DTC butcher Farmison has pulled a £2m crowdfunding raise as it puts the brakes on ambitious growth plans amid the challenging macroeconomic climate of squeezed consumer spending and surging costs.
A campaign on Seedrs, launched late last year, valued Farmison at £13m and saw more than 500 backers help the private equity-backed company beat its £2m target.
The money was earmarked to drive customer acquisition. However, a strategy rethink has put those plans on hold and funds have been returned to investors.
“We really appreciate the support of all our customers, existing and new, in our Seedrs campaign and regret that we have to cancel it,” a message from Farmsion to Seedrs backers said.
“We set out in the campaign how we wanted to use the funds to grow the business. However, the ongoing challenges of the current economic environment mean we have made a decision that we need to slow that growth and therefore take a different approach to our fundraising.”
Farmison sold a majority stake to Inverleith after the pandemic turbocharged growth at the company. Sales doubled to £12m in 2021, but the business slipped back £2.6m into the red after making a profit in 2020.
During the Seedrs campaign, chairman Christine Cross told investors the business had made a similar loss in 2022 as it invested further in winning customers and building IT infrastructure.
An industry source said: “Farmison’s change of strategy is consistent with other DTC businesses as the cost of living crisis focuses consumers on spending while input costs also pile on pressure.”
“In Inverleith, Farmison has a shareholder who can put more capital into the business if required. It is a relatively niche business and was not really shooting to be a unicorn with a £1bn valuation. It makes sense to have a modest period of retrenchment and rely on its loyal customer base before reassessing its growth plan.”
CEO John Pallagi founded Farmison in 2011, counting former Asda boss Andy Bond as a seed investor. The business also scored £500k in early backing from Finance Yorkshire in 2012.
According to market data firm Pitchbook, Finance Yorkshire and Bond sold their stakes in the company in 2021 to an undisclosed VC firm for an undisclosed sum.
Inverleith secured a majority stake in the business via a leveraged buyout in early 2022.
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