About the author: Jordan Gaspar is the co-founder and managing partner at AccelFoods where she oversees deal origination, structure and investment execution on behalf of AccelFoods, as well as heads up strategy, investor relations and general management of the fund. She serves as a member of the Board of Directors of Element Snacks and Four Sigmatic, as a board observer to KidFresh, Koia, and SkinnyDipped, and sits on the AccelFoods Investment Committee.
Food has a strong social component. So it makes sense that investing in brands has also become community-minded, to the point where we have started to call it “cooperative” in nature. With a record amount of money flowing into the packaged food and beverage industry in recent years, and with a lot more to come in 2018, cooperation, rather than competition, is the rising tide. Here are some reasons why we anticipate that 2018 will be a landmark year of “Coopetition” in food and beverage investing.
Every successful founder will tell you that they built a strong community around them. This network offers founders a halo of believers who also bring their own sets of skills, knowledge, expertise, and passion to the table. Investors play a part in that community and have a responsibility to be a positive force in a rapidly changing industry.
“The Right Human Capital”
For any company, it is important to know what brings out the best in you and to seek partners that can work within those guidelines. Human capital is just as important as the money that comes with it. Thousands of new brands launch every year. They each go down a different path for financing. Some seek organic, profitable growth independent of investors. Other new brands raise discrete pools of capital from close knit networks. Many brands seek institutional capital from funds of varying shapes and sizes. As capital sources, funds are sophisticated and each has a different set of value propositions to offer a portfolio company. While some funds are proudly “hands-on” and others are by decree “hands-off” – each is articulate about their differentiation. Like the underlying food and beverage companies seeking capital, the funds each have a different flavor. Good funds will be accretive to the halo around a brand and bring new resources to the mix.
“From Competition to Cooperation”
Whereas backing companies was once about finding a great jockey on a challenger horse, it has become clear that investors need to be in the right race, on the right track, at the right time. For all of these elements to come together, the community halo needs to widen fast and bright around a brand, and the traditional practice of competition has quickly shifted into one of cooperation amongst the quality industry investors.
Historically, funds would only invest in companies once they hit a certain revenue threshold and hot deals came along just a few times a year. As one would imagine, there would be a rather strong competitive process run amongst a select group of funds. While this still does occur, and will likely continue, there has been a sea change recently of investors willing to modify how they operate. As more capital enters the market, investors are becoming more flexible in their parameters when evaluating brands on everything from check size, to stage of development, and the existing infrastructure in place.
“A Case for Coopetition”
At AccelFoods, we have always believed that it is critical for brands to build a community around them, which includes collaborative investors with complementary skill sets. Having invested in over 35 companies, and having co-invested alongside over 20 funds, in addition to countless strategic individuals and family offices, we have seen the power and efficacy of investor cooperation.
There will always be competition amongst funds – particularly at the later stage of the cycle – but the emerging growth stage of the packaged food and beverage investment landscape has different rules of engagement. We have learned that so long as there is true alignment on strategic initiatives, priority of infrastructure, and going forward execution, investors benefit from the widened band of the halo around any given portfolio company.
When working efficiently, investors are less likely to work against each other in any given category, competing for shelf space. Instead, we enjoy the potential of a larger, faster return on our investment than we might achieve independently as our companies can now have a higher likelihood of owning their categories.
As larger funds are dipping their toe further upstream in the investment process, they’ll soon discover that it is all about coopetition. Coinvestment allows for risk and reward to be shared amongst stakeholders. We are looking forward to 2018 being the year of the cooperative cap table.
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