Tera's Whey founder Tera Johnson is the director of the Food Finance Institute, a Business & Entrepreneurship program of the University of Wisconsin System Administration.

For the rest of her life, Tera Johnson will probably be known as the “Tera’s Whey lady,” even though she doesn’t own the company anymore. 

“Most people know me from Tera’s Whey,” said Johnson, who sometimes introduces herself this way on her food business podcast, Edible-Alpha. “I gave up.”  

Tera’s Whey started as an idea Johnson had in 2007 to reclaim some of Wisconsin’s organic whey and process it into powdered protein. It takes roughly 10 pounds of milk to make a pound of cheese. Nine pounds of the remainder is whey.

By 2013, Johnson had gone from that relatively simple idea to $14 million raised from investors, an “earth friendly” facility in Reedsburg with 14 miles of stainless steel pipes inside, a national contract with Whole Foods and a $26 million sale of the company to Omega Protein.

It was, as Johnson said, “ridiculously fast.”

“You’re soaring over the Grand Canyon on a motorcycle and you’re either going to go Wylie Coyote or you’re going to make it,” she said. “Companies needed to grow coming out of the recession and there weren’t a lot of companies to buy.

“We were attractive for acquisition faster than we thought.”

After that whirlwind, Johnson began helping others recreate her success. She officially founded the Food Finance Institute five years ago under the University of Wisconsin System Administration umbrella. Locally she has worked with businesses like Underground Food Collective, Lonesome Stone Milling and Landmark Creamery, among many others. 

Johnson identifies as “serial entrepreneur.” She travels extensively, giving workshops for food hub managers, nascent brands and hopeful small business owners with big ideas.

“People say about me that I bring reality to what it’s going to take,” she said. “My goal is not to crush people’s dreams. I’m supportive of entrepreneurs. We make good choices when we have better information.”

Johnson spoke with The Cap Times about the biggest challenges for new food entrepreneurs, why she likes Kickstarter (but not for raising money) and where new areas of growth could be in food and agriculture businesses.

The Capital Times: Why did you start the Food Finance Institute — and why at the university, not a private practice?

Tera Johnson: I wanted to keep working around entrepreneurs, and I wanted to be the person helping them. I started thinking about what I had that was a unique skill, and it’s about the money. It’s very difficult to raise the kind of money I raised.

I’d been a CEO, I’d been on corporate boards. I understood governance and money. I had a lot of help from an investment banker to help me put the deal together. I learned a lot about how to raise money, but also about how to put money together and what money is good for what.

I helped the university set up this Food Finance Institute specifically with the idea that we’re going to make it possible for every growing food and value-added farm enterprise to get the money they need to grow. I wanted people to not always have to pay for it, and if they were, I wanted it to be accessible.

How are food and agriculture businesses different from other kinds of startups?

Ag and food don’t generate enough cash flow to fund their growth internally. It’s not like software. Software you’ve got to fund the development up front, but once you have a piece of software, the costs of goods sold is zero because you have it and you just sell it.

With food, you’ve always got to buy the ingredient. The way these food business models work, you have this upfront investment, but then all the way along, you’re incrementally growing with frequent cash flow.

You’ve got to get to be big enough to break even, and you can die before you do that if you don’t bring in the right kind of money at the right time from the outside.

Local food has become such a national phenomenon. Every community wants to make it part of their economic development plans. We’re passionate about our food and our booze, and we should be, but it takes a lot to be successful financially.

A lot of small food businesses crowdfund with Kickstarter. Is that a good idea?

If you’re like Mobcraft, you’re going to build a taproom with a brewery that has some scale to it. That is a $2 million investment. It’s not a Kickstarter thing.

Now, Kickstarter could be a little thing they do in the beginning. I love Kickstarter, because it forces people to put a database together. People don’t find you, you have to bring your people to Kickstarter.

All of that infrastructure they have to put together — a database and a way to send outbound emails, using social media to get people to come and invest. You have to make a pitch and have a video.

They can use that forever in their business, so it’s a really good thing. You’re building marketing infrastructure.

Kickstarter is valuable for everybody to go through that process. But it’s not a money raising thing, except if you’re going to be small and local. I like prepayments, like a CSA model.

Someone is always making a new hot sauce or pickle. Has the interest in local food made it easier to start a food company?

Because local food is such big deal, there’s lots of struggling beginning food, ag and booze businesses. It’s easy to start one because access to shared use certified kitchens is ubiquitous now. We’ve taken the barrier to entry to the industry down quite a bit.

And the retailers are bringing in local stuff. It resonates with people, so it’s easy to get on the shelf. You go into the store and there are a million brands of anything now.

How are you going to be defensibly unique? How do you stand out? How are you going to get a consumer to try your stuff?

That all takes money, it turns out. People underestimate how much money they need.

People can get romantic about local food and having their own business. It sounds like you’re the splash of cold water.

You need to get really realistic about local. Madison doesn’t have that many people. And if you need to have $250,000 in sales to break even in a small wholesale brand company, you’re not doing that here.

The local thing works if you have a retail focus — the price from the consumer is coming to you the maker, not a distributor or retailer in between.

It’s exciting to see brands like Cadence Cold Brew in Ohio and Potter’s Crackers at a store in Brooklyn. I still think of them as local.  

Those are good examples. They are not local in terms of how they sell because they couldn’t be, they would have gone out of business a long time ago. But they make stuff here, they hire people here, they tell the Madison story.

I like to peel the onion: What is it that is so appealing about this local thing to us? What are we really looking for? If it’s a local business, you want them to do whatever they need to do to be viable.

Usually there’s values underneath that, like local means sustainable agriculture, or local means clean food, transparent to the consumer. The “local” is the outside, but there’s something in it that’s actually what they’re looking for.

Where do you think the next big growth area is for food businesses?

There’s an idea that food is functional and curative of things. Like grandma said cod liver oil was good for you and it turns out the Omega-3s in cod liver oil are off the charts. We had this folk wisdom, and then we became so sophisticated that we ate Twinkies.

Yumbutter does a little bit of that. They call them inclusions (of probiotic culures, chia, hemp seeds and goji berries). It’s not just peanut butter anymore, it has higher protein and more functionality.

That is something that consumers are going to now. They’re looking for this stuff in food. That will open up opportunities for people that I don’t even know what they are right now.

Food editor and arts writer Lindsay Christians has been writing for the Cap Times since 2008. She hosts the food podcast The Corner Table and runs a program for student theater critics. Member @AFJEats and @ATCA. She/ her/ hers.