VMG Closes Fund V, Invests in Milton’s
Despite the past year’s global pandemic, its 15 or so years of investing in consumer brands allows VMG to say things are still business as usual. But the firm will have a lot more capital to keep it moving forward, with yesterday’s announcement that it has raised $850 million for its fifth fund, now known as the Growth Fund.
The raise follows a $550 million raise in 2017 for the company’s fourth fund. VMG plans to begin investing out of Fund V later this year. General Partner Wayne Wu said that the group will continue to invest in emerging or later stage consumer companies with revenues as wide ranging as south of $10 million or over $100 million.
Still, some things have changed: the company will now split investments between Growth Fund and Catalyst Fund investments. While Growth Fund companies are consumer focused (such as beverage, food and personal care), Catalyst — a separate, $250 million fund raised in 2019 — invests in the online marketplaces and technologies that power consumer brands. By splitting its investments this way, Wu said, VMG is able to be a better partner on both sides of the equation, giving its CPG companies access to new technologies, and its technology brands access to willing testers.
“We kept seeing very interesting tools, technologies and marketplaces that our partner portfolio companies were utilizing to grow their businesses or brands, but they weren’t necessarily a fit for our Growth Fund,” Wu said. “It’s really a flywheel between our Catalyst and Growth [funds].”
In addition to Catalyst, Wu also cited the firm’s recent hiring of Ian Park as VMG’s new head of data as another way the firm is seeking to enhance its offerings. VMG decided to add the role, he said, after seeing how VP Cassie Nielsen’s efforts around talent development had benefited its brands, as well as the larger CPG ecosystem.
Last month VMG announced its first fitness play, placing a “significant minority investment” in boutique fitness studio chain Solidcore. Solidcore’s consumer is familiar, Wu said, aligning with many other current and former VMG portfolio companies, such as Perfect Bar, Vega, Quest, Ancient Nutrition, and Drunk Elephant.
“We’ve been long standing investors in the wellness space, and for us this is just a continued extension,” Wu said. “What we’ve done over the history of VMG is follow a consumer on their wellness journey and one of the things we continue to think about is what portion of their share of wallet have we been a part of.”
Still, traditional CPG products will remain the core of VMG’s Growth Fund. For example, the firm will maintain a “strategic focus” on alcoholic beverages, Wu said, having previously invested in Ilegal Mezcal and Stone Brewing.
VMG also closed an investment in Milton’s Craft Bakers at the end of 2020, though Wu declined to confirm the terms of the deal or size of investment. The company produces crackers, breads, and frozen cauliflower pizza crusts. Milton’s had previously raised investment from GESD Capital Partners and, prior to that, Red Diamond Capital Partners. Wu said VMG was particularly interested in Milton’s both for the strength of its management team as well as the company’s ability to successfully operate in multiple categories.
Along with the new additions, the firm has also exited some prior investments, with 2020’s sale of Vermont Smoke and Cure and Solid Gold representing VMG’s official exit from all of its Fund II investments.
Despite all the changes, Wu said, the past year has only strengthened VMG’s investment thesis.
“For many funds, investing in the early to late stage consumer space has been a pit stop in their journey. They start there but then they raise larger and larger funds that are so large they no longer are part of the ecosystem,” Wu said. “For us we intend to permanently stay in this ecosystem…it’s about where can we add more value?”
