Beetnik-Dewberry deal a model for tech-ag ventures
Jane and Terry Levan needed a brooder. And a Gator,
and a scalder, and a plucker, and grain bins, and a pig fence to keep out the wild hogs. All the equipment needed to take their chicken farm from a small-scale operation to a midsize one.
David Perkins, CEO of Beetnik Foods, needed a more reliable source of organic chick
en to sell through his online store.
An investment by Beetnik in the Levans’ farm gave both sides what they needed.
Like many farmers, the Levans became chicken farmers after careers doing something else. In their case, it was operating computer stores in Austin for nearly two decades. When they were in their mid50s, they moved from Austin to 20 acres near Lexington — 50 miles east — and started Dewberry Hills Farms.
About that same time, Per- kins was an executive in the tech world and looking for his next project. Beetnik started as an online - only company but branched out to retail sales a few years ago with its Paleo-friendly line of frozen food.
Perkins’ meals are sold all over the country. Jane Levan sells most of her meat to Austin-area restaurants. She has been a staple of the Sunset Valley farmers market since before the Sustainable Food Center took it over in 2010, but they never made quite enough money to be able to scale their
chicken operation.
Banks weren’t eager to loan Dewberry money. Beetnik, on the other hand, is part of a quickly growing contingent of Austin consumer packaged good companies, an industry flush with capital.
With the recent sales of Stubb’s and Deep Eddy, there will be more money than ever flowing into the consumer goods portion of the Austin food industry. It just so happens there are a lot of producers, including farmers, ranchers and artisans, as well as community projects and socially conscious startups, that could use some of that good fortune.
The Levans have always processed their own birds, but previously that was done in a two-room building they built with the help of his parents.
“The average age of contractors on that building was 66 years old,” Jane Levan likes to say. “Our brooder was an old pole barn, and it was too cold in winter and too hot in summer. As we grew, we hobbled together brooders for the chicks.”
Dewberry Hills is selling at fewer farmers markets these days because the plethora of markets has decreased how much they make at any given stand. They also were trying to keep up with the commercial orders in a facility that was built to process half as many chickens per week, Levan says.
“We had the orders but didn’t have the capacity. We actually had to grow in order to survive,” she says. “We were at a real crossroads.”
With an undisclosed investment, the Levans could build a proper brooder for the chicks and expand the processing facility to include walk-in coolers, a scalder and a plucker than can each process eight birds at a time. Previously, they were having to clean birds one at a time.
Levan says she still wants to stay somewhat small so she can control the life of the birds and the quality of the meat.
However, as they grow, they’ve been able to hire new workers, which is personally gratifying to Jane Levan — but acquiring organic certification, pardon the pun, feels like a feather in her cap because there aren’t that many in the state.
“We hope to come to a place where we can rent out our facility to people who want to be state certified but can’t build the building themselves,” or buy time at a large-scale facility, she says. “There’s a limited profit margin on poultry, and if you’re paying someone else to process your birds, you’re losing a portion of your profits.”
Starting this week, Beetnik will start getting the first round of USDA-certified organic chicken, which they’ll sell at beetnikfoods.com.
Perkins says the investment, which the company made alongside a similar deal with a beef ranch in Bastrop, is a far cry from the kind usually made in the industrial, service and tech industries.
“Small farm invest- ments also don’t have the return profiles of many other investments, so they are less interesting to a classic investor.”
Perkins, who graduated from Le Cordon Bleu in Paris after his many years in the technology industry, had to learn how farmers like the Lev- ans run their business and the ins and outs of the agriculture industry. That’s a learning curve that not everyone is willing to tackle.
“By comparison to other investments, the business of food is highly regulated, for good reason, and because of that, there is an extremely high bar for small businesses to keep up with the regulatory world,” Perkins says. “Most food regulations are written for gigantic operators, not small farms and small food companies. That’s wildly different from the hightech world, and it poses a heavy burden on the small farmers, processors and food manufacturers.”
It’s been nearly two years since Beetnik first announced these partnerships. It seems like there are plenty of opportunities for these kinds of deals, where a food company with high margins that relies on one with lower margins might work out a funding arrangement that benefits both.
With banks hesitant to loan money to small and beginning farmers, finding an angel investor can be the break a farm needs to overcome the unpredictability of the weather, changing market conditions and high startup costs.
Though Levan hasn’t been a farmer all her life, she knows they are a proud crowd.
“They don’t want charity,” she says, “but on the other hand, if you’re a young person starting up, there’s almost no way to get the capital you need.”
“It’s not to the point where we aren’t working seven days a week, but now it’s not 14 hours a day,” she says. “I love what I do. I love the people it puts me in contact with.”
Lucky for her, that included a tech investor in Austin who is now in the food business.