By Justin Mares, Founder of Kettle & Fire
When business owners think of taking on capital to grow their business, one obvious choice is equity. Equity raises are celebrated in the news, often mean the involvement of a strategic partner, and offer the opportunity to assert a new valuation for the company. It’s exciting, but it’s not always the right move given unique needs. In fact, it seems that too frequently entrepreneurs go for equity when the easier and at times more sensible choice is credit.
The Excitement of Equity vs. the Utility of Credit
My company, Kettle & Fire, a line of bone broths made with all organic ingredients and bones from 100% grass-fed cows, experienced a particularly pronounced growth spurt in 2017. In a period of accelerated growth and strong sales history, equity can be attractive because investors perk up at your rising market positioning. But in reality, the process of raising equity is time consuming and complicated; for good reason, you have to give up some control of your company.
Ultimately, our priority for raising capital was to efficiently fuel growth to enable us to get our products to more people, meaning growing into more retail channels. This quick retail expansion entails having lots of accounts receivable (AR), creating an immediate need to buy more inventory. With credit being a faster, more nimble route, it ultimately was the best fit for fulfilling our specific goal. When it came down to it, we weren’t keen on diluting our ownership just to cover the costs of purchasing more inventory.
Between bringing our existing investors to the table and finding new investors for an equity raise, it may have taken us three to six months, even for a fairly conservative amount. Securing our revolving line of credit took about a month. It’s hard to put a price on that time saved.
An Anti-Banking Experience: Easy, Fast, Friendly
When initially exploring credit options, I was a bit worried about working with an unfamiliar traditional bank that wouldn’t give us enough sincere consideration. I was concerned most wouldn’t fully understand our company or the dynamics of early-stage CPG and ultimately wouldn’t have our best interests in mind. The traditional credit options were offering expensive rates and a long, cumbersome, and opaque process.
Talking to CircleUp was a relief as they proved incredibly easy to work with throughout the cycle. They were fast and flexible, which are seldom attributes that come to mind when you think about banking or credit providers. There was a short period of diligence, including a review of our current assets and liabilities, and then they wired us the money quite quickly. There were no onerous terms, and they were very startup-friendly. You can tell CircleUp’s business is built on partnering with early-stage CPG companies—they understood our business inside and out, and were always on the same page and empathic to our needs.
Next Up for Kettle & Fire
With Presence Marketing recently estimating that the bone broth category will grow to a $600 million market over the next 6 years (accounting for 77% of the growth of the overall broth category), we’re doubling down on the right products and retailer expansion to help lead the market and give more consumers something authentic, healthy, and organic to enjoy.
We’re set financially for the foreseeable future with our credit line secured, so we don’t anticipate raising more credit soon, but if we do, it will only be with CircleUp. We currently offer the category’s only 100% grass-fed, shelf stable and organic product, and are ready for our next phase of growth—now with the right financing in place.
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