All posts by Lin Zhu

Nutrileads: How One Health Ingredients Innovator Navigated The Investor Landscape

Hitting the sweet spot between pharma and nutrition isn’t easy.  How did the health ingredients innovator Nutrileads successfully navigate its way through the fundraising labyrinth? We’ll take you through the highs and lows of NutriLeads’ journey from zero to seed and beyond – and share what the team learned along the way.

StartLife alumnus NutriLeads works to identify and develop sustainable plant-derived health ingredients that can be added to food products. Their USP? Their products offer clinically-proven health benefits – from enhanced immune function to better gut health.

After completing a successful Series B funding round last year, NutriLeads’ key proprietary ingredient, BeniCaros – a unique carrot-derived fibre that supports innate immune function and improves resistance to respiratory infections – will be launched with a differentiating immune claim in the US market later this year, together with food and beverage and food supplement companies.

From immunologist to ingredients innovator: the birth of NutriLeads

Back in 2011, Ruud Albers was working as an immunologist at Unilever R&D, leading the global expertise group on nutrition, immunity and gut health. When the conglomerate opted for a strategic change of direction, Albers saw this as an opportunity to follow his passion for food and its positive effect on health, alone. Before parting ways, Unilever agreed that he could continue his research, allowing him to take over a number of food and health-related technology patents it had abandoned.

“I had the opportunity to acquire the know-how and the patents, so I decided to build the company developing a class of ingredients we had discovered,” he explains. “ This was essentially the basis of NutriLeads.”

Albers’ first step was to make something of these patents. In a bid to get the ball rolling, he got to work on expanding his network, looking for people whose profiles were complementary to his skill set and could help him develop his ideas.

It was during this time he ran into Erik Dam, who became CBO of NutriLeads and Annick Mercenier, who would become the company’s Chief Innovation Officer. Erik and Annick saw huge potential in Ruud’s vision and soon became co-founders. The fledgling team had the right mix of knowledge and skills, but they also had a huge challenge ahead of them.

“We realized very early on that we’d need a lot of venture capital.”

“We realized very early on that to develop these clinically-substantiated health ingredients, we’d need a lot of venture capital; there’s no way we could have bootstrapped it.” Albers explains.

Securing seed funding: hitting the sweet spot

The hunt for investors began. But after numerous discussions, nobody took the bite.

At that time, Albers’ networking endeavors landed him at the NGI Venture Challenge and at StartLife. It was here that he and his team uncovered a relevant network in the Netherlands. Their startup experts helped the team to better understand the range of financing options available and worked alongside them to hone their business plan to make NutriLeads a more attractive prospect for potential investors.

“Raising seed funding takes much longer than you’d expect.”

“I’d been working in R&D, and I had no idea of the business end of things. This is where StartLife helped,” says Albers. “We learned that raising seed funding takes much longer than you’d expect. It took around ten redrafts of the business plan until we got to a point that we were actually fundable.”

“Hitting the sweet spot between pharma and nutrition actually worked against us at first,” Albers explains. “While a lot of investors were very interested in this area, none of them felt comfortable investing – that was quite a hurdle!”

“We overcame this by bringing four investors who represented different aspects of our target industry between food and pharma into the same room. Their expertise was very complementary. Together, they were familiar with the whole food and nutrition value chain and this gave them confidence to move forward in this new area.”

This approach was successful and NutriLeads closed their first seed round in 2015.

Series A and B: the value of non-dilutive funding

After the company successfully met its milestones, it closed a Series A funding round with the same four investors.

But discussions around closing soon revealed that some of their investors were mainly focussed on making their lead ingredient a commercial success. The team, on the other hand, were eager to develop a whole new generation of ingredients.

“We had interesting discussions with the investors.”

“That was a challenge and led to some interesting discussions with the investors,” says Dam. But throughout the process, the team was able to focus on its long-term goals through non-dilutive funding; by leveraging the capital raised from the investors with grants.”

“This helped us to grow beyond the one-ingredient company that we were back then and brought us closer to where we are today. We now have a healthier portfolio of ingredients in different stages of development.”

When it came to applying for Series B funding, NutriLeads didn’t only want to innovate in relation to the development of ingredients themselves. The startup realized that to strengthen its position in the value chain, it should bring these ingredients to market by commercializing them and working alongside partners to develop and produce them.

As part of this vision, the team was also eager to diversify their investor base for their Series B round and initially garnered some good traction across the pond. But the Coronavirus pandemic hit just as they were about to secure a deal, which made closing exceptionally difficult. In uncertain times, many investors began to refocus on their own portfolio companies, only looking locally for new opportunities. So this meant pushing back the development of their overseas fundraising strategy.

Despite these hurdles in the midst of the COVID-19 crisis, the startup onboarded two new Dutch investors with strong domain expertise who were not only willing to invest but were also enthusiastic about NutriLeads’ aspiration to become a commercial company – while leading a Series B round together with existing investors. The rest is history.

So what’s next for the firm? Over the past nine years, NutriLeads has demonstrated that its products are able to deliver a genuine health benefit. The team has upscaled production, navigated many of the regulatory hurdles and now plans to launch BeniCaros with an immune claim in the US market later this year.

“We’re nine years into the game and we haven’t sold a thing yet,” adds Dam. “But that’s about to change.”

Advice for fellow founders: investment isn’t just about the cash

For founders looking to follow in NutriLeads’ footsteps, Albers has some noteworthy advice: the quest for the right investor isn’t just about funding.

“It’s a little bit like dating,” he proclaims. “You have to work closely with this person for quite a long time, so you’d better make sure that their ideas and their ambition – and their way of getting there – match with what you want to achieve as a company.”

“There will always be tension.”

He adds: “There will always be tension, but – if you have the luxury to choose – make sure it’s a good match.”

Albers knows that NutriLeads has been fortunate. Few small companies are able to get so many investors on board at such an early stage in their journey. But he believes that this mix of expertise and perspectives has been central to their success.

“This approach not only helped us to balance each investor’s individual interests, and enriched our discussions. It also provided us with access to a wider network – and this in itself has been very valuable.”

Albers also wants founders looking for investment to know that, as their company evolves, so will its needs.

“That’s why Erik will now take over as CEO.”

“You must put the company first. To maximize your chances of success, everyone needs to play to their strengths to make sure they’re adding value to the company. That’s why Erik will now take over as CEO to lead the evolution of Nutrileads from a R&D-driven organization to a company that develops, produces and sells clinically-proven health ingredients. Together with Annick and the rest of the R&D team, I will focus on the exciting science behind our unique ingredients, supporting production and sales to bring substantiated health benefits to consumers.”

And his final piece of advice to impart?

“Enjoy the ride because it’s gonna be a roller coaster, no matter what.”

Find out more about NutriLeads’ journey and how StartLife supports growing agrifoodtech businesses in this video.

 

p.s. You can also follow StartLife on LinkedinTwitter or stay up to date with the latest news about and for agrifood startups, scaleups and more via the StartLife newsletter.

Inside The Mind Of A Venture Capitalist: A Quick Guide To Raising Smart Capital Effectively

raising smart money

Many early-stage startup founders, especially first-timers, have very limited experience in interacting with venture capital investors (VCs). Consequently, venture capital is seen as a “black box”, largely due to a lack of insight into how VCs work and think. This article provides you valuable insights!

Founders frequently ask  “which investors should I approach?”, “how far am I from reaching a deal?”, and “why don’t investors invest in us?” To answer these questions and to secure that all-important funding, it could come down to simply better understanding who VCs are, how they tick and what drives their decisions. As StartLife’s Investor Relations Manager, that’s exactly what I’ll be helping you with in this article.

 

The basics: getting to know a VC

Finding an investor is comparable to dating in that it requires compatibility and chemistry. To secure the funding you’re after, you need to know the person behind the investment – both their professional background and their personality.

This might mean working out if they’re impact driven, financially driven or strategy driven, where their funds are coming from and what their financial return objective is. Gathering information on their investment scope, stage, and ticket size will also give you a significant head start.

These factors have a major influence on the decision-making process behind an investment. So to answer these questions and put yourself in a better position when it comes to approaching VCs, there are three key things you should do as a founder:

1) Research: find out who you’re partnering with

Founders are often looking for smart capital – funds that have expertise and networks in the relevant sector. Luckily, it’s likely that the information you need is already available online. While most founders take at least a cursory look at this information, it’s really important to delve into the detail.

  • Check out their website to find out the sectors they invest in, and also pay attention to what they do NOT invest in. This will save you a lot of time.
  • Take a look at the profiles of their investment team on their website or LinkedIn – can you find and connect with team members with knowledge in the sector?
  • Get to know their portfolio companies – have they invested in the sector or similar sectors?
  • Find out if organizations that partner with or invest in the VC fund have expertise in the area you work in.

2) More research: is the fund you’re applying for relevant to you?

Before approaching VCs, ensure that the fund is relevant to the development stage of your company. Stage can be rather ambiguous as everyone has a different definition of what early-stage, seed round, series A round, etc is.

Thankfully, you can find most of the information you need online, as long as you know what to look for. It’s worth bearing the following factors in mind:

  • Ticket size. This is often listed on their websites, so check if your funding needs fit into their range
  • The VC’s portfolio companies, at which stage the VC stepped in, and for how much. This can usually be found on the investor’s own website or sites like PitchBook and Crunchbase, etc
  • The investment criteria on their websites, including requirements on revenue or technology readiness level, for example
  • If fellow founders have had interactions with these VCs and if they have had any feedback

3) Consider your approach: make it targeted

As with job applications, you should target your approach to reflect the VC’s interests and personality. When possible, ask for a warm introduction – this is where StartLife could help. And remember that it’s like dating: you’re more likely to go out with someone who’s a friend of a friend as the vetting has already been done for you.

The Files: Building your documentation

While you were putting together your investor pipeline, you’d ideally been working on your pitch deck and materials, ready to send out to interested investors. We won’t dive deep into building a great pitch deck (there’s plenty of great guides on this online), but it’s absolutely worth putting in the effort to make a deck that is clear, comprehensive and convincing.

Other documentation you might want to have at this stage includes:

  • Forwardable Email Copy – This is the email you’ll use to personally engage key mentors in your process and ask for intros.
  • One Pager – This is a quick snapshot of your company, traction and other insight that could be helpful to an investor.
  • Emailable Deck – This is a high-level pitch deck that will be shared over email.
  • Meeting Deck – This deck will be similar to your emailable deck but will provide more sensitive details such as unit economics or financial models.
  • Financial Model – An overview of your key finances i.e. expenses, revenues, projections and so on
  • Cap Table – A spreadsheet that lists all the company’s securities such as common shares, preferred shares, warrants, who owns them, and the prices paid by the investors for these securities.

Need help putting this all together? The StartLife team has helped over 300 startups in the food and agriculture sector with their fundraising. Drop us a message to see if we can help your company too.

Useful tools at this stage :

  • Crunchbase (to see what investors have previously funded)
  • FoodHack database (to see a snapshot of all active foodtech VC’s)
  • Google sheets / Airtable (to build up your investor pipeline)
  • YAMM (to personalize and send multiple emails at once)
  • Streak (to keep keep track of your outreach)
  • Dropbox (to host files plus other materials you would like investors to review)
  • DocSend (to track who’s viewing your deck)

Scoring a deal: the process behind a VC’s decisions

Once you’ve successfully targeted a VC and have had a few initial conversations, it’s time to convince them to invest in your startup and turn that “no” into a “yes”. Understanding the process behind these decisions is critical. Be aware of the investment process; the steps along the way, and how close you are to a deal. There are normally three major phases in interactions between a VC and a startup:

  1. Screening phase
  2. Due diligence before issuing a term sheet
  3. Due diligence after issuing a term sheet and closing the deal

In general, phases 1 and 2 eliminate around 99% of cases. Once a term sheet is in place, it usually means that you’re very close to a deal. However, unfortunately, most startups don’t make it to this stage.

When this is the case, founders often get feedback that their startup was “too early” for the VC to invest in, and that they should “come back later”. As a result, they often don’t get to find out the real reasons behind the “no”.

“Too early” is usually a way of saying that there are some major risks in the business that need to be resolved before investors are willing to step in. In practice, the most common reasons behind this negative outcome are:

  • The market you’re targeting is not big enough
  • Your time to market is too long (due to regulatory issues or other major hurdles)
  • Your business model is not scalable
  • Your team doesn’t seem right
  • There’s a lack of competitive advantage
  • You have not met investment criteria (e.g. revenue or technology level)

Essentially, it all comes down to risk. Each of the above factors elevates your risk profile and reduces the probability of your startup becoming successful enough to reach the investors’ (usually financial) objectives over a three to five year period – the typical time for a VC fund to hold your startup.

To increase your chances of securing a deal, it’s important to develop mitigation plans to de-risk each of these aspects. The investor might then be ready to join you on your startup’s growth journey.

There are various things that you can do to increase your chances and to avoid feeling jaded by a negative outcome:

1) Ask where you are in the process
Ask the VC firm which stage you’ve reached in the process and make sure you’re clear on the next steps. This will help keep you focused and level-headed.

2) Get feedback from a VC firm
If you’ve failed to secure funding after several in-depth discussions with the investor, don’t only ask for the reasons behind the decision. More importantly, ask about the specific things you need to do to turn a “no” into a “yes”. Having this context will help you move forward and apply for funding again in the future.

3) Understand that a deal is a matter of science and art
Knowing that there are two sides to every decision will help, no matter what the outcome. There are the tangible content-driven motives, and the intangible reasons, which can simply come down to trust, drive, or how well you work together.

4) Start fundraising early
Be aware that the fundraising process, from initial interactions through to closing a deal, can take several months up to more than a year. It’s never too early to start building a relationship with investors in your areas of interest.

 

How StartLife can help you raising smart capital

In case you’re not familiar with us, StartLife is all about empowering founders to build and grow Foodtech and Agtech startups. Since 2010, we’ve built, supported, and funded over 300 startups in the food and agriculture sector, and helped to expand the ecosystem to create lasting impact.

As StartLife’s Investor Relations Manager, I’m responsible for leading investment-related activities for StartLife and its accelerator program, including deal flow with investors, establishing and maintaining investor partnerships, and coaching startups.

If you are an investor interested in getting in touch with startups, or if you’re an agrifoodtech startup looking for support to secure investment, feel free to contact me to get the ball rolling.

Startups are also welcome to apply for StartLife Accelerate – the leading acceleration program for agrifoodtech startups looking to validate customer segments, raise funding, and gain access to leading corporates and investors in the industry. The next program kicks off in September – come and collaborate with us!