What began as a family office in Kansas City is now a venture capital firm, investing in early-stage alternative protein start-ups globally. Reflecting on the market, chief executive Lisa Feria outlines plans to fill the funding gap and support entrepreneurs to get to the next level
By Murielle Gonzalez
Lisa Feria is a woman of conviction – and she is in the game for the long run. “Everybody talks about ‘the mission’, and that animal agriculture is a huge contributor to climate change and about the negative impact for humans and the planet. But this is not a situation we need to wait for our children or grandchildren to solve – it would be too late. We need to take the reins and upgrade the food system during our generation,” she says.
With a background in chemical engineering, her first job in the food industry was on the operational side of the business at General Mills. “I loved it,” she says, noting it was there where she learnt how food is made, from the wheat brought in by suppliers all the way to manufacturing Cheerios and delivering the product to retailers like Walmart, coordinating the supply to consumers. Her ambition, however, was to be on the other side. “I wanted to be setting the strategy, and learn more about how you manage profit and loss statements, how you think about R&D, and the structure of your brand,” she reveals. After a four-year tenure at Procter & Gamble, Feria found the perfect place to put her passion and purpose to work.
Stray Dog Capital was founded as a family office by married couple Chuck and Jennifer Laue in 2013. Feria met them two years later, and immediately connected with their impact investing philosophy.
Feria took up the chief executive role in 2015. At that point, Stray Dog was not heavily invested in the plant-based, foodtech or the synthetic biology world as it is now, but on a plethora of other investments.
The Laue’s, Feria says, were visionaries. They realised and connected the dots on how you can impact, affect and shape the future of the food system. “I joined them to put together an investment thesis, narrow the focus, and get a team around us – we now have more than 38 investors in our second fund and are about to fundraise for the third, so we’ll have even more investors,” says Feria.
A magnet for capital
Stray Dog Capital continues to invest opportunistically from its evergreen fund. The firm has completed 38 investments to date and exited multiple companies, including Beyond Meat, dairy-free creamer Nod Pod, and plant-based meal brand Purple Carrot. The two funds combined brings the total assets under management to $50 million.
The company’s second fund closed just over two years ago on $30 million, and this capital has been invested in nine companies to date. Alternative seafood start-up The Ish Company, and Better Dairy, a foodtech company that uses yeast fermentation to produce animal-free casein to make vegan and allergen-friendly cheese, yoghurt and ice cream, are Stray Dog’s newest investments.
Many milestones have passed through Feria’s journey at the helm of Stray Dog Capital, but creating the Glasswall syndicate is among the achievements she cherishes the most.
At the time the syndicate was launched, Stray Dog Capital was in the market as a family office investing in alternative protein. “We understood there was a lot of awareness about what was going on, and people wanted to use their money to change the foods system and make a difference,” says Feria. “Just because we couldn’t take the money it didn’t mean we couldn’t collaborate.”
Taking Paul McCartney’s quote “if slaughterhouses had glass walls, everyone would be vegetarian”, Stray Dog Capital formed the Glasswall syndicate, which today has more than 175 investors. “It was meant to gather a group of mission-aligned investors, to share deal flow and legal costs, and provide value to different companies,” says Feria.
She argues the syndicate was a strategic move. “We wanted to bring all that capital into the market, so the market grows – and faster.”
Feria looks back on her early days at Stray Dog Capital and says the firm was one of the very few investing in foodtech. “Even then, there were a few larger funds with opportunistic verticals, but the majority of the market was very mixed – many angel investors, not much institutional capital,” she says.
She also recognises that it was incredibly easy to get deal flow because entrepreneurs reached out to the firm for funding. “Over time, other funds have been put together similar to ours, and some institutional money has come to play – not specifically in this space, but in the ‘other bucket’ that almost all funds have,” says Feria, noting that’s where Stray Dog stands out.
“We are experts in this space – it’s our bread and butter, we live and breathe this market,” says Feria. “We want to be the preferred partner to entrepreneurs, and lend a hand when it’s needed. We’re here for the long run. We truly believe in the mission you have as an entrepreneur.
Feria expects that by the time the investment period of the second fund is over, the company should have about 20 portfolio brands. She reveals that plans are already on the table to start the third fund.
To the point
What signs do you see in the market that make you go for a third fund?
What’s happening is that more capital has come to the market, but it comes and goes, unfortunately. The effect of Beyond Meat has been that a lot of funds and investors see the opportunity and want to be in it, splashing money around.
Valuations have gone up because investors who aren’t experts or don’t know the market think about it with the mindset of technology, which has an entirely different set of valuations as opposed to foodtech.
We want to continue to support our entrepreneurs as they grow, but the rounds are getting bigger, so funds need to be larger – and we really want to bring as much capital into this market.
What capital are you after?
We want institutional capital – pension funds, insurance companies. We want the larger dollars invested into this market. There’s a big gap in funding between the early stages and the larger rounds – there are not as many investors in Series B. We want to continue to play a significant role in those gaps.
Why are most investors in the early stages?
Early-stage rounds are the easiest to invest in if you don’t have much knowledge in the marketplace – it’s all ideas, exciting potential, and opportunity. Once the company get to the later stages, you need to understand turns and velocity, retailer programmes, and so on. You need expertise.
Why are diversity, equity and inclusion important topics for you?
As a Latina, I was shocked to hear that fewer than five women in the US were leading their funds with more than $30 million of assets under management – everything that you can count with your fingers is not right in terms of representation. We decided to do what we can to change that.
We have a mentorship programme, supporting the HBCU (historically black colleges and universities) VC Programme and expect everyone in the team to mentor people from underrepresented minorities and groups. We are also facilitating the conversation internally with groups discussing different social justice books, articles, anything to continue to educate us as a group of people who want to change the world in that sense as well.
On the investment side, we need to understand how minorities can access to us – is our pipeline sufficiently placed to capture them or is it filled with bias? Are we investing in enough diverse leaders and founders?
We consider this part of our identification as a fund, how we are, whom we want to be, and what world we want to build.
What is your experience as a woman chief executive in a male-dominated investment community?
I reflect on this as a person who goes fundraising as well – at the end of the day where the rubber meets the road is work opportunities and funding.
I loved when people in my career helped me and mentored me, but what I needed the most was the job, the capital to pull together a fund – that’s where we really need the help.
Is diversity a topic openly discussed in the investment community?
There’s a lot of awareness and thoughtfulness in the investment community about diversity, equity, and inclusion. I’m very enthused to see statements and intention and thought coming out of VCs on how they’re going to change their practices, but I’ve also seen disconnection in the actual investment world. Having the dialogue is a very important start.
What do you make of investing against the backdrop of Covid-19 restrictions?
Our deal flow has not stopped a bit, but it changed how we interact with companies. I enjoy seeing that the best entrepreneurs are grabby – something like this comes along, they see an opportunity and pivot, surrounding themselves with the right partners to make the best of whatever it is.
How are entrepreneurs reaching out to you?
Typically, entrepreneurs want to control the consumer experience, trying to portray the product in the best possible way. Now, they send samples to us, and in the beginning, it was very disconnected. Some looked like little glad bags with no information. Others hired a local chef or sent a video with the co-founder cooking, or we got a beautiful box wrapped with very clear instructions and the recipes to cook ourselves. Some entrepreneurs have really risen to thrive under the circumstances – and if you’re a great company, you will get funded.
What category are you excited about the most?
Seafood. A lot has been said and made for meat replacement, but I don’t think there is enough realisation of how much fish we consume and the pollution in the ocean.
There are interesting companies in the market, such as Gathered Foods and Ish Food – the category is huge, and there are some very outstanding products coming out.
What are the headwinds in this space?
I think this is a good and bad situation. Companies like Tyson and Unilever started to put products into the alternative meat category, but large companies are bad at doing this. They come to the retailer with new products, tons of money to be put on the shelf, but returns are not sustaining their existence.
It creates hiccups because the start-ups compete with larger companies, and retailers want the money, the velocity and expect they will deliver that. However, this is really a game of ‘wait-and-see’. I think the market will right itself, but it’s challenging for brands to get shelf space because of that.
The conversation goes on for about an hour, and it’s clear to me that Feria is a can-do, resourceful leader in the investment arena – and her message to food entrepreneurs is clear. “If you have a good product, know your consumer, and you’re solving a problem, just hold on, you will withstand because you are better than the competitor product,” she says. “The alternative category is so hot right now that everybody wants to play in it, but only the best will remain,” she concludes.
Date published: 3 December 2020