Beware of Desperate, Old VC Funds Headed Your Way

Food tech ventures are imploding all around us. I just took a call from one with a mere $1M in revenue but had inhaled $500M in Silicon Valley money before 2023. 

I declined that project. It’s not a real company. It’s a wish.

There will be more food tech implosions in the coming months. New Age Eats. Freshly. They led the way. Alternative, laboratory protein brands will start dying at a very high rate this Fall. VC has pulled back from food overall almost completely. They realize now that most food startups take too long to make money and grow too slowly for their LPs.  The 7-10 year Skate Ramp average is too slow for them. LOL.

As companies become distressed, private equity firms will buy up most at a bargain valuation. But, the temptation for Phase 1-3 founders is that some older VC funds focused on consumer brands are still out there. These funds have deployment time clocks. You should know when that clock is running out.

The most time desperate actors will be active now through 2024 in consumer venture capital. They have stopped investing in Phase 1 seed rounds. So, be aware of VCs approaching your Phase 2 or Phase 3 company (which is still losing money). The less interested in due diligence they are, the more you will be tempted and the crazier these folks will be. 

Not immediately. Only later. If you start succeeding. That’s when venture capitalists will begin to have very strong opinions about how to exit and when and on and on. 

The smartest remaining VC money in CPG is on hold for quite a while and pulling out of food in favor of beverage, personal care, or household items (all of which have higher product margins). 

I remain adamant that angels, even syndicated angel rounds, are the optimum way to raise money until you get to Phase 3 (the earliest point at which you might clear the line of sight to stable EBITDA forecasts, sort of).

Be safe out there.

Dr. James Richardson

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