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At a time when venture capitalists are scratching and clawing for cash returns, a surprising but welcome guest has come to the party: Unilever.
Two months after acquiring Dollar Shave Club for about $1 billion, Unilever is reportedly in talks to buy Jessica Alba's Honest Co. for a similar amount. Like Dollar Shave, Honest is a popular consumer brand that's taken advantage of modern internet marketing and distribution tools to compete with industry giants.
The Wall Street Journal, citing a person familiar with the matter, reported Thursday night that talks between Unilever and Honest are at an early stage and that Honest "hasn't ruled out going for an initial public offering instead."
A Unilever spokesperson declined to comment, and a representative from Honest didn't respond to a request for comment.
While not providing the level of gains that VCs generate from massive Facebook and Google acquisitions or from blockbuster IPOs, Unilever is at least offering some healthy liquidity to investors and proving venture-backed start-ups can succeed in penetrating markets outside of technology.
The dealmaking is particularly good news for investors in consumer packaged goods, where big acquirers have yet to materialize. In retail, Wal-Mart recently shelled out $3.3 billion for Jet.com and Nordstrom previously purchased HauteLook and Trunk Club, but there's been virtually no activity in the market for packaged foods, beverages and household goods.
"Unilever is stepping up now and becoming potentially that innovative leader that looks at acquisitions of these new companies as a strategy for growing, modernizing the brand and taking products to new demographics," said Josh Goldman, a partner at Norwest Venture Partners and an investor in e-commerce companies including Casper, ModCloth and Gilt Groupe. "They've got a line of VCs lining up to talk to them now."
Honest is based in Santa Monica, California, just a few miles from Dollar Shave. Alba, who starred in films including "Little Fockers" and "Fantastic Four," started the company in 2011, and has gained traction through online sales of diapers, organic baby formula, laundry detergent and dish soap.
Headquartered more than 5,000 miles away in London, Unilever is the world's fourth-largest fast-moving consumer goods company, according to OC&C Strategy Consultants. The top three are Nestle, Procter & Gamble and PepsiCo.
As Unilever expands its brand, don't expect it to be entirely friendly to start-ups and Silicon Valley.
In 2014, the maker of Hellmann's mayonnaise sued start-up food company Hampton Creek, claiming that its Just Mayo product was engaging in false advertising because it wasn't real mayonnaise. Hellmann's later dropped the suit, but turned around earlier this year and introduced competitive eggless products.
Of course, San Francisco-based Hampton Creek now has bigger problems, after Bloomberg reported last month that the company bought its own products from stores across the country. The U.S. Justice Department subsequently opened a criminal probe into whether the company committed fraud.
Even if Unilever ends up buying Honest for $1 billion or something close to it, some investors will be disappointed. In August 2015, the company was valued at $1.7 billion in a funding round led by Glade Brook Capital Partners. In total, the company has raised more than $220 million.
Still, any billion-dollar acquisition lifts optimism among venture capitalists. After all, Twilio is the only venture-backed U.S. tech company to go public in 2016, and the IPO market is headed for its worst year since the depths of the financial crisis.
And for investors concerned that Amazon.com is becoming the one-stop shop for all retail and consumer goods, an aggressive Unilever represents some hope.
"Many investors shy away from commerce companies," wrote David Pakman, a partner at venture firm Venrock, in a blog post after Dollar Shave — one of his investments — was acquired. "The multiples tend to be low, Amazon is ever-present, and lots of capital can be required to scale. To us, we didn't see DSC as an e-commerce company, but instead as a model for new full-stack consumer products companies."