What if there was another way to build a brand and business in the natural products industry? A way that doesn’t require a founder to raise $20 million just to reach $20 million in revenue. A way that doesn’t involve chasing hockey stick growth or racking up commercial doors. A way that doesn’t cause 80% to 90% of brands to fail within two years.
What if there was a way to build a fund where every opportunity didn’t need a potential 10x return? A way that doesn’t result in 75% or more of the average fund portfolio returning 1X or less. A way that doesn’t require a home run or two to make the fund economics work and the limited partnerships happy.
Not every brand or product has unicorn potential. In my experience no more than 1 in 100 have it, so why are the other 99 still following the same playbook? Partly because there is no clear alternative, but there is. We just don’t talk about it, we don’t celebrate it and we don’t make it sexy. We call them tardigrades. Let me suggest what this might look like for both the entrepreneur and the investor.
Entrepreneurs, you will build a business focused on capital efficiency, cash management, unit economics and the buyer continuum. You may load up and you will undoubtedly be scrapped. You’ll stay smaller longer, make your mistakes, and learn lessons in bits and pieces. You will become cash flow and EBITDA positive ASAP. You will go narrow and deep. Equity will be for growth, debt for working capital. You will build a self-sustaining business. It may take five or more years to get to $10 million or $20 million, but you will get there, and when you do, there will be wealth-building opportunities for you and your shareholders.
Investors, you will support eligible entrepreneurs who are building viable businesses. Your investments will be tranched, dedicated to specific initiatives and based on milestones. You may receive a dividend, or at least accumulate one. You will augment your tranched investments with targeted debt to support important production runs or rollout to a new retailer. In return, you’ll get monthly cash flow and some attractive warrants. There probably won’t be any home runs, but there won’t be as many strikeouts either. There will be many singles and sometimes doubles or triples. In the end, you will be satisfied with the result.
We need to build a risk community. One that supports the 99 out of 100 that won’t become unicorns. Entrepreneurs who build agile, capital-efficient and sustainable businesses also need investors.
We launched the TIG Venture Community Fund in response to this need: We empower those on the front lines of human health, climate action, justice, equity, diversity and inclusion. We need more tardigrades.
For more information about the TIG Venture Community Fund, contact TIG Brands by email.
Have some big ideas or thoughts to share related to the natural products industry? We’d love to hear and post your opinions on the newhope.com IdeaXchange. Check out our presentation guidelines.