BFG Partners launches third fund of more than $100 million to support healthy consumer products

Colorado-based VC Boulder Food Group (BFG) Partners is a prominent backer of a variety of food and beverage pioneers, including prebiotic soda Olipop and cauliflower pizza crust maker Caulipower. I started investing in the second fund.

The company says it will continue to focus on healthy, sustainable consumer brands with core check sizes varying between $3 million and $5 million, from seed to Series B. So far, BFG has achieved 70% of the new fund’s $125 million goal. Previously he had two funds each with $54 million and his with $108 million.

“We are fortunate to have the opportunity to continue supporting the health and wellness ecosystem with Fund III,” Tom Speier, founder and managing partner of BFG, said in a statement. “We know first-hand what a difference growth capital can make to young companies competing for market share, and we are honored to share the learnings of the past decade with the founders we will partner with in the future.”

Identify category predecessors

Since its founding in 2014, BFG has amassed a portfolio of high-growth businesses, many of which are market pioneers. For example, Olipop accounts for more than 60% of the gut health-focused soda market in the United States today. [Nielsen data], was BFG’s first investment in its second fund. Caulipower accounts for more than half of the cauliflower pizza dough category in U.S. grocery stores. forbes Previously reported.

Aside from assessing profitability and consumer impact, many of these investment decisions were made after building long-term relationships with founders, said Dayton Miller, another managing partner at BFG. he said, recalling how the company turned down Obi and Ben Goodwin of Obi, a probiotic soda company. David Lester started and sold businesses within three years before he launched Olipop.

“We actually took over Obi, and the real lesson we learned was that the game is a long game and relationships are important,” Miller told me. “So 18 months later, when Olipop launched, when their revenue was less than his $1 million, it was much more comfortable for us to get into their business early. ”

“You never know how fast the consumer market is evolving, but we’ve always believed that Americans need more fiber and less sugar.” added Miller. “Awareness is a big driver of trial and repeat purchases. And we saw something similar in other categories, such as early Chameleon Cold Brew Coffee (acquired by Nestlé and later sold to System Foods)” .”

The same investment theory is applied to BFG’s other portfolio brands, from Mid-Day Squares and Bobo’s to Athletic Greens and Fourth & Heart Ghee, which together contribute to the fund’s 30% IRR, Miller said. He is said to have contributed to achieving the above.

With Fund III, BFG plans to expand its investment space into personal care while continuing to focus on businesses that deliver high profitability and capital efficiency. “There is no one-size-fits-all strategy forever. You need to segment your strategy based on the opportunities that are set relative to the competition in your space,” Miller said.

Secondary market overheats

BFG declined to comment on potential exits from the pipeline, but noted how the secondary market is heating up, with shareholders cashing out illiquid shares with outside investors. This could provide a new path to liquidity for consumer goods-focused funds going forward.

“When we launched Fund I, there were only three main paths of exit: financial buyers, strategic buyers, and an IPO,” Speer said. The secondary market is now mature, and the consumer business has expanded significantly over the years. The main factor is the recent slowdown in IPOs. The cumulative value of securities sold through U.S. IPOs in 2023 was $15.76 billion, down from $20.91 billion in 2022 and significantly higher than $286.86 billion in 2021, according to S&P Global. It went below.

“This is a result of private markets being around longer and venture/PE becoming a more understood and accepted asset class. Naturally, if that happens, markets will become more efficient and more Buyers and sellers will emerge and meet,” Miller said in an email. “Also, as companies across all sectors remain private for longer periods of time (for a variety of reasons, including COVID-19 and reporting flexibility), it is natural to see increased interest in the secondary market. ”

Miller continued, “In the long run, the system works best for all stakeholders: brands, investors, and employees. A healthy, active secondary market provides liquidity through means other than listings and sales. We look forward to demonstrating that we can secure this.” The whole business. ”