How an Organic Baby Food Company Raised $21 Million, Despite the Venture Capital Slowdown

What will it take to beat the venture capital crisis? In the case of organic baby food brand Amara, one of its secrets has been investing heavily in a proprietary method of creating shelf-stable foods that has made it a favorite among mom influencers from TikTok.

Amara just announced an oversubscribed $21 million Series B funding round in a minority financing led by HumanCo, with other backers including Melitas Venture Capital, an early-stage fund that invests in food and beverage companies, and Touch Capital, an investor in consumer brands.

Jessica Sturzenegger, founder and CEO of the San Francisco-based company, said she plans to use the funding to amplify the company’s market presence, increase distribution within grocery and online channels, and expand the company’s production and product lines. In addition to its website and Amazon, Amara is sold in stores such as Walmart and Kroger. “The hardest part for us was meeting the demand,” she says. “As your brand grows, you must ensure operational excellence. »

The investors have a strong track record in clean nutrition. “We are thrilled to partner with Jessica and the Amara team. HumanCo Investments is focused on finding partners who improve nutrition and restore the quality of real food. We look forward to being part of Amara’s mission to provide better options in infant nutrition,” Ross Berman, managing partner of HCI, said in a statement.

This round follows a previous Series A, in which the brand raised $12 million in venture capital in 2021. This round was led by Eat Well Investment Group, a vertically integrated plant-based food investment firm .

Sturzenegger founded the brand in 2016 with chef Vicki Johnson, with the then two-person startup leveraging a team of independent consultants, including food engineers and a nutritionist, to develop their idea into a direct-to-consumer brand.

Amara has invested heavily in creating intellectual property such as branded nutrient protection technology, a proprietary dehydration process designed to preserve the texture and flavor of shelf-stable foods when water or milk maternal is added. Amara now sells products such as baby foods, such as “Kale, Mashed Potatoes” and snacks for toddlers, such as “Mighty Sweet Greens Organic Smoothie Melts” online and in more of 1,000 retail stores. The company won the Purity Award from the Clean Label Project, which tests retail products for purity and compares the results, as well as Good Housekeeping’s “9 Best Organic Baby Food Brands of 2024.”

The company’s products have, over time, been the subject of a number of viral TikTok videos made by parent influencers eager to share videos of their little ones craving more. “The power of word of mouth has a huge impact in this category,” says Sturzenegger. “On these video platforms you can see how creatively they use the products and prepare recipes with our baby food. I am blown away by the creativity.

Venture capital funding is declining, hitting a five-year low in 2023 – $248.4 billion, according to research firm CB Insights. And deal volume is at a 10-year low, with just 2,182 deals in Q4 2023. However, some brands in the industry have done well in finding investment capital. Another baby food brand, Serenity Kids, known for its ethically sourced meat pouches, just closed a $52 million minority investment.

So how did Sturzenegger and his team beat the odds? She shared some ideas with me about her strategy.

Stay focused on operations. The U.S. baby food market is poised to grow from $103 billion in 2023 to $161.2 billion in 2030, according to Fortune Business Insights – and that growth potential has attracted strong competition in this sector.

“Amara has successfully carved out a niche for itself by focusing on protecting the texture and flavor of the foods it prepares,” says Sturzenegger. “This is possible thanks to a great team and some really great suppliers. Our suppliers, like our team, go above and beyond and I think the reason is because they believe in what we do. The mission really comes into play.”

Understand the importance of each team member. Sturzenegger recruited his team through constant networking in his field. “When you’re not one of the Hersheys of the world with thousands of employees, everyone does their part,” she says. “Every person who touches the brand has an impact on it, from the operations manager to the truck drivers who deliver it. It’s quite a puzzle that needs to work perfectly every time, especially as you scale quickly.

Learn to love forecasts. “What the pandemic has taught us is to be very close to forecasts and to be in high communication with our suppliers,” explains Sturzenegger. “We’re constantly forecasting, making sure we’ve sold what we thought we’d sell last week and that we’re in alignment. The online world moves so quickly that if you don’t check the forecast every week, you can very easily miss a video going viral on TikTok — and suddenly one of your mixed berry flavors has gone crazy. If you don’t stay informed, you just won’t understand. »

This need for accurate forecasting is reinforced by the company’s reliance on organic ingredients, which are not always as readily available as non-organic products and may require rapid supply if demand for a product surges. arrow overnight. “This means we need to be integrated and communicate even more constantly,” she says.

Stay connected to your finances at all times. “You have to know your numbers and be confident,” says Sturzenegger. “No one knows your business better than you. I’m not the loudest person in the room, but for me, numbers, models, and hard data analysis are what give me confidence.

Balance passion and realism. Potential investors expect optimism, but they also want to know that you’re prepared for unexpected challenges. “I always tell our investors that I’ve thought about all the things that could go wrong,” Sturzenegger says. “I’m obsessed with it. I go to the numbers to remind myself of scenarios A, B, C and D.” As a founder, she says: “The only person who is going to put in the hours is you. »