SC&H Group Blog: "Expertise Beyond the Numbers"

Cooking Up Capital with Terra’s Kitchen

Many startups begin – and end – with a great idea. Baltimore-based startup, Terra’s Kitchen, recognized in its early stages of development that a deliberate capital raise was critical to its growth and success. The company recently approached SC&H Capital to serve as its strategic partner as it lays the groundwork for an aggressive expansion plan.

In just over a year of operations, Terra’s Kitchen has quickly become a household name in the meal delivery industry. Taking on billion-dollar competitors like HelloFresh and Blue Apron, Terra’s Kitchen allows customers to subscribe to weekly or monthly deliveries, with refrigerated boxes or “vessels” that come packed with everything needed to prepare meals in half an hour or less. The company is averaging about 30 percent growth month-to-month, with no plans of slowing down.

“Raising capital isn’t for the meek. Investors painstakingly review and criticize every aspect of the business before committing funds,” said Kevin O’Sullivan, Principal, SC&H Capital. “A CEO needs to prepare, ask the right questions, and set realistic expectations for  potential investors. We’ve worked closely with Terra’s Kitchen to check all of these boxes.”

At the onset of the engagement, Terra’s Kitchen asked SC&H Capital a question, one that many rising startups surprisingly fail to ask: “As an investment banker, what do you look for in a company planning a capital raise?”

The answer: SC&H Capital thoroughly examines a company’s ability to raise money in the public and private markets and its potential valuation using several key criteria, including a successful track record, differentiation in a crowded market, and a drive for continued improvement.

Using Terra’s Kitchen as the example, here are three main “ingredients” of startup success:

  1. Start with a track record. Does the company’s leadership have a track record of building successful teams and profitable companies?
    This is not Terra’s Kitchen’s leadership teams’ first food industry endeavor. Previously, Michael McDevitt, CEO of Terra’s Kitchen, served as CEO of Medifast, Inc. Under McDevitt’s leadership, Medifast was named the “#1 Small Company in America” by Forbes Magazine, due in part to the company’s tremendous 120% year-over-year earnings growth. McDevitt brought his entire leadership team from Medifast to Terra’s Kitchen.
  2. Mix in market differentiation. In a crowded marketplace, does the company stand out enough and offer something new?
    Terra’s Kitchen is revolutionizing its industry by using high-tech delivery methods. Its refrigerated delivery vessels keep ingredients fresh, including chopped fruit and vegetables, which the competition simply does not have. Often these fruits and vegetables are received at your door steps three days more fresh than fruit and produce offered in the highest end grocers and markets. The vessels are also reusable.
  3. Add a drive to improve. Does the company’s leadership accept criticism in an effort to better their product or service for their customer?

Terra’s Kitchen is bolstering its marketing efforts and focusing on customer feedback in order to be the only meal delivery customers want. Accepting criticism gracefully has led to rapidly expanding product lines, including ready-to-eat snacks, family friendly options, and a new mobile app.

A successful capital raise also depends on a company’s ability to choose the right advisors.

SC&H Capital is an investment banking and advisory firm providing merger and acquisition, employee stock ownership plan (ESOP), valuation, and capital raise advisory services. The team works with middle market and growth companies throughout the entire business lifecycle – often, years in advance of a merger, acquisition, or buyout. Its clients receive pertinent, uncompromised advice on liquidity options that result in deal execution excellence.

SC&H Capital is thrilled to be a trusted advisor to the Terra’s Kitchen team and look forward to what they “cook up” next.

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