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Elliot Begoun | Jul 19, 2022
What if there were another way to build a brand and business in the natural products industry? A way that does not require a founder to raise $20 million just to reach $20 million in revenue. A way that doesn’t necessitate chasing hockey stick growth or an accumulation of retail doors. A way that does not lead to 80% to 90% of brands failing within two years.
What if there was a way to build a fund where every opportunity does not need a potential 10X return? A way that doesn’t result in 75% or more of an average fund’s portfolio returning 1X or less. A way that does not require one or two home runs to make the fund economics work and the limited partnerships happy.
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Not every brand or product has unicorn potential. In my experience, no more than 1 out of 100 have it, so why do the other 99 still follow the same playbook? Partly because there is no clear alternative, but there is one. We just don’t talk about it, celebrate it or make it sexy. We call them Tardigrades. Let me offer what that 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 shopper continuum. You might bootstrap and will undoubtedly be scrappy. You’ll stay smaller longer, making your mistakes and learning lessons in bite-sized chunks. You’ll become cash flow and EBITDA positive as soon as possible. You’ll go narrow and deep. Equity will be for growth, debt for working capital. You’ll build a self-sustaining business. It might take five or more years to get to $10 million or $20 million, but you’ll get there, and when you do, there will be wealth-building opportunities for you and your shareholders.
Investors, you’ll back bankable entrepreneurs who are building viable businesses. Your investments will be tranched, earmarked for specific initiatives and milestone-based. You might receive a dividend or a least be accruing one. You’ll augment your tranched investments with targeted debt to support important production runs or a rollout to a new retailer. In return, you’ll get monthly cash flow and some attractive warrants. Likely, there will be no home runs, but there won’t be as many strikeouts either. There will be a lot of singles and an occasional double or triple. In the end, you’ll be satisfied with the outcome.
We must build a venture community. One that supports the 99 out of 100 that won’t become unicorns. Entrepreneurs that build nimble, capital-efficient, resilient businesses need investors too.
We’ve 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, reach out to TIG Brands via email.
Have some big ideas or thoughts to share related to the natural products industry? We’d love to hear and publish your opinions in the IdeaXchange. Check out our submission guidelines.
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