A Bismarck-based all-natural pest repellent startup is in the midst of a major business expansion, having secured a $10 million growth equity investment.
EarthKind CEO Kari Warberg-Block started by selling produce and potpourri at farmers markets to get her idea for Fresh Cab, a scent-based rodent repellent, off the ground. On her own, she expanded her product line and grew EarthKind to more than $10 million in sales, a feat she said only 1 percent of female-owned businesses have accomplished.
Now she has her first investor — Sweat Equities Fund.
The fund is managed by former CEO of Earthbound Farms Charlie Sweat, who Warberg-Block credits with mainstreaming organic products and getting them into stores at an affordable rate.
All of Warberg-Block’s ingredients are farm raised and her products are poison free and, after looking for more than a year to find the right fit, she and Sweat partnered.
Warberg-Block had long sworn off sharing ownership in her company. EarthKind had good cash flow and always had been able to bank against its invoices. But in scaling her business, Warberg-Block had reached a size where she needed a boost to capture more of the market.
She turned to growth equity, a type of private investment, usually minority as is the case with EarthKind, in relatively mature companies that are looking for capital to expand or enter new markets without ceding control of the business.
Warberg-Block says Earth Kind is one of the fastest-growing consumer-packaged goods — CPGs are products that are sold quickly and at relatively low cost — companies. And she says, at 500 percent growth, she is the fastest-growing pest control company, though she’s a small player in the $2.4 billion industry.
EarthKind products can be found in 35,000 stores, including major retailers such as Lowes and Target.
Warberg-Block’s success hasn’t been easy. EarthKind took most of 2017 off, halting production for a company overhaul.
To sell commercially, Warberg-Block had needed U.S. Environmental Protection Agency registration, which required extensive studies over a five-year period proving the balsam fir needle oil in her products kept away pests. That was put at risk when she found a supplier wasn’t sticking to EarthKind standards.
The discovery led Warberg-Block to bring her supply chain 100 percent in house, working with farmers directly. And she set out to make sure it wouldn’t happen again, voluntarily asking the EPA to ensure her product contained no ingredients from its global hazards list.
Her new certification set the standard others will have to follow. The move also made it a federal offense for suppliers to tweak these products.
While all of this was going on, Warberg-Block kept the company alive and her employees on the payroll out of EarthKind’s savings. Employees were given development training and new processes were created. On Christmas Day, the EPA signed off.
“It was a tall order as leader,” Warberg-Block said, as new competitors were coming into the market. “But our customers came back, and we came out better as a result.”
The first half of 2018 has been the best for sales in EarthKind’s history.
Warberg-Block said she had been ready to ink the investment deal when she pumped the brakes on the company last year, but Sweat Equities was impressed by her integrity.
“In the end, we didn’t lose anything on it and, in fact, we gained a lot more,” she said.
Warberg-Block classifies EarthKind as “purpose driven” from the manner in which she hires to how she buys ingredients.
She won't make a product that doesn't serve what she sees as an unmet need. For example, she hadn't planned on creating an all-natural bug spray until friends who were allergic to DEET suffered through reactions during their mission trips abroad. Now, her new product is a scentless spray lotion containing picaridin.
Her plastics are bioplastics from North Dakota-based C2Renew. And of the 35 people she employs at her North Carolina-based manufacturing plant, 20 percent have disabilities but are able to make a life for themselves through their work at EarthKind.
Eventually, Warberg-Block would like to take EarthKind global to support female farmers in other countries.
Warberg-Block also is proud of her work in helping to create a no-kill pest repellant market. When she started, 98 percent of pest prevention was poison. In 2015 and still today, poison-free makes up 90 percent of the market.
“I have to think we played a big role in that,” she said. “And we’ll stick with it until it’s mainstream.”
Dean Reese, CEO of the North Dakota Development Fund, said he doesn't know of many North Dakota startups who have received EarthKind's level of investment. Only Great Plains Software comes immediately to mind.
Even though she's still growing it, Reese classified EarthKind as a more mature company and based on her client base he's not surprised by her need for a larger amount of capital to expand production and meet that market.
Warberg-Block has the goal of reaching $100 million in sales over the next five years. To do so, she’s needed the equity to hire more personnel. She sees EarthKind as on its way to becoming a middle market-sized company.
“We’re still small, but we’re moving in that direction,” she said.
Changes have been made to this story to clarify the number of retail locations that carry EarthKind and the hazzard-free standards met by the products.
Article provided by The Bismarck Tribune.