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Food Venture Financing News - Weekly Issue No. 18

07.21.20
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In This Issue:

Possible Changes to PPP Forgiveness

  • Last week in testimony before the House Small Business Committee, Treasury Secretary Mnuchin suggested that Congress amend the Paycheck Protection Program to deem that all loans under $150,000 automatically be considered grants.
  • These loans account for 86% of all loans issued under the PPP, and about 27% of the $520 billion of PPP loans issued to date.
  • There is concern that the SBA is not prepared to handle PPP forgiveness applications. Reports indicate that some lenders have not begun accepting forgiveness applications.

Slow Traction for MSLP

  • Demand for loans under the Main Street Lending Program is soft. Although the MSLP was fully launched on July 6, the Fed only started buying loans last Wednesday.
  • On the first day the Fed only purchased $12 million in loans from the MSLP program.

MSLP and Non-Profits

Last week the Federal Reserve modified the Main Street Lending Program to provide greater access to nonprofits. Key terms that apply to nonprofits are as follows:

  • Minimum Loan: $250,000
  • Years in Operation: At least 5 years
  • Minimum employees 10 (previously 50)
  • Total non-donation revenues equal to or greater than 60% of expenses for the period from 2017 through 2019 (previously 70% of revenues)
  • 2019 operating margin of 2% or more, (previously 5%)
  • Current days cash on hand 60 days (previously 90 days)
  • Current debt repayment capacity—ratio of cash, investments and other resources to outstanding debt and certain other liabilities—of greater than 55% (previously 65%)
  • Venture firms and investors in the food and beverage sector are focusing on traditional metrics such as barriers to entry, IP, margins, and EBITDA rather than solely on revenue to evaluate the viability of potential investments.
  • Sustainability, natural ingredients, and functional heath foods are top sectors for current food venture financings.
  • The effect of COVID-19 on the food supply chain has prompted companies to develop new technological solutions for managing food production to prevent waste.
  • Food startups are also developing sustainable proteins and ingredients to extend the duration of perishable products.

CPG Corporate Venture Funds

Our featured CPG corporate venture investment team this week is Kraft Heinz.

  • In 2018 Kraft Heinz announced the formation of its $100 million venture capital fund, Evolv Ventures, which is based in Chicago, IL.
  • Evolv Ventures invests in emerging tech companies that are transforming the food industry.
  • Key investments to date include:
    • GrubMarket, a San Francisco-based food-to-table delivery service (2019)
    • New Culture, a San Francisco-based start-up that produces animal-free dairy cheese (2019)
    • Flowhub, a Colorado-based cannabis tech firm (2019)
    • Zippin, a cashier-less technology start-up that provides checkout-free services for grocery retailers (2019)

Please check out DWT's newly re-launched Startup Law Blog

At Davis Wright Tremaine LLP (DWT), we are proud to have one of the largest Food & Beverage legal practices in the country, with over 40 attorneys representing food innovators, entrepreneurs, and investors at every level of the food chain, from Farm to Label.

Please contact our Food and Beverage team if we can assist you in any way in these unprecedented times.

The facts, laws, and regulations regarding COVID-19 are developing rapidly. Since the date of publication, there may be new or additional information not referenced in this advisory. Please consult with your legal counsel for guidance.

DWT will continue to provide up-to-date insights and virtual events regarding COVID-19 concerns. Our most recent insights, as well as information about recorded and upcoming virtual events, are available at www.dwt.com/COVID-19.

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