Chicago-based S2G Ventures has closed its second fund at $180 million to invest in all things food, CNBC has learned.
The firm raised its fund during a year of high-highs and profound flameouts among food start-ups. Just last week, Nestle took a majority stake in Blue Bottle in a deal reportedly valued at $700 million. By contrast, last month Juicero shut down after raising over $100 million in venture funding.
S2G Ventures managing director and founder Chuck Templeton, who earlier founded OpenTable, told CNBC, "Sophisticated investors are not phased by these events...Consumers are changing the food system, whether the bigs want it or not. So there are and will continue to be big opportunities to make great impact and financial returns."
For example, organic food sales have outpaced overall food sales since the late 90's, he noted, growing around 15% annually versus just 3% for all food. In 1997, the organic food market in the U.S. represented some $3.4 billion in annual sales. That ballooned to $43 billion in 2016.
A CIO and managing director with the fund, Sanjeev Krishnan, added that while consumers have changed what they're buying, they've also changed how they're buying it, following the lead of millennials and buying more groceries online.
He said, "Consumers are buying around sustainability, health and dietary limitations now. At the same time, they don't trust big companies as much as they once did. They are able to find new items to try on social media and online. This is allowing more fragmentation and creates opportunity for companies that can use data to find and connect with their customers."
S2G Ventures has backed some recognizable emerging brands like the "locavore" restaurant chain Sweetgreen and plant-based burger makers Beyond Meat.
Now one of the largest food-focused funds in the U.S., S2G invests equally in food brands you'll see on the grocery shelf, and "hard tech" start-ups in food and agriculture. Its portfolio also includes Ataraxis Bioscience which offers a single test to identify unwanted chemicals in food, and MycoTechnology which developed a fungi protein to block bitterness in foods, instead of chemical sweeteners or sugars.
To help manage its second fund, S2G has also added a new chief of operations to its team, Aaron Rudberg, formerly a partner at Baird Capital. Rudberg said he believes food and related food-tech companies are still not seeing as much funding as they need to grow to their full potential.
He expects that following reality checks like the shut-down of Juicero and Sprig, and the rocky performance of Blue Apron's stock post-IPO, investors will be more "realistic" but equally enthused about investing alongside S2G in coming years.