Renewal Funds may not be the most well-recognized investor on the food scene, but its portfolio certainly catches attention. The Vancouver-based impact-focused, venture capital firm, which now has C$240 million in assets under management, boasts wins like dairy company Stoneyfield Farm, which was later acquired by Danone, and meat alternative company Sweet Earth, which sold to Nestle in 2017.
Renewal Funds isn’t exclusively a food-focused investor; it invests in consumer products and environmental technologies spanning food, agriculture, transportation, water and energy. About half of its portfolio is comprised of food and agriculture ventures though, and their common trait is that they emphasize earth-friendly products and business models, Paul Richardson, Renewal’s managing partner, told AFN.
“There are a lot of brands that are good for you, but if you look at the carbon story and packaging, they’re not so good for the planet,” he said.
Favoring organic, waste-conscious companies over “health food” brands is how Renewal differentiates its food thesis from other investors in the food scene. And now, with C$145 million in dry powder ready to deploy from its fourth fund, the firm will double down on that thesis.
Timing is everything
Renewal Funds’ investment track record dates back to the mid-1990s, when it was Renewal Partners, a Canadian family office. Wanting to spur the social business movement, Renewal launched a venture fund to be able to deploy more capital into early impact companies.
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Its timing wasn’t ideal. Renewal launched its first fund in 2008, right as the financial markets collapsed.
By 2010, the firm managed to scrape together C$35 million for what it called Renewal2, and deployed the capital across 11 companies, five of which it has exited.
“The timing was terrible,” Richardson says, reflecting back. “But the portfolio performed well, so we went back to the market for Renewal3 in 2013.”
That fund raised C$63 million and closed the following year. It is now fully deployed and already has two exits.
Renewal only planned to raise C$100 million when it launched Renewal4 last year. It ended up closing on C$145 million, having had a markedly different fundraising experience from its first fund. Richardson chalks that up in part to a better economic environment and to greater momentum behind impact investing. But he also touts Renewal’s diligence.
“We have been very deliberate in growing a strong team. Renewal invests a lot in its people, and we will continue to do that with Renewal4,” he says.
Growing its team will enable Renewal to look at more opportunities, and expand its reach into niche sectors that other investors steer away from, like public transportation tech, water and agrifood tech.
On the agrifood front, Renewal will continue investing in food products, like snack company Prana, which it backed with Renewal3. The firm has re-upped its commitment to Prana from Renewal4, and has two other food deals in the works: one with an alternative dairy company and another with an alternative protein company.
It also wants to expand more into the tech domain, hunting for opportunities like food traceability software company FoodLogiQ—a Renewal3 portfolio company.
Is bigger better?
Richardson is aware that having a significantly larger pool of capital to deploy could dilute the firm’s thesis. “There is, of course, worry that raising a larger fund will change who you are. But I don’t think we will,” Richardson says.
Renewal’s team is attuned to trends in the food sector, like alternative proteins, but also to hype… like alternative proteins.
“It’s a hot area for people to invest in, but some of the valuations don’t make much sense for our business model,” says Richardson.
Renewal was an early investor in Canadian plant-based meat company Sweet Earth, backing the company’s Series A round in 2014. That was before the current “flurry of activity” in alternative proteins, says Richardson. Renewal will continue to look for opportunities in the sector with Renewal4, but will focus on companies that seek investors with a long-term view rather than an eye for fast, exponential growth.
“I’m thrilled that so many people are starting companies in this space. But we look for ones that have been around longer and want to partner with long-term actors like us,” Richardson explains.
Commitment to positive environmental impact is also a prerequisite. Renewal was pleased with Sweet Earth’s tracking and reporting of metrics like carbon and water saved compared to livestock products, for instance.
“But here is a huge variety of people tackling alternative protein in different ways. Some have ingredient lists that we would not be interested in investing in,” he notes.
For Renewal’s two pipeline food deals, Richardson says they are both run by entrepreneurs who are “true to their missions.”
“And they have built the companies to a state where they have real brands that we can properly kick the tires on,” he adds.
That includes taste testing, of course, which Richardson describes as one of the “best parts of the job” of investing in food companies. “The taste factor counts for a lot! If you don’t love it, you don’t want to invest in it.”
Renewal4 closed with backing from 140 investors, including repeat investors as well as institutional investors like the Business Development Bank of Canada and insurance cooperative The Co-operators.
“We are pleased to partner with Renewal Funds as we believe innovation in the environmental and sustainable food/consumer sectors are promising areas of growth globally,” BDC Capital’s vice president Alison Nankivell said in statement.