Seed 2 Growth (S2G) Ventures’ Fund 1 still has about 80 percent of its $125 million raise available to deploy over the next 3 to 5 years, according to its managing directors.
The fund closed in June 2014, but its managing directors, Sanjeev Krishnan and Chuck Templeton, said they wanted to wait to announce the fund until it had a portfolio which represented its strategy of investing in companies at various stages of development and points on the value chain for healthy and sustainable foods.
It currently has investments in eight companies from producers to restaurants and apps.
“We wanted to build a team and make investments that … show a validation of [our] thesis, and really speak to the thesis more through our portfolio companies. I think the eight we have really do a good job of showing where the consumer is going in the food system, and how to feed the new consumer,” said Krishnan.
The firm is backed largely by family offices and other typical investors in first-time funds, according to Krishnan and Templeton, who describe the investor pool as “mission-aligned”.
“We’re hopeful that Fund 2 and Fund 3 will have more institutional capital coming into the fund,” said Krishnan.
Templeton explained that syndication has been a major part of the fund’s strategy to build and de-risk a diverse portfolio. He estimated the ratio of syndication capital to S2G’s investments at about three to one.
S2G believes shifting consumer tastes toward “identity food” like certified organic, non-genetically modified and health-conscious ingredients is a trend rather than a fad.
“The largest buyer of organic products is now Costco,” said Templeton. “They just passed Whole Foods. When Costco is your number one seller of organic product, they’re not selling to the upscale consumer necessarily. They’re selling to the value-conscious family.”
The firm intends to build robust supply chains, as it sees the lack of these in the space as a barrier to rapid growth.
The portfolio companies are: Beyond Meat, a meat substitute producer; Maple Hill Creamery, which makes dairy products from grass-fed cows; Mercaris, an online marketplace with an organic focus, Midwestern Bioag, which promises better farming through better soil; MycoTechnology, which uses fungus to remove bitterness; Shenandoah Growers, which supplies herbs from climate-controlled farms; ShopWell, an app which lets consumer shop according to their health and welfare goals, and SweetGreen, a fast casual restaurant.