Focusing on investments in high-growth companies innovating in the field of food sciences and technologies, Tate & Lyle Ventures launched in 2006 as the venture capital arm of UK-based global food company Tate & Lyle, best known for its global sweetener manufacturing business. The company creates a wide variety of food products divided into two subsets: speciality food ingredients and bulk ingredients.
AgFunderNews recently had the opportunity to speak with managing partner Simon Barnes about Tate & Lyle Ventures, just days after the firm launched it’s second £30 million ($37 million) fund through the $9 million Series A round with Evolve BioSystems. Evolve is a company developing probiotic-based biotherapeutics to restore symbiosis in infants following pre-term birth or Caesarian-Section deliveries.
With a first class honors degree in Natural Sciences and a PhD in Plant Biochemistry from The University of Cambridge, Barnes is particularly well qualified to help Tate & Lyle’s venture capital arm identify cutting-edge opportunities for investment in the space. Prior to heading up Tate & Lyle Ventures, Barnes worked in the London office of Atlas Ventures and subsequently with GIMV Venture Capital.
How is Tate & Lyle Venture structured?
The structure of the funds is such that we are basically independent from Tate & Lyle. We came in during 2005 to help Tate & Lyle formulate plans for a venture fund and we launched the fund in April 2006. We are a team of three including myself, David Atkinson — working under the label Circadia Ventures — and Heather Roxborough. We are actually not employees of Tate & Lyle. We manage both funds independently from the corporate parent and we are structured basically like a regular VC fund would be, with an unlimited partnership arrangement with Tate & Lyle serving as the only limited partner. This means that investment decisions can be taken relatively independently driven by making a financial return and not hampered by the lengthy approval process to get deals done.
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This structure is key partly so that we can be independent from the corporate parent in the sense that when we talk to entrepreneurial small companies actually they sometimes are nervous about getting involved with a large corporate. The whole idea was to make the fund independent so that once we invest and join the board of that company, we are working for the company and not as a monitor for Tate & Lyle. We want to make sure that there are no strings attached to the investments. There are no rights of first refusal for Tate & Lyle over companies we back. If you come with strings attached, it is difficult to get into deals. I learned that from a previous experience.
How does Tate & Lyle Ventures fit within the larger Tate & Lyle corporation?
The funds are part of a bigger open innovation program. Tate & Lyle has an extensive open innovation program which includes links to universities, licensing of tech collaborations, and the like. The VC fund is an element of the open innovation mix. It’s another way of looking at the technology that is happening in the industry, a window on the world, and another way of looking at deals and seeing what’s going on. We talk to different networks of people than the licensing people do, so we are cultivating a lot of investment communication. We look at deals and invest in some of them, but on other occasions we find deals that might not be suitable for venture investment, but could actually be interesting licensing or otherwise fit with Tate & Lyle as a corporation. If both sides agree, we make the introduction.
What investment thesis do you follow when looking for potential deals?
Broadly speaking, we invest in food science and technologies around that sector, including nutrition. Everything from high-intensity sweeteners, which is the core of Tate & Lyle’s business, through to salt replacers and alternative sources of protein. We really focus on the food ingredients side, but also stretch out as far as diagnostic platforms that could help consumers manage their health and wellness. This allows us to look at all sorts of smart applications that can help consumers with diet and nutrition. With Evolve, for example, we spent a lot of time looking at the microbiome as a field. There is a lot of interest in digestive health and everything that emanates from it.
What are some of the portfolio companies in Tate & Lyle Ventures Fund I?
The firm’s first £25 million venture capital fund is now fully deployed and in the process of making multiple strategic exits. One of the most recent exits we made was a U.S. company called Allylix, which developed a fermentation technology for developing and manufacturing flavors and fragrances. The company was acquired by Evolva, a Swiss-listed company, back in December. The fund also includes Fugeia, a Belgium based functional food tech company creating a wheat bran fiber and digestive health products. Cargill acquired the technology and corresponding intellectual property in February 2013.
What factors do you evaluate when considering whether to make an investment in a particular company?
At the end of the day, venture capital investors are interested in a certain subset of things. First, the potential to address really big global markets. You can think of Evolve in that sense; babies are born the world over. Their technology cuts across any culture whether its the U.S., Europe, Asia, or anywhere else. In every culture it’s the most important thing. So, we look for opportunities that have the ability to really make a step change in the global markets. If a company addresses markets like this, its a massive advantage.
Beyond that, if you can build your business on really strong fundamental science and protect it with well-developed intellectual property, that’s an important part of the story.
Also, a lot of VCs will also tell you that the team is the most important part of the story, and I think that’s absolutely right. But, when you’re an early stage company it can be hard to build a team. We look for, at the very least, the beginnings of a strong team or an individual or group of individuals who really understand the market they are in. In the case of Evolve, the chief executive David Kyle has been integral in the creation of Martek Biosciences Corporation, the company that made a massive impact on omega-3s and brought them into infant nutrition. We thought he had a fantastic set of experience in his field and absolutely has the vision to take this forward.
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