One of the cardinal rules of venture capitalists is to avoid investing in small companies starting up in industries with heavy government regulation. This rule has helped explain in the past why we didn’t see a lot of startup companies in areas like insurance, or see venture capitalists pursuing dairy farms. Investors don’t like to be involved with companies that have to justify price increases or where there are lots of officials rules, which can be changed by legislators who control the regulators.
But, of course, every rule is made to be broken, and when the possibilities for growth are so strong, or the potential profit margins so large…well, exceptions can be made.
All this is preamble to letting you know that Organic Pastures Dairy Co., the nation’s largest raw milk dairy, in California, is negotiating with private investors for a major cash investment.
Mark McAfee, the owner of Organic Pastures, says he is meeting next week with the principals of a $1.5 billion private equity investment firm “that wants to see raw milk change nutrition and illness patterns in the U.S. They also see that a great deal of market growth and smart money can be made.”
He doesn’t want to mention the firm he’s negotiating with, or possible details of a deal, since nothing has yet been finalized. But he says the firm’s principals are well aware of all the regulatory turmoil in the raw milk arena, and aren’t fazed.
Indeed, I take Mark’s openness about his disputes with the Food and Drug Administration and other agencies as evidence that the investors appreciate how FDA invective seems to stimulate sales—free advertising, as it were. Mark even sent along a photo one of his employees took of the license plate of an FDA car—cutely emblazoned with an Organic Pastures promo flyer–when Organic Pastures was visited by an inspector a couple weeks ago in connection with the recall of raw cream possibly containing listeria monocytogenes.
The private investors “see us as a market disrupter,” he says. Yes, I’d say Organic Pastures has been a market disrupter.
Mark views outside investment as a way to grow Organic Pastures much more quickly than it might otherwise–so significantly that there might eventually be a public offering, a sale of stock that he envisions as possibly “the world’s biggest cowshare.” He also sees it “as a way to energize and push the vision of true health forward in a time when this kind of vision is oppressed.
While it’s important to remember that no deal has happened yet, the fact that serious investors are sniffing around in the raw milk arena is significant. I wish there were a pastured-raw-milk commodity market I could invest in.