Caroline Beckman, founder and CEO, Nouri Life
Even though Caroline Beckman is only 26, she is not new to the start-up world. In 2012, when she was 18, she joined Suja Juice as one of its first employees. By year two, the cold-pressed, organic juice company generated $10 million in sales. In 2015, the Coca-Cola Company took a 30% stake. Goldman Sachs also invested. During her time with the company, Beckman rose to be vice president of special projects. She discovered her passion for building products at the intersection of consumer health and business.
At the same time, she was working in the health and wellness space, she was struggling with immune issues. “I was getting sick more often than I should,” she stated. “I had low energy for someone who was only 21.” She became fascinated with the connection between the immune system and gut health.
Awareness is growing awareness about the association between food and the gut for increased immunity. Overall, annual healthcare expenditures for gastrointestinal disease total $136 billion, which is more than for heart disease ($113 billion), trauma ($103 billion), or mental health ($99 billion). About 100 trillion microorganisms live in your gut, protecting you from infection and helping you maintain a healthy immune system. They comprise more than 75% of the immune system. The global probiotics market is projected to reach $77 billion by 2025, according to Grand View Research.
In April of 2015, Beckman started a company, Nomva — a probiotic smoothie — with her friend and the daughter of Suja’s CEO. Despite having tech investor Peter Thiel and Zico founder Mark Rampolla as early investors, raising a Series A led by Evolution Media, and distribution through Ralph’s, Sprouts, Target, and Whole Foods, the pair closed the company at the end of 2017. “Some of the best learnings I’ve had so far came from this experience,” she reflected. “Having something that doesn’t work is usually more important than having something that does.”
Being resilient and having grit are defining traits of entrepreneurs. By October 2018, Beckman launched Nouri Life — probiotic capsules. The company differentiates itself by using clinically supported blends of plant-based omega oil with healthy bacteria, and a delayed-release capsule to optimize absorption. The supplement requires no refrigeration. “We discovered a novel combination of ingredients that helps us have a superior product,” she said.
Beckman raised a friend-and family-round but chose account receivable financing or factoring for her next round. Consumer package goods companies have dramatic swings in inventory. As a result, even successful companies can have cash-flow issues. Factoring means that a business sells its accounts receivable (invoices) to a third party (called a factor) to get its money quickly rather than waiting for the customer to pay directly. It provides a flexible funding strategy. Since you don’t incur debt, it’s not a loan. It’s not equity because you don’t give up a piece of your company. However, invoice factoring can provide the financing your company needs.
As a consumer packaged goods company, “we have dramatic surges in inventory,” she said. The company has applied for a small business loan and a line of credit. Though more costly than a loan, A/R financing has a faster approval process.
Factoring is particularly useful when your start-up or small business doesn’t qualify for traditional financing, when you need to supplement an equity raise, or when you need money faster than banks can deliver it. A factor’s application process is typically quicker and simpler than a bank’s. While factoring is more expensive than a bank loan, “the benefits of qualifying based on your customer’s creditworthiness, not yours, an easier application process, and speed of receiving money can outweigh its costs,” said Rachel Hersh, sales director of North America, Prestige Capital, a factoring company. It is essential that you understand the costs and compare the costs of factoring to those of traditional loans.
A trusted source — an investor and advisor — referred Beckman to Prestige. She also gained confidence in this type of financing because Hersh explained the process and fees well. “I felt we could pay them [Prestige] back,” said Beckman. “You’re not borrowing money from a factor and you don’t pay interest on the money,” said Hersh. “Instead, you sell your invoices at a discount to get cash. The factor then owns the invoices and gets paid when it collects from your customers.”
Beckman is not ruling out equity financing in the future. However, for now, COVID-19 is shaking up the availability of venture capital. She is a firm believer in the benefits of venture capitalists’ involvement. In addition to money, they provide advice and connections. However, right now, VCs are focused on supporting their portfolio companies, in general, moving more slowly, and are focusing on their core competencies.
VCs focused on the supplement sector may have an interest. It’s just not that likely right now. Consumers were already interested in preventive health prior to COVID-19, but BCG expects this to grow over the next six month. Preventive health spending is #3 of the top 10 categories to win consumer spending in the next six months. “This is a busy time for us,” said Beckman. “There is a connection between probiotics and respiratory health. This hasn’t gotten the attention it deserves.” There’s lots of consumer education to be done. Sales are ticking up and moving from retail at Whole Foods to Amazon and their website. This trend is likely to hold steady even after coronavirus is contained.
Are you taking advantage of the best financing options for your situation?