The fund, which has already invested in high-profile brands including Thrive Market, TerraVia, Rebbl, Hail Merry, Treasure8, Juicero and Hampton Creek, is looking to partner with entrepreneurs that are “helping to re-architect the food system to deliver better nutrition in more sustainable and ethical ways by leveraging the power of plants,” Boylan told FoodNavigator-USA.
“But we’re not being didactic about it. For example, we’ve invested in Thrive Market, a great company, and while the vast majority of the revenues come from plant-based products they do have a paleo offering [Thrive sells EPIC meat bars for example].”
80% of customers at Veggie Grill are meat eaters
And if you think about ‘plant-centric’ [as opposed to 100% vegan], the market opportunity is huge, said Boylan, who noted that 80% of the customers at Veggie Grill – the vegan fast casual chain he co-founded 10 years ago – were meat eaters, but that per capita meat consumption is falling in the US, and people are not necessarily eating meat at every meal anymore.
“Our same store sales are up 12% - and it’s not because there are more vegans or vegetarians, but it’s because people are looking for clean, tasty food and they are thinking more about what they are eating. We eat there all the time and almost never run into a vegetarian! It’s driven by meat eaters, particularly Millennials, who are just more mindful about what they are putting in their bodies.”
‘We’re the first fund of any scale that’s only looking at plant-centric solutions’
Powerplant Ventures was first conceived in late 2014, and launched in early 2015, he said. But in the beginning, the partners were investing their own cash.
“Setting up a first time fund is extraordinarily difficult, no matter how successful the partners have been individually; institutional investors want to see how the team works together, and it can be a mind-numbing slog, so we’ve been very fortunate that we’ve been able to close $42m.
“We’re the first fund of any sort of scale that is only looking at plant-centric solutions in food and beverage and we’re getting a lot of calls from people that want to work alongside us because they know we have the deal flow, the contacts and the ability to vet these companies.”
Three buckets: Fast-growing better for you brands, paradigm changers, and early stage firms seeking seed capital
So where will the money go?
“We’re breaking things down into three buckets,” said Boylan. “About 70-75% of the fund will be in next wave better for you food and beverage businesses that already have traction, they have revenues of around $1-10m – so they are still fairly small, but they are growing at least 30% year on year and have a capable management team – brands such as Rebbl, which we feel is just a category killer.
“The next bucket – 20-25% - will be on 'paradigm-changers,' companies at the intersection of food and technology that are disrupting existing categories or creating new ones. Think of companies like Hampton Creek or TerraVia.
“The final bucket – around 5% - will be seed capital – in really early stage companies, think of brands such as Treasure8, where we’re looking at writing a $250k check, whereas we’d normally be looking to put in around $2m-$4m.”
Aside from offering a capital injection, the Powerplant Ventures team will help entrepreneurs develop their strategy, branding, teams, and operations, added Boylan, noting that all of the partners know what it means to build a successful brand from nothing.
Meal kits and cultured meat likely not on Powerplant Vetures' menu
But what’s not on the menu at Powerplant Ventures?
One thing the fund won’t be investing in is cultured meat, said Boylan. “It’s a very ethical way to create meat, as you’re not killing anything to create that burger, but it’s still meat.
"However, we are interested in what companies like Beyond Meat, Impossible Foods, Ripple Foods and Hampton Creek are doing and I think companies at that intersection between food, technology and agriculture are only going to grow.”
Another category of business that has not – so far – captured his imagination, is meal kits, he said.
“We’ve said no to every meal kit company that’s approached us so far because it’s just so capital intensive, it’s so competitive, the retention rates seem low and it creates so much waste. It just feels a bit bubblish. So there’s going to be a shakeout.”
Are meal kits a good investment? Head to Food Vision USA 2016 in Chicago on November 9-11, to hear from experts at Sonoma Brands, CircleUp, Rabobank, General Mills 301 INC, and Honest Tea founder Seth Goldman.