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Mar 30, 2021
Despite many food companies' stated focus on healthy foods, Karp said consumers still have a tough time deciding what to buy at the store that will actually be good for them. In part, he points to mixed messages from brands about whether certain components of food, like fat, are good or bad for health. "If you go into a gas station, if you go into many grocery stores in the middle of the country, you just don't see a lot of options that you can feel good about," Karp said. "The genesis behind [HumanCo], which is how I will measure success, is: Have we made it easier for consumers to live a healthier life?" he said. HumanCo works with food brands in different ways. It's taken majority ownership of Coconut Bliss, an Oregon-based company that makes plant-based ice cream, as well as Monty's, which makes cream cheese from cashews. It also builds its own brands from scratch, as it did with Snow Days, a pizza pocket with a crust made out of cassava, a starchy South American tuber. There's also some variety to how HumanCo raises money for investments. Last December, Karp raised about $288 million through a SPAC he set up along with CAVU Venture Partners, a venture capital firm that focuses on health and wellness brands and has invested in brands including Oatly, Beyond Meat, and Thrive Market. It also raised $15 million through a Series A funding round it closed in January 2020. Investors' appetite for new deal targets remained strong in 2020, though many preferred to take bigger bets on fewer companies, according to data from CB Insights. US VC fundraising rose 14% last year to $130 billion, though the number of deals fell 9%, Reuters reported. Acquisitions of small brands by large food companies has also continued: In addition to Mondelez's deal for Hu, major food deals in the last few months have included Mars's $5 billion purchase of snack bar maker Kind. Jason Karp HumanCo. Karp said most money that's being invested in upstart food brands today goes to what he calls "functional" products: Those that meet specific nutrition or ingredient requirements but often end up using lots of artificial ingredients and processing-intensive techniques to get to the final product. "A lot of the money that's been thrown at keto products is creating highly processed, weird franken-foods that just don't have sugar," he said. "The same things are happening with the plant-based meats: Using technology to check a box that the consumer thinks they want." HumanCo's approach is different, Karp said. The brands it builds and invests in eschew highly processed foods in favor of ingredients that are "recognizable" to average consumers. That involves seeking out sustainably sourced ingredients, an area that Karp focused on while sourcing cocoa for Hu. "We're looking for companies that are thinking holistically about the problems that face humanity, not just trying to solve one particular need like 'This needs to be plant-based,'" he said. The timeline for HumanCo's investments is also much longer than typical venture capital and private equity backers. When it acquired Coconut Bliss, for instance, Karp said he had discussions with the owners about their goals over the next decade. "It's a very, very long-term bet," Karp said. "Our approach is not like typical investing, where we're just buying it, then we'll do some tweaks and sell it two years later." Kim Gibson Clark, the CEO of Coconut Bliss, said that she opted to sell a majority stake to HumanCo last year given Karp's experience developing a food brand himself and his more measured approach to expanding the companies he acquires. "If we would have gone with any other larger group, they could have very easily taken the production away from our family manufacturing plants," she said. Since HumanCo took ownership, Coconut Bliss has redesigned its brand and found new channels for selling its products. For instance, before the deal, Clark was talking to retailers about debuting an ice cream machine and corresponding soft-serve mixes that would allow consumers to make their own Coconut Bliss at home — something that capitalized on demand for at-home activities during the pandemic. In January, it launched its soft-serve instead as an e-commerce, direct-to-consumer offering. Clark said the connections to make that happen came through HumanCo, which provided a contact for a logistics company that could take care of shipping. "It might've taken us a bit longer to just figure out how to launch that and how to do all the logistics to get that program going," she told Insider. Moving quickly on opportunities like that is one advantage that Karp said HumanCo has over its larger multi-national peers. "It's a challenge when you're so large to innovate rapidly," he said. "You always have to be concerned about the cannibalization of your existing products." Without that large stable of existing brands, Karp said, HumanCo is freer to take bets on emerging brands that, like Hu, seem like moonshots today but have the potential to grow. "A lot of them started with ideas that probably wouldn't have gotten the thumbs-up from a corporate boardroom," he said. Was this article valuable for you?