Last Updated Apr 7, 2009 3:19 PM EDT
The media has jumped all over Coke's Â£30m investment in Innocent, implying the famously ethical smoothie makers have sold out. Hogwash.
What to make of Innocent's announcement that it's taken investment from its very antithesis, Coca Cola - faceless, heartless, exploitative and manipulating (if you believe its detractors)?
The Innocent founders are sticking by their ethical and health-conscious standards. But an online statement says: "We chose Coca-Cola as our minority investor because as well as providing the funds, they can help us get our products out to more people in more places. Plus, they have been in business for over 120 years, so there will be things we can learn from them. And in some small ways we may be able to influence their thinking too."
The fact is that you can't always choose your investors. Innocent's founders could have attracted cash from a private equity fund -- but they'd probably have had to sell a majority stake, they'd face being sold again (to who knows which giant corporate) and they would have been under intense pressure to deliver cash -- whatever the cost.
Even with the right PE backer, one who understands the global drinks market, they'd have had a mere fraction of the expertise they'll get with Coke.
Could they have floated a stake of the business on the public markets to raise cash? Well, IPOs are as rare as hen's teeth these days -- in Europe, just EUR9m was raised in the first quarter of 2009.
Besides, raising Â£30m would have cost them upwards of Â£4m (even if they could get the deal underwritten) and handing that sort of cash over to bankers would have been even more unpopular than a deal with Coca Cola at this point.
(And remember -- Body Shop's minor ethical undoing was driven by a public listing.) Borrowing is out, angel investors rarely get involved in deals this big -- and unless they'd punted Â£300,000 on Mon Mome in the Grand National, when it comes to raising cash, Coke is it.
Could this deal go sour on the Innocent team? Maybe, but I doubt it. Pret a Manger has coped fine after taking money from McDonald's a few years ago.
In fact, the burger giant's healthy eating range has expanded hugely since that deal, lending credibility to the Innocent's assertion that they might influence Coke in positive ways. If they get to promote fruit drinks all over the world, that has to be a good thing, right?
I'm certain there will be lots of entrepreneurs, MDs and FDs reading this who would bite the hand off a big corporation that expressed an interest in funding their expansion right now. There's no better time to seize share and new markets than a recession. So let's not knock Innocent for taking on a sugar-daddy.