Two years after announcing its first close and making its initial investments, Supply Change Capital today reported a final close on $40 million for its inaugural fund, which is investing in the future of food and food systems.
Data shows that “first-time funds take longer to raise and if you’re diverse-led, it can take even longer,” co-founder and managing partner Shayna Harris told Venture Capital Journal.
Among the firm’s limited partners are 301 INC (part of General Mills), Bank of America, Illumen Capital’s Catalyst Fund, JP Morgan Asset Management, MassMutual (through its First Fund Initiative) and the Illinois Growth and Innovation Fund (via the Office of the Illinois Treasurer). The debut fund will eventually invest in a total of 25 to 30 pre-seed and seed-stage start-ups, with checks ranging from $500,000 to $1 million on average.
The Los Angeles-headquartered firm is one of the largest led by a Latina, having deployed more than $13 million across 15 food and agriculture tech start-ups since June 2021. Co-founder and managing partner Noramay Cadena was born in Mexico and emigrated to the US as a baby. Only 2 percent of venture capitalists are Latino or Latina, according to LatinxVC, the first organization to support Latino and Latina investors in the venture industry. Cadena is one of the founders and founding board members of LatinxVC.
Supply Change is among more than 100 women-led fund that have raised a combined $5 billion since the start of 2022, according to Venture Capital Journal research. See our exclusive list of women-led funds here.
Harris and Cadena’s investment thesis looks at the future of food in a couple of ways. Because climate change is exacerbating water stressors and soil degradation, “On the supply side there’s a lot of work to be done, and technology is going to play a critical role in enabling us to continue to produce sufficient food,” said Harris.
On the demand side, which is often overlooked in the food investment ecosystem, the fastest growing demographics in the US are Asian-Americans and Latinx people, with women controlling most of consumer spending.
“Yet if you look at the types of the start-ups that are getting funded, they’re typically not diverse-led or led by women,” Harris noted. “We think there’s a lot of innovation to be had and a lot of alpha to be gained in also thinking about the dynamics around demand. There are amazing technologies that can support and enable consumers to be able to consume foods that are more resident to them culturally, more appropriate to their diet and also healthier.”
She cites the proliferation of allergens in foods that are having an adverse impact on kids and adults at an accelerating rate, as well as medical conditions such as Celiac disease, a chronic digestive and immune disorder that damages the small intestine and is triggered by foods containing gluten.
“We see a lot of dietary-related trends that are linked to health and the environment that we don’t totally understand medically yet but are critical to address in food,” she said.
Harris also pointed to a growing desire for a more flexitarian diet. Three-quarters of what humans eat are derived from only 12 crops and five animal species, “which is crazy when you think about the diversity of foods that traditionally humans have eaten around the world,” she said. “So it’s really critical to be offering more culturally appropriate and resident cuisines that use diverse sets of ingredients to consumers, so we can be supporting more flexitarian diet, a more nutrient-rich diet and a diet that also enriches our soil and environment.”
While Harris said Supply Change is a returns-first focused fund, she added that, “If you’re investing in the future of food and food systems, you have to be thinking about health and sustainability. There’s no way around it.”
How it began
Cadena and Harris met while earning MBAs at MIT’s Sloan School of Management in 2009. Cadena, a mechanical engineer, spent more than a decade bringing complex space systems to market at Boeing before making a career change to VC in 2015. Prior to launching Supply Change, she was a managing partner at MiLA Capital, an early-stage VC firm focused on agriculture technology and food tech, health/wellness, mobility/aerospace and climate tech.
Harris is a food industry veteran who spent five years leading sourcing and impact for cocoa and chocolate at Mars before joining venture-backed Farmer’s Fridge as chief operating officer. Later, as chief growth officer, she led revenue growth as Farmer’s Fridge raised its Series A through Series C funding rounds.
One focal area for Harris at Mars was the future of commodities, which eventually became a key driver for forming Supply Change. Environmental and social instability in many growing regions around the world are undermining the “pretty steady state production of commodities and crops [that humans have relied on] to forecast supply and demand in price” for the last century, Harris explained.
“The future of commodities, which is the base of our industrial food system, is a very important thing we think about at Supply Change Capital, both in terms of the types of ingredients going into products and the types of foods that consumers are looking to consume.”
Some of the firm’s investments are in ingredient-related deep technology having to do with the future of crops such as coffee and cocoa, the future of colorings and flavorings (which are traditionally based on petroleum-derived ingredients), and the future of proteins.
“A number of alternative ingredient investments based in precision fermentation and other types of technologies” that Supply Change has made have been inspired and informed by Harris’s work at Mars.
Food safety, another part of Supply Change’s thesis, is informed by Harris’s experience at Farmer’s Fridge, where a great deal of time was devoted to the topic. One of Supply Change’s portfolio companies is FoodReady, whose food safety software technology helps clients more easily comply with changing food regulations.
Strengthening food supply chains
The firm also invests in supply chain technologies that support a more resilient food system. Robigo creates biopesticides that are hyper-targeted to specific plant diseases such as citrus greening, which is harming much of the US citrus crop. Hyper-targeted pesticides aim to avoid the widespread environmental damage inflicted by chemical pesticides.
Another supply chain bet, PartnerSlate, provides a marketplace that connects brands with contract manufacturers. Emerging food brands report finding it hard to find a manufacturer to produce their product. A PartnerSlate service called “partner match” not only uses a dynamic database to facilitate those matches, but it also provides a suite of services to make the business deal easier, including financing options and software that helps brand managers track projects when working with contract manufacturers.
Supply Change’s deal sourcing benefits from a diverse network of women investors who Harris and Cadena co-invest with, including members of LatinxVC.
“We’re all seeing deals and sharing deals with each other within the network on a regular basis,” Harris said. “Our dealflow echoes the percentages of founders we invest in. Over three-quarters of the deals we saw last year – and we evaluated 1,000 companies — were diverse-led, and 80 percent of our founders are female, Black or Latinx. So you really see how our network comes to light.”
Supply Change tries to surface the biases that its partners bring to the table and implement programs to check them. Any founder can submit information about their company through the firm’s website. Every founder that Harris or Cadena meets, whether through a warm introduction or a cold inbound query, is asked to fill out a submission form that enables the firm to compare information on an apples-to-apples basis across companies so the firm can “surface and adjust any of the biases we might have implicitly as we’re evaluating the deal,” Harris said.