Arlon and Rabo-backed Boulder Food Group closes second fund above $100m

Boulder Food Group, a venture capital firm including Arlon Group and Rabobank among its investors, closed its second fund on more than $100 million.

Boulder Food Group II raised $103.3 million from 57 investors since its first sale in November 2018, according to regulatory filing this month.

Founded in 2014, BFG pursues minority growth investments in early-stage organic, non-GMO and healthy food and beverage companies with at least approximately $1 million in annual sales.

The firm’s current investments include non-GMO and organic products brokerage Green Spoon; cauliflower-based snacks provider Caulipower and Ohi, which offers plant-based bars derived from non-GMO ingredients including flax seeds, mushrooms and algae. One of its former portfolio companies – Austin, Texas-headquartered coffee provider Chameleon Cold Brew – was sold to Nestlé for an undisclosed amount in 2017.

Managing partner Dayton Miller told Agri Investor BFG closed its first fund on $54.4 million in 2015 and a majority of those investors also committed to Fund II. Miller declined to disclose return expectations for Boulder Food Group II.

In addition to substantial commitments from Arlon Group and Rabobank, Miller said, the remainder of the capital was raised from high-net-worth individuals and family offices.

“Every investor looks at who is already in a particular deal and looks to them for guidance,” Miller said. “If there is ‘smart money’ there, hopefully that gives comfort to people – who may have made money in real estate or retail or something else – to invest alongside.”

In addition to providing comfort to investors that might otherwise be reluctant to endorse a firm without a long track record, Miller said consultations with Arlon and its parent company Continental Grain have played a role in BFG’s product development and planning efforts.

“Supply chain and production is certainly global and competition is global,” said Miller. “Allowing us to elevate and have macro conversations – whether it is about the supply of cauliflower for one our investments or grass-fed butter for another of our investments – Arlon and Rabo have been fabulous partners in that regard.”

Miller said BFG’s relationship with Arlon has also included collaboration with Continental Grain’s Continental Ventures arm and an exchange of potential deals.

“Since we are such a targeted fund, we see a lot of companies that are not a fit – whether it’s food tech or more supply-chain driven, or other things – we certainly pass those along to our partners. Arlon sees a lot that is not a fit for them, and they pass it along to us,” Miller said.

Past investments by BFG, which maintains offices in Boulder, Colorado, and Los Angeles, have ranged from as little as $250,000 to more than $10 million, according to Miller, who added plans call for BFG to make between 10 and 15 investments from Fund II.

Miller said BFG uses outside firms to gather data measuring factors such as customer retention, brand affinity and the ability of existing brands to extend into new categories and product lines.

Asked to describe trends currently of interest to the firm, Miller highlighted that the recent Expo West Natural Products trade show in California demonstrated how many start-ups are currently focused on CBD-enhanced offerings and a wide variety of dairy replacements.

“Both of those trends are real, but picking the winner among the sea of competition is what we are paid to do,” said Miller.