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.