Note: This article is the fourth in a series of interviews highlighting the work of interesting fund investors.
Brad Johnson believes the “world deserves craft.” As the General Partner of Third Craft Partners, Brad joins with and accelerates those passionate challenger food and beverage brands that believe the world deserves better. Brad brings deep experience in product management, brand management and high end luxury real estate development to his work at Third Craft.
Brad, thank you for participating. When was the fund established, and is this the first fund you have managed?
The fund was established in late 2020. And, yes, this is my first fund.
Do you have a thesis or focus on any particular type of founder, company or industry? Are there particular types of startup companies you steer away from?
We provide venture capital to early growth stage craft food and also invest in enabling infrastructure. The world is undergoing a tectonic shift in how they eat, drink and live. People are orienting toward healthier alternatives. Third Craft focuses on the eating and drinking parts of that shift.
Tell me a little bit about your fund size, stages you focus on, and your typical check sizes when investing in early stage companies?
Our current fund is $30M in total size and was established in 2020. To date, we have invested $6M. Our typical check size is in the range of $500K to $2M.
What would you say are the main things that differentiate you from other similarly-sized VC funds?
We are a small but unmatched team in terms of experience and track record working in the consumer packaged goods space.
Tell me a bit about yourself; what makes you good at what you do?
My experience in sales and the insights I bring to helping brands understand their consumers. I spend my time listening, learning and applying what people say and do.
Tell me a little bit about your LPs?
Our LPs are mostly individual high net-worth individuals. We do not have a lot of institutional money in our fund.
Do you lead rounds or do you tend to follow other leads? Do you have a preference and, if so, why?
We mostly lead rounds and play an involved role as an active investor due to our stage of investment as well as our team’s experience and ability to help our partner companies.
Would you consider your fund an especially “active” or “value-added” investor?
We consider ‘valued-added’ and active to be one and the same. We add value in every aspect of business from strategy and team to marketing and sales, finance, operations and scaling.
What are the most important ways you would say the investing world changed during your time as an early stage investor? Looking ahead in the area of early stage investing, what are you most excited about? What keeps you up at night?
I would say the biggest change in my space is the proliferation of VC stage food and beverage funds. In last two years valuations have increased while margins have compressed due to temporary supply chain challenges which makes it more challenging for both me and my portfolio companies.
I am most excited about our brands’ abilities to meet massive unmet consumer needs.
The thing that keeps me up at night is always the fickleness of consumer trends, making sure portfolios have adequate cash and making sure they execute to their full potential.
If you could give entrepreneurs one piece of advice about working with you or your fund, what would it be?
Passion, persistence and planning is what we love. All else follows.
Tell us about "The one that got away."
We were looking at a baby food brand in Austin. Their CEO insisted on an NDA. Like most investors, on advice of counsel, we wouldn’t sign it. We loved the business, team, market and opportunity, but we didn’t want the liability of signing an NDA. At the time in 2019, the company was raising at a $4M valuation. It just closed its Series A at $50m+ valuation. In retrospect, this was hard-headed and stupid on our part to prioritize a legal document over a great investor opportunity.
What's the greatest advice you received about early stage investing?
What early stage investing blogs/thought leaders/sources do you follow?
Podcasts I like include Consumer VC and 20 Minute VC. For reading, I find the following blogs and sites useful: Whipstitch Capital, Fred Wilson (AVC), Austin Inno, VMG, Sequoia, WSJ, and Strictly VC.
What is your biggest challenge running a fund?
This is a business which presents demands 24 hours a day, 7 days a week, and draws on every business skillset and personality trait I have. To be successful in this space, you have to be all in.
Do you have set expectations for founders on how they should lead their teams and communicate with their investors?
Integrity, kindness, consistency.
What do you see as the key drivers of success when investing and driving returns?
Passion. Persistence. Planning.
Any good war stories to share?
I don’t know about good, but how about painful. We spent 6 weeks doing heavy due diligence on a brand we loved and were about to bet the entire fund on it. At the last minute a West Coast VC learned about it and invested in the same day. We lost the deal. The company was worth $45m when we were considering investing and it got scooped up. They just raised a round at a $400M valuation just 18 months later.
What are the top 3 qualities you look for in a startup founder?
Passion. Persistence. Positivity.
Stay tuned for additional interviews as The Seraf Compass continues to profile interesting small funds, impact investors, women investors and family offices.