Aiming big, right from the start
We've all heard of small-scale start-ups - but it's a different story if you want to start big from the beginning. Alison Cowzer explains how she plans on doing it at East Coast Bakehouse
I never thought I'd find myself quoting Donald Trump - particularly in light of some of his latest absurd pronouncements - but I have to admit that his mantra of 'You have to think anyway, so why not think big?' resonates with our experience in founding a large-scale food manufacturing business.
Two years ago we gathered together a team of ex-colleagues to discuss the crazy idea of going again - that is, starting a large-scale food manufacturing business.
We'd all been around the block before, buying, developing and subsequently selling a number of food businesses including the Jacob Fruitfield Group, which we sold to Valeo four years ago. The opportunity to do it all again was just too good to turn down.
There are many routes to developing a large-scale food business - all equally valid and each with their own positives and challenges.
Three possible routes are:
Start small and grow - the route of many Irish food businesses, however it takes tenacity and usually a long time...
Acquire and consolidate - needs serious funding, and finding the right opportunities and deal flow can be tricky...
Large-scale start-up - start big from the beginning, it sounds fine, but requires substantial up-front investment.
While all routes can work and we have pursued each of these options in the past, this time we chose the third option.
Our plan was to found a large-scale food manufacturing business from scratch.
We believed there was huge opportunity to manufacture Irish-made biscuits for the Irish, UK and European markets - and the plan was to start big! What we began with was a blank sheet, no external funding in place, no factory, no product range.
Sounds like a challenge? Yes, a big one, but over the past 24 months we've made some real progress.
East Coast Bakehouse is nearing launch and next week the first of our manufacturing machinery will arrive. Over the next couple of months our factory in Drogheda will start to produce our range of biscuits for the Irish and UK market.
'Baking Better Biscuits' is our goal and we're well on the way. We've hit some bumps along the road, but so far we've:
Built a team - working with mainly ex-colleagues, we've recruited our core team, and plan to build the team to 100 employees. The core team comprising myself, Michael Carey, Daragh Monahan, James Yarr and Gerry Murphy have all worked together before, and this is a huge advantage when it comes to the challenges of a start-up. Together we've got 70 combined years in the biscuit industry across manufacturing, finance, sales and marketing.
Secured funding - the total funding needed was €15m which has been sourced from a range of promoters' equity, external investors, bank debt (Ulster Bank) and with substantial support from Enterprise Ireland.
Bought a factory - we found the perfect site in Drogheda, a 120m-long building (that's the length of a football pitch), that will house our 80m-long travelling oven - one of the biggest in Europe. We've also specified and ordered manufacturing equipment from a range of leading suppliers to the industry.
Built our offices - and not just our offices, but also our new product development kitchen and we've started baking lots of biscuits.
Engaged with potential customers - and so far the response has been very positive!
The experience so far has been scary, exhilarating but overall enjoyable. It's probably too early to look back on the road travelled so far, but here goes:
Keep all the plates spinning simultaneously
The start-up stage is fraught with frustration, much of it to do with timing and co-ordination. How do you get to a point where all elements are ready to go at the same time?
All the items are co-dependent: the bank won't sign the loan without the Enterprise Ireland funding being in place, the EI funding is dependent on bank funding, the equity investors need to see bank funding in place before they sign the legals, etc. Not to mention the fact that the building had to be secured and paid for before the bank loan was nailed.
Throughout the process, the whole deal was in danger of being derailed on a number of occasions but keeping an eye on the final goal was crucial, and open lines of communication really helped to keep everyone on board.
Find the best advisors - it's not cheap but it will pay you back in spades
We worked with a superb team of advisors and suppliers who stuck with us through the process and delivered real value and expertise including William Fry, Goodbody, the designers at Dynamo and JLT Insurance.
It's tempting to find the cheapest suppliers, but for key areas such as legals, finance and design you need a team with the best available talent - and they need to believe in the project as much as you do!
It's all about the people
Having the right team on board is without doubt the most crucial element of the process. We are lucky to have a team that have all worked together previously and know each others strengths and weaknesses.
The challenges of a start-up can overcome an individual. Sharing those stresses among a group that trust each other and respect others' skills and expertise really does lighten the load. For a start-up, the team comprises much of the story - the story that encourages investment and reassures investors, lenders and partners that the goal is achievable.
Be willing to give up some equity
Many Irish food entrepreneurs struggle with the idea of parting with equity in their business. The trade-off between 100pc ownership versus the prospect of significant investment and faster, more sustainable growth is a price I believe is worth paying.
Somehow it doesn't seem to be such an issue for the IT sector, where founders are happy to bring in big investment often accompanied with industry specific expertise in exchange for equity.
It's a model worth looking at for food founders who find fast-paced growth a challenge. Our external equity investor group, who have acquired 30pc of the business, is a significant support for the business.
Lots of goodwill for new Irish food businesses
We have been surprised and very grateful for the warm welcome we have been given since going public in June of this year. Neighbouring businesses in Drogheda, suppliers, potential customers and the media have been extremely supportive and encouraging.
The financial support and strategic advice we have received from Enterprise Ireland has been instrumental in getting the business started, and their expertise and help will assist us over the coming years.
The ecosystem supporting food businesses in Ireland is exceptional: Bord Bia, Enterprise Ireland, Department of Agriculture and Food, the universities and local community funding organisations are all working together to secure the future of the Irish food industry and we are proud to be part of it!
The food sector is a good bet
As many Irish food business have experienced, the financial crash is still rumbling through the lending market.
We got funding - but we encountered a real lack of appetite for risk among the main banks. The food sector offers many real opportunities but banks are still insisting on personal guarantees, high lending rates and other, hard to swallow terms and conditions.
Food is a good bet, and I believe financial institutions need to wake up to it.
Founding a large-scale food start-up is a challenge, one that brings sleepless nights, and asks many hard questions, but its also exciting and exhilarating. Being part of a great team with a common goal is a real motivator. Let's hope it all works - in the meantime, we're well on the way to baking better biscuits.
Alison Cowzer is marketing and innovation director at East Coast Bakehouse
Sunday Indo Business