Five Lessons Learned from the Ample Hills $8 Million Raise

Board meetings at @amplehills are dangerous.

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When you're Ample Hills Creamery, the #1 rated ice cream shop in the country you can pretty much throw everything you've been told about fundraising out the window.  Nothing seems to apply--you're not a tech company, you bootstrapped your way to millions in revenues before taking on capital, and you sell mostly through brick and mortar.  Yet, the lessons learned from their $8mm round of funding announced this week are still widely applicable to every startup--particularly food startups and those in four walls retail that struggle through the traditional venture process.

Here's what I think everyone involved learned in this process.

1) Find backers who love you for what you are, even if you're a square peg.

When Ample Hills first raised $4 million in 2015, people asked if it was a seed round.  Technically, that's what we called it, but it didn't seem entirely appropriate given that it had already been up and running for years and had millions in revenue.  When we raised that first round, we needed to figure out who was even open to the idea of backing an ice cream shop with national and global ambition.  We hosted meeting after meeting, stuffing as many investors in the room as we good in groups, invited via waves of mass e-mails to anyone I thought might be interested.  What we found is that while most of the people turned down the invite, most of the people who showed up invested.  Ample Hills wasn't a deal for everyone, but for those that were open to it, they loved the company.

Did that seed make this round our Series A?  Would we pitch Series A players?  I pushed that we should just say what it is--an $8 million raise to grow the company.  Who cares what we called it?  In fact, I thought we should have named our rounds after ice cream flavors but that was quickly shot down by the lawyers.  

The truth is, it doesn't matter--that you can very easily get caught up in positioning, but at the end of the day, an investor who really wants to invest is going to invest.  It's too easy to think that if you tilt the pitch just a little one way or the other, that's going to make the difference, but that's Monday morning quarterbacking.  Rounds aren't close--they either happen or they don't, and an investor on the fence is a pass.  Investors who want to be in will find a way to come in and will structure an economic deal that makes sense, no matter what they call it.

2) When you stray from traditional tech investors, leave yourself twice as much time, because they're twice as unpredictable.  

Tech VC is a pretty mature marketplace--the players are known, the process is established, and so while relationship building might take time, usually you can estimate how long a deal will take with some accuracy (besides, of course, that it takes longer than the founder wants). AH kicked off this raise based on some inbound conversations with high net worth individuals back in the first quarter of this year--over nine months ago.  These types of folks, who may or may not have family offices that they work with, range in difficulty to work with.  Sometimes, the person whose money it is could just say yes, and points to a person to make it happen.  Other times, they hand it off to a team that could take months to do their work.  You just don't know.

In AH's case, ultimately, the person we started talking with didn't actually wind up participating, but still remains a valuable contact and potentially a key partner for the future.  However, someone they introduced the company to wound up a writing seven figure check on a quick turnaround.  Point being, if you're working with family offices and high net worth folks, leave yourself plenty of time.  Investing in you isn't always their immediate priority, and they're used to dealing with people they know a lot better than the typical VC knows a founder when they pull the trigger.

3) Find a flexible lead.

One of the best things a lead can be, especially when you've got a company that doesn't exactly look like every other company, is flexible.  Mike Murphy over at Rosecliff was actually one of the last people Brian and Jackie at Ample Hills spoke to in this process--but he said exactly what any founder would want to hear.  He wanted to be an investor and was willing to fit into the round any way he could.  He didn't come in asking for some crazy ownership or with lots of caveats about minimum check size, etc.  As it turned out, we were oversubscribed with a bunch of individuals and smaller funds that wanted to participate but wouldn't lead, and the round the founders liked the most was one where everyone got to participate.  What was needed was for someone to set the price and to be flexible enough to allow these strategic and helpful new investors to participate.  That was in stark contrast to other folks the company spoke to who wanted to eat up the whole round--so, in the end, he won out by being the most reasonable to work with in addition to all of his great experience investing in the space. 

There's really no better way to win around than to make the founders feel the most comfortable working out a transaction with you.

4) Don't be afraid to wait for the deal you're happy with.  

Ice cream has gotten to be a pretty hot space, ironically, for high profile investors to get into lately.  Sometimes, you run into big name investors who have great potential value as a strategic investor, but they want to get paid extra for their brand's value in the form of equity or lower valuations. 

Ample Hills has been offered these deals and turned them down.

Other times, you might meet a great investor you like a lot, but who isn't as familiar with your space.  They may want a lower valuation as a kind of risk premium for investing in you.  That happened with Ample--they found an investor who spent most of their time in adjacent spaces but didn't quite have the same risk tolerance to participate in a vision that included a big bet on a particular strategy.  It was tough, but the company felt like it could do better economically--which was pretty stressful given how long the process was taking. 

It turns out the right investor and the right deal was worth waiting for as we got a fair price and a great lead that believes in the company.  I see so many retail and CPG deals that get hamstrung by bad investment deals they felt forced to take that only limit them later on.  Of course, a key to this strategy was knowing that there was a critical mass of insiders who would have bought the company another 6-9 months if needed, so we knew the company wasn't going anywhere.

5) Give all of your existing investors homework.

We wound up with about two dozen investors in the first round of Ample Hills, and we had a bunch of those people pitch in to help with the second.  Closing this round was a real team effort. 

Taylor Greene from LHV was the first to bring up Mike at Rosecliff as a potential investor.  Adam Struck brought on significant additional capital from his network.  I introduced the company to Bullish as well as the Allana Group who, amazingly enough, cold e-mailed me out of the blue from a Bloomberg article.  (Sometimes, foreign strangers offering business deals aren't spam after all!). 

Also, Brooklyn Bridge Ventures LPs contributed a big chunk of the round as co-investors, adding to their participation in nearly 40% of the firm's deals.  One investor, Morgan Johnson of Nucleus, wound up spending so much time helping to coordinate negotiations with some of the potential new investors as well as bringing new capital to the table, that he built up a lot of trust from Brian and Jackie.  This led to him actually joining the company as President.  

While some companies might feel that having so many investors on the cap table creates a lot of people to manage, I can easily say that without almost every last person on this capital, we wouldn't have been able to close this deal.  I can't say enough about putting your investors to work with specific homework.

We're excited about the future of Ample Hills, our new factory opening soon and a lot of great deals in the works for expansion and creative collaborations like their fan favorite Star Wars themed ice cream.