Food Venture Financing News - Weekly Issue No. 1
In This Issue:
COVID-19 and Food Venture Financing
We're hearing the following news from the industry this week:
Some companies are now trying to stockpile ingredients for a period of at least six months from domestic and international suppliers. Others are facing a cash crunch just to stay current with vendors for supplies on hand. For many, this will require expanding lines of credit and other debt facilities or finding new sources of capital. We will inform you of developments regarding emergency SBA loan availability and other economic relief packages on an on-going basis.
Cash Flow Management
Many companies are revising their cash flow management plans for the balance of the year. Early and frank communication with vendors and customers remains key to pursuing extended payment terms and discounts for prompt payment. Some are drawing down their available lines of credit now to bank as much cash as possible.
Everyone in the industry should be exploring credit options, from commercial debt to private bridge lenders. Some founders have recognized that their network of angel and seed investors includes high net-worth individuals who may have greater optimism for the prospects of companies and management they know and understand than for the uncertainty of volatile public markets. In the meantime, we are organizing a national task force within the Naturally Network organization to develop industry-wide credit solutions for emerging food & beverage brands. More information will follow about this later this month.
Corporate VC Investment
We anticipate that the corporate venture capital investment funds will continue to support their portfolio brands. Valuations will likely be affected in the short-term. To the extent that emerging brands can access the debt market until the storm passes, they may be able to protect their valuations until the equity market stabilizes.
Private Equity Investment
We expect that private equity firms will continue to support their existing portfolios in the near-term but are unlikely to make sizeable new investments. Nonetheless, some in-process private equity transactions to support the growth of food & beverage companies that are less vulnerable (or perhaps even optimal) under COVID-19 related pressures are getting papered and closed.
Business Interruption Insurance
Check your business interruption insurance policy for possible coverage during this crisis. Contact your insurance broker for preliminary guidance on this issue as soon as possible. Not all policies are written the same, and deserved coverage may require advocacy.
Food manufacturing and virtually all related supply chain activities are among the "essential business practices" that are exempt from stay-in-place orders. Nonetheless, a key to maintaining financial stability will be effectively managing co-packing relationships. That market may shift as larger companies see their supply chains affected. Communicate regularly with your co-packer to make sure you can participate in their planning process.
Recent Food Venture Financing Transactions
These links highlight recent food venture financing transactions that occurred just before the pandemic hit the U.S. We'll see how the market for these offerings changes in the next few weeks.
- Impossible Foods confirms $500 million fundraising
- Fulcrum Global Capital closes $36m agrifoodtech fund and four investments
- Why food titans invested $200M to form plant-based platform LiveKindly
- New Crop Capital Makes First Investment in China, Partners with Dao Foods to Back Starfield
- Alternative meat industry moves beyond the burger
- Food Entrepreneur: The plant-based revolutionaries
- GrainChain scores $5m more from Overstock.com’s blockchain-focused Medici Ventures
- PepsiCo to hire 6,000 new workers
At Davis Wright Tremaine LLP (DWT), we are proud to have one of the largest Food & Beverage legal practices in the country, with over 40 attorneys representing food innovators, entrepreneurs, and investors at every level of the food chain, from Farm to Label.
Please contact our Food and Beverage team if we can assist you in any way in these unprecedented times.
The facts, laws, and regulations regarding COVID-19 are developing rapidly. Since the date of publication, there may be new or additional information not referenced in this advisory. Please consult with your legal counsel for guidance.
DWT will continue to provide up-to-date insights and virtual events regarding COVID-19 concerns. Our most recent insights, as well as information about recorded and upcoming virtual events, are available at www.dwt.com/COVID-19.