The pressure of launching and operating a startup in a highly-competed environment compels OFS (Organic Food Stores) to rely on venture capitalists to obtain the startup funds and working capital upon which it will depend. The reasons for which this is the preferred option are that: (1) venture capitalists can provide the network and connections required to aid operations during the early days of operation; (2) the venture capitalists can provide the guidance and expertise required to stabilize performances, and; (3) there is often limited pressure to pay back the financial resources provided by the venture capitalists.
In total, the above strategy should help raise the initial $800,000 required to kick start operations, and the additional $2,000,000 that will be used for expansion for two years following the business’ launch. While the initial $800,000 will be used to acquire the primary license, install refrigerator shelves in stores, and the produce meant for sale, the additional $2,000,000 will be used for the establishment of a large supply chain network with the capacity to reach the additional cities to which the business shall have expanded.
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Obtaining the funds from venture capitalists will require researching about venture capitalists with interests in healthy eating and organic farming. Pitching to them will largely entail explaining to them how the business’ business model fits their needs and interests, and how their contributions toward the business’ growth can help counter some of the health problems brought about by unhealthy eating habits.
While the processes involved in seeking the support of venture capitalists are likely to be challenging, the other probable options are weighed down with disadvantages to which the business need not be exposed. For instance, I decided against the use of convertible debt because it would have required that I give up some form of control, the possibility being that I would have eventually had to alter some elements of the business plan just so to accommodate the investors’ interests. The other option was Friends and Family (FF), an option which would have had the convenience of limited pressure to pay back any borrowed money, but which could have had the disadvantage of limited diversity in leadership mainly because reliance on friends and family could have required that I get to depend on them for labor, or that they get to ratify decisions on how the business should run.
