NCN III Fall 2008 Investor Meeting
November 12-13, 2008
The St. Regis, San Francisco

What a difference a few months makes. At the NCN II Spring Investor Meeting in New York last April, few could have imagined the scale of the economic debacle about to unfold globally. Fortunately, with 60 Investors attending, NCN III showed no signs of cooling investment interest in the nutrition industry. If anything, with debt financing and credit options diminished, more businesses than ever are seeking other forms of backing. Sensibly, this means greater choice and more opportunities for Investors. The nutrition industry is also fortunate in having a sophisticated consumer base which so far is proving that, despite economic pressures, health, nutrition and preventive health remain a priority for their households.

Clear skies shone over The St. Regis hotel in San Francisco, where Investors gathered to review 22 Presenting Companies and their natural product business plans at the Nutrition Capital Network Fall 2008 Investor Meeting in November. Companies were selected by the NCN Selection Committee from a pool of 84 qualified applicants and included:

2 natural/organic personal care companies
2 baby food companies
3 beverage companies
8 snack, bar and food brands
3 representatives from the dietary supplement segment
3 raw material companies (ocean fish farm, buffalo meat provider and snack brand, nutritional oils) and an independent retailer.

In terms of scale, the largest company had $32 million in revenues; with the majority in the $3-10 million sales range. Also presenting were 6 early-stage companies, but virtually all presenters showed recent growth well into the double digits.

NCN continues to encourage investors to consider funding nutrition industry companies with revenues smaller than their typical investment target. The $10 million plus investor ideal exists only in very small numbers in the nutrition industry, and we believe Investors must adjust.

We were pleased to welcome new participants from the ranks of the multinational food corporations in addition to almost 30 private equity and venture capital investors active in the healthy products industry, some of whom were attending their second or third NCN meeting.

The event opened on Wednesday evening with cocktails and dinner, which featured as its entrée a delicious fish, Kona Kampachi ® from one of our Presenting companies, Kona Blue Water Farms, an eco-friendly open ocean fish farm.

Thursday morning began early with a networking breakfast. This was followed by the first raft of 10-minute company presentations to a full auditorium of 120 people, including presenters and sponsors. After a coffee break the second group of companies presented.

Lunch was preceded by complimentary cocktails served by Synergy Beverages, which provided the natural ingredient mixers. After lunch companies and investors retired to breakout sessions for one-on-one meetings. Meetings stayed on track until about half way through the afternoon, when a few started to run late, contributing most likely to a few missed appointments. At our next meeting (NCN IV, our 2009 Spring Investor Meeting in New York on April 21, 2009) rather than retire to private rooms for breakout sessions we may experiment with a format in which one-on-one meetings are held in a single large venue divided into semi-private tabletops. This format would be designed to help keep breakout appointments on schedule and to sustain the momentum of the meeting by encouraging networking between breakout sesssions in an adjacent refreshment area.

Feedback From NCN III

What Investors Valued at NCN III

Asked about meeting highlights, “networking opportunities” and “company presentations” were cited in almost equal measure by Investors. “There was very good access to all of the entrepreneurs, and the NCN books were extremely helpful in learning a lot about the companies in a short time frame,” noted one Investor.

Another identified two hightlights: (1) Having an opportunity to see my fellow investors who focus on this space, as well as the strategics. (2) The presenting companies were in niches that we love (functional food & beverages, natural personal care).

Of the 15 Investors reporting, six said they had attended previous NCN meetings. The majority (72%) rated the quality of the companies as either excellent or good, and no one rated them inadequate or poor. Three quarters of Investors said the NCN Workbook was an excellent resource. The Workbook contains four-page profiles and contacts of all Presenting Companies, in addition to a listing of NCN Sponsors and participating Investors. In response to requests from the last meeting, Investors received a draft PDF of the workbook one day prior to help them prepare for the meeting.

Asked how many companies they talked with at some length, 15 responding Investors reported an average of 4.5 meetings. How many companies did they express a legitimate investment interest in? Out of 15 responding Investors 13 reported having real investment interest in 2.5 companies on average. Only 2 investors said none, at least for now. One of them indicated they had “highlighted a few to watch and keep in touch with.” The second noted, “maybe one or two [companies] eventually, but none at this stage in their development.”

What Presenters Valued at NCN III

Asked to rate “Level of satisfaction with your participation in the NCN 2008 Fall Investor Meeting,” 45 % said excellent, 45% said good, 5% said adequate and 5% said disappointing. It’s a harsh reality of this kind of matchmaking meeting that some companies will inevitably attract more attention than others.

Asked what was of most value about the meeting, Presenting Companies not surprisingly said, “networking” and “the opportunity to present in front of investors.”
One said: We “had a chance to present our new technology to potential investors in the nutrition industry, partners, buyers, and customers who understand our field. I can think of no other venues that can give us such positive exposure.” However, regardless of outcome, several respondents cited the independent value of the planning and preparation process.

As was the case with the first two NCN meetings, Presenters were uniformly satisfied with the submission, screening and preparation process. Thanks again go to Executive Director Mike Dovbish, who worked closely with all presenting companies on their slides, business plans, and presentations.

What follow up services would Companies like? Without offering many specific details, most wanted to “stay in touch” and for NCN to continue to find ways to match them with investors. One suggestion was for “a brief newsletter to the investors, sent in 60 days. I'll bet that a lot of the presenting companies have made adjustments in their direction, business plan and capital needs after the input gained at the meeting. This newsletter would give companies another shot at getting their attention with a perhaps better targeted, more mature message.”

Another commented: “Keep us posted on what investors (relevant to our industry) are doing/thinking as the global financial and economic issues unfold.”

NCN continues lay the groundwork for investment in nutrition and natural product brands. to improve Investor openness to smaller companies which will become the next generation of We believe this “disconnect” deserves to be addressed in order to sustain a pipeline of companies to the numerous strategic acquirors in the nutrition industry, many of which have lowered their threshold of size of company (witness Coke-Fuze and Kellogg-Bear Naked).

Although closing a deal is not the only measure of the value offered by NCN Investor Meetings, enough time has passed to gauge results from NCN I and II, which to date have yielded financial investments in 10 and 8 companies, respectively. Deals take time to mature and Investors often want a second or third look and to allow some time to pass before considering a target. Relationships made at our first three meetings could take many months to bear fruit.