Food Venture Financing News - Weekly Issue No. 40
In This Issue:
- Second Wave of PPP Loans Authorized
- Food Venture Financing Trends
- CPG Corporate Venture and Private Equity Funds
- Links to Relevant Content and Events
Second Wave of PPP Loans Authorized
- After months of speculation, the Paycheck Protection Program was reauthorized pursuant to the "Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act", which was signed into law on December 27, 2020.
- The Act allocated around $284 billion for PPP loans, which may be made to both first-time borrowers ("First Draw Loans") and those that took out a PPP loan in 2020 ("Second Draw Loans").
- The SBA re-opened the program on Monday, and the revitalized PPP is expected to run until March 31, 2021.
- Some key points include:
- Fact Sheets: The SBA has released fact sheets for both First Draw Loans and Second Draw Loans.
- New Restrictions: A business is not eligible to apply for a PPP loan if it is:
- A public company;
- Owned 20% or more by a Chinese entity or has a resident of China on its board;
- Primarily engaged in political or lobbying activities;
- Required to register under the Foreign Agents Registration Act; or
- Was not in operation on February 15, 2020.
- First Draw Borrowers: Apart from the new restrictions above, new PPP borrowers have the same general eligibility as under the prior PPP – namely, small entities, that together with their affiliates (if applicable), have 500 or fewer employees per location.
- A new borrower may take out a PPP loan of 2.5x average monthly payroll, with a cap of $10 million.
- Second Draw Borrowers: Businesses that previously took out a PPP are eligible to do so again, provided:
- The proceeds of the previous loan will be fully used before receiving new funds;
- The business has 300 or fewer employees per location; and
- The business experienced a decline in gross receipts of at least 25% during any quarter in 2020 as compared to the same quarter in 2019.
Second Draw Loans are capped at the lesser of $2 million or 2.5x average monthly payroll (but note that NAICS code 72 entities—in Accommodation and Food Services—may receive up to 3.5x average monthly payroll, up to the $2 million cap).
- Forgiveness: As with the prior version of the PPP, the loans are forgivable provided 60% of the funds are spent on payroll and 40% on expenses over a 24-week period. The Act expanded the original list of eligible expenses (rent, utilities, mortgages, and interest on existing debt) to also include essential supplier costs, personal protection equipment, and operational expenses such as software, accounting, and cloud computing.
Food Venture Financing Trends
- Venture financings and M&A activity in the foodtech industry have already picked up in the beginning of 2021, signaling a busy Q1 for emerging food brands.
- McCormick & Co. announced its acquisition of natural flavorings provider FONA International, LLC as part of its plan to expand its natural products portfolio.
- Investors anticipate that alternative proteins and fermentation products will see accelerated investment and growth in 2021.
- Food industry experts predict that companies formulating barley protein have the potential to impact and influence the plant-based protein market.
CPG Corporate Venture and Private Equity Funds
Our featured CPG private equity firm this week is Amberstone Ventures.
- San Francisco-based Amberstone Ventures is a private equity fund that supports entrepreneurs building breakthrough food and consumer product companies.
- Amberstone invests in early-stage brands with less than $15 million in trailing revenue that are seeking $1-10 million in growth capital.
- Portfolio companies include:
- Honey Mama's
- June Shine Hard Kombucha
- Daily Harvest
- Chameleon Cold-Brew
Links to Relevant Content and Events
- Outstanding Foods Raises $10 Million Series A for Its Plant-Based Pork Rinds and Puffs
- Plant-Based Supplier New Wave Foods Nabs $18 Million Investment
- Egg Innovations, the Ethically Farmed Premium Egg Pioneer, Announces Acquisition of PECKISH
- Tiny Organisms, Huge Potential
- Crop Trader ADM Pours Money Into Firm Making Meat Out of Air
- New Wave Foods Nets $18 Million and Plans Foodservice Launch in Q1
- Trends That Impacted Agrifood Technology in 2020
- Connecting Demand to Supply: 2021 Food Supply Chain Tech Outlook
- Gro Intelligence Raises $85 Million in Series B Funding
- Mondelez Agrees to Buy Rest of Paleo Chocolate-Bar Maker Hu
- Allergy-Friendly Cookie Company Partake Foods Gets $4.8 Million to Fuel Expansion
- McCormick Acquires FONA International, LLC
- Some of Our Food Tech Predictions for 2021
- Barley Protein Emerging as Attractive New Option in Plant Protein Toolbox, Says AB InBev-Backed Upcycling Startup EverGrain
Naturally Bay Area's 3rd Annual Pitch Slam
Thursday, February 11, 2021
Here's your chance to show what you've got — get in front of top industry investors and your peers (virtually)! Naturally Bay Area's 3rd annual Pitch Slam competition celebrating the Bay Area's brightest brands, and giving the spotlight to a handful of local, emerging companies who will go head to head for a chance to win prizes worth thousands of dollars.
Apply to pitch here (Applications due Tuesday, January 12th)
Please check out DWT's newly re-launched Startup Law Blog
At 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.