Raising Dough: The Funding Journey of Chelsea Approved
Capital Innovation Lab’s Money Map is a comprehensive self-directed, online resource for entrepreneurs and small business owners to learn about raising capital for their start-up or early-stage business. This case study shows an example of how a business has built its “money map” and the journey and decisions that informed it.
Introduction
Chelsea Approved started as a family project and a creative solution for gluten-free, vegan baking. Its specialty baking mixes help people enjoy indulgent cookies, brownies, and other baked goods while staying conscious of their health and dietary needs.
Chelsea Approved is currently in its Growth/Scaling Stage and poised to reach a broader target market. Because of intentional decisions the founders made when establishing the company’s capitalization chart, they had the flexibility to pivot their sales strategy. At first, they had their sights set on selling to individuals via e-commerce; now, they are finding a promising market in selling to food service providers.
Chelsea Approved baking mixes are displayed next to baked samples at a local Vermont farmers market.
Business Overview
Sisters Chelsea and Emily Austin grew up enjoying baked goods with their parents in northern Vermont. After Chelsea was diagnosed with Crohn’s disease, the rest of the family became more conscious about the gluten in their diet in order to support Chelsea in maintaining her health. So Chelsea and Emily’s parents stuck “Chelsea Approved!” notes on each dish they made that their daughter could enjoy. After college, Chelsea went on to become a registered dietitian to help other people enjoy food while listening to their bodies’ needs.
Emily befriended Adam Bouchard in 2016 and they adopted vegan diets in 2020. Chelsea, Emily, and Adam wanted to be able to enjoy baking and eating together, but couldn’t find baked goods on the market that were both gluten-free and vegan. So they decided to make their own “inclusive treats,” Emily says. Thus, Chelsea Approved was born, and incorporated in 2021.
Chelsea Approved sells six types of baking mixes, including chocolate chip cookies, pancakes, and brownies. The mixes contain a few simple ingredients and are certified by the Gluten-Free Certification Organization, Vegan Action, OU Kosher, and MenuTrinfo. The products are sold at local grocery stores in Vermont and surrounding states as well as online.
Originally, the founders thought they would sell mostly to individuals and families wanting to bake allergen-free foods. In November 2022, they started selling e-commerce pre-orders alongside a crowdfunding campaign, then sold their first real-time sales in January 2023.
Funding Strategy
Chelsea, Emily, and Adam started their business by bootstrapping and raising capital from friends and family. They quickly raised $55,000 from six immediate family members, and Emily and Adam contributed a combined $50,000 in initial equity. Then, Emily and Adam contributed a combined $69,000 to the business, set up as personal loans.
“We are treating [the $69,000] as line of credit loans, with the plan to pay back those loans to ourselves from the business at a later date,” Emily says. “We have expenses that we pay for with credit cards. We use our personal money to pay off the credit cards and add that amount to our line of credit loans, increasing the value that needs to be paid back to us by the business.”
The founders chose not to pursue venture capital because they wanted to maintain full control of the company as it grew. In most situations, VC funders design agreements that will require the company being funded to cash-out in seven to 10 years. This can create uncertainty for the company after it has been purchased by a non-founder. According to Adam, this is the approach peer company start-ups have taken.
“Our intention is to grow the company indefinitely,” Adam adds. “Most of our time is spent exclusively on cash flow rather than profitability.”
The family-funded model lets the founders maintain full autonomy of the company. When there are unplanned expenses, they cover those out-of-pocket themselves or from company cash flow. For example, this happened when the company decided to spend an unanticipated $18,000 ordering extra chocolate, driven by concerns about the goods’ increasing futures price. (Chocolate chips are key ingredients in Chelsea Approved’s chocolate chip cookie and brownie mixes.) In the end, this move saved them $8,800 based on the May 2024 market price of chocolate chips.
This agile model has also helped the founders pivot their business model to meet consumer demand. While Chelsea Approved still sells products online and in stores, they’ve branched out to now selling cases of frozen “cookie pucks”–which are wet and dry ingredients mixed together and pre-formed for baking–to food service providers. In April 2024, they delivered eight 10-pound cases of pucks to a sampling event at the University of Vermont’s campus dining services, to be baked onsite for students to eat.
“The opinions that matter are the opinions of people who have already written you checks,” Adam says. “Those folks want to buy frozen [cookie] pucks.”
Conclusion
Chelsea Approved’s capital journey shows the pros and cons of crowdfunding a business from the ground up with funds from founders and family.
Although Emily and Adam had to contribute a personal loan to get the company started, Chelsea Approved remains flexible and can respond to changing consumer demands. As the company scales up, its progress is a sweet success.