Sunday, October 4, 2009

The Vermont Food Venture Center and a Bit About Financing

Farmers' markets are almost over for the season. Shelburne has one more week and Middlebury goes a few more. I have mixed feelings about the end of the season. As I mentioned before, I am tired, bone tired, and ready to have one less thing on my plate. But this may well be our last farmers' market season, so I'm feeling nostalgic since Shelburne Farmers' Market is where it all started. We will save the decision until next year (when we are more rested?) but as it stands, we feel spread a little too thin and are inclined to stop trying to do the farmers markets.

In the recipe development phase, we made all our batches at home. But we knew that we were going to need more dough to make our cookies and frozen cookie dough than our trusty stand mixer could handle, so we started exploring options for mixing elsewhere. Paul had learned about a wonderful resource in Vermont called the Vermont Food Venture Center where small food entrepreneurs could make their product. We called them up and set up a meeting.

The staff at the Venture Center was amazing. They provided us with a cd about starting a food business that outlined many of the steps involved in launching a product -- from batching-up our recipes (i.e., turning our home batch into a gigantaur batch), to licensing requirements, to FDA nutritional labeling requirements and more. It provided lists of resources for labels and packaging materials and ingredient distributors and service providers for food nutritional analysis and graphic design.

The facilities at the Venture Center are great for a start-up company. It's in a cool old manufacturing building in Fairfax, Vermont, about an hour's drive from us. It has a large commercial kitchen, a 60 quart hobart mixer (important to us), a flash freezer and large walk-in storage freezers and refrigerators. Each company is provided with a little space to store ingredients, which can be delivered directly there by the ingredient distributor. And the best part, perhaps, was that a tiny company with no real capital behind it (more about that later) could rent all this on an hourly basis after becoming a member (which only cost about $100 a year). In our case, we figured one mixing session would last us a month at the beginning, so all we would need was a few hours at a time once in a while. At that time, rates were roughly $20 an hour, give or take depending on the equipment you needed to use.

With their resource cd in hand, we went about doing all of the things we would need to do in order to offer the frozen cookie dough at the first farmers' market. The next thing on our to-do list was to figure out how we would package the frozen cookie dough, get labels designed for the dough and have nutritional analyses done to put on those labels. At first we planned on offering only two flavors as frozen dough, even though we had four flavors developed at that point. If those were received well, we'd go forward with the others.

The nutritional analysis part was interesting. I had never even wondered how that was done. Basically, you hire someone to take your recipe and break it down into the nutritional components that are required by the FDA to be on labels. One thing to note is that if you never plan on selling your product in "interstate commerce" then you don't have to have this done. Basically, if you do not sell your product across state lines, then you can get away with just a list of ingredients, but the minute your product crosses state lines, then you must abide by all the FDA regulations. We had no idea if our product would ever cross state lines, but we wanted to be optimistic and do it right out of the gate to avoid having to redesign packaging later. (As it turned out, we did have to redesign packaging anyway, and will again soon, but whatEVER!)

Our nutritional analyst was and is Wendy Hess. She is based in Burlington, Vermont and must be kept very busy with all the food businesses that are started here. She was great to work with, turned our materials around very quickly, and even offered great email moral support.

When it was time to design the labels for the frozen dough, we once again turned to Gotham City Graphics. We loved the logo they had come up with for us, and we loved working with them, so it was a no-brainer. We had already decided that we were going to package the dough shaped like a burrito, although some of the details of that had yet to be worked out. Steph from Gotham designed what came to be called a "cuff" that would wrap around the burrito shaped log of dough and provide all the information. We wanted to keep expenses very low at first, so we decided these cuffs should be something that we could photocopy and adhere with one of our logo label stickers. Early devoted customers will remember the pastel colored paper we used -- goldenrod for chocolate chip, baby blue for triple chocolate, green for peanut butter, pink for oatmeal, etc.

I'll go into more detail about packaging decision for the dough in another post. For now, I want to talk a little about financing. In the beginning, our financing consisted of whatever money we had on hand. Since we had no financing to speak of, we were forced to start incredibly small. I wonder what it would be like to launch a new product on the market with real capital? We saw a few companies at the trade show that were less than a year old and had their acts together in a manner that made it clear they had some moolah behind them. I still feel like a freshman when I see companies like that. But on the positive side, we were able to test our product in a small market and figure out whether or not there was a demand and whether people liked it before taking on much risk.

A year into the business, when we had already placed the products in more than 20 stores, we finally sought some additional financing. But again, we have not ventured into the real world of capital yet as our only investors so far are family and friends. By the time we went begging with out hat in our hands, we had answered the questions about there being a demand and interest in the products. So here we are at the beginning of our third year in business and we really have no experience in raising serious capital. I may be trying to pick some of YOUR brains about that in the coming years.

I'm off to open the shop with both kids under foot. Paul is giving away samples at the City Market Harvest Festival in Burlington today.

I think I'll go further into packaging and batching-up in my next post.

Until then...


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  3. I agree that financing a business can be quite tough. That's why most people start with the money that they saved prior to starting the business. Another interesting strategy that you may also try is to opt for restaurant loans from lending bodies and banks. Start up businesses which needed venture capital do this to be able to buy the necessary materials for their business.

    Hope this helps. Thanks!

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