Alongside New Capital, Sunrise Adjusts Strategy, Brings on Burns
CPG-focused investment group Sunrise Strategic announced late last week that it would bring aboard more food and beverage veterans, notably ex-ONE Brands CEO Peter Burns, to help the firm diversify its capabilities. The news comes as the firm also announced its financial partner, Trilantic North America, had invested additional capital into the group.
What Is Sunrise Strategic?
Founded in 2016 by CPG veterans Steve Hughes and Vincent Love, Sunrise Strategic is a Boulder-based venture capital firm investing in CPG brands.
Backed by Trilantic North America, the group invested roughly $200 million from its first fund into 11 companies including Kodiak Cakes, Perky Jerky, Kill Cliff, Maple Hill, Vital Farms, Coolhaus, PACT, and Little Secrets. Though Sunrise has outright acquired or purchased the majority stake in several companies, such as Cali’flour Foods, it also places minority investments.
From that group, there have been two exits, with Vital Farms going public last year and Kodiak Cakes selling to private equity firm L Catterton earlier this year.
Who is involved?
Sunrise announced late last week the closing of more capital from Trilantic, though it stopped short of calling it a second fund. Hughes declined to comment on the exact amount Trilantic has invested in this round, but said it was similar in value to the last amount, and should fund a further 11 investments over the next two to four years.
In addition to the new capital, there will be some new faces joining the team, most notably new managing partner Peter Burns, the former CEO of ONE Brands (which was sold to The Hershey Company) and Justin’s (which was sold to Hormel). Burns consulted with Sunrise over the last year, serving as an advisor to Cali’flour. He and Hughes have a long history — when Hughes was CEO of Celestial Seasonings, Burns first headed up the company’s East Coast sales team, before moving into a role overseeing the entire sales organization.
“Steve is [about the] big picture and strategy,and sees things at an early stage that have some traction and envisions it being a platform down the line,” Burns said about the duo’s complementary skill sets. “He will always push on the innovation side, which is great because he always keeps you on the treadmill.”
Meanwhile, Burns is “always focused on the executional nuts and bolts of how to build a business,” Hughes added.
Sunrise is also welcoming two new operating partners, Mark Doiron and Hunt Killough, both of whom worked with Burns at ONE Brands and Justin’s leading the companies’ sales teams. Burns said part of Sunrise’s new strategy will be to have operating partners who can help conduct diligence on investments, and then likely move into executive roles in their portfolio companies.
More of Burn’s old colleagues are expected to join the firm over the next few months.
“It’s almost like I’m graduating to this new role and the folks who are joining us will have the ability to be CEO’s and lever up their careers as well,” Burns said.
What’s Changing in the Strategy?
Typically Sunrise has invested in brands with roughly $10 million in revenue. However that approach hasn’t proven to be capital efficient; according to Hughes, getting a brand from $10 million to $20 million not only takes time, but also requires a lot of investment into new processes, products and people. He cited grassfed organic dairy brand Maple Hill’s pivot from yogurt to fluid milk as an example.
Moving forward, he said, the firm will instead look to invest in brands closer to $20 million in revenue. Bringing in Burns, along with Dorion and Killough, will also help shorten this process and get to this next point of growth faster.
“We realized that we spent a lot of capital to get those companies going… there was a lot of capital spent getting them to the starting line,” Hughes said. “We were very strong in strategy, branding and innovation but we had opportunities to provide more capabilities in supply chain, sales and overall financial support. Peter’s posse has those capabilities.”
Another lesson has been in making sure that brands and their founders are fully aligned with Sunrise’s strategy before the investment has closed. For many companies, the founder may not ultimately be the person who can take the brand to the next level, Hughes said, and he’s learned that there needs to be a frank conversation about roles before investing.
He cited Coolhaus, Little Secrets, and Cali’flour as good examples of this new strategy. The founders of the latter two brands are no longer involved in the day-to-day running of the business, while Coolhaus’ founder has moved into a role more focused on innovation and marketing.
“When you start getting some scale in these businesses, you really need someone who knows how to do operations, who has done sales before, who knows how to manage a team rather than being kind of autocratic, which is what most founders typically tend to have to be,” Hughes said. “The ones that don’t know what they don’t know and just want the capital, they aren’t going to be good partners for Sunrise. We’re really here to create enduring brands and creating value for the business and the shareholders.”