Founded by three established and successful industry veterans, including Orgain founder Andrew Abraham, RxBar founder Peter Rahal and consumer lawyer and founder of Giannuzzi Lewendon Nick Giannuzzi, Humble Growth has a massive $321m from which it plans to write checks between $10m to $40m for mid-stage innovative consumer brands. It also has an impressive roster of investors with lived experience who are ready to share lessons learned, including Nestle Health Sciences and the founders of Body Armor and Stonyfield Farm.
In this episode of FoodNavigator-USA’s Soup-To-Nuts podcast, Humble Growth founder and CPG lawyer Nick Giannuzzi shares what it takes to raise money into today’s economy, why money isn’t everything, the types of companies and products in which the fund is interested in investing and what the next two years will look like for CGP companies raising money. He also shares tough lessons learned and advice for surviving economic challenges.
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A ‘purposeful’ approach to fundraising and investing
The current capital squeeze is not only challenging for small and mid-sized businesses, it also reduces how much money limited partners are willing to trust to investment groups – especially first time funds, like Humble Growth, which makes its eye-popping $312m fundraise more notable.
The amount of money – and calibre of investors – speaks to the successes of Humble Growth’s founders and the realities of how much money it takes to make money in today’s environment.
Both were also purposeful, said Giannuzzi.
He explained, “To do a small fund just wouldn’t have made sense for us,” in part because they had enough experience between the three of them to know that it is “really, really hard” to pick which small businesses will succeed.
“Our thought process was that by having a big fund -- $300m plus fund – was that would allow us to write bigger checks at a slightly more advanced stage,” he said.
By targeting companies that make at least $20m in revenue, Giannuzzi said it is easier to establish if there is product-market fit, if the price point is correct, if consumers are loyal and there will be continued demand, and to review whether the data suggests the company will continue to grow.
How did Humble Growth raise so much money in a difficult economy?
While Humble Growth’s logic for establishing such a large fund is sound, the question remains – how did a first time fund raise that much money in one of the worst times to ever raise a fund? And how can small and medium-sized businesses do the same?
“We were successful … because we didn’t do it the typical way,” Giannuzzi said.
He explained that rather than go to the usual sources for money, such as family offices and pension funds, Humble Growth’s founders went to industry, including co-packers, founders, distributors and suppliers – the people who know what it takes to succeed in the food and beverage industry. And, because they now have money on the table, they have an interest in helping the entrepreneurs and companies in which Humble Growth invests.
“There [are] … 100 of us that are willing to help. And every single person who wrote a check … said, ‘Yeah, we’ll help. We’ll send you the deals we are seeing, we'll roll up our sleeves, we’ll help that founder and that management team, we will give you introductions,” Giannuzzi said.
Succeeding means being a warrior and a worrier
While Humble Growth has stacked the deck with LPs ready to fight for the entrepreneurs and businesses in which it invests, Giannuzzi eschews the adage that people – especially leaders – should be warriors and not worriers.
Rather, he says, successful entrepreneurs, including many of Humble Growth’s LPs, are both warriors and worriers – a combination that gives them an edge on competitors that are one or the other.
He explained that being an entrepreneur requires being fearless and having the courage to start a brand, but “unless you are a fool, you worry all the time. The odds are not so great. The chance of being successful is not so great,” and, so, “to be a great warrior … you have to be someone who worries because you go to sleep afraid and you wake up the next morning and you start the battle again. “
‘We really like … longevity and wellness’
While Humble Growth will heavily weight the experience and ethos of the founding team or entrepreneur behind potential investments, it also is looking for product-fit and brands that tap into real consumer needs and long-term trends, rather than fads.
“We really like … longevity and wellness. Why do we like? The same reason everybody else likes it – because it’s where people are starting to really focus a lot of attention,” he said.
Looking over the past 10 to 15 years, Giannuzzi said most of the successful fads and trends – even those that have spiked and settled – centered on improving consumers health. That central trend is here to stay, he said.
What is next for the food and beverage investment?
A self-proclaimed “glass-is-half-full” guy, Giannuzzi is optimistic about the future for Humble Growth and the broader CPG industry, even while he acknowledges the current investment challenges and the reality that the so-called “easy money” that was available pre-pandemic is unlikely to return to the food and beverage space.
“We see the slowdown. We certainly see the last two years has been lighter on M&A activity, which is sort of the driver and it trickles down,” but there is money available and interest, Giannuzzi said.
He added he believes the industry is a trough, but that it will re-emerge and “go through another really good time.”
While Giannuzzi says he is no economist, he says he hopes 2024 will be better and 2025 will be “really good.”