The co-founder and managing partner of the venture capital fund in Paris explains why he is focused on investing in business-to-consumer brands with exceptional storytelling

By Murielle Gonzalez

Portrait photo of Niccolo Manzoni

Niccolo Manzoni’s background in management consulting steered him to venture capital investments, but it was the experience at Jeremy Coller’s family office that moved him closer to investing in foodtech. “I built a huge passion coming out of it, so I decided to start a dedicated fund to do venture capital in foodtech,” he tells me. That idea came to fruition in 2016 in the shape of Five Seasons Ventures. The fund closed two years later, and today it has €80 million of assets under management. Manzoni says this is a pan-European, early-stage (Series A and B) fund that invests in business-to-consumer companies making food better, healthier, safer and more sustainable.

Five Seasons Ventures currently has 10 portfolio companies – four in Germany, three in the UK, and one in Switzerland, France and Italy, respectively. Nine investments are public and the tenth hasn’t been revealed yet. Manzoni says the announcement is imminent.

“We tend to invest in companies when they have single-digit million revenues, and then we like to back them all the way through their fast growth,” he explains, noting that eight of the 10 portfolio companies are revenue-generating.

I sense pride in the words he speaks next. He tells me that these eight companies combined generated €161 million in revenues in 2020, a 187% increase over the previous period. “Three years ago, six out of those eight companies didn’t exist. That’s definitely an incredible ramp up, a hockey stick growth, which is clearly showing that these companies are doing something right and that’s having appeal to the consumers,” he says.

Manzoni explains that what’s behind the performance of the fund’s portfolio companies is the ability to identify potential category leaders. He believes that on this front, the brand’s storytelling is crucial.

“The way that you build trust in a food brand is no longer dictated by how long it’s been around,” he says. “Trust is now dictated by what kind of story brands can tell you and what kind of value sets they’re projecting upon you, and how much you align to those set of values.”

Manzoni also notes that brand storytelling is why a lot of the market share of the large food corporations has eroded in favour of more local, more sustainable, better-for-you food and drink brands.

Five Seasons Ventures: A point of view

The 10 companies in Five Seasons Ventures’ portfolio come from a scouting and screening process, which Manzoni describes as the firm’s intellectual property. “We see about 1,000 companies in a year – we invest in four, more or less. And we keep on seeing fantastic deal flow,” says Manzoni, noting the secret sauce lies in the company’s proactive methodology to sourcing investment opportunities.

He explains: “When we launched, being a first mover in foodtech investments, we received a lot of inbound deal flow. So, we quickly figured out that when we received an email from a pet food company, for example, probably there were another 20 to 30 companies around Europe doing something in this category. We decided to flip that equation completely and look at specific themes and verticals in the food space, and build what we call a point of view.”

This viewpoint is a thematic study of the industry. Manzoni and his team look at the market size, trends and dynamics, key players, and so on. The outcome of this process is the fund’s investable thesis in those sectors.

Water brand Air Up is the latest addition to Five Seasons’ portfolio

“We then speak to as many companies as possible within a sector – we had spoken to 30-plus companies before we invested in Butternut Box, which is our pet food company in the UK,” says Manzoni. He argues that building on this workflow, and knowing exactly what the dynamics are for growing those businesses, he and his team have become specialists and can help the companies they invest in become successful. “By seeing so many companies in a vertical, we hopefully are able to pick the category winner,” he notes.

For Manzoni, the Covid-19 pandemic has not only accelerated existing consumer trends, challenging the industry to adapt quickly, but has also allowed the industry to show resilience – a feature that’s even more latent in early-stage companies.

“Through the pandemic, we have seen that early-stage companies can capitalise an increase in demand, and I think we’ve reached a tipping point in consumer adoption of innovative products and innovative brands, which have now become mainstream,” he says.

To the point

What do you make of the massive influx of venture capital in foodtech of late?

I think the capital that is coming in is fully justified. I would argue there is still very little capital, though. If you look at the amount of capital that goes into foodtech with the size of the food industry, it’s still a drop in the bucket compared with the amount of capital that goes into fintech and the size of the financial services industry.

Niccolo Manzoni

The food industry is the biggest private sector in the world and it’s ready for disruption. The capital we see coming in is just the beginning.

What is your analysis of the food industry?

If you read our State of European Food Tech report, we talked about ‘waves’. The first wave was food delivery services, which have generated pretty meaningful returns to investors.

Then you have what we call the next generation brands further upstream in the agtech space that have received a lot of attention and capital. But again, we’re just at the beginning because there’s just so much to do, and the market is so deep.

When you do due diligence on an early-stage company, you look at the total addressable market. The smallest total addressable market in food is several billion euros in size – just in Europe.

What type of founders do you like to invest in?

We like founders that are ambitious. We say no to founders that have very unambitious growth plans. We like to invest in companies that have the potential to show super-fast growth and super-fast scale-up revenues, and continue growing and expanding internationally with new products, and so on.

We look for ambitious founders who have the vision either to become a category leader in a specific vertical which has not been innovative for many years, even if that means creating a new vertical or disrupting an existing one.

Aren’t all founders very ambitions?

Most founders are definitely very ambitious, and maybe too ambitious, saying things like they want to destroy whatever big food corporation in the market – that’s not going to happen. But, if you say that you can grow the business really big to become a pain in the neck to that food corporation, and that you want to work with other players in the industry to take the business to a much bigger scale, that’s different.

What is the most business-critical factor to scale-up a CPG food business?

It’s always demand. CPG food businesses are selling stuff that you want people to eat every day and repeat their purchase. So you really want to make sure that you’re on top of your game, and demand is there.

How can CPG food brands make sure they are a product-market fit?

Product-market fit means that you’re making a product that people want to buy. Now, there are lots of food products and food innovations out there, which only cater to a very small demographic – and they are unlikely to reach mainstream adoption.

The product-market fit that we try to assess answers a few questions: can this product become mainstream? Can we see one or more consumer demographics and consumer segments? Who would buy this product and consume it several times a week? That’s how you become mainstream.

And it’s got to do with the executions: the branding, the channels that you choose to use, and of course the taste, the price, the convenience, and so on and so forth.

What aspects of the business-to-consumer model are you most excited about?

We’re definitely more focused on business-to-consumer with a direct-to-consumer model because we believe that there is huge scalability in growing very fast revenues at the right margin structure. And I think Covid-19 has accelerated this – a lot more people are buying food products online.

Anybody can put together a website and sell online, what goes into making it right?

Founders must have the ability to build a digital-first brand, which not only means selling online, but it’s also a choice of how you decide to build a brand through social media and through influencers.

It’s about building the vicinity, and a rapport with your consumers. This is something that large food corporates have lost over the years.

Today, vicinity and trust in a brand are built through social media and the internet. So definitely, this is a big focus area for us.

What do you think of crowdfunding?

We invested in This at its seed round, and later on, the company raised money via Seedrs, and it was a great success, the fastest FMCG business to hit target ever, and the fastest-ever campaign to hit €1.6 million-plus. We think that This has shown that you can first turn social media followers into consumers of your products, and then turn some of them into investors. That round is a testament to the strength of the brand and how engaged its community is.

Manzoni is adamant that in consumers’ minds, taste, price and convenience, and sustainability in some cases, are top priorities in the purchase decision, and it’s even more important to gain consumers’ loyalty and trust.

He also emphasises that storytelling and social engagement are fundamental skills to have, particularly when products of challenger brands hit the market at a price point above the incumbents.

“The food industry is going towards premiumisation. Whether that comes through personalisation of the choices, from better sourcing ingredients, or functional benefits of the food you eat,” says Manzoni. “The question is, can you tell a story and substantiate a premium price? Can you sell enough products for those margins to make sense? These are the key questions to answer right,” he concludes.

Date published: 4 February 2021

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