Commentary: Harnessing entrepreneurial investment

By Thomas Moffitt, President, and Ben Johnson, CFO, Commonwealth Dairy, Brattleboro The typical narrative of a bootstrapping entrepreneur goes something like this: A couple of folks with a good idea for a new web-based application start creating prototypes in a spare bedroom, maxing out credit cards and friends and family support until their venture gets big enough to require the trappings of a real business, like an office, marketing materials and sales team. Some initial success generates customers, that attracts VC funding or a partner company with cash, allowing for future growth.
That model has indisputably worked for some of the biggest business successes in recent history, particularly those in the social media, online commerce or creative economy spaces. Unfortunately, if you are trying to be a business innovator in one of the oldest sectors -- manufacturing -- a lot more bricks and mortar are involved. And that requires a heck of a lot more up front investment.
When we realized that the yogurt industry was ripe for some new thinking -- a focus on private label products, Greek yogurt, environmental sustainability and industry leading standards for safety and product quality -- innovation needed to be paired with a whole lot of STUFF. A factory. Processing equipment. Milk! And that's before we hired a single employee.
Both dads with families, going deep into personal debt wasn't an option. But we also didn't want to give up our idea to a partner company who could provide us with financial resources without any skin in the game. So we found a different way to do it. A lot of the lessons we learned apply to other companies that require more than a computer and a good idea.
1. Sell people on your vision
The number of experts one needs to start a business can be overwhelming: lawyers, business advisors, accountants and (in our case) people who had actually made yogurt before. One meeting with all of those experts in the downtown Boston law firm we were working with would have cost us thousands of dollars. Except that we had sold them on our vision, our potential for success and THEIR potential for future business with our company. At the outset, their counsel was free and we used it wisely.
2. Locate in an area hungry for economic development
Our original hope had been to do business in Massachusetts (hence the name "Commonwealth" Dairy) -- it was close to our homes, had the right logistics and market access and the western part of the state wanted business and had a strong dairy history. Surprisingly, the statewide economic development folks were less than enthusiastic in supporting our venture- the opportunity didn’t fit with what they were after at the time - BioTech. The situation couldn't have been more different in Vermont -- they knew our proposed business meant another buyer for their milk, more jobs and an addition to their already strong reputation for great agricultural products. Their support helped us identify a site (a brownfield, which was eligible for financial support when we developed it as a result), build relationships with farmers, and find the right employees.
3. Take advantage of tax credit programs
Most importantly, our relationship with the state assured that we maximized our ability to leverage tax credit programs. The availability of New Market Tax Credits drove our decision to locate in Brattleboro. We also got Community Development Block grants from both the federal and state government for investing in jobs. Vermont specific programs that encourage capital investment and job creation along with Department of Labor grants were also part of the mix.
4. Get creative
We always knew we wanted to operate a green business. We leveraged that for financial support too, getting incentives from Efficiency Vermont for equipment that would be more efficient -- allowing us to lower our energy costs as well.
This "package" of investments and support allowed us to approach and convince our eventual partner Ehrmann AG, a large family-owned and operated German company with a long history in yogurt production, to put dollars on the table. They just weren't our dollars. This initial experience also encouraged us to continue to look for ways to benefit from the credits and investment opportunities available for growing businesses -- something that has helped us as we expanded in Vermont and to the West Coast.