Venture capital bringing an appetising offer to the table

29 November, 2019

 

Since selling a 50% stake to venture capital and private equity specialists Active Partners, Honest Burgers has enjoyed a successful performance whilst some rivals have been forced to close sites. And although this difference in fortunes may be attributable to a number of factors, VC firms in particular are seen as an increasingly attractive option for those companies in the food and drink sector looking to scale-up, but struggling to find finance through traditional routes like bank funding.

 

The appeal of US venture capital

In 2017, venture capitalists in the US secured over ten times more deals by value than those in the UK. There is clearly a thriving US venture capital community able to fund companies looking to expand. With deep pockets and a higher appetite for risk, it is easy to understand why US investors are becoming so appealing to innovative companies in the food and drink sector.

 

A loss of appetite for UK public markets

Recently, some food and drinks businesses have decided against floating in the UK public markets. For example Gousto, a London-based recipe box delivery service, has announced its intention to move away from floating on the public markets. Due to being oversubscribed in their last round of funding, Gousto has the attractive option of moving beyond the confines of the public markets. JustEat, the food delivery platform, is also potentially departing from the public sphere as there is talk of it leaving the FTSE 250 in its current takeover battle. With huge sums of venture capital and private equity money accessible, fewer expanding food and drink companies are considering listing as the most viable option.

 

Bucking the Trend

With many large food and drink companies, particularly in the restaurant sector,  struggling and even having to undertake substantial restructuring exercises to try to survive, you might think that it is all doom and gloom! However, as Honest Burgers success shows, there are plenty of companies out there bucking this trend and enjoying a fast pace of growth. Those that will be most successful are businesses that are able to spot trends and gaps in the market and move quickly to take advantage of these, backed up with a strong management team and willing investors who are prepared to provide financial support. A recent example is the trend for market food halls, where restaurants offering speciality cuisine group together in a central location which can then offer consumers a wide variety of food options in one place. This trend looks set to disrupt the traditional restaurant sector and we have seen a number of clients investing in this space.

 

For further information on obtaining funding for your business, through listing, venture capital or otherwise, please contact John Kirkwood on 01892 506 226 or at john.kirkwood@crippspg.co.uk.