NuttZo Skips Venture Capital In Favor or Revenue-Based Financing to Expand Distribution, Portfolio
While venture capital is a popular choice to fund food and beverage brands, other options – such as revenue-based financing* – can provide entrepreneurs with capital necessary to grow without diluting their equity, according to the founder and CEO of the CPG brand NuttZo.
“One of the hardest things when looking for capital is obviously giving up equity and being diluted. Equity is king,” and most venture capitalists are banking on equity being worth more than their investment, Danielle Livolsi, who founded NuttZo in 2008 as a trailblazer in the nut- and seed-butter space, told FoodNavigator-USA.
This didn’t sound like a fair exchange to Livolsi, which is why, she said, she recently opted for a seven-figure investment from the revenue-based financing from Decathlon Capital instead of venture capital from one of the “high profile groups that everyone knows and everyone thinks will take them to the next level.”
She explained that as a brand that launched during the recession when most Americans were not willing to purchase premium nut- and seed-butters, NuttZo had to rely on out-of-the-box thinking and bootstrapping to grow despite the odds and with very little funding.
She added that she saw this same kind of out-of-the-box thinking at Decathlon Capital, which she was also attracted to because they offered more than money – they also offered expertise and guidance.
“I wanted a real partnership,” and Decathlon is providing that by offering guidance and business connections, Livolsi said.
Livolsi added that she understands the attraction to the “big, famous groups that everyone will think is a perfect fit,” but she wants that when it comes to picking an investor who will have equity it isn’t enough to ‘think’ it is a perfect fit – they need to know it is a perfect fit.
“Partnering with an investor is a marriage,” only more difficult to unwind if someone decides later it isn’t the right match, she said.
Staying afloat in a sea of new brands
Just as difficult as finding the right investment partner, Livolsi said she struggled with the decision about whether to raise funds at all, after more than 10 years of successfully growing her brand on her own – other than a small friends and family round in 2014.
Ultimately though, she decided she need extra funding to put NuttZo on an even playing field with the influx of new venture-backed brands that had enough capital to come running out of the gate.
“I realized we have to play the game and come full force now. There is no slowly building up the brand anymore. We were afraid we were going to get lost in the shuffle with all these new shiny things,” she explained.
With this infusion of funds, Livolsi said, NuttZo plans to increase its distribution, build out its digital marketing campaign to support recent launches and develop new products.
“Increasing distribution can be extremely expensive, as can the development process for new products and bringing something completely new to the market from the ground up,” she said.
And she would know. In addition to launching her nut- and seed-butter blends at a time when most people at peanut butter and likely hadn’t even heard of almond butter – let alone a blended option, NuttZo also recently Staying afloat in a sea of new brands launched a line of protein refrigerated bars using its butters as a base.
The refrigerated bar set is still relatively new, but also already crowded. However, Livolsi said, her bars stand out because not only do they have 60% of NuttZo butters, but they have added functionality either from collagen, Macha or probiotics, and they are low in sugar and easy to eat on-the-go.
Beyond this, the company also recently launched a keto-friendly seven nut and seed butter that uses coconut as the base for a “delectable, yummy butter that is amazing” and has only two grams of net carbs.
Livolsi plans to continue her out-of-the-box thinking with additional launches in other categories in the coming months. While she couldn’t share details, she said, she is hoping to provide samples at least by next Natural Products Expo West in March. Plus, she is working on another flavor for her line of nut- and seed-butter blends that she is sure will be “another favorite.”
*Revenue-based financing is a type of financial capital provided to small or growing businesses in which investors inject capital into a business in return for a percentage of ongoing revenues.