Redbud Brands’ New $46M Funding Round Signals Growing Interest in Startup Studio-Backed Food and Beverage Brands

Backed by higher success rates and operational efficiencies, coupled with extensive networks of industry talent and capital providers that are typically difficult for new entrepreneurs to access, venture capital studios risk are attracting concept-stage consumer brands at an unprecedented rate.

The venture studio or holding company model isn’t new to the tech world since the 1996 founding of Idealab, which claims to have created more than 150 companies to date, about 30% of which have exited via IPOs or acquisitions. This model essentially allows venture capital studios to partner with founders during the creation or incubation phase after validating their ideas through market research, and to leverage their internal resources and partnerships to help them evolve.

Compared to venture capital firms and traditional accelerators, venture capital studios are more proactive in building brands, involved in the day-to-day operations of startups, in addition to providing capital funding. However, interest in consumer venture capital studios, including CPG-focused venture capitalists, is a recent but rapidly growing phenomenon.

With backing from Satori Capital, Sands Capital and VMG Partners, Austin, Texas-based holding company Redbud Brands has secured $46 million in a latest round of funding to accelerate the launch of its brand portfolio in incubation phase, while seeking to acquire and create more attractive products on the market.

The company, founded by Brian Goldberg and John Ferrari, has been primarily focused on creating, incubating and accelerating healthier and better-for-you consumer products since its inception in 2020, such as the juice cocktail brand ready-to-drink ferments SunDaze, plant-based nutritional supplement brand KOS and cannabis snack company TSUMo Snacks. Goldberg previously helped create Amplify Snacks Brands, parent company of SkinnyPop Popcorn, as a senior executive before the company was acquired by Hershey in 2018 for $1.6 billion.

As lead investor in this round, Randy Eisenman, co-founder and managing partner of Satori Capital, believes that Redbud Brands has “the expert knowledge and key relationships to capitalize on the transition to healthier alternatives” in the space. consumers. He said: “The Redbud team’s experience in many consumer verticals and their ability to add both strategic and operational value to their portfolio companies gives them a real advantage that we believe will create considerable value for our stakeholders.”

Wayne Wu, General Partner of VMG, also said: “We are delighted to start a partnership with long-time friends like Brian Goldberg, John Ferrari and Redbud Brands. We have a similar ideology in an ecosystem-driven approach that Redbud uniquely brings to life through its branded incubation studio. We look forward to seeing their brands come to life in the years to come. »

High-speed business development engine

According to Goldberg, Redbud Brands currently operates a portfolio on varying growth curves, with 10 companies at roughly the seed stage where the company has partnered with co-founders and funded the majority of their capital to launch and commercialize.

“Separately, we are working on several potential operating partnerships with companies where the company is already in the market with approximately multi-million dollar sales,” Goldberg said, in addition to serving as an operating partner in brands of later-stage growth capital, including KOS, beverage flavor company Torani and nutritional supplement brand Physician’s Choice.

The goal of its incubating companies, in which Redbud Brands holds a majority stake, is to facilitate their launch by helping to hire their first dedicated employees and supporting their first 100 days in market through an iterative approach to prepare them for scalability and retail expansion, noted Goldberg.

“We are a collaborative ‘no sharp elbows’ organization, and as such it’s no surprise that we have several venture capital and investment firms that have invested directly in Redbud,” he said. explained, including one of the company’s early backers, Springdale Ventures. “We also have a long list of former CPG founders, lawyers, bankers, retailers and executives on our capital table and in our ecosystem. A key growth initiative for us is creating advisory boards for each Redbud business to ensure proper leadership and corporate governance. We are an open door with a high-speed business development engine to continue to expand our ecosystem so that we can collectively build exceptional consumer brands.

As consumers increasingly seek out brands that resonate with themselves, Redbud Brands underscores how authenticity simply cannot be manufactured; instead, it takes “the core vision and story of an entrepreneur, and building complementary teams” for them, according to operating partner Ferrari.

For example, Ferrari said: “When we created Picadas with Hugo Martinez because he felt as a Mexican student in Stanford’s MBA program that all of his classmates enjoyed alcoholic beverages that were better for you, but none of them spoke to him or his Mexican peers.. So we created the brand based on Mexican street art with a Mexican design company, used a Mexican manufacturer to build the product, hired a team entirely and later launched the product in Mexico.The initial success helped the product attract major US distributors and celebrities.

The beginning of a cycle of more than 20 years

Looking ahead, Goldberg expects the venture capital studio model to play a prominent role in the venture capital and private equity ecosystem, in part due to its reduced sensitivity to volatility. market and growing demand for sustainable and better-for-you consumer products.

We apply our model to ensure that brand consumption rates are very low in the first few years: since we finance the seed phase of our activities, we are not extremely sensitive to changes in appetite from external investors” , Goldberg explained. “Notably, consumer investment also performs very well in countercyclical environments, which we would be happy with. If there was a downturn, we would likely have better access to talent, manufacturing capacity and suppliers and less competition from new brands. »

Goldberg mentioned how Redbud Brands is currently working on new healthy snacks made from a regenerative dairy farm, and the team hopes to slowly integrate these new ideas into people’s eating habits and eventually make them mainstream.

In the short term, he added, “We expect the consumer brand market, particularly in the wellness space, to remain very strong…we believe wellness and anti-aging, better-for-you food and drink and sustainability are going through a 20+ year Supercycle that is just beginning.

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