Ideas and the ability to raise capital to implement those ideas are two key characteristics of the capital markets.
Those themes are on full display when the journey taken over the past few years by two Montrealers, Neil Cuggy and Jonathan Ferrari, is put under the spotlight. Because of the progress they’ve achieved, they’re now hoping to raise at least $20 million. And if things work out as planned they’ll be in charge of a newly minted public company that provides customers with fresh ingredients to allow them to prepare original recipes at home each week.
“It’s been an amazing experience and shows how quickly you can build a company when the market is so big,” said Ferrari on Thursday. “The point of the transaction is to establish ourselves as the leading meal-kit brand in Canada.”
But getting there wasn’t a straight-line journey. Four years back they were toiling away in the investment-banking department at RBC Capital Markets. But adventure beckoned so the two left their jobs and set up a search fund, MTL Capital, the first of its kind in Quebec.
The two borrowed a method developed almost four decades back at Stanford University: raise enough capital from investors to allow then to seek out a business opportunity; when they find a suitable target return to their original investors and request additional capital to allow them to became the owner-manager.
At least that was the plan. But after raising an initial $400,000 and after searching for a suitable target, they concluded the search fund model wasn’t for them.
So they paid back the rest of the original capital — and launched Culiniste.ca, an e-commerce company specializing in food. Customers of the service became members, order a series of recipes and receive the ingredients required for those meals.
In time, there was a name change (to Goodfood), the arrival of a private equity backer (edo Capital kicked in $1.1 million.) And the business expanded from its Quebec base, initially to Ontario and later to the Maritimes. It now employs 150 people. Each week, a dozen new recipes are posted on the web site and Goodfood prepares a box of ingredients that is delivered to the customer’s doorstep with easy-to-follow instructions.
And in about six weeks, there will be another highlight when Goodfood goes public by way of a reverse transaction with a capital pool company, Mira VII Acquisition Corp. For Mira V11, which went public in 2015, the deal represents its so-called qualifying transaction.
As part of going public, Goodfood intends to raise at least $20 million by way of brokered private placement. It has hired GMP Securities, National Bank Financial and Cormark Securities to round up the investors.
Going public via a reverse allows Goodfood to go public faster, and at a lower cost, than otherwise. “If you want to build an iconic Canadian brand, you need access to the public markets,” said Ferrari. And GMP wasn’t selected randomly: a former RBC colleague of Ferrari is now with that firm.
When the transaction closes, Goodfood will join Freshii as the second food purveyor to go public this year. Ferrari said Goodfood was “excited” by the reception given to Freshii where demand was so strong the issuer hiked the price at which the shares were sold.
“Investors are looking for investments outside (the traditional) sectors such as resources to help diversify their holdings,” he said. “And they are interested in companies that provide real sustainable growth.” Plans call for the service to start in western Canada by the end of the year.