Juice Bar Funding: Raise Money for Your Business

This article is a comprehensive guide to the juice bar funding process. We share the importance of understanding the funding process, the different sources of capital you can raise, and tips on structuring investment agreements. Additionally, there are juice bar funding sites referenced at the end for your own research purposes.

 

The United States Bureau of Labor Statistics reported 774,725 new businesses started by entrepreneurs in the financial year ending March 2019. Based on historical trends, it’s predicted that approximately 155,000 of those startups will fail within the first two years. 

This isn’t to paint you a bleak picture or deter you from your entrepreneurial dreams, it is rather to stress the importance of taking your startup process seriously by investing your time and energy into learning the most effective ways to achieve success.

The Importance of Understanding the Funding Process

Funding plays a big role in the success of new business endeavors. Lack of sufficient funding is one of the key reasons that these new businesses fail. It’s essential to not only understand how to approach potential investors to land funding but also how to create an optimal investment agreement for the new business to feel supported as they grow, rather than being depleted of their hard-earned profit simply to pay back investors or loans. 

We’ve put together this comprehensive funding guide for juice bar startups to give an in-depth explanation of the different types of funding sources, as well as key tips to remember, how to structure agreements, and where and how to pitch to potential investors. 

We want to see you succeed, and with this information being backed by our real experience in the business, as well as overseeing countless clients go through the funding process for their juice bar, we have a lot of insight to share.

By the end of this article, you’ll have more clarity over the avenues of funding available to you, as well as how to reach out to investors, and what to consider when structuring your agreements. Additionally, at the end is a list of helpful links to search for juice bar funding sources that are right for you.

 

Main Types of Juice Bar Funding

There is a myriad of capital-raising sources available to entrepreneurs. Know that there is no right or wrong way to receive juice bar funding – it’s more about which avenues are more advantageous and intelligent for your particular situation. Our advice is to explore as many options as you have available from this list, weighing the pros and cons and contingencies of each source.

 

1. Bootstrapping

Though this is not actually an outside juice bar funding source, it’s important to mention this term as it relates to startup business capital. Essentially, bootstrapping is self-funding. This is where you invest your own savings into the startup.

 

Pros: 

• You don’t need to give equity away.
• You don’t have any interest in repayments.
• You have full sovereignty over how the money is used.

Cons:

• Unless you have a lot of savings, it’s risky (and not recommended) to put all your savings into a startup.
• You usually won’t have enough of your own money, so this financial restraint may force you to make decisions that are ultimately detrimental to your execution and could be the reason for your failure.

 

2. Friends and Family

When raising money from your community of friends and family, you can do so by simply asking for a loan (which may or may not have any interest conditions), or by offering an investment agreement where they have partial equity in your business (more on equity conditions and what to know about equity later in the article).

 

Pros:

• You can be creative with how you use the money and repay agreement can often be more ‘casual’.
• Oftentimes, loans from families and friends might not have any interest repayments, so it’s cheaper than other loan types.
• Taking small loans from many different friends and family could be more accessible to get the larger amount you need.

Cons:

• Mixing professional and personal relationships isn’t always easy, and can put a strain on family ties or friendships.
• If those ‘casual’ agreements can be too casual, things can be confusing and not clear for those who have invested or loaned you the money. This makes the whole process more complex and risky when challenges arise.

 

 

3. Traditional Bank Loans

The most traditional financing sources for small businesses are business loans, using credit cards, and lines of credit. That’s not to say as that’s the most ideal way to go for juice bar funding – again, this is unique to your circumstance and preferences – though many people will still choose this route.

Documents you’ll need/general requirements to secure bank loans:

• Balance Sheets
• Tax Returns
• Personal and Professional References
• Need Good Credit Scores
• Generally, some kind of collateral, like housing/other property you own.

 

Pros:

• If you have all the required documents and meet the conditions, you can get the full amount that you need for funding.
• You will not need to give up equity in your business.

Cons:

• Without the right documentation, or credit scores, etc, you can be rejected.
• Interest on repayments means that you’re still giving away part of your profit as you pay back the loan, and this might go on for years.
• More risk in losing the collateral that you need to offer if the repayments can’t be made (like losing your car or house).
• Potential stress on cash flow because of monthly loan payments.

 

 

4. Crowdfunding

As one of the more recent sources of financing business endeavors, crowdfunding offers a creative way for startup entrepreneurs to gather the funds that they need. Crowdfunding can also be described as taking contributions, pre-orders, or investments from many different people. 

The process is as follows:

An entrepreneur describes the business on the selected platform (suggested platforms at the end of the article), and they will mention the goals of the business, plans for profits, what funding amount is needed, and how the funds will be used. Consumers can then give money to the business if they are interested in the idea, making it either a donation or more commonly, it is a pre-purchase of a product that the startup will offer upon opening. 

 

Pros:

• Usually, not many contingencies and equity isn’t being taken.
• No need to collateralize a loan -less risk for losing any property.
• It can create community and potential customers before the business even opens.
• You have creative freedom with the pre-ordered product that you offer to funders (free juices, health products, etc).

Cons:

• Not generally an avenue that can raise the entire amount for the business (but it’s not impossible).
• They need to have the ability to provide large quantities of the pre-ordered goods that the funders will receive from their investment.

 

Crowdfunding Sources:

Kickstarter.com

indiegogo.com

https://www.crowdfunder.com/rockethub

https://www.dreamfunded.com/

https://www.onevest.com/

https://www.gofundme.com/

 

 

Additional: Peer-To-Peer

http://prosper.com/ 

http://lendingclub.com/

 

5. Angel Investors

An angel investor is an accredited individual with a net worth of more than $1 million, or an annual income of $200,000 or more. With their surplus of cash available to invest, they generally operate by investing in startups that they’re interested in, either alone or working in networks of other angel investors. 

Did you know that angel investors were actually responsible for helping to fund some of the most successful startups in the world? Namely, Google, Alibaba, and Yahoo.

 

Pros:

• They can help you by providing a substantial amount of capital to get you started.
• Sometimes, if they are part of networks that deal with specific industries or businesses, they can offer business advice and mentorship.
• They can also be less hands-on, leaving you to the work and not being interested to have a big say in how the company is run (contrasted to venture capitalists – see below).

Cons:

• Investors would expect up to 49% equity or more in your company in terms of investment.
• They generally invest lesser amounts than venture capitalists.
• They operate very professionally, so if you aren’t very organized with a solid pitch and business plan, they won’t consider a new startup.

 

Angel Sources:

https://www.angelinvestmentnetwork.us/

https://www.fundingpost.com/

http://usangelinvestors.com/

https://www.funded.com/

 

 

6. Venture Capital Funds

These are investors that use professionally managed funds to invest in companies where they see the up-and-coming potential. Usually, equity is a term of investment, and investors stay on until there is an acquisition or IPO. A point of difference between venture capitalists and angel investors is that venture capitalists prefer companies that are more established and already seeing the positive financial flow. Angel investors, in contrast, often invest in early-stage startups more readily. 

 

Pros:

• They can often fund the entire amount that you are looking to raise.
• Venture capitalists can provide mentorship and business expertise by assessing and evaluating how your company is growing. 

Cons:

• Many venture capitalists may want to be hands-on and have a big say in your operations, which can limit your decision-making and cause potential rifts.
• They often look to recover their initial investment within 2-5 years, and if your business is set for a slower growth rate, they won’t choose to invest.
• Venture capital firms generally have larger minimum investments as opposed to angel investors, so often they won’t consider a single storefront for a juice bar startup. 

 

 

7. Business Incubators and Accelerators

These are suited to early-stage businesses. Incubator and accelerator programs can be found in nearly every major city. Incubators are programs that nurture businesses through tools, training, and networking. Accelerators are done in a similar way, though through a much faster process (hence, the name, ‘accelerator’). 

Where incubators can last years, accelerators are generally 4-8 months in from concept to opening. Venture capitalists and other investors can be accessed through these programs, and the accelerators and incubators often assist the businesses with pitching to the investors to gain funding.

 

Pros:

• Mentors, business advisors, tools, and other experts can all be accessed through both programs, creating a network of highly skilled people to help you as you open. 
• Assist with gaining funding through access to venture capitalists who have relationships with the accelerator and incubator programs. 
• With accelerators, the short time frame of 4-8 months to opening can be preferable for businesses looking to become operational soon. 

Cons:

• A business will enter an agreement to give equity to the accelerators and incubators.
• Top programs are selective and hard to enter – not everyone can just apply and be accepted into a program.
• Working with incubators is less targeted on the individual company, as many startups will be part of the program, so there is not a priority for one company to open and begin operations fast. This means it could take up to a few years to get up and running with this less focused approach. 

 

 

8. Microfinance

This is where a startup has access to financial services that otherwise would be unattainable (such as in the case of not getting approved for a loan). Non-Banking Financial Corporations or NBFCs, are corporations that offer banking services in general without being a legally defined bank. These options are accessible for people who have poor credit, or no collateral to get a loan from a bank. 

 

Pros:

• Great for entrepreneurs who have been rejected from traditional bank loaning, or who prefer not to go through banks.
• With access to multiple micro-investors, you can raise the entire amount you need.

Cons:

• Microfinancing means smaller loans, which would mean having to get funding from multiple sources. That creates a more complex process of handling multiple investors.

 

Microfinance Sources:

https://www.seedinvest.com

https://fundopolis.com/

https://www.startengine.com/

 

 

Understanding Loans and Structuring Investment Agreements

As mentioned throughout the list, for many of the juice bar funding sources that were mentioned, investors will want equity in your company. The fact that there’s no need for you to collateralize a loan with any property plays into this, and it is also a way for investors to benefit from fronting up to hundreds of thousands of dollars. 

There are some key things to know when entering investment agreements, so take note of the following so that you can craft the most supportive agreement for your situation and preferences in the role you want this additional party to play in your business. 

 

Convertible Notes in Juice Bar Funding Agreements

This denotes flexibility in an agreement with an investor. It could be a scenario where for the first two years there is a certain percentage agreed upon that the business pays the investor, and after assessing how the business is performing after those two years, the investor can decide to convert that into equity, or if deciding not to, the business would payout whatever investment it was that was given. 

 

For example: 

An investor gave $50,000 to the startup, and the business paid the investor back 15% per year for two years. At the end of those two years the investor assesses that the business is going well and decides to turn the $50,000 into equity to continue along with the investment. If the investor decided against equity, that would mean that the business owner would pay back the $50,000 along whatever terms that the parties decide. 

 

Equity Considerations

When raising funds from investors, generally at a minimum it will be an agreement for about 40%. If less, great. Though we recommend that you don’t give away more than 49% of equity.

You could have one investor receive the entire 49% in equity if they are the only party funding your business, or if you have two investors, they might each get 24.5% equity, the total still being the 49% equity that you give away.

 You can continue like that with multiple investors lending smaller amounts, but as we mentioned earlier, it’s always better to have fewer investors to have to communicate with and maintain relationships with. 

A critical consideration when dealing with equity is that there is a big difference between finances investing in the location, or the parent company itself. Your brand owns the intellectual property, and the storefront is an extension of that brand. If the agreement is for equity in your entire company, then if you were to open multiple storefronts in the future, the investor will then own that equity for all locations. 

We suggest structuring the investment to be equity in the location and stipulate that clearly in the agreement so that when you want to open additional locations, you have equity in those locations to continue to expand your business and you can reap the rewards of the profit that the additional location/s makes. 

 

Handing Relationships with Investors

Communication is of the utmost importance when it comes to the relationships you have with your investors. We’re talking about strong, clear communication as you craft the agreement. There needs to be full transparency in what the relationship will look like in terms of the role that the investor will play in your business management. 

Imagine an investor coming into your juice bar, noticing some things about the store and operations, and then having to discuss for the next few hours or days what they don’t like and the changes that they want to make – essentially telling you how to run your business. 

This is a difficult way to manage your business, having to react to what’s being shared, and not knowing when they will come in to offer their two cents. You simply won’t have time to work on your business and manage what you need to in order to continue to grow, while your energy is spent on the back-and-forth between the investor and yourself. Throw in the mix, multiple investors and it can get even more complex with conflicting ideas. 

A way to prevent this from sapping your energy and is to structure the agreement so that there is clarity over when and how the communication will take place between both parties. We recommend quarterly check-ins and payouts where conversations can be had around how goals are being met and what the financials are looking like. Have this all outlined in the investor agreement from the very beginning. 

How to Find and Approach Investors for Juice Bar Funding

The list below is our advice on how to best find and pitch to investors so that you create the best agreement and structure that works for your unique situation, as well as enhance your success to actually land investment opportunities.

 

• Talk to as many people who you feel are qualified in this area as possible. Other entrepreneurs who have gained investments or loans, what has worked for them, and who they may know in their network. 

 

• Ask around in the local community first, before seeking out online investors. There may be many philanthropic people who want to see the local community to evolve and flourish and would invest in a business that supports that.

 

• Consider a pitch meeting with multiple potential investors, rather than single meetings. Create a ‘discovery’ pitch meeting with, say, 10 interested investors, where you have 5 spots open for multiple investors. This can create some urgency and demand for the investors to take action and be a part of your startup, if they see that they are competing with others. Not only that, but you’ll also save time and energy doing a singular pitch, rather than holding multiple meetings.

 

• Create an experience for investors to get excited about your business. An idea could be a tasting party, if you have already started developing your menu. 

 

• Securing investments is essentially a sales process. If you think of it as selling, you’ll approach the pitch in a more strategic way. Consider who the investors are and what is most important to them – do your research on the investors. That way, you can speak to exactly what they are looking for. 

 

• If the investor is interested purely for the financial return (most will be), then speak about that in the pitch. Frame the discussion to point to how they will receive the benefit that they desire. If they’re interested in enhancing the community, then speak to the community-building opportunities that your business will create. 

 

• Always in any pitch, answer concerns before they arise. Think about all the questions and concerns that investors might have – big or small – and prepare your pitch in a way that answers them already.

 

We Can Help

There are key components you need to have ready in order to present to potential investors or lenders. At the bare minimum, you’ll need a business plan. If you haven’t yet created a business plan, this is one of our services we offer our clients – creating a unique and comprehensive juice bar business plan. 

Once you’ve got your business plan, to support your pitch to investors, developing the following supporting materials will give your company a competitive advantage in the investment procurement process.

• Menu
• Logo
• Branding Guides
• Pitch Deck (shorter, visual business plan)

The more real your business feels to prospective investors, the less energy they will need to put into imagining what the end result of your company will look and feel like. If done well, this will increase your chances of acquiring an investment.

We can assist with developing not only business plans, but also all of those elements mentioned above, as well as a service of sitting in on pitch meetings to help communicate your business concept in a professional, direct and clear way.

If you’re interested to discuss any of these services we offer, fill out the contact form at the end of this article.

The Bottom Line: People Invest in People

This is one of the key takeaways to remember when you’re in the phase of securing juice bar funding. People invest in people, not companies. Present yourself as someone who is going to give investors confidence in your capacity to run the business. 

This means having a professional manner of approaching the investors, delivering clear and refined information (like a great business plan), and framing the pitch to suit the investor/s desires. 

One last tip – resilience is key for this whole process. If you don’t ask, how can you expect to receive? The worst that can happen is that a potential investor says ‘no’, and since there are so many different avenues of securing investment out there, you have plenty of opportunities to try again!

Also remember, that investors are looking for opportunities to put their money to work. No one is doing you a favor by investing in your business. You are helping them make more money, on money that would otherwise may end up sitting dormant in a low-interest bank account. Keep this alive in your mindset so that you approach the entire process as it is – a mutually beneficial business relationship. 

 

Also! We have a YouTube video on how to structure investment agreements – watch below.

References

https://www.bls.gov/bdm/us_age_naics_00_table5.txt

https://www.profitbooks.net/funding-options-to-raise-startup-capital-for-your-business/

https://blog.mycorporation.com/2017/12/ready-to-expand-your-business-here-are-6-ways-to-raise-capital/