As to what potential investors look for in a management team, above all, people who understand that they are building a business, not just a brand, said entrepreneur-turned advisor and investor Brad Barnhorn.
Brands and products can be imitated, whereas a business model and a supply chain can’t be replicated so easily, added Bradhorn, who advises several private equity funds investing in consumer products, but also serves on the board of several rapidly-growing food & beverage firms from KeVita (sparkling probiotic drinks), to KRAVE Jerky (gourmet jerky).
As for the skillset, passion is a given, but entrepreneurs must also be pragmatic, adaptable, and good at scenario planning (if this happens, we’ll do that…), he added.
Entrepreneurs also need to be prepared to move rapidly, as in a fast-paced environment such as food and beverage, you may only have a narrow window of opportunity to make your mark, he added.
“10 years ago, you might start in Whole Foods, build up over 3-4 years, get your business model figured out and then move to the mainstream channel over another 3-4 years. Today that whole process could take two to three years and you need to be capitalized to move quickly.”
Today, he said, buyers at Target and Costco are going to trade shows such as Expo West and looking at young brands at a much earlier stage, and if they show interest, you need to be ready, or you could miss an opportunity.
When Barnhorn looks at an early stage company he looks at velocity (is the brand generating rapid repeat sales?), the management team, capital efficiency (what does a dollar put in your business deliver?), plus how scalable the brand and business model might be.
He also expects firms to have a clear path to profitability, and to know their numbers inside out.
It doesn’t inspire confidence if you respond to a basic question about your performance with, ‘I’ll have to get back to you on those numbers…’ he observed.