This VC firm has invested in buzzy food brands like Oatly, Beyond Meat, and energy drink Bai. Here's what they're looking to invest in next.

  • CAVU Venture Partners has backed a host of food, beverage, and wellness startups.
  • It’s expecting a surge of ideas from founders as society opens up after the pandemic.
  • Here’s what the cofounders, Rohan Oza and Brett Thomas, said they look for in potential investments.
  • See more stories on Insider’s business page.

If a new snack, beverage, or personal-care item has caught your eye in the last few years, there’s a good chance that Rohan Oza and Brett Thomas helped it get there.

The pair founded CAVU Venture Partners in 2015, but the list of companies that they’ve invested in reads like a who’s who of trendy food brands: In addition to names like Beyond Meat, Oatly, and energy drink Bai, they’ve taken stakes in brands from organic and natural online grocer Thrive Market to kombucha-maker Health-Ade to Jennifer Garner-backed baby- and kids’-food brand Once Upon a Farm. With a focus on broader health, they’ve also invested in a variety of brands that offer better-for-you products, from fitness trackers to Vital Proteins, a maker of collagen food and beverages.

Before starting CAVU, Thomas had experience in the finance world, working for a hedge fund and in private equity. Oza, meanwhile, brought his experience from the marketing world of consumer packaged goods, where he had worked on Coca-Cola’s Sprite and other brands, including Vitamin Water. 

Oza and Thomas spent months in early 2020 waiting to see how the coronavirus pandemic would play out. Thomas said that CAVU’s investments tend to come in waves, and for much of 2020, they didn’t see many brands that met their investment criteria. 

But now, as vaccines become more widely distributed, Thomas expects the opposite: a lot of entrepreneurs creating new pandemic-inspired products in the food, beverage, and wellness world. “Necessity is the mother of all invention,” he said. “Obviously, living through COVID, I think, is going to spur first-time entrepreneurs that we’ve never seen before.”

Across all industries, venture capitalists took larger bets on fewer companies in 2020, data from CB Insights showed. While US VC fundraising was up 14% last year to $130 billion, the number of deals fell 9%, Reuters reported. Funding rounds for companies in food, beverage, and related areas have clipped along, with online grocers such as Weee!, upscale convenience stores such as Foxtrot, and alternative protein-makers among the many companies that have continued to raise money.

Since last fall, CAVU has made several investments. Their latest picks include fitness tracker Whoop as well as chocolate-coated nut brand SkinnyDipped, according to Pitchbook. 

One key thing they’re looking for is a brand that’s either “a category creator or a fast follower,” Thomas told Insider.

A good example is Vital Proteins, which CAVU invested in back in 2017 and exited after Nestle took majority ownership of the brand last year. Besides money, Oza said CAVU provided guidance to Vital Proteins’ team, ultimately shaping its collagen products into a lifestyle brand “that almost became an accessory to beauty and personal care,” a move that “differentiated Vital from everybody else.”

Since then, many other brands have come out with collagen-infused products, which they often market as replacements for the human body’s own production of the protein. Collagen is the most common protein in the body and plays a role in keeping skin, hair, and other body parts healthy.

Collagen had been around for a long time before Vital Proteins, Thomas said, but the focus on branding and marketing helped make the category larger. “As great as it is to be a category creator, you also have the challenge of educating the consumer on what your product is because none have come before you,” he said.

That’s not to say that CAVU only invests in early-stage startups: Oza and Thomas said that their investments span seed rounds and late-stage raises. Oza calls CAVU’s approach a “Swiss-army knife of tools,” adding that the partners use their in-house agency to advise very young brands around packaging and branding while also working with more developed brands on landing a celebrity sponsorship. 

“We found that if we pick the right brands that are part of the right movements within health and wellness, we can provide as much value on early-stage companies as we can on late-stage companies,” Oza said.

Thomas met Oza while he was trying to make more connections in the CPG world. But his initial inspiration for focusing on better-for-you food, beverage, and wellness brands came while raising his first child, then an infant.

“I grew up in the Midwest on a diet of soda and chips,” Thomas said. “I saw what we were putting in his body, in terms of food, reading the labels, and making sure it was healthy as can be.”

“That was my ‘ah-ha’ moment about this whole health and wellness secular theme,” he added.

Source: Read Full Article