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Daily news and analysis about the food tech revolution

financing

Is Kiwibot’s Sale & Leaseback Deal a Way For Food Tech Startups to Traverse the Venture Capital Winter?

Interesting bit of news today from sidewalk delivery robot startup Kiwibot: The company announced it has signed a $10 million financing deal in the form of a sale and leaseback arrangement with Kineo Finance, an asset financing company based in Switzerland.

According to company founder Felipe Chavez, the deal is structured such that Kineo will make up to $10 million available in financing to Kiwibot, and in return, Fineo will buy the robots built by Kiwi at cost and lease them back to the company. This arrangement enables Kiwi to have ready access to growth capital to build its robots and also limits the equity dilution of a typical growth-round investment.

 “It is a straightforward sale and leaseback,” Chavez told Tech Funding News. “Once we manufacture them and ship the robots to their final destination, we sell them to Kineo at cost.”

While this is the first time that I’ve seen this type of capital agreement in the food robotics space, it could be a sign of things to come. As we’ve seen from this month’s news from Picnic, the food tech hardware market is having challenges as more traditional venture investor appetites for large growth rounds have shrunk in the current uncertain economic environment. By using a sales and leaseback deal, startups can get access to a whole new type of financing and also limit how much of their company they need to give up in the process.

Of course, there are also downsides to these types of arrangements. Kiwi has to make sure they can find customers for their leased robots, as they’ll now have a monthly payment to service for the robots in the field. Kineo owns the robots and if Kiwibot can’t make the payments, the financing company can do whatever they want with them. Add in other complicating factors like the loss of tax benefits such as asset depreciation, and the conversation about whether to adopt this new model becomes somewhat nuanced.

That said, I applaud Kiwi for finding a new and creative way to fund their expansion, and I have to think other food robotics vendors might be taking a look at this type of financing arrangement.

GoSun Goes to Crowdfunding to Kickstart its Series A

GoSun, the company behind the eponymous solar-powered ovens, announced today that it was cowdfunding its Series A round of financing. Technically, the company is looking to, pardon the pun, kickstart its Series A by raising just $500,000 on the StartEngine equity crowdfunding platform. If it reaches that goal, it will then go to private investors to try and raise an additional $1.5 million.

GoSun makes a variety of outdoor products including its titular ovens, which use a combination of parabolic reflectors and insulated chambers to cook food using only direct sunlight. The company expanded this year with a hybrid solar + electric outdoor cooker, a solar-powered portable fridge and a DIY version of its solar oven.

This is actually the second time GoSun has crowdfunded its financing. In 2017, the company raised $500,000 in seed funding, which then allowed it to get lines of credit with the bank to pay for its growth. “We’re a crowdfunded company,” Patrick Sherwin, CEO of GoSun told me by phone today. “Every new product is launched on the crowd. We just go to the crowd first.”

Given the success GoSun has had–the company says it has sold 35,000 products across 60 countries and earned $1.6 million in revenue in 2018 — I asked Sherwin why his company wasn’t going with more traditional routes of funding like venture capital.

“Traditional VC will breathe down your neck,” Sherwin said, “And drive everything towards more profit. This gives us more flexibility and keeps us in charge.”

As with any crowdfunding venture, and especially equity investing, there is no guarantee of a financial return for investors. Indeed, given the slower, deliberate pace at which GoSun wants to move, and without pressure from VCs, who knows when an investor would see any potential return. Caveat emptor.

UPDATE: An earlier version of this post mentioned GoSun valuation and minimum investments. We were asked to remove this public information by GoSun in reference to SEC rules. We are honoring that request while we work to understand the particular issues around it further.

Hungry for Funding? New Avenues for Food Startup Financing are Opening Up

Ask many people how to find funding for emerging food projects, and lots of them will point to crowdsourcing sites. After all, sites such as Kickstarter have driven concepts ranging from PicoBrew to the Anova Precision Cooker to levels of funding that would put a smile on any startup founder’s face. Indeed, when it comes to gadgets and devices in the food arena, the widely known crowdsourcing sites can pay off, but other kinds of concepts are finding funding through alternative routes and alternative crowdsourcers.

Where can you turn if Kickstarter or GoFundMe don’t seem right for your project? If you have a food or beverage startup concept, consider PieShell. It’s based in New York, and was founded by entrepreneur Cheryl Clements. Check out some of the concepts that PieShell is funding here.

Part of PieShell’s concept is that crowdfunding has benefits that go beyond just money. “Crowdfunding ultimately brings you closer to your customers — something that’s crucial for startup success,” notes PieSheller Caroline Halter. “Branching out beyond friends and family helps you learn what your customers like about your product, as well as what they don’t like. For instance, one of our first PieShellers, Edamam, crowdfunded to build a nutrition app. The crowdfunding experience helped them realize that their real potential was in B2B (business-to-business), rather than consumer markets.”

According to Halter, another benefit to crowdfunding is that it can give you an instant hook for a pitch to the press. “Once you get a little bit of press, it’s much easier to get more,” she said.

 Credibles is another avenue to look into for funding. It was started in San Francisco in 2014 by founder Arno Hesse. The twist that Credibles provides is a way for customers to financially support their favorite food businesses. The basic concept is that customers are investors. Customers can prepay a business by starting a tab with the business, and then they draw on the tab whenever they visit.

Credibles offers food and beverage businesses financial flexibility up front. Case in point: Driver’s Market is a small grocery store that focuses on transparent, non-GMO sourcing direct from as many local producers as possible. Through Credibles, Driver’s Market has already raised over $100,000 from its customers, with the first $10,000 arriving in 10 days. You can find out how to get your business or concept funded with Credibles here.

The angel investors who provide funding for technology-focused startups have their counterparts in the food and beverage arena. Food Angels is an organization that strictly invests in early stage food and food-tech startups. The group consists of accredited angel investors who screen companies each month and select a few to consider for funding. Food Angels invests in the form of equity, royalties and more.

There are also community organizations for food startups seeking funding. The Angel Food Network is an organization of emerging food and beverage companies seeking funding. Membership is by invitation and you can apply here.  Some types of food and food tech concepts may also qualify for the IKEA Bootcamp accelerator program, which will reward startups trying to solve the world’s problems. Food tech concepts have the potential to qualify, and you can find out more here.

Finally, it’s worth noting that the world of food funding has its own dedicated conferences. Future Food-Tech is one that is typically held in North America and Europe, and the Food Investing Conference is another one to look into.

Getting a project funded can call for some creativity, but there are more options available to startups than ever before. Entrepreneurs who think outside the box will have the strongest chances to find funding.

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