Prelude Closes Fund II to Invest in ‘Distinctive’ Brands

Prelude Growth Partners, a New York City-based fund, announced last week the close of their second fund at $250 million dollars. The majority of the fund’s limited partners also backed Prelude’s first $85 million fund in 2018, co-founder and partner Neda Daneshzadeh said.

Prelude had previously invested in seven brands across beauty, food and beverage including Banza, 8 Greens and So Good So You from its first fund, writing checks of $5 to $15 million. Now with the new fund the group can increase its check size to $10 to $40 million, Daneshzadeh said, across a “broader set of opportunities.” Though Prelude makes minority investments in emerging brands, it still prefers to lead or co-lead rounds, she added, and for many of its investments it’s the first institutional capital into the brand.

Despite the larger capital pool, the company plans to continue to be selective with its investments, likely investing in ten brands from the new fund. Though Daneshzadeh said she and co-founder Alicia Sontag look to the “vision of their founders” when it comes to the ultimate direction of their portfolio companies, the duo still prefers to have an hands-on approach, drawing from their time in consulting, investing and working for large global companies such as Bed Bath and Beyond, Johnson & Johnson, Estee Lauder.

“We’ve always had a high conviction, high engagement type portfolio construction,” Daneshzadeh said “We do very few investments but when we do, we give a lot of ourselves, our firm and our resources and want to be a true value add resource to our companies.”

While Prelude is somewhat uniquely positioned, with two female co-founders and substantially more female operating partners then found at most funds, the firm invests in brands “irrespective of who they are run by.” Yet, Daneshzadeh added, the diversity of its team imbues the fund with a unique point of view to share with its partner companies.

Those efforts and insights include keeping up with dramatic changes to the retail landscape and due to the impacts of the COVID-19 pandemic — such as increasing consumer interest in companies’ social and environmental values and the importance of being a digitally native brand. Though these shifts may have resulted in strategy changes, they’ve also opened a window of opportunity to identify new category leaders, Daneshzadeh said.

“We’re focused on the regeneration we see in the consumer sector,” she added. “This is a modern consumer and an evolved consumer who is driving a lot of new demand and we’re just at the very beginning.