Butterfly’s debut fund closed on $520 million in June 2019. The firm says increased valuations for certain investments and a series of co-investment vehicles bring Butterfly’s total assets under management to “nearly $4 billion.”
The firm was founded in 2016 with a strategy focused on agribusiness and aquaculture, food distribution, food service, and food and beverage brands. Targeted subsectors include specialty inputs, high-value crops, functional products, healthy snacks, and protein-rich foods, along with natural and organic retailers, healthy fast food and franchised restaurant concepts.
Co-founder Adam Waglay told Agri Investor that Butterfly’s specialization on the entire food value chain has made it an attractive partner for food businesses, as well as the US and Canadian pension plans, sovereign wealth funds, insurance companies and funds of funds that provide the majority of its capital.
“We’ve also become a partner of choice for limited partners because we can give them a menu and say: ‘It would be nice if you invest in the fund, but beyond that, we will just show you everything and you elect in’,” Waglay explained. “That flexibility in creating your own risk/return structure is what’s unique about us in the framework of being a specialist.”
While most co-investment partners also have fund investments, there are some investors that only participate in co-investment vehicles, Waglay said. Whereas many GPs have rigid rules about when and how co-investment opportunities are distributed, he said Butterfly’s flexibility allows a strategic approach to selecting co-investment partners
“We have a really good partner model with some of the larger institutions that want to deploy capital in the space and can only do so much into a fund, but for a certain deal, when their team gets really excited about it, they can double down on specific areas of focus within our food strategy,” co-founder Dustin Beck told Agri Investor. “Some folks gravitate towards the upstream style deals, some gravitate more towards downstream, but it’s been really nice and bespoke to have partners that can come into a variety of deals and help us bat above our average.”
In November 2019, Waglay told Agri Investor that Butterfly’s investment into plant-based functional nutrition platform Orgrain was supported by a co-investment investment vehicle in which the largest investor was Ontario Teachers’ Pension Plan, investing alongside its flagship fund. In February, Butterfly sold a majority interest in Orgrain to Nestlé Health North America for an undisclosed price.
Waglay said the speed of Butterfly’s partial exit from Orgrain was more a function of the company’s performance than any effect of working with OTPP.
“We together with [OTPP] agreed, given the success in this business, we have to entertain some of these calls that are coming in. Strategics were calling us to try and buy the business. The IPO markets were hot. It just made sense to explore,” he explained. “Frankly, we were surprised that we did something. I just think Nestlé was willing to pay a price that was hard to say no to.”
Beck said all vehicles managed by Butterfly have committed 10 percent of net profits to a related foundation supporting non-profits providing food to people in need, in and around Los Angeles, including Food Forward, the Hollywood Food Coalition and ALMA Backyard Farms. The firm has also started fundraising for the Butterfly Equity Foundation, he said, from third-party philanthropic and corporate investors.
Butterfly is also applying for B Corp status as part of an effort to become the first GP to have attained the certification for itself and all of its portfolio companies, he added.
“It matters to the consumers, who are gravitating towards these better-for-you/better-for-the planet companies, but also for our LPs, to make sure we are great corporate citizens,” said Beck.
Butterfly’s portfolio includes Mexican striped bass producer Pacifico Aquaculture; Bakersfield, California-headquartered carrot and beverage supplier Bolthouse Farms; and farm-to-table restaurant chain Modern Market. In early August, Butterfly merged Modern Market with QDOBA after acquiring the fast-casual Mexican restaurant chain from Apollo Global Management for an undisclosed sum.