Seed2Growth Ventures (S2G), a Chicago-based agriculture and food venture capital group, is looking to revolutionize the seafood and oceans space -- all it needs is one big hit.

The fund, backed in part by Lukas Walton, the billionaire grandson of Walmart founder Sam Walton, is just seven years old, and began its life with less than $150 million (€126.6 million) under management.

Since that time, however, the fund has racked up a string of successes that has emboldened the group to extend the size of its fund to $750 million (€633 million), giving it the capital to invest in a range of companies across the value chain, from firms developing RNA-based coronavirus vaccines, to salad bowl makers, to mushroom food additives.

But among all its investments, none stands out more than Beyond Meat, the plant-based meat alternative.

“We invested in Beyond Meat when there were brackets around the gross margin, and there was a lot of risk left in that business,” S2G Ventures Managing Director Chuck Templeton told IntraFish.

“We got to know the team, liked how they saw the world but knew there was a lot of work ahead.”

The work paid off, to say the least. By the time S2G and its co-investors were finished, Beyond Meat had become the global phenomenon it is today. The company listed on the NASDAQ stock exchange in 2019, and is now worth $7.8 billion (€6.6 billion). Perhaps more importantly to S2G, though, Beyond Meat upended the traditional protein space.

“It changed the paradigm of what’s possible,” Templeton said. “They are disrupting the beef industry, and now the beef industry has to get cleaner products or embrace plant-based alternatives.”

Beyond Meat is just the kind of unicorn S2G looks for, and now the group wants to find that unicorn in the seafood and oceans space.

Humble-ish beginnings

The company’s seafood ambitions are, to start, humble. The group’s new seafood and oceans fund of $100 million (€84.4 million) won’t be enough to gobble up a major company, but that’s not the goal of this fund, either from a financial or impact point of view.

To give its mission a leg up, the company brought on two new managing directors: Kate Danaher, an executive with a background in impact finance, and Larsen Mettler, a former head of US lender Keybanc Capital Market’s seafood investment team and most recently chief financial officer of US seafood processor Silver Bay Seafoods.

Having spent years moving in traditional seafood circles, Mettler brings an insider’s view into seafood’s potential, as well as its shortcomings.

“The industry has been under-capitalized on both the economic side and on the innovation side for quite some time,” Mettler told IntraFish.

“If you compare seafood to other protein sources, it’s definitely a couple of decades behind on innovation. The technology that has gone into alternative protein and processing and farming of other proteins is well beyond where seafood is.”

Who is going to be able to write checks along side us so that we’re not the only capital? A lot of these deals are pretty pricey – they’re big checks.

Danaher, who most recently has been focused on sustainable food and agriculture investing, saw a reluctance among other funds to put money into seafood and oceans industries, in large part because of a lack of understanding of the sector.

“A lot of people don’t know how to underwrite the risks there,” she told IntraFish.

Mettler and Danaher’s job is not only to calculate those risks, but to convince co-investors that the investments they chose are worth betting on, so that they too can spread the cost and the potential losses.

“One of the biggest risks in being an investor in this sector is syndication risk,” Danaher said. “Who is going to be able to write checks along side us so that we’re not the only capital? A lot of these deals are pretty pricey – they’re big checks.”

Danaher watched S2G closely in her prior role, and saw how the fund deftly recruited other investors, companies and private individuals.

“Because of the work they did building the ecosystem and leading from the front, we now have over 150 co-investors in our network, and a lot of corporates, industry, new funds and legacy funds are investing very actively in food and ag,” she said.

“We’re hoping to replicate that in oceans. There’s a lot of people interested in seafood – they understand the need – but there are really very few people leading from the front.”

50/50 chance

Beyond Meat may be the breakout success story, but Templeton points to San Francisco-based Good Eggs, an online organic grocery delivery service, as a template for how S2G’s investment can create critical mass for businesses.

S2G’s small initial investment in the startup helped it on its way to nearly $300 million (€253 million) in revenue, in large part by convincing other like-mined (and well-heeled) investors to back the group, including the likes of Benchmark Capital and Google Ventures.

“We used the network to go out and bring in other world-class investors who might not have looked at food and ag as a potential investment opportunity,” Templeton said.

For S2G, achieving success is a game of averages.

“Because we take minority stakes and these are high-risk early stage investments, oftentimes you’ll get a 50-60 percent casualty rate,” Templeton said.

To reach the fund’s goal of a 2x return of cash-on-cash in the fund, there has to be some break outs that deliver an eight, 12 or 15x return.

Finding those companies in the seafood and oceans space will take some hunting. So far, S2G has invested in only one seafood company: FishPeople, a small branded seafood processor based out of Portland, Oregon. But the company isn’t indicative of the fund’s ambitions.

“Fishpeople it’s doing fine, but we need to figure out bigger opportunities than that,” Templeton said. “It has to grow – that’s what we’re here to do.”

Choices, choices

There’s no target on the number of companies the fund will hold, but it's likely S2G will place its chips on a range of companies, from a handful of small groups with as little as a $250,000 (€211,000) investment, and on up to investments of as much as $30 million (€25.3 million).

The companies and segments themselves won’t be clear until Mettler, Danaher and their teams begin their work in earnest. As an example, an emerging area such as land-based aquaculture could fit the bill, Mettler said, but not necessarily in the operations themselves.

“There’s been a high rate of failure in land-based aquaculture, so maybe we can invest in technology that can help everybody be successful there,” he said. “We’re looking for something that will change the entire system.”

Whichever companies S2G chooses to pursue in the space, though, the mission goes back to the dream of finding those handful of breakout seafood and ocean investments that can, theoretically, change the world.

“We’ve been lucky enough to be a part of four companies that have gone from basically startups to billion-dollar exits,” Templeton said.

“It’s awesome watching that process happen, and watching an entrepreneur grow. It’s powerful.”