Example 2 of the neat info coming out of CB Insights: 146 Startup Failure Post-Mortems. Not trying to be negative here, but there is a possibility of learning something from others' troubles.
The graph above shows back when they only had 101 tanked dreams in the data set. #1 cause of wreckage: "No Market Need".
Potential AFI Investors take note: that's why one of our key "qualification" metrics is that the company be up and running, products on the market, and high proven customer demand. Which, interestingly, we're actually seeing a lot of. In the food subsegment of the LOHAS (lifestyles of health and sustainability) market, many, many of the firms that come to us have this problem: "Customers want 5-10 times what I can produce, but I need working capital / equipment / people to satisfy demand." That's a good problem to have!
Maria Rodale, CEO and Chairman of Rodale, Inc., wrote on the Huffington Post about the legacy of her father, Robert Rodale, on the 25th anniversary of his death.
"To him, organic alone was not enough. He believed we needed a commitment to making things better."
The article also contains a very interesting document called "The Seven Tendencies of Regeneration", which links agriculture with communities and personal spirit. What a cool way to unify our work with the earth, our work with our neighbors, and our work on ourselves!
One of the best email newsletters we get is from Anand Sanwal at CB Insights. They look at data from the professional investing world and spin it around in most interesting and clever ways.
Example 1: Let's say you are an entrepreneur looking to use the typical Silicon Valley / tech / VC model for raising money and you're at "Seed" stage. Of course you're special, but what have over a thousand other companies who've been where you are experienced?
Anand and team looked at a cohort of companies that raised seed in '09 and '10, and followed them through November of this year. What they found was that 77% of the companies "are either dead, the walking dead (bad outcomes), or became self-sustaining".
Of those 1,027 companies studied, 40% raised a second round, allowing them to chase that gold ring; 12% exited (yaaaay!), and 48% went zombie or "self-sustaining".
Here's a telling comment: Anand says being self-sustaining is "a potentially good outcome for the company but probably not good for their investors". Wow! "self-sustaining" gets lumped in with "dead"! Too bad those investors used financial vehicles that equate the two!
What's this mean for investors? What's this mean for entrepreneurs? Maybe we're reading the data wrong, but we're just not sure about this investing model for either investors or companies, especially in the food and ag space. Looks like bad odds, unless the company and investors figured a way - other than seed equity - to work together. Is that possible? (Spoiler alert: it is!)
Example 2: coming soon: why CB Insights thinks that companies fail.
Here's an oldie but a goodie, from way back in October 2014, from the Bluebonnet Electric Coop website by Kathy Warbelow...
"On a rural road in Manor, Sean Henry and Wesley Kener grow frilly lettuces, fragrant basils and other fancy greens in a 40,000-square-foot hydroponic greenhouse. Inside, workers harvest plants from trays set in shallow water and pack them in plastic clamshells for wholesale customers that include Whole Foods Market, H-E-B and Central Market." Read the full article here.
News from AFI; Links to stories on business-for-good, private-company investing, fundraising, & sustainable food.