Navigating the Funding Landscape: Strategies for Early-Stage CPG Founders

In the current financial climate, raising capital has become an increasingly daunting process for early-stage founders in the consumer packaged goods (CPG) industry. Experts in the field share their insights on how to effectively engage with investors and secure the right funding for your business.

Unlocking the Funding Puzzle: Aligning Investor Expectations with Your Vision

Defining Your Investor Fit

Securing the right investor for your CPG startup is crucial, as it can make or break the success of your venture. "How do you know what is the right investor for your company?" asks Elliot Begoun, founder and brand champion of TIG Brands. "How do you align around a shared vision for the business and desired outcome?" Begoun emphasizes the importance of finding an investor who is not only financially capable but also strategically aligned with your company's goals and growth trajectory.

Navigating the Funding Landscape

Gary Hirshberg, CEO of Hirshberg Entrepreneurship Institute, describes the current funding environment as "the most difficult I've seen in 40 years." This challenging climate requires founders to be strategic and persistent in their approach to raising capital. "Fundraising is getting punched in the face and saying thank you," says Noah Kraft, co-founder and CEO of Wonderbelly. "All you need is one person to say yes."

Crafting Your Investor Pitch

When pitching to investors, founders must shift their focus from selling to consumers or retailers to selling the investment opportunity. "You're selling securities, which is a legal thing," explains Andy Whitman, managing partner at Loft Growth Partners. Founders should highlight why investors should want to be part of their business and why they should invest, rather than just showcasing the product's features and benefits.

Establishing Credibility and Differentiation

Investors need to be convinced that your brand and category offer a compelling value proposition. "Whether you're a napkin-idea that's pre-revenue or a million business, I think the same five things apply," Whitman says. These include articulating your brand's differentiation, the size and growth potential of your category, and your traction and momentum in the market.

Demonstrating Operational Readiness

Founders must also be prepared to share concrete metrics and data points that illustrate their company's operational readiness and growth potential. "Look at contribution margins, sell-through rates, trial-and-repeat metrics, and average order value," Whitman advises. These metrics help investors understand the viability and scalability of your business model.

Fostering Investor Alignment

Transparency and self-awareness are crucial when engaging with investors. "Investors know how to sniff out b.s.," says Kraft. "That's their job." Founders should be honest about potential challenges and risks, while also highlighting their ability to navigate them. Aligning with investors on the desired outcomes and growth trajectory is essential for a successful partnership.

Timing Your Fundraising Efforts

Founders should be cautious about raising capital solely because they can, as it can lead to unsustainable growth and unrealistic expectations. "Capital is a commodity," Kraft warns. "Don't raise capital just because you can." Instead, focus on achieving regional growth, profitability, and sustainable unit economics before considering a larger funding round.

Cultivating Resilience and Persistence

Raising capital is a challenging and often grueling process, but it's essential for early-stage CPG founders to maintain their resilience and persistence. "For every yes I got, I got 10,000 nos," Kraft shares. "It's really important to remember fundraising is getting punched in the face and saying thank you. All you need is one person to say yes."By navigating the funding landscape with strategic focus, operational readiness, and unwavering resilience, early-stage CPG founders can position their businesses for long-term success and secure the right investors to support their growth.