At Supply Change Capital, we are committed to identifying and supporting startups that are driving positive change in the food system. Our thesis focus is at the intersection of climate and culture as the foundational forces impacting the food system. In addition to thesis alignment, we screen for companies that can positively impact diversity, health, and the environment. In considering impact, we consider a full value stream view that extends stakeholders to include employees, customers, and suppliers.
Founders often ask us about our process, so here is a behind the scenes look at how we process deals and some data for reference.
A Deeper Look at the Data
In 2022 we saw 1,050 deals, had intake calls with 235 companies, and invested in 8 new companies.
Types of deals: We saw deals across the value chain, from AgTech (18%) to ingredient innovations (21%) to enabling technologies (25%), and to cultural and innovative brands (26%).
Sources: Deals came to us from four primary sources: events (29%), investor and professional networks (24%), inbound (21%), and outbound (20%).
Diversity: 67% of all companies that we saw in 2022 identified as an non-white, with most common representation from Asian + South Asian (19%), Latinx (18%), Black/African American (15%). On gender, 41.5% of companies were led by a founder identifying as a woman. Overall, 74.5% of our pipeline identified as BIPOC (Black/Latinx) and/or women.
Timeline: Of our last 5 investments (Q4 2022-Q2 2023), we led two of the five deals. It took us on average 62 days from first call to investment decision, with an average of 5-15 touch points with the founding team in the interim.
Deal Flow Process
Step 1: Intake form. We ask all companies to fill out this form. We found it minimizes bias in our process and ensures we give every company an equal opportunity to meet with our team while we all see the same baseline information shared. It feeds directly into a CRM everyone on the team has access to and also ensures a deal does not get missed in an email shuffle. The questions asked align to our FOODS framework.
Step 2: 30 minute initial call. When we screen a compelling opportunity, we schedule an initial call to learn more. Due to the volume inbound, we don’t respond to every submission, but we do evaluate every single form submitted. Our goal is to decide whether or not to take an initial call within 7 days of intake form receipt.
Step 3: Preliminary diligence & follow-up. In 30 minutes, we usually have a good sense if we’d like to investigate further or pass for a variety of possible reasons. Thirty minutes of course does not address all questions we would typically have in order to move forward, so founders typically receive an email with 3-10 questions from the team’s discussion to help us prioritize our next decision. If we decide we have no further questions or decide to pass at this stage, we will loop back with founders either way. If we choose to proceed to a team call, our team creates a FOODS framework for that company, where we summarize learnings from the first call, follow-up questions, and our own preliminary diligence research to get the team aligned on top priorities and critical questions for the team call.
Step 4: Team call. Next we’d invite the team to meet either or both of the Partners. The first objective of this call is to determine whether there is alignment along thesis fit, market fit, and founder motivation. Second, we want to dig into more specifics around your operations and tech. Finally, we want you to ask questions of us. If we do invest, we expect to work closely with your team for years to come, so want to ensure this critical alignment early.
Step 5: Full diligence. Within 7 days of a team call, our team will be in contact about moving into full diligence. We will ask for access to a data room if we haven’t received one yet, and we’ll outline what documents we expect to review. The full diligence process typically takes between 4-6 weeks, where we will be in touch with your team regularly. As soon as we come to a decision either way, we will let your team know. Typically at this point, we value the time and learnings from the process and will offer a debrief if you are interested.
Step 6: Investment decision. We are always thrilled to be able to share that our team has come to the decision to invest in your company. Please note, final investment always hinges on successful completion of legal diligence.
FAQs:
Are warm intros better?
We use our intake form to try to reduce bias and evaluate all companies on the same basis. Of course, we are always happy to know who else in our networks you are already connected with, but of the companies we have invested in, a few have come as inbound prospects.
Do you only invest in female or BIPOC founders?
No, we believe diversity means that everyone should have an equal opportunity. Diversity is a part of our impact framework, and we consider the diversity of the founding team, employee base, customers, and community.
Do you lead?
Yes, we can lead. We expect to lead ~⅓ of the deals in Fund I.
Do you follow-on?
Yes, we have a follow-on allocation.
What can I expect from you post-investment?
Kick-off Strategy on-boarding session & on-going support
Supercharge III (SIII). A program we built based on our own experience as operators, which includes building (1) Leadership, (2) Management, and (3) Culture for fast-growth organizations. Read more in this blog.
Impact Monitoring and Reporting: At our firm, we believe that impact in the food system should be measurable. Therefore, we work closely with founders to define and track key impact metrics that are aligned with our food system impact goals. These metrics could include environmental indicators (ex: greenhouse gas emissions, water usage, or land conservation); health indicators(ex: nutritional value or accessibility of food); and social indicators (ex:fair labor practices or community engagement). We aim to invest in startups that demonstrate a clear commitment to achieving measurable and meaningful impact in the food system.
Our investment process has been iterative over our first two years of capital deployment. While we are structured as a traditional 10 year fund with external Limited Partners, our investment committee decisions are made by the Partners, Shayna Harris and Noramay Cadena, with diligence support from the investment team. I lead the overall movement through our deal process and I look forward to chatting with you!
How a deal becomes an investment
Love this, Rafa!