Some Thoughts on Investors

As a deer farmer, how often have you thought, “If only I had a little more money, I could buy a better breeding buck, A.I. my does, expand my facilities or do a lot more marketing?” Money is the fuel that drives business, and for most of us, there never seems to be enough money to do all we want.

One way to get money for your deer or elk farm is to find people who are willing to “invest” in your business. There are several benefits to getting outside investors involved:

  1. Provides additional capital, not only to expand individual operations, but for the growth of the deer farming industry as well.
  2. Getting external individuals involved increases the awareness and support for the deer and elk farming industry. You can significantly increase the number of “stakeholders” and thus influencing regulatory and policy changes becomes easier because of a broader support base.
  3. Brings increased knowledge, expertise and contacts to the industry. External investors can bring a lot more than money to the table – they can bring business experience, marketing savvy and a whole network of contacts that can benefit the industry.
  4. Provides an easier option for new entrants into the industry. For example, setting up a deer farming operation can be an expensive and major undertaking. However, one option for people wanting to get into deer farming is to “invest” in animals in an existing operation. This gives them an opportunity to learn about the industry, and grow their herd. Setting up their own deer farm is much easier when they have some experience and seed stock. If they decide deer farming is not for them, they can then sell their deer (for a profit) and continue with their lives.

There are also some disadvantages to bringing in investors into the industry:

  1. Many investors may be the “meddling” type – they will want to have a say in running your deer operations. This is not always bad, especially if they bring expertise, knowledge and contacts. However, in many cases it becomes a source of conflict, stress and diffused decision-making.
  2. Investors usually expect a significant return on their investment. This means at some point, they will want their money back along with a premium. You need to consider whether you will have the money to buy them out, and what impact this expenditure will have on your operations. If you need funds, it may be cheaper to get a bank loan, and keep total control of your operations.
  3. How much of your business are you willing to give to investors? Some will want over 51% and thus have control over your deer farm. Some will want to be the single largest shareholder which means they also have control. Are you willing to give up being the boss?
  4. Legal and administrative costs will increase. Investments of any type are usually subject to strict regulations by various securities agencies. You need to get legal and professional advice in getting investment and in complying with applicable regulations. Be prepared for additional costs and paperwork if you do get investors.

I see three types of potential investments in a deer farm:

  1. Corporate investment – the deer or elk farm is a private corporation or limited liability partnership, and the investor buys shares or a portion of the company. Investors are usually represented on the Board of Directors and have to be consulted on major decisions made by the organization.
  2. Syndication – these are more common in the elk and other livestock industries. A group of investors gets together and buys the “rights” to a superior breeding animal. The investors get their return from the sales of stud services or semen from the animal.
  3. Animal purchases – the investors buy one or more animals on your deer farm. You continue to look after the animal either on a contract fee basis (for boarding, feed, vet care, etc.) or on some split arrangement for offspring. For example, the investor may buy a doe, and gets to keep half its offspring while you get to keep the other half of the offspring in return for boarding and care. Be sure to have a detailed contract in place outlining the responsibilities of both parties. This arrangement is an excellent, low-cost, low-risk, way for new people to get into the industry.

If you are considering looking for investors, here are some things you need to do:

  1. Prepare a business plan describing your operations, the market potential and five-year financial projections. Investors will want some assurance that you know what you are doing, and that their investment is likely to provide some return.
  2. With the help of your local deer or elk association, put together an information package about the deer farming industry. Potential investors will want to know more about the industry and its prospects for the future.
  3. Get legal, accounting and other professional advice before you start looking for investors, and with all negotiations, contracts and agreements.
  4. Be prepared and willing to communicate regularly with your investors to keep them informed and involved in what is happening. Take advantage of their knowledge, experience and contacts. If you make them part of the team, you will reduce the chances of conflict and misunderstandings.
  5. Offer investors something special. Be sure to give them photographs of your best buck so they can brag to their buddies, “Hey look, I own this 205 B&C whitetail buck.” Consider giving them the antler sheds from your largest bucks. If you have a hunting preserve, consider throwing in a free annual hunt.

Where do you look for investors? Try the following:

  1. Start with family, friends and other people you know. There may be someone there that would like to make a small investment. Be careful, sometimes having family and friends as investors causes additional problems as compared to professional investors. Make sure proper paperwork is in place, and everyone is clear about expectations.
  2. Ask your professional advisors – lawyer, accountant and banker – if they know of anyone that may be interested in investing in a deer farm. They have extensive contacts and may be able refer potential investors to you.
  3. Post an advertisement, either in your local newspaper or on the Internet. Be careful how you word it so that you don’t get into trouble with the securities agencies. It usually safest to ask for partners and that an investment is required.
  4. Put an ad in a hunting magazine such as Peterson’s Hunting. It is estimated that between 15 to 20 million Americans hunt deer each fall. Certainly some of these have money, and some would love to “own” a trophy whitetail buck or bull elk.
  5. Post a “seeking capital” ad in the various venture capital directories that can be found on the Internet. Visit http://www.steppingstones.ca/library for a list of Internet sites where you can advertise for capital.

There are a number of things that the deer and elk associations could do to encourage investment in industry. These include:

  1. Prepare a comprehensive information package on the opportunities and benefits of investing in deer and elk. Make these packages available to their members, government departments and other organizations who may have contact with potential investors.
  2. Conduct general advertising about benefits of investing in the industry in appropriate trade magazines.
  3. Hold meetings in large centers with potential investors about investment opportunities in deer and elk.

There are probably hundreds of millions of dollars in investment money available to the deer and elk farming industry. However, individual farmers and their associations need to take coordinated and concrete action to make potential investors aware and interested in our industry.