The first question most farmers and producers who plan on starting a new operation or expanding their current one ask themselves is, “Where am I going to get the money?” For some of them, driving down to their local ag credit union will suffice. But others who may be thinking on a larger scale might consider raising capital with outside investors. For those, we offer a list of commonly seen mistakes.
1. Unrealistic Timeline Expectations
Having too short of a timeline for a full capital raise is unrealistic and can create problems when purchasing land or planning your operating schedule. It takes time to raise any amount of capital, and usually the more valuable the investor, the longer the sales cycle. You need to plan, put together high-quality marketing materials, build relationships with, and educate potential investors. Cramming everything into a 1-3 month timeline if you’re attempting to raise the capital on your own, can be a recipe for failure.
2. Not Dedicating Any Resources to Capital Raising
The old adage it takes money to make money is true in capital raising. The same is true for time and effort spent chasing funds. Many times, team members dedicated to finding funds will make 2-3 phone calls a week (or even per month), and then wonder why they have not raised more capital. Performance does not market itself just as an ag degree or years of growing experience does not swing all doors wide open. You need to have dedicated resources, an at least a part time internal marketing person, investor databases so you can spend your time calling on real prospects instead of always having to qualify them, and have a growing internal CRM in place to track your investor relationships. These take time and money.
3. “If You Build It, They Will Come” Mentality
This is believing that if you grow a great hydroponic lettuce or raise the best bulls, investors will find you and you don’t need to work at raising capital. That doesn't work. If your offering's financials don’t make sense or the deal isn’t structured properly, no matter how many investors you approach, you’re unlikely to get interest. Having a professional team help you with this aspect of a fundraise is critical.
4. Underestimating Building Brand Value
Many agriculture entrepreneurs conducting their own capital raises are completely missing the mark on authority positioning, content marketing, and improving their own standing in their chosen ag industry. In today’s capital raising environment, you can’t just rely on the old-school cold-call and networking strategies. Sure, this works some of the time, but it’s better to rely on a more sophisticated system that works all of the time and builds real relationships with investors.
So how do you build your brand value? If your farm or ranch isn’t already a legal entity, it’s best to start there. Have you put together a logo or marketing materials for your business? A website and social media accounts are great ways to get in front of your customers, as well as potential investors.
5. Thinking Capital Raising is a Numbers Game
In some ways, it can be. Your success will be likely higher the more potential investors you are able to reach. However, even if you maximize outgoing phone calls and investor touches at all costs, you might still fail to raise capital. That’s because all investors aren’t created equal. A family office or high net worth person who invests in tech start-ups may not be the same person who will invest in a grass-fed cattle business. Targeting the right investors is essential.
How We Can Help
Clearly, if you are a farmer who has never raised outside capital, the process can be daunting. KrogerFarms has worked with dozens of farmers who have tried to raise outside funds on their own without success and help them close their offering. By leveraging our experience in capital raising, our pool of thousands of potential investors, and our marketing team’s expertise, we can prevent producers from wasting time and money on unsuccessful fundraising efforts.