3 mistakes mission-based businesses make when seeking capital
For over 15 years, Do Good CFO has served as a fractional #CFO firm for mission-based Lotus Foods, a global pioneer in heirloom, organic and regenerative rice cultivation and a leader in rice-based noodles. During this time, Lotus Foods grew its revenues by nearly 20X. Do Good CFO’s work also helped contribute to an amazing achievement: an investment of $22.5 million from Grounded Capital, a San Francisco-based investment firm focused on deploying capital that supports healthy social, ecological and financial systems.
Do Good CFO works with Lotus Foods on financial analysis, business strategy, and capital raise strategy and we advised them through challenging early moments that helped lead to this latest success. This case study resulted in several lessons to share on financial advice for the mission-based industry.
Here’s the first post in that series:
3 mistakes mission-based businesses make when seeking capital
1. They don’t choose mission-based partners.
For a mission-based startup, it’s key to align with like-minded financial experts and institutions, because choosing an investor is like deciding who to marry - when the waters get choppy, you need to know you are with a trusted partner. This rule extends to other financial partners along the way, including fractional CFOs, who understand the unique needs of mission-based businesses and can provide tailored guidance.
2. They don’t pay enough attention to the questions investors are asking
These days, many investors and financial institutions may claim to be mission-aligned because it’s popular. Lotus Foods CEO, Andrew Burke says: “When interviewing investors, mission-based businesses have to dig deep, ask probing questions about the investor’s values, and pay close attention to the questions coming back from the investment team to ensure everyone has the same priorities and values in moving the company forward.”
3. They don’t understand the subtle differences among “mission-based” investors
Capital in the mission-driven space can be roughly divided into impact-first investors who are willing to concede on return in exchange for impact; and finance-first investors, who are typically seeking market-based returns while also having a focus on the mission. The majority of impact investing capital is #finance first. Though both groups may seem to be “mission-based” the subtle difference makes the first group a better choice for mission-based businesses because they offer more patient capital, which can make the difference between life or death of the company when times get tough.
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