We sit down with Alicia Robb, a managing partner at Next Wave Impact, an early stage venture fund, to gain insights into the investor perspective on food start-ups. She is a Visiting Scholar with the University of Colorado at Boulder and the Federal Reserve Bank of Atlanta, as well as being the author of several books on investing in women-run and minority-run companies.
We ask her what she looks for in a food entrepreneur, as well as her take on diversity in investing and the future of veganism.
Fund Manager + Angel Investor
Next Wave Impact
Rockies Venture Club, Social Venture Circle + GlassWall Syndicate
What is your approach to investing?
I’m a fund manager for Next Wave Impact and an angel investor, with membership in several angel groups including Rockies Venture Club, Social Venture Circle, and GlassWall Syndicate. So my focus is really on impact companies, and I have a particular interest in investing in vegan companies.
I am primarily involved in early-stage investing—at the seed-stage and some at series-A. With our fund, we have done some later-stage Series-B investment, including Kuli Kuli, a new moringa company. But typically, we are looking at early-stage companies with some traction. These are companies that are starting to take their first outside money—ones that have a paid pilot or some paid traction through customers.
What are you looking for in a company when you are considering an investment?
When I’m investing other people's money (as a fund manager), there are different criteria I look at. With the fund, we’re looking for a couple things: One, a company with solid team that ideally has some experience previous to this startup. Secondly, and more importantly, we are looking for a company that can really scale. We are evaluating the total market potential and looking for something that is more than just a mainstream lifestyle business or a restaurant—a company that could really scale up and get into global markets.
What are some types of businesses and food trends that you see having this kind of potential?
This is a great time to be in sustainable food! There is more and more demand for companies with organic, clean ingredients. Those kinds of products are in high demand, and as such, there is a high level of activity in the acquisition space. Remember—as investors, we only get paid when our companies go public or get acquired. So we’re looking for companies that are going to scale to that level and would most likely get acquired by a larger company. It’s a great time to be a sustainable CPG company in this space due to this acquisition interest.
We are also particularly interested in products with sustainable packaging. Right now, one of the struggles that I have when evaluating a business is that their packaging isn’t sustainable. As an impact investor, I can’t justify investing in a company with packaging that doesn’t fit those values. Many products come in single-use plastic, and so I have to pass on them as investments because it’s just not sustainable in the long-run.
So what types of companies do we see potential in? Obviously, we can look at Beyond Meat as an example, which is going to be doing an IPO. They have clearly shown that there is a scalable and large market for their products, plant-based protein alternatives. Right now, we are looking at everything from jackfruit to moringa powder, which have multiple uses. Kuli Kuli, for example, makes moringa protein powders and moringa bars, but are also looking to be a wholesaler to other products that may use moringa. That means that they have a lot of different revenue streams.
Companies that are looking at food service as entry into the market is also intriguing to us. This is mainly because this area is not as saturated as the retail market. Consider all of the outlets in food service—schools, cafeterias, universities, and hotels. Going wholesale to those kinds of outlets is interesting. Especially schools, elementary schools and high schools, where the food is so bad and largely non-nutritious. If we can see opportunities for kids to eat better, that’s interesting to us. So if a company can develop a following and a brand loyalty in the food service space, then there’s potential there as well.
Do you see a challenge with companies that have one impact focus (responsible labor policies or sustainable ingredients, for example) but aren’t considering all of the other pieces?
Yes—when we’re looking at impact companies for the fund, we are looking for [values] that are built into the company DNA. So if it’s just one component, like labor, the question becomes: how do we guarantee that the impact is going to be sustained beyond acquisition? If it's not something that is integral to the company’s DNA, then there isn’t a way to guarantee that the impact is going to be a permanent fixture. Whereas, if everything about the company focuses on sustainability and fair wages and impact, and it’s built into the company culture, then we know that this is something that is fundamentally making the company successful. It is far more likely to persist after acquisition.
This attention to company culture also gets you away from the problem of greenwashing.
There has been so much greenwashing among food companies that people are now digging deeper to make sure [impact] is an integral part of the company, and [greenwashing] isn’t really going to fly anymore. At least ideally.
You’re written two books: A Rising Tide: Financing Strategies for Women-Owned Businesses and The Next Wave: Financing Women’s Growth Oriented Firms. Tell us a bit about the advantages of investing in women-owned companies—what are the challenges or opportunities there?
My research and work has been focused around both women and minorities in terms of entrepreneurship and investing. In fact, my impact fund is really a way for us to drive diversity in early stage investing—the fund investors are 99 women, 25 women of color. We are focused on finding entrepreneurs that are under-represented, including women-led companies and minority-led companies. I think [these types of companies] are a real opportunity. There is research that shows that people only invest in things they have a personal need for. So, if most of the investors on that side of the equation are white males, they are only going to fund what they see value in. You miss out on other perspectives and potentially valuable opportunities.
There is a phenomenon called homophily—people tend to spend time with people that look like them, or are similar to them. In that way, people also start companies with people like them, and invest in companies like them. So one of the reasons why most funding goes to white males is due to the [simple fact that] the funders are white males. By driving diversity on the investor side, we’re going to see more diverse entrepreneurs get funded. For that reason, our current portfolio with the impact fund focuses on women and minorities, and we hope to bring a wider perspective in what is valued, and ultimately, invested in.