How can crowdfunding help new food companies get in the game and include consumers in the process of developing a new product? The latest from Food, Nutrition & Science....
The team at Maple Farms loves maple syrup. From pancakes to pizza, they put it on everything. And who can blame them? After all, Maple Farms stands among towering old-growth Red and Sugar Maple trees just outside of Lake Placid, New York, deep in the heart of the Adirondack Mountains, where legend has it, the process of maple sugaring was discovered.
Inspired by the abundance of fresh produce in and around the Adirondacks, Ben Parker, the company’s founder, began infusing his maple syrup with fruit and eventually liquor, and interest in their products spread. Previously, they had only sold their infused maple products at farmers markets and a few local shops, but he wanted to take their love for maple syrup to a much wider audience. With only days to go until their retail website launch, the Maple Farms team decided to push the release back a month and try their luck on the crowdfunding platform site Kickstarter.
Kickstarter raises money for creative projects and includes everything from films and music to art or food. When an entrepreneur has an idea for a new product or venture, he or she can build a project profile and come up with rewards to incentivize backers to support their project. Every project creator sets an all-or-nothing fundraising goal and deadline. If the project doesn’t make its goal then the entrepreneur doesn’t receive a dime. Kickstarter earns a small percentage on projects that receive funding. To date, more than four million people have pledged over $615 million, funding more than 41,000 creative projects.
“I think it’s the perfect fit for any physical product based start up that can reward supporters. Food products work well in particular because of low price points and funding goals – so backers don’t have to risk a lot and the project has a strong chance of funding. And I think its easier to showcase food – I know I’m going to click on the delicious looking cupcake picture versus the watch or book every time,” says Parker.
Starting a food-based company can be a daunting task. The margins are usually low, the hours long, and more than 90% fail within the first year. It all begins with an idea that develops into a business plan through constant refining of the concept until it’s unique enough to capture attention and get people excited – followed by fundraising.
There are several ways to raise capital when starting a new business. Before the existence of the Internet, entrepreneurs relied on small business bank loans, venture capitalists and most often, borrowing money from friends and family, deemed “Angel Investors.” Today, many of these same tactics apply, but food projects are benefitting from “crowdfunding” on sites like Kickstarter and IndieGoGo. Crowdfunding is a way to raise small amounts of money from a large group of people. While crowdfunding itself isn’t a new concept, the Internet has enabled its explosive growth.
“I think it is revolutionizing every industry it’s touching – you see this in the Zach Braff and Kristen Bell projects. It’s allowing new products tremendous growth potential in a very short timeframe and changing the way businesses are structured. It’s still early in our campaign, but I can’t see our product being nearly as successful without the crowdfunding platform. We probably would have struggled along at Farmers Markets and trying to get into more specialty, gourmet stores,” says Parker.
Back To The Roots, a company that develops inspirational products to connect families to food, fullyfunded their aquaponics garden idea on Kickstarter last November. Founders Alejandro Velez and Nikhil Arora say that consumers want to be involved in funding a food project because in a world where the food system is so far removed from us, and there's no connection to the type of food being developed or how it's made, it's really refreshing to be able to have a hand in bringing to the world foods that we think need to exist, and to be able to get to know those behind it.
“A lot of people think Kickstarter is just about financing, but it's more than that – it's about finding a passionate, loyal customer base that will help you develop, market, and validate your product. Also, there's a big shift in the food industry right now where consumers are demanding more transparency from manufacturers and growers – they want to know the people and places behind their food. Kickstarter is perfect for that, because consumers can not only get to know their producers first hand but also help fund their growth/be a part of the business,” says Arora.
For the maple syrup industry specifically, there is a push to start promoting maple syrup as a gourmet product with different tasting qualities derived from location, soil conditions and climate, similar to how the characteristics of fine wine, cheese or scotch are described. There has also been rapid technology development in the equipment used in the maple syrup industry, making it less labor intensive and dramatically increasing yield while increasing the safety for the trees and sap.
Maple Farms’ initial goal is to raise capital for purchasing packaging supplies in bulk, as it’s one of their biggest expenses. Reducing those costs will go a long way to making their products more profitable and allowing them to expand into new flavors and related products.
“If you look at the really successful food projects on Kickstarter, their campaign is more of a pre-sale than a fundraiser. The backers get the added benefit of knowing they helped bring a new product they believed in to the market, but I think it’s mostly about the exclusivity – there are great new products out there that you can’t get anywhere else,” says Parker.
Arora adds, “It all comes down to transparency. We're moving to a more transparent world where customers are tired of not knowing what's going into their food – they are tired of being manipulated through packaging – they're demanding authenticity and transparency from companies. Social media is an incredible way for brands to tap into that desire – on a real time basis – and build an incredibly passionate and loyal customer base. No longer does big media or million dollar ad budgets control how a brand is perceived – providing customers the right stories and content through social media can go a long way!”
Back to the Roots is shipping out their AquaFarm product to 4,000 consumers, and Arora says that without Kickstarter, they wouldn’t have been able to do it. For their part, Maple Farm plans to follow up their Kickstarter campaign with their retail website launch, a social media Pin for Charity campaign to support other family farms through Farm Aid, and possibly a follow up Kickstarter campaign in the fall.
“We’re hoping we can differentiate ourselves by sourcing the highest quality, all natural ingredients to infuse with our syrup and cross promoting the family farms and craft distillers that produce them on each of our products. Coming from a farm family, we know all the hard work that farmers put into their produce and we want to help spread the word about other family farms that are utilizing innovative and sustainable farming practices,” says Parker.