Launched last December by the industry veterans behind JPG Resources and RCV Partners, RCV Frontline is seeking to invest annually in four seed- and series A stage emerging brands with $1-5 million revenue run rates in the food, beverage and food technology space that want to bring their products to the largest audience possible.
As fund co-founders Andrew Reynolds and Erc Stief explain in this episode of FoodNavigator-USA’s Investing in the future of food, RCV Frontline seeks to help fill two emerging gaps – the first in operationally-focused funding for early stage brands and second around a shortage of innovation in coming years as ongoing fallout from the pandemic.
‘We saw a gap in that early stage’
Over the past decade, as more investment interest has targeted the food and beverage industry, many funds have grown and are looking for more developed companies that have a stronger proof of concept that can justify larger checks, Reynolds said.
“As that happened, I think we saw a gap in that early stage where there aren’t a ton of really operationally focused, experienced funds out there,” and RCV Frontline can fill that gap, he said.
Stief explained that RCV Frontline is well positioned to fill this gap because the founders all have experience operating or launching food and beverage companies, including finding financing, developing products, managing supply chains, manufacturing and brand building.
They also have experience working at large CPG companies, as well as many connections within those companies, that help them as they consider exit strategies, he added.
Large CPGs may be pruning SKUs now, but many still seek bolt-ons
RCV Frontline is comfortable investing in earlier stage companies than many venture capitalists not only because they have the lived-experience to spot winners and help course-correct companies early when needed, but because they see a significant demand by large players for new ideas in the coming years.
Reynolds explained that many large CPGs were built for low-cost, large-scale production based on the Ford model, which means they don’t have as much innovation experience or appetite for the risks that come with pushing the envelope.
He also noted that while many large CPG companies currently are pruning their SKU assortment as fallout from the pandemic continues, he predicts that many will need innovative new ideas in a few years because they haven’t tended to their R&D pipelines over the last year.
“We’ve seen some interesting things in the pandemic where the larger strategics have dialed back their R&D because people couldn’t’ get into the labs to work on those things, basically, and that may create a … heightened demand for innovation in a few years down the road where the brands that we’ve invested in today will” have grown and be ready to showcase their value, he explained.
Stief added that many large corporations are unable to push boundaries the same way smaller players can, and therefore they are “the hungriest” for really innovative ideas that gain consumer acceptance.
Four areas of interest
While RCV Frontline is open to investing in startups playing anywhere in the food, beverage and food-tech space, it is particularly interested in improving the omnichannel experience – whether through last mile deliver or product discovery. It also is looking for next generation products that offer functional benefits, a luxurious at-home experience or are plant-based.
Reynolds explained that the pandemic accelerated adoption of buying food online, but many consumers complain that discovery is difficult.
“So, now you’re seeing tons of curation platforms coming up, whether it be online shops or people trying to do pop-up concepts. But the idea of curation and bringing the bet products to consumers is something we are interested in,” he said.
Likewise, he said, RCV Frontline is tracking the evolution of functional foods and beverages as many of the high-impact ingredients once concentrated in beverage move into more foods and consumers begin to think of food as medicine.
The pandemic also created consumer demand for more luxurious experiences at home, such as meal kits or other ways to recreate restaurant dishes at home, which Stief says holds significant potential.
Finally, Reynolds noted that “anyone in our industry would be remiss not to mention plant-based products.” But for RCV Frontline the most interesting products in this space are clean label and less processed.
Entrepreneurs and startups that think they are a good match for RCV Frontline can reach out directly to the team through its website at www.rcvfrontline.com or connect on LinkedIn. And potential investors looking for exposure to the food, beverage and food-tech industries likewise are encouraged to reach out for more information about funding opportunities.