Selva Ventures Looks to Double BFY CPG Portfolio with $34M Fund II

Health and wellness-focused CPG investment firm Selva Ventures announced this week it has closed a $34 million raise for its second fund, which included backing from Unilever Ventures, PagsGroup and Obelysk as well as existing investors.

Launched in 2019 with a $10 million fund, Selva Ventures has invested in better-for-you CPG brands like coffee alternative MUD\WTR, chocolate brand Mid-Day Squares, cereal brand Three Wishes and non-alcoholic wine maker Surely, as well as several health and beauty companies.

With its first fund, Selva typically issued investments of around $500,000. Now, according to founder and managing partner Kiva Dickinson, the firm will use its larger Fund II to increase its average check size to around $1-$2 million. Selva will also seek to broaden its category coverage, with an emphasis on making a third of the portfolio beauty and personal care brands – a sector that firm principal Madeline Kaplan, who joined Selva in March 2022, specializes in.

“The first fund of $10 million, we felt, was always going to be our proof of concept for the strategy,” Dickinson said. “It was our chance to show investors and portfolio companies that specializing at the early stage of consumer wellness, and supporting these early stage companies in seed and Series A with not just capital, but the resources that you can typically expect from a later stage private equity firm, would be impactful on their chance of success, and would be impactful on the best brands wanting to work with us.”

The new fund, Dickinson added, will help Selva to lead in more rounds. He said that although the firm often acted like a lead investor in terms of its hands-on involvement with its portfolio brands, the limited funds often proved to be a “pain point” for founders as Selva was unable to offer larger checks.

So far, Selva has used Fund II to lead three investments, including in rounds for Surely, longevity skincare brand OneSkin, and luxury hair care company Crown Affair. While Surely and OneSkin were existing portfolio brands from the first fund, Dickinson said that the group is now looking to avoid reinvesting in brands in order to bring new companies under its umbrella, with the goal of doubling its current portfolio of 14.

Selva is also looking to now tighten the relationships between its portfolio brands. This summer, the firm will host a two-day summit in Orange County, California for the leaders of each company in order to better introduce them to one another and run educational programs.

“The advantage to being so focused in our strategy is that so many of these companies solve similar problems and have a real tight association with one another,” he said. “There’s so much serendipity that can happen if you bring them all together in one place and give folks a chance to pick each other’s brains and learn from each other.”

Although beauty and personal care is a focus for the firm going forward, Dickinson said Selva will still seek out food and beverage brands, which will ideally make up 30-50% of the portfolio, and vitamins and supplements companies. He noted that as the investment landscape has evolved to become more focused on performance and profitability over the past two years, the emphasis on beauty has to do with higher gross margins and repeat purchase rates. That said, he noted there are still plenty of food and beverage brands that fit that bill, highlighting MUD\WTR – a powdered functional coffee – as one example.

“I think we’ve probably learned from the past few years that when there is a lot of capital in the system growth becomes a priority, and many low-margin, high-cash-burn businesses emerge and attract a lot of investor, press and consumer attention,” Dickinson said. “I think now that we’re living in a more capital-constrained environment, people are just a lot more focused on efficiency.”

Dickinson acknowledged that the shift in investor priorities has been difficult for founders seeking capital, noting the new focus on performance metrics across the investment community “changed on a dime” between 2021 and 2022. And that change has gone both ways: Dickinson said raising this new fund was “profoundly difficult,” but Selva was able to rely on the strong relationships it had with its existing investors and form new partnerships with like-minded CPG-focused firms like Unilever Ventures and PagsGroup to close the financing.

Despite higher scrutiny within the finance community, he said the demand for innovative, better-for-you CPG products has remained strong from both the consumer and retail buyer point of view.

“The demand from consumers really has not gone away,” he said. “It might be harder and more expensive to acquire customers online, but those customers are still shopping in retail and looking for better products to solve problems in their lives. The retailers are still looking for innovative products to put on shelves. So if you can survive this time, and continue to find efficient ways of getting in front of the consumer, if you have a great product, I still have huge conviction that it will work out for you.”