Investing in the Future of Food: VMG Partners raises $850m to invest in CPGs with potential to be iconic

10-Mar-2021 - Last updated on 28-Sep-2021 at 14:25 GMT

Known for its strong track record of helping emerging brands, like KIND, Bare Snacks and Spindrift, become household names, private equity firm VMG Partners is on the lookout once again for new investment opportunities after securing $850m for its Growth Fund V.

As in the past, VMG’s Growth Fund is seeking “a small handful” of early- and later-stage consumer brands in the food & beverage, wellness, beauty & personal care and pet sectors that support consumers on their incremental health journey and which hold the potential to become iconic brands.

To learn more about what it takes to catch VMG’s attention and how it selects and works with entrepreneurs to build powerful brands and strong businesses, VMG’s General Manager Wayne Wu joins this episode of FoodNavigator-USA’s Investing in the Future of Food.

‘We focus on spending time with the ecosystem of entrepreneurs, founders, retailers & industry’

VMG’s secret to consistently uncovering and cultivating breakout brands, according to Wu, starts with its passion for supporting and participating in the “ecosystem” of entrepreneurs, founders and retailers over time – not just “deal hunting.”

“A lion’s share of the investment industry is extremely focused on a day-to-day basis of finding next week’s deal, quote-unquote. And as a result, they’re not really building an ecosystem. They’re essentially just deal hunting. And as a result, they’re have to quickly make decisions” with limited information, Wu said.

VMG, on the other hand, follows a “slow is smooth and smooth is fast” approach in which it focuses on “spending time with the ecosystem of entrepreneurs, founders, retailers and industry,” Wu said. This allows the team to find entrepreneurs with a pattern for delivering on promises and who have great data stories.

In addition, Wu says, VMG places a strong emphasis on a company’s business model, supply chain and overall team.

Finally, Wu says, VMG looks for businesses that share its vision, which is less focused on macro trends and more focused on entrepreneurs’ creativity and ability to spot and solve for emerging consumer challenges and needs.

“As an example of that, we invested in Vega years ago before people used the term plant-based. For us, we invested in Vega because it’s clean nutrition,” and we were really excited about what the founders were creating and that consumers were voting for their products with their wallets, Wu said.

“It was through our ecosystem building of meeting interesting entrepreneurs who saw opportunities that nobody else saw,” that we found Vega and many of the other companies in VMG’s past and current portfolio, Wu said.

Trusted partnerships

Part of what allows VMG to take its “slow is smooth and smooth is fast” approach is the patience and trust of its limited partners.

“We have a very long-standing, supportive LP base that has for the large part been the same group of people who invested behind VMG since our first fund. And they trust our judgement to invest capital at a prudent pace. And so for us, we’re never in a rush. For us, we want to partner with entrepreneurs and founders that we think have a real differentiation,” Wu said.

“So, for us, that could be zero investments in a given year or it could be many for us. It’s not about quantity, it’s about the right partnerships,” he added.

“We want to support and help every entrepreneur”

VMG’s patient approach to investing also allows it to cast a wider net than expected by many entrepreneurs, some of whom Wu says unnecessarily “self-select their way out of VMG,” even though the firm has plenty to offer everyone.

‘We want to support and help every entrepreneur. We’re not going to invest in every single company, but it doesn’t mean we can’t and won’t help,” he said. “So, we always encourage every entrepreneur, founder to reach out to us at VMG.”

That includes entrepreneurs from all walks of life, according to Wu, who stresses that VMG is dedicated to diversity and inclusion.

“We’ve also been very passionate about helping drive diversity in the space” from day one, Wu said. “Our head of talent, Cassie Nielsen, she has played a big part as the executive director of the Women on Boards Project, which helps support female representation on CPG related boards in the space. And so, its another area of passion for VMG.”

Successful exits

In addition to closing Growth Fund V, which brings VMG’s assets under management to about $2.6b, the firm announced it has substantially exited all of its portfolio companies in its first three funds in less than 15 years as of the end of 2020.

Part of this success can be attributed to VMG offering more than capital – it also offers expertise and mentorships to help grow, and in some cases redirect, businesses to a more profitable future.