Entrepreneurs not only need vision and drive to commercialise their ideas; they also need to raise capital and fully understand their market.
March 24, 2020
We spoke with Maarten Ooms, Managing Director of Financial Advisory & Solutions at Rabobank, about the sorts of challenges all start-ups are likely to face, and how Rabobank’s innovative FoodBytes! Platform is helping to create solutions that address some of the world’s food challenges.
“The main financial challenges are raising capital, especially in early rounds. The real challenge for startups is being able to convince potential investors about the fact that their business will give them the right return for the commensurate risk they are taking by investing into them. Another recurring issue for startups is that the only available financing is equity financing (raising capital by selling company stock to investors), which is both expensive and dilutive. Particularly for businesses that have a working capital need, that is not ideal.”
“There are many non-financial challenges. The most important is to thoroughly understand your customers, their needs and the market, in order to get them to buy your product. Making sure that you understand your competitors’ landscape is also key. There are operating challenges as well, such as getting access to production, distribution and finding the right sourcing partners. And last but not least, building a strong team is key for success and can be challenging especially in early stages, when financial stability is still low.”
“Plan meticulously. Every little detail matters. For instance, it matters who your investors are, as they are not just providers of capital, but can give you so much more in terms of expertise, potential route to market and can also enhance your reputation.”
“It is also important to make sure you understand your market, competitors and the regulatory environment in which you operate. Think your pricing and sourcing strategies through, and be able to explain why your business is unique. How easy is it to copy, can you protect your IP, etc."
“Think also in the longer term. Scaling your business will be a challenge, because when you grow, every small little issue will be magnified. Understand your customer needs and behaviours, think of potential partnerships and about the people running the business with you.”
“At Foodbytes! by Rabobank we look for businesses that can help transform the global food system and address global challenges such as food waste, climate change, food shortage, better nutrition, etc. This of course in addition to being a viable and investible business.”
“The criteria we use for startup selection are essentially five-fold: having a robust team, having a cutting-edge product/technology addressing major industry challenges, having a focus on positively impacting people, profit and planet and feeding the world more sustainably, having a collaborative mind set and having validation to growth stage.”
“During ideation stage it will be difficult for you to demonstrate potential investors that your business will generate cash, let alone profit. You probably have not yet tested and validated your product. At this stage, typically, funds are made available by family, friends and angel investors.”
“It is also worth considering the various programmes offered by governments and supranational organisations. Each country often has startup programmes and facilities available that can be cheaper than equity and may not require you to give up a stake in your business. It is important to have a solid business plan and investor deck where all details are thoroughly explained.”
”Rabobank is a leading global bank in consumer food and agriculture. We use knowledge, networks and financial solutions to increase support to our clients and partners working to improve the sustainability of the food and agri sector.”
“Through our leading innovation platform FoodBytes!, Rabobank has built an ecosystem from farm to fork to help spur innovative solutions that address the world’s food challenges. The platform builds lasting connections between the most promising food and agriculture startups, our corporate clients and investors, helping them pioneer a more sustainable future, via our pitch events and our bespoke pilot programme.”
“The bank furthermore offers various forms of capital, via our captive venture capital and private equity funds and growth capital solutions, including our Equity Private Placement and the ‘Subordinated Innovation Loan’, which is designed for private limited liability companies (BV’s), established in The Netherlands, that do not (yet) qualify for a bank loan or lease, because they have not yet demonstrably produced results and/or because their cash flows are inadequate.
“We have many stories to share. We have an active network of Foodbytes! alumni that we engage with regularly. Our investment funds have invested in some of them, and some startups have raised funding from partners they collaborated with in our pilot programme. We have also raised funds for startups within our investor network and more generally, have given our startups and corporate clients access to each other and facilitated collaboration. A statistic worth sharing is that alumni have raised in excess of USD 300 million in funding since pitching at one of our Foodbytes! events.”
