When he arrived in East Bali in 2011 as a volunteer with a health programme, Aaron Fishman had no idea that three years later he would be managing 300 employees at a cashew nut processing factory after raising over $2.37 million in private capital.
He also had no idea that one of the largest private equity firms in the world would have helped him to structure the business.
But soon after his arrival he realized that Indonesia, a large producer of cashew nuts, was processing just 10 percent of what it produced. It was sending the cashews to India and Vietnam for processing at very low costs and missing out on a valuable part of the value chain.
“The villagers in East Bali are very poor so I soon saw the opportunity for the locals to process their own cashews, thereby developing the local economy and providing jobs,” he told Agri Investor.
East Bali Cashews, which launched operations in November 2012 and started selling cashews in January 2013, recently closed its third round of funding on just over $1 million after attracting capital from high net worth individuals and family offices. It will use the capital to triple capacity at the factory and hire an additional 50 employees, according to Fishman.
When the company started processing cashews it had 100 employees but Fishman soon realized there was potential for a lot more. In 2013 he decided to expand into a bigger factory and grow the business but was not sure how. This is where KKR, the global private equity house, came in.
“We had a proven business and concept but no idea how to grow it, no business plan or structured concept about whether to raise equity or debt and so on,” said Fishman.
Fishman contacted Asia IIX, a Singaporean social enterprise development company, which in turn approached KKR. KKR had been wanting to find a social enterprise to work with but had not had any luck finding the right candidate, according to Fishman.
“KKR spent 12 weeks with us, wrote us a business plan, did a financial model and advised us on the best way to expand,” he said. “They looked at us like we were a portfolio company.”
This involved telling Fishman that he needed to raise $900,000 in the next stage, not $300,000. They also introduced the idea of raising debt alongside equity in a stapled investment.
And Fishman successfully raised $900,000 in debt and equity on a 2:1 basis. This was the second round of funding after an initial $137,000 raise.
“That was very successful for us because it is very difficult to get working capital in Indonesia. There are no micro-finance bank loans available,” he said.
Most of the capital was raised from family offices and high net worth individual although one corporate investor came into the second round called Red River Foods, a US cashew trading company that is keen to see how East Bali Cashews develops. It could be an offtaker in the future for example, suggested Fishman.
East Bali Cashews is now a brand in its own right offering several different flavours. The company has also built a preschool for the children of its employees to attend; KKR donated $40,000 to the school.
Fishman’s goal is to get 100 percent of cashew nuts grown in Indonesia processed there to provide much-needed jobs. Currently his company processes only about 1 percent of the country’s cashews as 85 percent still goes to India and Vietnam.