BATTLE CREEK, MI — The baked goods segment of CPG has been attractive to investors over the past few years, including legacy acquisitions. From an investor or acquirer perspective, these companies have the capabilities to deliver ingredient mix (grain/gluten-free, nut-free, allergen-free, dairy-free, etc.); on the shelf or frozen; decadent; nostalgic or nutritional products to a diverse consumer set. That offers the investor or acquirer several lines of vision as to how the brand can grow and bring to the investor a healthy return on their investment.

The first step for emerging brands and small businesses to attract investors is establishing strong business fundamentals. While there are many strategies that will indicate a founder has established such practices — from managing costs and operations to managing people and marketing — managing cash flow and having a weekly analysis meeting with your team and/or advisors is essential.


When it comes to finding investors, the rule is to start now. Depending on the size and type of the company and investment, this could take many, many months. Do online research of trade publications and news sources to find those investors interested in your segment. Network with other brands and co-founders, as well as third-party providers like distributors and co-packers, to get names of possible investors.

For smaller companies, local angel groups and grant foundations may be available, though these can be overly bureaucratic and slow. There are many organizations and people that offer long lists of possible investors. Many of these can be discovered on LinkedIn and other online providers. Be mindful that these lists are very often not scrubbed or targeted, so they can be cumbersome and time-consuming to use, with little reward. Ideally, your best contact is always a referral, so the bottom line is to network.

Finding the right investment partner is like finding any other partner in business and life: seek compatibility, agreement on long-term goals, and an environment of open, honest and thoughtful communication. The earliest investors from friends-and-family rounds, crowdfunding or angel investors will likely not provide much expertise or support to the business. As the business grows and investment stages and sizes become larger, and the investors become more sophisticated, they will seek more involvement and control.

While these investors will perform a detailed due diligence on your business, a founder should also perform due diligence on the investor; this is, after all, a two-way street and a partnership. Find out more about their involvement with other investments. Ask others important questions, like how the investor has interacted in good times, and how they were in bad times. All businesses run into issues from time to time, so you will want investors who can help problem-solve and find solutions.


Finally, and perhaps most importantly, assess what type of business skills, knowledge or experience they will bring to the business as a resource. While an investor may have the funds, there is a difference in the value the investor brings if their capital also includes specific business knowledge or experience that can help grow the business.

Even the most successful business has less negotiating power when they enter larger funding rounds. More sophisticated investors will rely heavily on the technical analysis to determine valuation and terms that will provide a return on investment. They will intensely analyze the business pro forma to determine what they expect to happen in the coming years, and then present terms. In many cases, those investors and firms have strict guidelines as to the offers and risk they will take on, so they will not be open to a great deal of negotiation. The amount of risk they see will also determine the amount of involvement, control and oversight they expect.


Raising capital is a full-time job, on top of the full-time job of running a young, growing company. Finding the right investor, and the right investment, takes time. Start early with making contacts and keep potential investors up-to-date on your achievements to build important relationships. Watch your cash flow to know the lead time you have for your current cash position.

Remember, most businesses fail, not because of a bad product or poor management, but because they run out of money. It is important to always think about the next round and making contacts that will help you raise capital across the various stages of growth.

This story has been adapted from the February | Q1 2022 issue of Commercial Baking. Read the full story in the digital edition here.