According to GlobalData, 137 private equity and venture financing deals were announced in the food service industry in the U.S. from June 2021-June 2022. These deals resulted in a total value of $2,724.2 million. In January 2022 alone, investors offered over $743 million, leading to an average of $61.9 million per deal.
Pretty remarkable numbers.
For those in the restaurant industry, the question that may be circling is, how do you know? How do you know when your restaurant is ready for an equity partner, and how do you choose the right one?
Different Types of Investors
There are three main types of investors. These include friends and family who may invest significant money in exchange for partial ownership. Though there have certainly been success stories in this arena, the old saying about never borrowing money from a family member is still repeated for a reason. If something goes south, so could your relationship.
Angel investors are another type of investor. These investors should offer some expertise in the industry and provide some guidance.
Venture capital firms invest in startups that they see potential. This investment should come with a wealth of resources, including networking connections, supply chain recommendations, and marketing support.
For those looking to expand, venture capital firms offer the experience and the connections that can reduce risks and maximize profits. Remember, however, that this is like a partnership—and a partnership with the right group can offer extensive benefits and long-term success. On the other hand, getting into business with the wrong group can lead to increased stress and few benefits.
What to Look for in an Investor
One of the main aspects you want to look for is a founder-friendly investor. These individuals and groups are active investors with the ultimate goal of maximizing your success. Unlike passive investors that only provide capital, these investors offer active guidance. They help founders build their companies and scale for growth to ensure success.
They identify weak areas and determine opportunities for improvement. They can guide the founder in hiring practices and use their knowledge to develop expansion plans. Conversely, they don’t take over and leave the founder in the dust. They work as a collaborative team, optimizing marketing, customer engagement, and guest retention.
These investors provide emerging concepts with years of experience, reducing the chances of errors that may be hard to recover from.
EMERGING FUND: Founders Helping Founders
General partners (GPs) of a venture fundraise and allocate investor capital while supporting the founders of the restaurants they invest in. These managers have “skin in the game,” investing their own money into the fund. They’re responsible for raising capital from investors or limited partners (LPs), performing due diligence, and finding the best investment opportunities. GPs monitor the performance of the portfolio and provide direct support to founders. They help restaurants make relevant industry connections by leveraging their network.
EMERGING FUND offers an unusual opportunity for restaurants. Our GPs are proven owners and investors of top restaurant, entertainment, and food & beverage technology companies. Together, these GPs are committing $11 million to Fund, including $7 million in new capital and $4 million in warehoused investments.
EMERGING FUND is led by founders in the restaurant and technology industries. As a strategic partner, our goal is to support founders to attain sustainable high growth by offering our value and expertise, not just capital, while earning outstanding returns for our investors. We accomplish this through our data-backed real estate expansion strategies that reduce risks, our nationwide supply chain sourcing with $15 billion in purchasing power, technology to attain high-quality labor, and more—a network developed over the last 25 years.
What are the different types of investors?
There are active investors and passive investors. Active investors become an integral part of a restaurant’s success, using their years of experience to help founders. Many different types of investors may fall into one of these categories. A few of these include angel investors, P2P lenders, personal investors, banks, and venture capitalists.
What should I look for when choosing an investor?
Expertise is one of the primary considerations. A restaurant investor with a proven track record instills faith and can help your business get through any rough spots and take it to the next level and beyond.
Connections in the industry are vital to success. These may revolve around the supply chain, technology, staff, or other never-ending aspects of restaurant operations. It’s also important to trust this person or group and have confidence in what they bring to the table.