When Adam Hamilton co-founded Nuttin Ordinary, now Shires Naturals, in 2013, neither he nor his partner Joshua Velasquez knew the ins-and-outs of attracting investors or building networks of advisors. But Hamilton learned quickly that if the company was going to grow, it needed help.
Shire’s Naturals in Peterborough is New England’s first 100% plant-based cheese company using cashews that are naturally fermented. After starting in a 750-square-foot lab in Velasquez’s parents’ basement, the company moved to a new fermentation facility with the help of angel investors in 2019.
Getting financing is critical for many small startups to succeed, but knowing how to find and approach potential investors takes time and skill. Whether its investment from state funds or angel funding, founders need to show they have skin in the game and have a solid business plan.
“I wasn’t raised with an understanding about how investing works. I didn’t know you could just go to someone else for money. I didn’t know that was a thing,” Hamilton says, adding that when the idea for the business originally came up his father taught him that finding investors
was critical.
Keeping his day job at a bank, Hamilton and his business partner started their company one step at a time. The first step toward financing the company, he says, was reaching out to family for financial support to buy equipment. “We aren’t independently wealthy, so the question was how are we going to get the equipment we needed?” he says.
Amy Bassett, district director for the U.S. Smal Business Administration, says stories like Hamiliton’s are not uncommon. “Regularly people have to bootstrap,” she says, adding that this can be appealing later for lenders and equity funders. “From a debt and investment standpoint you want to know that someone is showing they have skin in the game.”
After the business was featured in a magazine article in 2016, a local angel investor showed up at Hamilton’s door. “At first, I didn’t know if we believed him, but he became one of our biggest supporters,” he says.
Understanding the Funding Landscape
After the partners became committed to Shires full time, they began looking for ways to raise more capital and network. “After we started to understand the landscape in New Hampshire we couldn’t find a central place to go for investors,” Hamilton says. “Over the years we’ve learned the importance of building relationships with influential organizations in the area such as Hannah Grimes, and many others like Naturally New England, a networking group concentrated on package goods and a New England forager for Whole Foods.”
Hamilton advises, “Start building relationships with people long before you need them.”
Alison Chisolm, a consultant for the Hannah Grimes Center for Entrepreneurship in Keene who handles programing related to major grant funders, says the organization has various ways of connecting startups and small businesses in the Monadnock Region to needed capital. One way is through direct grants like the Community Development Block Grant that help low-and-moderate-income small business owners purchase equipment.
Another way is through the Micro Enterprise Program administered by the U.S. Department of Housing and Urban Development (HUD) at the state level through the Community Development Finance Authority (CDFA).
“During the last program year, Hannah Grimes deployed $100,000 in direct grants to startups and early-stage small businesses in region,” Chisolm says, adding that a second layer of capital comes through lending. “We have a revolving loan fund operated in partnership with the Regional Economic Development Center that provides loans to startup businesses unable to acquire traditional bank fund revenue.”
On the equity lending side, Hannah Grimes offers a program called PitchFork Growth where small businesses and startups pitch their ideas and needs to the community. “Some of the audience at these events may be local investors and we’ve seen local businesses acquire equity funding this way,” she says. “We’re trying to create pipelines for local investors.”
The Securities and Exchange Commission (SEC) allows non-accredited investors to invest in small businesses through equity crowdfunding, which is another way Shires raised investment dollars. The SEC defines non-accredited investors as those who make less than $200,000 annually (or $300,000 with a spouse) or have a net worth of less than $1 million, excluding their primary residence.
Businesses can raise money through online crowdfunding through an SEC-registered intermediary (either a broker-dealer or a funding portal). The SEC allows companies to raise up to $5 million in a 12-month period through equity crowdfunding offerings.
Hamilton says Shires raised $250,000 through equity crowd sourced investments. “This brought in much needed cash,” he says, adding that over the years Shires has also used several accredited angel investors who invest their own money in a startup or early-stage business in exchange for equity. “While all angels are different, an angel might say, ‘I have X amount this year,’ but they’re typically not going to want to invest each year in a row,” Hamilton says.
Investment Challenges in NH
One challenge for small businesses and startups in NH is the finite pool of money. Another challenge, says Kyle York, who founded the tech-driven venture capital and advisory firm York IE in 2019, is that investor dollars are drawn toward Boston. “There’s a talent pool in Boston and the suburbs,” he says. “Think of the parallel between San Francisco and Silicon Valley. But in the New England states, which are small and close together, this happens as well.”
Startups seeking investment need to keep in mind that angel investors are often looking for a high return on investment, says Elizabeth Hitchcock, principle of the Orbit Group, a venture capital firm in Manchester. Exactly what investors are looking for, she says, depends on the industry.
Hitchcock was the first head of sales and marketing at Dyn, a company started by her husband Jeremy in 2002 that was bought by Oracle in 2017. “These angel investors would be looking for someplace that might already have some annual reoccurring revenue to show proof of concept,” she says. “On the other hand, someone that was looking to invest in a small business might do a loan with a higher interest rate.”
Hitchcock’s most recent project is the Millwork Fund, a NH-based fund of 40 NH investors that invest in early-stage technology companies. “We definitely found ourselves looking for 10% ROI companies,” she says. “Some of our investments include places like Datanomics and College Pulse.”
Daniel Cohen, founder of Cohen Investment Advisors in Bedford, says most of his clients who need capital for their new or established business choose bank financing if they can. “It could also be as simple as borrowing from a retirement account or liquidating stocks,” he says, adding that going with outside investors means giving up part of the ownership of the company. “Ideally people should try to retain 100% if they’re able to raise the funds they need.”
Chisolm says there is no standard when it comes to expected return on investment, but that this varies by industry, the stage of the business, and the amount of investment being made. “The bottom line is we try to have whole array of funding sources including crowd funding,” she says. “For businesses looking for equity funding they have to be ready for investment. Not all are going to have an ROI in a timeline an investor might want.”
Finding Others Who Share Your Values
Chisolm says one important dimension of attracting investors and creating a successful business is establishing professional and social networks.
Over the years, Hamilton and his partner have weathered a lot of ups-and-downs but they’ve established a network of strong financial advisors and good friends, particularly people with expertise in natural food products. “These are folks who understand our long-term vision and share our values,” he says. “They’re going to take you further because ultimately the check isn’t the most important thing.”
A big inspiration for starting Shires, Hamilton says, was the story of Gary Hirshberg who co-founded Stonyfield Farm organic yogurt in 1983 in Wilton. “That story was a big inspiration for why we believed we could do this in New Hampshire rather than Boulder, Colorado, or somewhere else,” Hamilton says. “[Hirshberg] raised money all from folks in state and we thought that was a thing we could do as well.”
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