Steven Allen of Nutrition Capital Network03.15.12
As industry headed off to Natural Products Expo West last week, there was optimism about the growth prospects for the nutraceutical and functional food industries. The sales tracking companies report growth in many categories. In fact, extremely strong performance continues in segments such as probiotics, essential fatty acids and energy drinks. It should be an exciting show with record attendance from both domestic and international participants.
Estimates suggest that about 10% of the companies presenting at Expo are raising capital. Judging by the number of investor groups that have signed up for the Nutrition Capital Network Annual Investor forum at Expo West, there is also increasing interest in the sector from the investment community.
Recently in the world of finance there were two notable acquisitions by strategic buyers—Pfizer said it was buying Alacer Corp, maker of Emergen-C, and General Mills snapped up Food Should Taste Good, the natural snacks company. Incidentally, Food Should Taste Good presented at an earlier Nutrition Capital Network meeting. These acquisitions signal a continued interest in profitable, fast-growing companies that have created brand equity and have potential for further growth nationally and internationally.
Some years ago, we might have expected both of these companies to sell shares in an IPO in order to raise money for continued expansion and allow their investors/owners to realize gains. In 2011, however, the U.S. witnessed only 134 IPOs—a 20% decline from an already small number in 2010. The complex regulatory requirements of filing for and maintaining a public listing in the U.S. mean companies like Alacer and Food Should Taste Good are unlikely to choose a public offering as a route to an “exit.” As a result, there will likely be more reliance on private equity and strategic investors.
At the other end of the funding spectrum, there’s the practice of crowd funding. This is the term given to raising capital for a business venture through a network of people—usually via the Internet. There are several regulatory issues with crowd funding (i.e., some websites have gone out of business following investigation by regulators). While the Obama administration is in favor of relaxing the rules inhibiting a wider use of crowd funding, a committee of the SEC, the government agency that regulates the issuance of stock, has asked for more time to study the matter. In the meantime, it has warned of “an opportunity for fraud in the extreme.”
Estimates suggest that about 10% of the companies presenting at Expo are raising capital. Judging by the number of investor groups that have signed up for the Nutrition Capital Network Annual Investor forum at Expo West, there is also increasing interest in the sector from the investment community.
Recently in the world of finance there were two notable acquisitions by strategic buyers—Pfizer said it was buying Alacer Corp, maker of Emergen-C, and General Mills snapped up Food Should Taste Good, the natural snacks company. Incidentally, Food Should Taste Good presented at an earlier Nutrition Capital Network meeting. These acquisitions signal a continued interest in profitable, fast-growing companies that have created brand equity and have potential for further growth nationally and internationally.
Some years ago, we might have expected both of these companies to sell shares in an IPO in order to raise money for continued expansion and allow their investors/owners to realize gains. In 2011, however, the U.S. witnessed only 134 IPOs—a 20% decline from an already small number in 2010. The complex regulatory requirements of filing for and maintaining a public listing in the U.S. mean companies like Alacer and Food Should Taste Good are unlikely to choose a public offering as a route to an “exit.” As a result, there will likely be more reliance on private equity and strategic investors.
At the other end of the funding spectrum, there’s the practice of crowd funding. This is the term given to raising capital for a business venture through a network of people—usually via the Internet. There are several regulatory issues with crowd funding (i.e., some websites have gone out of business following investigation by regulators). While the Obama administration is in favor of relaxing the rules inhibiting a wider use of crowd funding, a committee of the SEC, the government agency that regulates the issuance of stock, has asked for more time to study the matter. In the meantime, it has warned of “an opportunity for fraud in the extreme.”
