Crowdfunding, the ‘new school’ way to launch a business

Mention the words “old school,” and I’m sure some of my friends would definitely nod their heads and point their fingers at me. Now, keep in mind that old school can have two connotations, definitely retro in a hip and cool way; and then not so much.

Thus, I admit to having a bit of both in me. Things that I truly value, such as face-to-face interviews, no cell phones during a meal, dialogue and plot in movies versus non-stop action, phone calls instead of a dozen e-mails on the subject.

On the opposite side, my refusal to get cable television until this year had led to many of my friends calling me a Luddite. Hey, I was getting nearly 40 channels for free using today’s version of a rabbit-ears antenna.

And the only reason I agreed to cable was because of the need for a high-speed internet connection. The company even threw in phone service. So yea, now I Skype with my children and grandson, can watch television programs only available on cable and have caller ID.

Hence, I am cognizant of technology and what it can do in today’s world. Even my father, who’s much more old school than I am, is amazed by what today’s internet-driven world can deliver, both good and bad.

And that leads me to ZĒGO, a startup company launched three years ago that produces a gluten-free, allergy-friendly energy bar made from organic sunflower seeds. As you can imagine, the editorial staff on Candy Industry gets numerous e-mails regarding new product launches. In a way, that’s what drives the consumer packaged goods industry, the confectionery sector even more so.

At first glance, I thought, “Oh well, yet another energy bar.” But a couple of things caught my eye. First, was the fact that this bar was made without any nuts, gluten, soy or dairy. It was also vegan and contained no GMOs. Add to that the claim that sunflower seeds are a “superfood,” I was compelled to investigate.

The founders, Colleen Kavanagh and Jonathan Shambroom, had some fairly impressive credentials. Kavanagh is a pioneering child nutrition advocate while Shambroom is a competitive athlete and seven-time technology startup veteran.

From Kavanagh’s perspective, it was a challenge to find an allergy-friendly, protein-rich snack for children. Shambroom had a different need — finding a nutritious bar that was easy to eat, easy to digest and had great taste when cycling.

The two experimented with the recipe for two years before they determined they nailed the flavor and texture. In doing so, they invested $100,000 of their own money in setting up a company, ZEGO, which went for development of the recipes, brand, packaging, website, legal and business fees. The monies also went for a trial test run of 4,000 bars and then a production run of 25,000 bars.

Based on their initial success, the two decided to extend their reach beyond San Francisco, which is where the company is based. To raise an additional $50,000, the two entrepreneurs opted to use crowdfunding. Yes, crowdfunding is exactly what it means, soliciting funding (typically small amounts) for an idea from a large group of individuals.

As Shambroom explains, he and Kavanagh opted to go through Indiegogo, the second largest crowdsourcing fundraising site over Kickstarter, the largest, because Kickstarter wouldn’t allow them to say that they are donating 20 percent of the company’s profits to improve nutrition for low income children, a tenet near and dear to them.

And yes, I have heard of crowdfunding. Despite being “old school,” I don’t live in the past. One candy company that comes to mind, which also used crowdfunding, is Charles Chocolates. They used it to open a retail shop in, coincidentally, San Francisco.

But as I researched ZEGO’s website and story, I was fascinated by the amount of detail Shambroom goes into explaining the process, the campaign and the results. Anyone entertaining the idea of crowdfunding should definitely take a look at the ZEGO example.

In short, the company raised $50,000 from 537 contributors in 47 days. That money is earmarked for the next production run of ZEGO bars, which will be 100,000 bars. Estimated cost for that run is $75,000, $25,000 of which will be funded from existing sales.

Although I haven’t had a ZEGO bar yet, I do think the company had hit on a great niche — allergen friendly snacks. More children today, including my soon-to-be-two grandson, have allergies, something that we “old-schoolers” don’t recall seeing in kids in our day. Today, it’s an entire new subsegment in food.

So check out www.zegosnacks.com for an example of starting a business new-school style.