Boulder County’s Hallowed Natural Food Companies Are Officially In Wall Street’s Sights

By Shay Castle
Daily Camera, Boulder, Colo.

WWR Article Summary (tl;dr) This article takes a look at the booming investment industry surrounding the natural food market in Boulder. If you are one of the millions of women in business focused on creating healthy bites, Colorado may be the place to be!


Food is the new tech, and Boulder is its Silicon Valley.

Long considered a hub of the growing natural and organic food scene, the Boulder Valley is home not only to some of the country’s premier brands but, increasingly, the industry’s most innovative investment groups.

Locally controlled capital has grown tenfold in the past decade. One $20 million fund has morphed into half a dozen established and upcoming funds.

Together, they will funnel more than $200 million to emerging brands in hopes of growing them into multi-million dollar companies within the next two to five years, according to estimates provided by five local funds.

New industry born out of need
One of the first firms to specialize in natural foods locally was Greenmont Capital, founded by industry insiders in 2004.

Greenmont started with a single $20 million fund, and Boulder’s Eco Products was its first investment.

“Companies were doing deals together” back then to get needed capital, said David Haynes, a managing director with Greenmont Capital. “They decided to leverage each other and create an investment firm.”

Greenmont’s portfolio includes Door to Door Organics in Boulder and Longmont’s Madhava Sweeteners. The fund is preparing to raise another round of funding with which to start hunting for new investment opportunities.

Greenmont is joined by a handful of other funds focusing in part or whole on natural foods — including new ventures from industry veterans.

Tom Spier, co-founder of EVOL Foods and chief operations officer for Bear Naked during its rapid expansion, formally launched his fund last month after more than a year of fundraising.

Boulder Food Group partners will focus on non-GMO food brands. Seven companies are in the portfolio now (three of which are in Boulder), and Spier said they hope to double that number over the next couple of years.

Natural brands ‘nibbling away’ at market
Spier said the rush of capital into the space is a response to consumers’ shifting priorities.

“The consumer is really yearning for quality and transparency (in their food) and that’s the area where some of the big food companies have stumbled,” he explained. “Every year there are more dollars shifting away from legacy brands into natural ones.”

An analysis by Credit Suisse analyst Robert Moskow found that the top 25 U.S. food and beverage companies lost an equivalent of $18 billion in market share from 2009 to 2014. During that same time, sales of organic food rose from just over $20 billion to around $35 billion, according to data from the Organic Trade Association.

“Even those who don’t wear Birkenstocks are taking a fresh look at the way they want to feed themselves,” said Robert Heilbronner, managing partner of Denver investment bank Integris Partners. “Natural brands are sort of nibbling away at the larger food market.”

Multiples, valuations rising
That’s causing big brands to go looking for natural companies at earlier stages than ever before.

“It used to be that (big brands) wouldn’t touch (small companies) before they got to $100 million in revenue,” Heilbronner said. But now, they’re looking to get in at the early stages to minimize their investment, knowing they can grow the brands quickly.

They are also paying more than ever.

The purchase price of natural food companies relative to their revenue (called a multiple) on high-value deals are on the rise, according to Shina Culberson, president of Quist Financial. Quist is a Boulder-based business valuation and securities analysis firm.

A smattering of some recent big deals tells the story.

Last year, Denver’s White Wave bought plant-based food and beverage company Vega for about $550 million — 5.5 times the company’s $100 million revenue.

The year before, General Mills purchased organic behomoth Annie’s for $820 million, a multiple of four times revenue. In 2012, General Mills’ acquisition of Food Should Taste Good carried a 3.6 multiple, Culberson said.

“It’s obvious with the activity we’re seeing that valuations are on the rise,” she continued. In deals to come, “we’re going to see multiples we’ve never seen before.”

‘Eye-popping valuations’
Those numbers are fueling investor interest, which has really picked up in the last 12 to 24 months as these high-profile deals have occurred, said Greenmont’s Haynes.

“If you look at some of the recent exits people have had recently, the valuations are eye popping,” Haynes said. “It’s an exciting time to be an investor.”

Folks outside Boulder seem to think so, too. Rumors abound of big name New York investment firms setting up shop in Boulder, and a few smaller players have already established a presence here.

Chicago-based Range Light tapped Boulder native Luke Vernon to head operations here three months ago. Vernon, formerly chief operating officer with Eco Products, said the fund’s first food investment will be finalized in the next few months and that all the investments he will oversee will be in Colorado companies that fall under the company’s active lifestyle platform.

“I think there’s a ton more (investment) activity coming on,” Vernon observed. “When you start to see companies like General Mills and Kellogs coming to Naturally Boulder events, that’s a sign.”

Easier access to capital for entrepreneurs
Among the local crowd, there’s little concern over big-name players entering the space.

“It takes a big company like that to further the industry,” Vernon said. “It’s only going to spark innovation” — in part because capital has never been more accessible to food entrepreneurs.

Joshua Tabin, co-founder of Loveland startup Wild Zora, has raised money for a handful of food and tech companies over more than a decade. Just recently, his wife’s idea for a meat and veggie bar company sent him back to the negotiating table.

Tabin raised around $250,000 in recent weeks for Wild Zora, winner of the 2015 Naturally Boulder Pitch Slam — enough to fuel expansion into 150 stores along the Front Range, including a recent move into King Soopers.

The experience was easier than it’s ever been, Tabin said.

“People are very open to small upstart companies now (because) they’re familiar with growth of natural food industry,” he said. “I feel like the wind is a little bit behind us.”

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