Andrew Bluestein and Ashley Hartman | Bluestein Ventures
Bluestein Ventures is a family-backed early-stage investor with food industry experience, backing start-ups that redefine how consumers achieve health and wellness through the products and services they consume
By Murielle Gonzalez
Andrew Bluestein and Ashley Hartman are the driving forces behind Bluestein Ventures, an early-stage investor like no other – it’s an early-stage family office that has invested in the future of food since its inception in 2014. Hailing from Chicago, it has completed 30 investments to date, building a portfolio of 23 brands in the US with one mission in common – to redefine how consumers achieve their health and wellness. “We saw an opportunity at the time with innovation taking off and emerging disruption in terms of what people were consuming and how they were consuming,” says Bluestein. “For us, this opportunity was not just about becoming an investor but a partner of these entrepreneurs to help them grow successful businesses.”
Co-founder and managing partner Bluestein is an experienced consulting professional. He says the firm kicked-off with the backing of his mom and dad – Ilene Gordon Bluestein is a former chief executive of food ingredients giant Ingredion, and Bram Bluestein has more than 30 years in management consulting and private equity. Hence, it’s not surprising that Bluestein Ventures’ investment thesis builds on a strategic mindset and food industry know-how.
Bluestein Ventures focuses on investing in high-growth consumer brands, proprietary foodtech, next-generation commerce, and value-added technology. The firm participates in funding rounds up to Series A with a cheque size ranging from $100,000 to $500,000.
Prime examples in the portfolio include Vive, a California-based start-up in the US market offering cold-pressed immunity shots; Meati, an alternative protein company using fungi’s mycelium to produce chicken and beef products; Foxtrot, a mobile app that lets customers shop for their curated collections of drinks, food, and everyday essentials across Chicago and Dallas; and FourKites, an end-to-end supply chain visibility platform that global companies use to track and manage their freight.
Senior principal Hartman joined the company three years ago and is now known in the firm as ‘the operative’. She works hands-on in all areas of the company, from screening prospective start-ups, performing due diligence, supporting portfolio companies, and helping on Bluestein’s own brand strategy – the company underwent a rebranding as it was operating as Bluestein & Associates.
“Building our brand has an opportunity to leave an impression with start-ups that we’re trying to talk to, which impacts our deal flow, as well as the investors we talk to,” says Bluestein. The effort, he explains, was to make clear its primary focus is on investing in start-ups.
“We are a venture capital fund. We may not have the same LP base as others, but we are doing the same thing, and we wanted that to be conveyed in our name,” he explains. “This was an opportunity for us to reflect and say who are we, what do we do, whom we want to be, and how we want to help others.”
Bluestein Ventures has been actively investing this year, despite the restrictions imposed by the Covid-19 lockdown. The team adapted quickly to working remotely, and in this period the company completed two investments and committed to a third.
“We never met in person with the founders or saw their operations,” says Bluestein. “That brings a challenge but at the same time opportunities. The companies we invested in are on the West Coast, so in a way, Covid-19 has made it easier to connect with people outside of our primary geography that is Chicago.”
Hartman concurs. She says it has been surprisingly seamless moving from face-to-face to online meetings. “For example, we’re now doing calls via Zoom – why weren’t we using these platforms that were available to us before? We’re getting comfortable with the conversation we have on video with entrepreneurs. We also make sure we connect with investors who had previously invested in the company or were able to visit the company’s operations, so we are relying on that.”
The two companies that recently joined Bluestein Ventures are New Culture and Zero. Based in San-Francisco, New Culture uses fermentation technology to produce casein protein without animal milk. “The company is at a very early-stage coming to market with a plant-based cheese,” says Hartman.
Zero is also from California and is tapping into the upcycled food trend and next-gen commerce at once. Hartman explains: “Zero is innovating the supply chain with no-waste grocery baskets to customers without compromising price, convenience or selection.” Hartman says the third investment in the pipeline is also a foodtech company.
To the point
It seems that Bluestein Ventures is drawn to foodtech; why is that?
Hartman: We’re focusing a lot more on this area because the Covid-19 pandemic has shown the food ecosystem needs to change, and commerce along with that. The trends of online shopping we saw pre-Covid-19 that we expected will develop over five years happened within weeks – consumers are ready to adopt omnichannel shopping. We think brands who recognise that will win in the market.
What do you look for in the early-stage companies you invest in?
Bluestein: The founders have to tell their story right. We want to see how the business is developing, and whether it is driving innovative change into the industry, which is a large market opportunity. What’s the value proposition of this company and what is its potential? What are the economics of that business and how attractive would that be as it develops?
Then it’s the team. How they bring people and partner investors around them, and how can we be helpful to them as they think about their go-to-market strategies.
How important is that the company has market traction?
Bluestein: We are venture investors that bet on the possibility – and there are signs of traction you can evaluate along the way. On the foodtech side, for example, you think about what they’re building and the real potential it has. There are always reasons not to invest, but at the end of the day, you invest in what this could be – is the right tech? Have they got a good plan?
One of our companies, FourKites, is a logistics technology business, and we invested at a pre-revenue stage. We sat down with the chief executive, and at the time he got great consumer interest, including Fortune 500 shippers. It was he who could tell us how well he knew the industry. He showed confidence in how it’s going to play out. Was he arrogant? No, he had the vision, and it has played out exactly how he said.
How are you dealing with valuations?
Bluestein: We look at the valuation of the company in terms of how it compares with everything else we invested in. If we buy ourselves into the company, we can sometimes tolerate the high valuation environment in which we are in now. If we don’t have the conviction it’s easier for us to say no because there are other opportunities out there.
Hartman: Founders are setting high valuations, and we think it makes it hard for them to raise capital after because if you don’t live up to that bar, you potentially go down and that’s not a good situation. Setting high valuations sometimes put unrealistic expectations on the business, and we think that’s not setting up the company for success.
What do you make of the double-digit seed rounds we have seen this year?
Bluestein: When we started investing, round sizes were lower than today, and so too valuations – and there was less capital in the market. What you see now is that the future of food is an attractive investment category because you see great successes. And you see dollars with an impact mindset – health and wellness or environmental.
People want to invest in this space, and I think that’s a healthy dynamic – for the companies having that capital is important to succeed. It does lead to higher valuations and more competition for dollars, and that can be an unhealthy dynamic – overspending capital inefficiently.
There’s probably a healthy medium, and we’re probably somewhat in that now. As an investor, we have to play in the environment that is – we have to be mindful of the pitfalls.
How do you stand out from other venture capital investors?
Hartman: We differentiate in two ways – an exclusive focus on the food industry across the value chain, understanding the ecosystem with deep expertise in it, and nd in the way we help our companies through go-to-market strategies – that’s our view to accelerating the company’s growth.
We have developed frameworks to help companies think about how they get to the next stage and get to the holy grail: product-market fit – what’s the vision, your playbook and the engine, which is the team. Everything interlocks in a strong, innovative go-to-market strategy.
Once that’s done, how you set initiatives and KPIs to measure your growth.
Bluestein: When founders have a clear vision, it allows us to jump right into a conversation about the critical issues and be helpful quickly – that’s what we strive for.
Bluestein Ventures is not only putting dollars into budding food and drink brands but also putting the family name at risk. “We’re in this for the long-term to be partners – we know we have our reputation at stake, and that’s the type of investors we are and why founders want to work with us,” Bluestein concludes.