Siddhi Capital “deploys capital as it is raising capital” and has already invested in packaged food and beverage brands Mid-Day Squares, Magic Spoon, Momofuku, Aura Bora, Immi and MUD/WTR, meal delivery service Thistle and food-tech companies Liberation Labs, Plantible Foods, Ark Biotech and MycoTechnology as part of its Fund II, Melissa Facchina, co-founder and general partner at Siddhi Capital, told FoodNavigator-USA.
Siddhi Capital was founded in 2020 — raising $70 million for its first fund the same year — as a joint venture between Facchina’s operations firm, Siddhi Ops, and the family office of Brian Finn, former CEO of Credit Suisse, USA. Brian Finn and his son Steven Finn are both co-founders of Siddhi Capital, with Brian Finn also serving as chairman for the firm.
The firm focuses on growth-stage CPG brands providing restaurant-quality foods and beverage that appeal to a wide swath of the population and food-tech companies creating novel ingredients and addressing food-manufacturing challenges, Facchina shared.
Siddhi Capital’s investment portfolio consists of approximately two-thirds of CPG food and beverage brands and one-third of food-tech companies, she added.
“We have been deploying over the last 18 months that we have been raising, and what we generally care about ... [is scale]. I appreciate that there are niche brands and products out there, [but] ... they are likely not investable for Siddhi because what Siddhi cares about is solving mainstream mass-market consumer desires with what I like to call non-intimidating product profiles,” Facchina said.
‘The investor [and] investee dynamic ... is completely broken’
Over the last several years, many CPG startups struggled to grow their business during the COVID pandemic at the same time VC funding has dried up.
Additionally, many VC investors who entered the food and beverage space “do not understand the practical application of growing a CPG business, so they are putting impractical acts on these companies,” Facchina said.
“One of the main reasons I launched Siddhi Capital is I am very passionate about reinventing the investor [and] investee dynamic — it is completely broken. ... We all should be incentivized to go in the same direction, which is building a business and selling it — that has not happened. It has turned into — in many cases — investor versus company, where we have companies and management teams who are afraid to tell the truth to their investors,” she elaborated.
To improve the investor and investee dynamic, Siddhi Capital takes board positions on its invested brands to help them scale their businesses, Facchina said. Facchina sits on the board of Magic Spoon, Mid-Day Squares, immi, Momofuku, Aura Bora and Moku Food.
The Siddhi Ops team helped more than 550 companies and made more than 90 market exits since 2015.
The state of VC: ‘There is some end in sight’ to funding woes
Many VC investors are struggling to secure capital for their own funds, given high interest rates and financial institutions less likely to lend out money, Facchina explained.
“We have interest rates at high levels where people can just sink cash in a liquid account and earn 5.25%. Basically, people who have opportunities to put money in risk-free places are getting paid a nice [premium] on that,” Facchina said.
She added, “[Investors] are not incentivized to take the risk to deploy capital into private equity and venture capital firms — that is the same with institutions, by the way. And if [institutions] are not incentivized to deploy capital to the [VC] investors that means that the [VC] investors do not have capital to deploy in the brand.”
Despite the slowdown, Facchina predicts that VC deals will start up again the moment interest rates come down or when the stock market sees a correction. The Federal Reserve signaled that it plans to make at least one rate cut in 2024 and four in 2025 and 2026, according to AP reporting.
“There is some end in sight, ... and we are starting to see sentiment around it change. But for it to ultimately hit the brands’ pockets in a material way, we are still 12-18 months out from that — that is my best prediction,” Facchina added.
The CPG reality post-COVID: ‘Consumers only have so many dollars’
Struggling startups also are finding it harder to break through on store shelves, with many brands lacking meaningful product differentiation and innovation, Facchina explained.
In a recent report, Mintel found that the number of new CPG product launches is at the lowest point since 2007, showing slowing market innovation. For the first five months of 2024, 35% of CPG launches were “genuinely new products,” compared to 65% that were reformulations, new packaging, relaunches or line extensions.
“The truth is that emerging CPG had an onslaught of brands for the last decade, and we really did need attrition in the space. Consumers only have so many dollars. There are only so many choices you can put in front of them, and retailers only have so much shelf space. Funding aside, we got to a point post-COVID that the industry would benefit from some natural attrition,” Facchina said.
