Note: This article is the fifth in a series of interviews highlighting the work of interesting impact investors.
Marcia Hooper currently serves as a Partner of Branch Venture Group, LLC, an angel investing group focused on food startups, targeting food products, food technology, business services for food-related companies, ag-tech, and sustainability. She has over 35 years of venture investing experience. She also serves as a Senior Advisor to Bowside Capital, a private equity firm focusing in the small capitalization market.
Marcia, thank you for participating. How long have you been an impact investor and how did you get started? What would you say are the main ways the impact investing world changed during the time you have been involved?
I’ve been investing for three decades. Impact has long been a part of my focus, although impact investing as we know it currently has come a long way. At Branch Venture Group, in which I’ve been involved as a co-founder for the last five years, we specialize exclusively in food-related startups, whether they are in CPG, agtech, or foodtech. And all of them are intricately related to impact.
What we see now is that consumers are demanding so much more of their food. From the impact of fertilizer run-offs to upcycling, consumers are acutely aware of their own environmental footprint. As a result, corporations are compelled to change the way that they might have previously processed or grown food. It’s almost table-stakes in this industry – now it’s essential to the financial success of the firms we look at. And what we’re seeing is that consumers are willing to pay for food that they feel good about.
It’s extremely exciting because we see a shift in the founder mindset. The entrepreneurs themselves are now thinking about how best they can contribute, in their own unique ways, to environmental and sustainability goals.
Do you have a thesis or focus on any particular type of founder or company? Are there certain kinds of products you steer away from?
Food is one of the few industries that is at an advent of change. Historically, it has changed so little and has been overlooked by industries going through quick iterations (software, AI, biotech). Now we see an ever-growing interest in bringing that growth to food. It’s not easy – it requires an upheaval of our current processing, distribution, and fulfillment systems. But that hasn’t hurt our funnel – people are eager to take these challenges on.
As for what we look for, we look deeper than what’s a fad or a fashion – we’re building a beachhead in a market that will grow and develop into a long-term important segment of the market. We tend to look for companies that have strong intellectual property.
How did you prioritize which ESG issues you were going to focus on?
As an investor in early-stage companies, we do prioritize issues that can be solved in a period of time that works within the venture capital model. There are some issues that may take decades to implement. While we’re excited to help solve these issues in any way we can, the reality of the market is that we look for issues that are on the precipice of change.
But that doesn’t limit our reach. We find impact in a wide range of applications. An example of an industry at the tipping point is plant-based meats – we can lessen the environmental load by delivering a similar taste profile to animal-based products. And with the advent of alternative meats, we see interest in alternatives to other animal products, such as dairy, cheeses, and fats.
How do you measure the impact of your investing and the portfolio companies you work with? Do you use company-specific and/or portfolio-wide KPIs?
Because we look at impact in many different forms, our impact is measured company-by-company. Even within a specific vertical, you’ll find variations in ways to measure impact. A CPG company that sources traditional ingredients via upcycling, or the use of typically discarded ingredients, will have different metrics than a category-creating CPG that makes innovative, carbon-neutral snacks.
Candidly, developing metrics around impact investing is still a work in progress. We’re hoping the industry standardizes so that the effort becomes more wide-spread.
Do you expect market rate returns, or are you willing to accept concessionary returns for especially worthy companies?
Of course, we expect market returns! I don’t see impact investing as inherently contradictory to solid returns. Both in size of the markets and underlying economics, financials in the industry are extremely healthy.
As mentioned earlier, it’s almost difficult to see a company that comes across my desk that doesn’t have an impact angle. Because food is so intricately linked to a consumer’s perception of their environmental footprint, impact is table stakes.
Do you do straight equity investments only, or do you utilize other early stage deal structures such as lending, revenue-based financing or grant-making?
We invest equity-only but a number of our portfolio companies are able to use grants for funding.
Where does your best deal flow come from, and do you ever feel frustrated or limited in terms of deal flow by having a specific impact focus?
At Branch Venture Group, we’ve worked hard to establish our reputation in the space as not only shrewd investors but also as great advisors. Thus, the best deal flows come from our entrepreneurs – either those we serve at Branchfood and or word-of-mouth from within our network. We also source from our members in our angel group, other investors and service providers that know the work that we do.
I’ve never felt frustrated by lack of deal flow. It’s actually daunting to see the amount of deals that demand our attention! As the food industry increasingly gets more attention and our network continues to grow, we’ve never struggled to get healthy deal flow.
What would you say makes you good at what you do?
Our strength is in listening and asking questions. Through decades of experience in working with early-stage companies, I’ve learned to listen closely when people tell you the answers. Oftentimes, the biggest takeaways are not what’s explicitly stated!
We are also fortunate to have built such a great network in the food industry to test our assumptions and hypotheses to see if they have merit.
If you could give entrepreneurs one piece of advice about working with you, what would it be?
There is no such thing as a dumb question! We understand that the path of an entrepreneur is highly uncertain. Being open to advice and being coachable are key skills we look for in all of our entrepreneurs.
Stay tuned for additional interviews as The Seraf Compass continues to profile interesting impact investors, small funds, women investors, and family offices.