Fair-trade food startup connects with cash

French entrepreneur Mathieu Senard, co-founder and CEO of Alter Eco, pitched his startup to investors for two-and-a-half years before closing a $2 million Series A investment late last month.

Senard says that his unorthodox business approach is largely what got him ignored when he took his startup to venture capitalists on Silicon Valley’s Sand Hill Road.

“The maximization of profits is not something we believe in,” Senard says.

Paradoxically, Senard’s desire to do more than make profit is the same thing that helped him eventually connect with the venture firms that backed his San Francisco-based fair-trade food product business.

To be sure, the firms that backed in Alter Eco aren’t your average venture capitalists. They’re what are called “double bottom line” investors and look to support companies that have a social mission and a profit motive. Senard raised the money form San Francisco-based Good Capital, New York-based Serious Change Fund, and Vancouver, British Columbia-based Renewal2 Investment Fund, in addition to a handful of individual investors.

Senard’s pitch also attracted Ben & Jerry’s ice cream co-founder Ben Cohen to join Alter Eco’s board of directors.

Senard plans to use the $2 million he raised for his business to help present the Alter Eco brand to consumers by investing in marketing and communications. The push, he says, may take the company to more than $20 million in sales within the next five years. Maybe, it will even earn a profit.

Alter Eco markets chocolate, olive oil, rice, sugar and quinoa. Its products come with a heavy dose of good feelings. Its olive oil, for example, is certified organic, fair trade, carbon neutral, GMO free and vegan. A 12.7 ounce bottle sells for $20 on the company’s website. The revenue “translates into financing scholarship funds, micro loans for women’s empowerment programs and olive tree planting,” according to the company’s website.

There’s a growing market for this type of product, according to the Fairtrade Labelling Organization International, an organization that helps manage the standards for certifying fair-trade products. Consumers bought $3.8 billion worth of fair-trade certified products in 2008, up some 22% from 2007, according to the organization’s data.

Still, that’s a tiny part of global trade.

“The notoriety of fair trade is very big compared to the actual volume of trade,” Senard says. “It hasn’t gotten to the mainstream in the same way it has in Europe. But when you see that Walmart and Safeway are trying to support this [type of product], it will take another three to five years before this concept catches on.”

Senard has a good insight into how fair-trade products have caught on in Europe. His company is the U.S.-based affiliate to Alter Eco Europe, which operates in France and carries a wider range of products. The French company, which is an independent operating entity with a non-control interest in Senard’s San Francisco company, has gained substantial market traction in its market.

Still, it’s something that doesn’t always resonate with investors.

“I did a presentation at an investment forum and the first question I was asked was, ‘If you pay a fair price, how do we, as investors, maximize our money?’” Senard says.

Senard says he tries to achieve a fine balance between doing good and operating a business.

“Everybody can open his heart, if people understand what fair-trade does and the impact it has in the field. The communities become much more healthy and happy and produce products with very high quality,” he says. —Alexander Haislip