Food Startup Strategy with Food Lawyer Larry Gennari
It’s no secret that Babson boasts some incredible food entrepreneurs. Food Sol’s Community Table is a mix of people with varied interests in food and entrepreneurship that helps keep this trend going. The event meets at the Blank Center, an incubator that is perhaps the heart of Babson’s entrepreneurial pursuits.
In early September the meeting was with Larry Gennari, a local lawyer with a breadth of experience in helping food startups bake their legal documents. “Any business where the product is ingested” has a huge potential risk associated with it, and so Gennari provides services to assist budding startups cover themselves. That said, this Community Table talk focused on business structures, and featured a founder of a fast-food restaurant that had recently been sold, a few aspiring health food fanatics, and bloggers from zestforcooking.com and thecleanfoodclub.com, all looking for a good takeaway.
The talk started by focusing on the types of food business people start. Founders need to honestly ask themselves “Is this an idea, or is it a business?”, and should seek serious, unbiased advice. If it is a business, a founder needs to ask whether it is either a “growth” or a “lifestyle” business. A lifestyle business is something you enjoy. You want to do it regardless of the money. This is different from a growth business, where the goal is to build something to sell in 1,000 markets, not just a few. Gennari recalled specifically Annie’s Mac and Cheese, a company that he worked with that, although seemingly part of a cottage industry, is now on shelves in thousands of grocery outlets.
At this point, Gennari got into some practicalities, focusing on the oft-misunderstood subject of raising capital. His focus is on helping companies that will raise between $250,000 and $500,000, although he indicated that he has helped companies raise “quite a bit more”. There are many misconceptions about raising capital, the most common being that your first funding will come from Angels or VCs. In fact, the vast majority of businesses are originally funding by debt, family, friends, and neighbors, often in that order. It is only a little later that an Angel might come in, and finally a VC, although Gennari said that the currently aggressive investments market has made many Angels more cautious, such that they are acting more like VCs, with more checks in place. Of course VCs are the most cautious. One venture capital company that Gennari spoke with stated that “this year we will read through 2700 business plans, of which we will fund four”.
The main takeaway for attendees of this Community Table meeting seemed to be structure. Especially with food, it is important that your company looks “buttoned down”. Every step that a company takes to make it look more professional, from business plan to types of investor, to other due diligence, will help to make a company more appealing to investors. But at the end of the day, it’s about more than money and contracts and plans. Food is about eating. In short, “Food investing is visceral”.
Community Table meets every Tuesday at 1pm at the Blank Center. All are welcome.