Expo East

301 INC shines light on what qualities in startups catch investors’ attention

By Elizabeth Crawford

- Last updated on GMT

Related tags Investment

Hardly a week goes by without a large food company snapping up an innovative food or beverage company or someone investing millions in a promising young brand – but for every entrepreneur who secures sufficient funds to scale, many more struggle to be noticed and succeed.

“It is an incredible time to be a food entrepreneur today. … The wind is at your back and there are so many things that favor rapid development of food brands,”​ says John Haugen, VP and general manager of 301 INC, General Mill’s new business development and venturing unit.

He explained to FoodNavigator-USA at Natural Products Expo East in Baltimore that the quickly evolving food culture has given rise to many accelerators, incubators and investment firms that are eager to help brands overcome many of the traditional barriers to entry. But, he acknowledged, there are still limited resources – forcing investors to choose only a few companies to fund.

“We talk to a lot of great companies, and sadly we can’t invest in every great company that we have the opportunity to meet,”​ he said.

He explained that the “emerging brand elevator”​ chooses entrepreneurs in which to invest by evaluating “three really distinctive factors.”

Factor 1: The Product

The first factor is the actual product.

“We really look for a remarkability factor. For that one that is really, truly memorable,”​ he said, explaining: “Think about when you go out to a restaurant and you have a really amazing meal … and how you are so eager to tell your friends that they need to go try this restaurant,”​ or when you see a product for the first time and you “instantly think about it and how you might incorporate it into your current routine.”

As an example he pointed to startup Tio Gazpacho’s drinkable soup sold in a bottle, which caught the attention of 301 INC during the company’s fund raise through CircleUp.

“The first time I tried this product it had all the ingredients listed on the back of the bottle and it was so fresh that it was one of those things that, while I was drinking it, I felt like I could taste each individual vegetable that was in the bottle,”​ Haugen said.

He added that Tio Gazpacho is a game-changing brand​ because “if you think about soup and the goodness of soup, the wholesomeness of soup, the nutrition of soup – soup is really a great meal occasion. But you know, it is sort of stuck in the bowl. And if you think about taking this and really making it a portable occasion and still be able to deliver a great nutritious product that is great tasting – we think it is exciting … and we are happy to support him.”​ 

Factor 2: A Sticky Brand

The second factor that 301 INC considers when evaluating possible investment opportunities is the “stickiness of brands”​ and whether they are memorable, Haugen said.

Part of this also is “the whole value proposition”​ and whether the brand can expand to include new forms and new segments and “stand for something maybe more broadly than the first product that came out.”

He pointed to Rhythm Superfoods​ – another brand in which 301 INC is invested – as a prime example. This company launched with a kale chip at a time when the leafy green was at its peak popularity in the US. But the brand didn’t stop with just the one attention-grabbing product. It expanded its portfolio to include crunchy, dehydrated broccoli bites, and most recently beet chips for healthy snacking. 

Factor 3:Good People

The final factor 301 INC considers when evaluating investment is the people, Haugen said.

“In those early stage businesses, often you are investing as much in the team running those businesses as you are the brand itself. And so it is really important that you understand and that we understand the motivations of the team, the skill level of the team, the expertise of the team and just more of the connectivity that we have,”​ he said.

He explained that 301 INC has a “very high engagement partnership model, so that not only do we deploy capital to fund expansion of these businesses, but we also tap into the capabilities and resources across General Mills to help enable it so the relationship we build with that leadership team is absolutely vital for us to be the indispensable partner that we want to be to help them grow.”

With that in mind, he added that he looks for people who have relevant experience that gives 301 INC confidence that they will execute their plan, people who are passionate and with whom the investors have chemistry and who have a sense of humor.

The future of food and beverage investment

Looking forward, Haugen predicts the breakneck speed of investment in food and beverage brands will continue because consumers’ “appetite”​ for these businesses and the products that they create shows no sign of slowing.

“We are in a generational transition – a turn over where people are really looking for new brands. They are looking for new food experiences and new brands and because of that, I think this pace is going to continue,”​ he said.

“We are really lead by the consumer, because ultimately the consumers are the ones who are going to pull it, and so what we are trying to do is just keep pace with that. And that is why we believe in the future of these brands and we love the pace of activity that sometimes seems daunting,”​ he added.

[Editor's Note: Learn more about what investors look for and how the big players are buying talent at Food Vision USA in Chicago in November. Hosted by FoodNavigator-USA, Food Vision is a must-attend event on the current state and future of the food and beverage industry. Register HERE​.] 

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