TerraVia, formerly Solazyme, Inc., has created a new company with VMG Partners, a private equity firm focused on consumer products, to exploit the market opportunity for algae-based foods.
The new venture, named TerraBrands, will marry TerraVia's algae-based food and nutrition platform with VMG's financial capital and expertise in investing and scaling consumer brands like KIND, Vega, Pretzel Crisps, Justin's and Health Warrior. Keith Belling, the founder and former CEO of popchips, will also join the company to provide mentorship to the entrepreneurs.
Algae might not look like the most obvious area for investment, but there has been an uptick in interest from consumers in this nutrient dense superfood. Packed with protein, fiber and amino acids, it has the added bonus of being sustainable since it can be grown anywhere without using large amounts of land and water. Research from Mintel found that 46 percent of U.S. consumers have either tried or would like to try algae as a protein source. "What you are seeing in the consumer world is this movement towards plant-based nutrition," said Michael Mauze, managing director, VMG Partners.
Perhaps even more emblematic of the market opportunity is the adoption by major food companies. Within the last nine months, TerraVia has penned deals with several brands to use its algae ingredients including Hormel, Utz, Enjoy Life, So Delicious, Soylent and Follow Your Heart.
TerraBrands will focus on investing or acquiring established lower middle-market companies in food, pet and nutrition segments. In addition to providing growth capital in the $3-25 million range, the group will also help companies build leadership teams, create a sales strategy and identify manufactures in the supply chain.
This is not the first time that VMG and TerraVia have partnered together. Last month, VMG was named as an investor in TerraVia's rebrand that had the company shedding its old name and declaring it would depart from biofuels to double down on food, nutrition and specialty ingredients. The move came at a crucial time in the company's history as recent times has seen its stock plummet from an all-time high of more than $27 in 2011 to a 52-week low of $1.18.
TerraBrands could reinvigorate TerraVia and help it create value for its shareholders while also allowing it to capitalize on a part of its portfolio that hasn't seen much of the spotlight. "We have been working on algae-based food ingredients for more than a decade, although I don't think most people paid a lot of attention, to be honest, until much more recently," said Jonathan Wolfson, founder and CEO, TerraVia.
And Wolfson believes that TerraBrands will be critical to elevating status of algae. "I think this partnership is a first shot across the bow to demonstrate how important algae is going to be in what we eat across all kinds of food categories."