David Barber, the storied owner of the Blue Hill restaurant, farm, and hospitality consulting mecca (a favorite of President Barack Obama and First Lady Michelle Obama), has long been an angel investor in startup companies.
Individually, he’s backed companies like Sweetgreen, the fast casual farm-to-table restaurant chain, that share Blue Hill’s focus on sustainable products and socially responsible businesses, and now he’s institutionalized that investment approach with Almanac Investments.
The new $30 million investment fund will look to back companies that are developing products and services that improve the food and hospitality industries — a thesis that could include everything from a WeWork for food preparation, to enterprise software for the restaurant industry, to new consumer food companies.
Indeed, Almanac has already made investments in all three areas. The firm’s first investments are Pilotworks (the WeWork idea), Nona Lim (a new, organic food brand), and Bluecart (an enterprise software tool for resource planning).
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For the past several years there’s been a steady push of venture investment into the consumer packaged goods industry and more broadly into food and agriculture. The results have been as mixed as a hand-squeezed bag of Juicero fruit blend.
While Juicero has become a punching bag for everything wrong about Silicon Valley’s forays into food, the industry is facing real pressures that technology can help to fix.
For restaurants the cost of labor keeps rising and that will continue to squeeze margins for businesses that are already on a razor’s edge between profits and losses. Barber says that technology has to be adopted to keep operational costs down as everything else rises.
And food production is also being stretched to its limits as an increasing global population becomes increasingly wealthy, moving to diets that include more meat. Climate change is increasing the scarcity of arable land which will force farmers to do more with less, while responding to increasing demand for more, and better, kinds of foods.
Finally, consumers tastes are changing, which presents an opportunity for new brands to come to market with products that cater to the new needs of more health conscious consumers.
“There’s no brand today that has the same trust that my parents had in Quaker Oats,” Barber tells me. The relationship between the consumer and marquee brands of the 20th century has been eroded to the point where new entrants can come in and create that old brand magic with a new audience, he says.
Joining Barber in the hunt for transformative technologies for the food industry is Zoe Feldman, a former Blue Hill intern, who went on to jobs at PepsiCo (where she worked on launching a venture investment strategy), and Cleveland Avenue, an early stage investor in consumer packaged goods companies based in Chicago.
Barber’s firm isn’t the only one to recognize these changing market needs. Indeed, Barber serves as an advisor to Acre Investments and S2G Ventures, which both look to invest in companies that are tackling these issues.
Indeed, the investor ecosystem for these types of firms continues to expand. Late last year, CircleUp announced a $125 million fund to focus on the area as well.
“We do see a lot more capital coming into consumer today than we did five years ago. That both excites me and scares me,” says Ryan Caldbeck, CircleUp’s founder and chief executive. “Our mission is to help entrepreneurs to thrive. Having more capital come into the sector is a wonderful thing when it’ s done in an appropriate and prudent way.”
As competition increases, it’ll be interesting to see whether the market can bear the infusion of so much capital, or whether it will create unreasonable exit expectations for young companies.
So far, there’ve been a few successes coming from consumer investments. Blue Bottle Coffee, a silicon valley darling, was acquired by Nestle for more than $700 million. And many investors point to the instructional story of RXBAR, which raised no outside capital since its 2013 launch and was sold to Kellogg for $600 million.