QnA with a Corporate VC turned VC on Food System Innovation and More
Behind some of the US’ most forward-thinking food producers is Boulder Brands, whom you may have heard of via brands such as Glutino, EVOL, Smart Balance and Udi’s. The public company was acquired by Pinnacle in 2015 as part of the latter’s shift toward a health and wellness strategy. After the acquisition, Boulder Brand’s corporate venture capital (CVC) arm rebranded to Boulder Investment Group Reprise (BIGR) and became independent. In late 2016, BIGR raised a $55 million fund to continue their investments in natural products startups.
AgThentic caught up with Duane Primozich, BIGR’s Co-Founder and Managing Partner, to understand the venture’s evolution and what is coming up for entrepreneurs in the food system.
AgThentic: What’s the story and background of BIGR?
DP: BIGR is a follow-up fund to our first fund, Boulder Brands Investment Group (BBIG). BBIG began as the CVC arm of Boulder. We had a robust M&A practice, and our goal was to set up a team that could de-risk entrepreneurs and connect them to this pipeline. We were able to leverage the intellectual infrastructure of the corporation to help entrepreneurs.
We never ended up acquiring any of the portfolio companies, but we ended up having successful exits, and it was a good financial play.
Once it was understood that Boulder Brands would be sold, Carole Buyers, Bill Weil and and I, the three partners, decided to raise an independent fund, with no affiliation with Boulder Brands or BBIG. We are still in the natural foods space and have the same investment thesis. But now we have Limited Partners (LPs).
AgThentic: I know you’re not a CVC anymore, but is there any downside to working with a CVC for a startup?
DP: For the startup, they have to be a little cautious: if it comes time to sell, and the strategic from whom they have received investment doesn’t want to buy them, then it can be a question mark for other investors or potential acquirers. Others might ask, “Why don’t they want to buy? What’s wrong or missing?” This never came into play for us, but it’s a reasonable fear.
AgThentic: What is your value proposition to the ventures you invest in?
DP: Today’s investment environment is a sellers’ market. Entrepreneurs can get money anywhere, but they are increasingly looking for a value-add partner. To add value, investors can sit on boards, add operational expertise, tap their networks of relationships and generally be a resource for the entrepreneurs.
A differentiator for me has been the relationships I create and maintain. I also mentor several entrepreneurs in whom I have not yet invested. Then, when it comes time for a raise, we’re already comfortable with each other. The entrepreneur doesn’t need to hire anyone to help with the raise, and I already know about the company and leadership. We can trust each other.
AgThentic: Do you co-invest or syndicate?
DP: We have both led and tagged-along. It really depends on the asset and who the players are.
For example, if you have a capital-intensive business and therefore need to raise a bit more money, it is helpful to have co-investors to spread risk for your investors and ensure they aren’t over-allocated.
Overall, we are more likely to co-invest with the investors we like and have worked with before. You need to be very selective in who you partner with. People matter, and relationships matter. If I’m tagging along, I have to trust someone else to have done diligence and really understand the business. If we don’t know the lead investors, we just say no.
AgThentic: What’s your view on the value of accelerators?
DP: No accelerator in food has emerged with the kind of success someone like a TechStars has had. None of them, to my knowledge, has a big win yet, but they will.. That said, accelerators are really great for inexperienced entrepreneurs: they can really help them with the basics. I like what the folks over at Accel Foods have been able to accomplish and I’d point to them as an example of a model that seems to be working.
AgThentic: Are startups making a pitch about sustainability? Do you want them to — is it compelling?
DP: We’re seeing more unique sourcing stories and cases where non-profits get a percentage of sales.
The key is that they have a sustainable business first. We love to see this as part of their DNA. So, really, they have to do both [business and sustainability] well. This is starting to become the ante to play.
For example, we invested in a company that gives a significant amount of money to a non-profit addressing human trafficking. The business itself was compelling, and they source from areas where trafficking is an issue.
AgThentic: What are some real challenges for entrepreneurs that you’re seeing, and what can startups do about them?
DP: Startups need to ask: am I solving the right problems? The data suggest that very few consumer packaged goods companies ever make it to $10MM in sales. The odds of success are stacked firmly against start-ups, so they need to seek every possible advantage. Help should be solicited from all corners and they should take particular care to surround themselves with at least a couple of folks that have done it before.
Entrepreneurs see successes, and lots of folks feel they can replicate it, but may not fully appreciate the challenge or understand the industry But the best young entrepreneurs seek out advice from anyone they can get to — accelerators, industry leaders, investors, whomever. Getting the right kind of advice is critical.
