“Never waste a good crisis. It forces you and your team to face reality about what is and isn’t working. If you are successful in doing so, it is what makes you ready for the next step ahead.” – MINA STIERNBLAD, CFO INSPIRAFARMS
“In the beginning of 2019, the future looked great for us. We had a strong pipeline, big clients and were in advanced conversations with a multinational to become the lead investor of our Series B. And then, the perfect storm hit us. Both the lead investor pulled out at the last moment and one of our biggest clients went into a payment default” After a nine-month roller-coaster period, we now rejoice with InspiraFarms’ CFO Mina Stiernblad to look back at an intense sequence of events, but with a happy ending.
As a shareholder of multiple young and disruptive impact scale ups, we often see companies struggling with similar growing pains. The more we share, the more we hope to spread the learnings. In the case of InspiraFarms, who offers cooling and processing facilities to agribusinesses and smallholder famers in developing regions, they were confronted a sudden cash crunch and some very tough decision. Ultimately, they succeeded to raise €3.1m of growth capital as well as a €1.2m grant. Here’s what Mina had to say on their lessons learned.
1. Re-evaluate your product-market fit. It is both easy and understanding to get carried away with enthusiasm about your own business offering. But are you really sure your product is well enough positioned in the markets where you are active in? Mina: “We aimed constantly to offer the best, high spec, products to our clients in order to improve the standard of post-harvest cooling and processing. However, we got frequent feedback from clients that we needed to offer a cheaper and less complicated version of our product. We ignored this feedback for too long. When we eventually did change of our course, lowered our specs so we could be more competitive, we immediately saw sales growing and gross margin increasing, giving us enough cash to get through a difficult phase.”
2. Be bold by remaining lean Early funding rounds are often utilised to expand the team, to release some of the pressure on the pressured team. However, too much work with too little time is a fact of life for a startup or scaleup and it is easy to loose sight of which hiring are really crucial and which simply aren’t. Mina: “Within less than 12 months we grew strongly along multiple geographies. Everywhere we came, we saw huge business opportunities. In the end, we had been spreading ourselves too wide and too thin. We had hired too many people before we were ready to actually scale. After the bridge round in 2019 we restructured our HR base and to first focus on our core market, East Africa.”
3. Dare to face the brutal facts There is no way to deal with a crisis if you are unable to foster a culture in which your team voices red flags early on. Only by having the difficult conversations will you be able to turn things for the better. Mina: “We were for a long time on a ‘high’. Funding was secured, big players were interested to bring the company forward, clients were lined up. It all looked very promising. There were of course some concerns – the wide spread of the team, lack of sufficient customer after sales support and the lack of the broader product catalogue. But pointing out these sore spots doesn’t seem urgent when you’re on a roll. Only when we were hit with reality did we address these issues. During this whole period, working together with a strong passionate team is essential to overcome challenges and solving problems. – Your company’s value is equal to the sum of the problem you solve”.
4. Get yourself a sparring partner. In challenging times, you will need to every now and then take a step back, let off some steam, or, be given a mirror (ouch!). Do not underestimate the power of somebody you can confide in when the heat is on and invest in having such a relationship outside the structured corporate governance. Mina: “The one-on-one talks I had with my investors were fundamental to stay motivated and during these difficult times. I have experienced the relationships with all stakeholders and the support they gave through these extreme times as the fuel to keep going and push for the right ending”
5. Do not overpromise and underdeliver. We often see that entrepreneurs can be rather bullish in their projected growth. Understandable, if you want to keep their stakeholders eager and remain positive about the company. However, the risk is that if you are consistently over promising and underdelivering, it is going to break trust and make stakeholders wonder whether management is at all realistic about building this bold new business. Mina: “We were constantly aiming for the stars, without asking ourselves the question: are we not taking too many risks, banking on one big (but promising) investor and too few number clients?”
While the nine-month period was full of stressful moments, the crisis forced them to turn the company around, make it more efficient with a better product market fit. They now find themselves in a far stronger position: their cheaper and less complicated version of their product better suits market demand, their restructured HR base focuses on their core market, their improved strategy focuses more on smaller, local clients, supported by client to client recommendations and they have reduced their cost base.
As a shareholder to this company during these difficult times, we cannot emphasize how proud we are to see how InspiraFarms managed to raise €3.1m of capital (unlocking furthermore an additional €1.2m grant from the Shell Foundatinon) to fight food loss and increase market access for small holder farmers. What’s next?!
“I want to thank Pymwymic for the role you played in one of the most turbulent times in InspiraFarms’ history. Your support has contributed to create a final push and helped us successfully close this round.” – MINA STIERNBLAD, CFO INSPIRAFARMS