.
In the same communal spirit, Slow Money NC supports local food makers and farmers. The network has raised over $3 million for local food-based enterprises since 2010, but is expanding efforts this year with the Slow Opportunities for Investing Locally in North Carolina
(“SOIL NC”) Fund, which provides 0% loans to enable more farmers and NC food makers to fund projects and reach their goals. In order to apply for a loan, farmers or food makers must pay the Slow Money membership fee. The goal of the fund is to reach $50,000 by July.
The importance of community does not just stop at the dollar with these organizations. Slow Money NC, groundworkk, as well as the Carolina Small Business Development Fund, provide support and financial training for small businesses to help them succeed.
No matter which resource a business chooses to use to raise money, there are several viable options to choose from.