Organic Processing Vo1.5 #5

ganizations to the point of forcing mistakes. Building a solid and profitable business model that does not depend on the convergence of many factors that are beyond your control (and regular cash infusions) may not be immediately “sexy,” but it establishes a solid foundation and allows you to retain control of your destiny. Raising too much money too early in a company’s development often results in giving up too much equity in your business.

Get Advice. Major financial transactions by any business can significantly affect the value that its owners receive, and successful management of the capital-raising process can mean the difference between a great outcome and a mediocre disappointment after years of hard work. For most entrepreneurs, their expertise and “value added” is based on business skills such as product development, marketing, sales and distribution. Financial structuring and negotiation are a specialized disciplines and it is unreasonable to expect every business leader to become an overnight expert in these matters. Furthermore, many times the opportunity cost of losing focus on the business while carrying on a transaction can be very costly and even undermine the financing itself. Just as with any other aspect of your business, you will benefit greatly by getting the best possible advice from your trusted sources and delegating the effort to someone with the expertise and capacity to deliver the best possible result.

Do what you can to avoid joining the long list of entrepreneurs who raised money without understanding the implications of crucial yet very complicated legal concepts such as “preferred stock participation,” “ antidilu-tion,” “option cost allocation,” “supermajority voting,” “clawbacks” and “ROFRs.” Before your head starts spinning, realize that most people don’t know what these terms mean unless they went to law school or frequently work with financing agreements. However, this “legal jargon” (which would take a textbook to explain properly) can surface when you least expect it and can greatly affect each stakeholder’s interest. For example, a multimillion dollar financing was recently scuttled at the last minute because the company did not anticipate early-on that the investor it selected expected to receive additional ownership in the company through a backdoor equity mechanism called “preferred stock participation.” In effect, that financing would have cost almost double the initial presumed price. To safeguard your negotiating position it is recommended that you reach out to attorneys, accountants, and other business leaders you know and trust to connect you with professional financial advisors that can help you improve your chances of completing a successful deal. This together with the proper preparation and organization can provide the funding partnerships you need to grow _{your business.}

Pedro Garcia is a managing director and a partner in the investment banking firm of Hadley Partners, Incorporated ( www.hadleypartners.com), where he specializes in capital raises and mergers and acquisitions within the food industry. He also serves on the board of directors of Frontier Natural

Products Co-op. He can be reached at Garcia@hadleypart-ners.com.

Ronan P. O’Brien is a partner with the law firm of Sey-farth Shaw LLP ( www.seyfarth.com), where he advises businesses and entrepreneurs on venture financings and mergers and acquisitions. He can be reached robrien@seyfarth.com.

Datebook

JANUARY

15-19 The Agriculture Course: An Intensive Study of the Origins and Future of Biodynamics, Chestnut Ridge, NY. Contact: The Pfeiffer Center, 845.352.5020 ext 20; info@pfeiffercenter.org; www.pfeiffer-center.org.

18-20 NASF T Winter Fancy Food Show, San Francisco, CA. Contact: National Association for the Specialty Food Trade, 212.482.6440; www.specialtyfood.com.

20-21 CCOF Educational Conference: Hot Topics in Organics, Pacific Grove, CA. Contact: California Certified Organic Farmers, 831.423.2263; ccof@ccof.org; www.ccof.org.

21-24 Eco-Farm Conference, Pacific Grove, CA. Contact: Ecological Farming Association, 831.763.2111; info@eco-farm.com; www.eco-farm.org/efc_09.

22-25 Guelph Organic Conference, Ontario, Canada. Contact: Organic Food Conferences Canada, 705.444.0923; organix@georgian.net; www.guelphorgan-icconf.ca.

26-29 USCC Annual Conference & Tradeshow, Houston, TX. Contact: US Composting Council, 631.737.4931; www.composting-council.org.

FEBRUARY

1-3 AAIE Ecological Pest Management Conference, Modesto, CA. Contact: Association of Applied IPM Ecologists, 559.907.4897; director@aaie.net; www.aaie.net.

3-4 CLFP Expo & Showcase of Processed Foods, Sacramento, CA. Contact: California League of Food Processors, (916) 640- 8150; www.clfp.com.

3-6 NGA Annual Convention & Supermarket Synergy Showcase, Las Vegas, NV. Contact: National Grocers Association, (703) 516-0700; www.nationalgrocers.org.

11-13 Scientific Conference on Organic Agriculture, Zürich, Switzerland. Contact: Research Institute of Organic Agriculture FiBL, www.wissenschaftstagung.de/ index_en.html.