Benchmark Capital which was an early investor in Twitter was also in an investor in the decidedly non-tech Potbelly Sandwich Shops which also IPO’d in 2013. Maveron, the venture firm of Howard Schultz, was also a significant backer of Potbelly.
Increasingly, food & beverage companies – whether physical retail services or makers of food products – are being invested in by venture capital firms. While these industries have traditionally been the provenance of private equity, there’s been a decided uptick in venture capital activity to these types of companies.
The spectrum of opinions on these investments ranges across two extremes:
- No industry is safe from Silicon Valley – In this view, Silicon Valley is going to go after more and more industries – whether tech is at the heart of industry or not. In this scenario, the consumer packaged goods (CPG) companies like Uniliver, P&G, General Mills, Kellogg, Danone and Seneca among should watch their back. From food & beverages to consumer products such as razors, glasses and clothing, VC-backed companies are encroaching on all of these areas.
- Silicon Valley hubris – The more cynical read on these investments is that a “VC is eating the world” mindset leads investors who know little about these industries to jump in and believe they can be successful. The clean tech experiment is often viewed in the same light. Furthermore, even if they can be successful, the argument against these investments is that these types of companies don’t provide the multiples on investment that VCs need to be successful in the eyes of their LPs.
VENTURE CAPITAL FINANCING TREND
In 2013, venture capital investments to food & beverage companies hit $146M across 35 deals. (Note: PE deals were excluded from this analysis.) Compared to 2009, funding and deal activity in 2013 to the food and beverage sector rose 123% and 169%, respectively. Among the companies in 2013 to receive venture capital financing were Maveron-backed NextFoods, Khosla Ventures-backed Hampton Creek Foods and Sequoia Capital-backed Hector Beverages.
As a testament to the rising interest by VCs in emerging food upstarts and brands, over half of the investments into private food and beverage companies in the past two years came at the early-stage. Seeded firms in 2013 include nutritional beverage maker Soylent and Highland Capital Partners-backed health brand Aloha. Series A deals since the start of 2012 include Balance Water and Google Ventures-backed Blue Bottle Coffee, which took a notable $25M Series B round earlier this year. Fewer than 20% of investment came at the late or growth equity stage.
FOOD & BEVERAGE VC INVESTORS
Below is a sub-section of active investors in the food & beverage sector since 2009 along with specific portfolio companies. Among the more bullish investors in the sector is Khosla Ventures (Vinod Khosla has been a public proponent of food startups), which has invested in five unique companies during the period including Hampton Creek Foods and Aloha. Also getting in on the action in “traditional” food & beverage companies are Highland Capital Partners and Sherbrooke Capital.
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