February 2, 2016

By Elizabeth Penney

Sanjeev Krishnan is looking for more than great concepts, well-managed companies and growth potential for Seed to Growth’s $125 million portfolio. He wants to transform a $1.4 trillion industry from soil to shelf.

“The consumer is changing the US food system,” managing partner Krishnan says, commenting that Millennials, defined as 18 to 34 year olds, are the main group driving the shift, with their focus on healthy, fresh food. Results from the 2015 Food & Health Survey support Krishnan’s theory, reporting that seven out of ten Millennials think about whether food and beverages are produced sustainably. They also tend to make purchases based on labels, with natural, organic, and locally sourced receiving high marks. The Food & Health Survey, conducted annually by the International Food Information Council, surveys Americans of all ages on food choices and health practices.

Krishnan regards these trends as a starting place, with the ultimate goal making better food affordable, consistent, convenient, and safe. This mainstreaming of what some consider expensive niche markets has the potential to transform the entire value chain. Seed to Growth’s (S2G’s) role is “to layer on the entrepreneurship, risk capital, innovation, and sustainability,” that will make these changes possible. S2G is well placed to have an impact; they are presently the country’s largest multi-stage food and agriculture venture fund. Krishnan, who has worked for JP Morgan and the World Bank, co-founded the firm in 2014 with Victor Friedman and Chuck Templeton.

So far, 18% of the fund has been committed to eight companies working in a range of industries from biotech to consumer products. These firms aren’t all start-ups; the most seasoned is over twenty years old. But Krishnan believes each is poised to bring significant innovation to their sector.

On the consumer end, S2G is investing in companies that already are feeding people well. Shenandoah Growers, founded in 1989 in Harrison, Virginia, grows fresh herbs sold in grocery stores and other outlets. In addition to cut herbs, they sell potted plants and specialty items such as edible flowers and rosemary skewers. With 300,000 sq. ft. of greenhouses, they now have facilities in Georgia, Florida, Texas, Maryland and Indiana as well as Virginia. S2G believes that herbs are a “key component” of meals rather than a garnish or culinary afterthought and that Shenandoah Growers is poised to become a national brand.

Another portfolio company, Sweetgreen, is a restaurant chain offering locally sourced salads and soups in metro areas, including Los Angeles, DC, Boston, and New York. Their creative, reasonably priced offerings are aimed to entice Millennials and other foodies to chose Sweetgreen for lunch. The chain fulfills S2G’s mission of providing healthy, affordable and convenient food.

It’s when discussing soil biology and agtech that Krishnan reveals revolutionary thinking regarding food functionality and the possibility of real change in how food is grown, processed and eaten. “Food is the cheapest drug,” he says. Citing the interest of health insurance providers in incentivizing healthier eating, Krishnan believes diet can address many chronic conditions. “The discussion is going beyond organic and GMO or non-GMO,” he says. Personalized nutrition and micro-nutrients are areas he sees the healthy food industry heading.

As always, the challenge is to change eating habits. While the Food & Health Survey reports that about half of Americans give a lot of thought to the healthfulness of food and beverages, survey results show that doesn’t always translate into purchasing decisions

S2G is taking the approach of making food healthier rather than discouraging consumption. Mycotechnology is a biotech firm that uses edible fungi to remove bitterness from coffee, chocolate, and stevia. “This reduces the need for masking agents,” Krishnan says. Reducing the need for added sugar can potentially make products healthier as well as less expensive. Mycotechnology is now working on removing the gluten from wheat. The success of that project could have huge implications for baked goods and cereal companies.

Farming isn’t neglected in S2G’s efforts; in fact, Krishnan calls growers “the most important actor,” saying that “acreage needs to catch up to the consumer while being profitable for the farmer.” Midwestern BioAg, a Wisconsin company offering soil analysis and amendments, is considered by S2G to be a leader in biological farming. Through in-depth soil analysis, Midwestern BioAg can prescribe the right blend of nutrients to improve productivity and crop health. Specialized fertilizers are aimed at livestock feed production, row crops, berries, and orchards. Krishnan says that farms can substantially reduce application of amendments once the soil is healthier, thereby reducing costs. About three-quarters of Midwestern BioAg’s clients are conventional farmers.

S2G is actively adding companies to the portfolio. Krishnan says the effort is a combination of entrepreneurs coming to them and S2G identifying prospects. Central to the search is finding companies with the ability to become leaders in emerging and growing sectors. “We want to do well, do good,” Krishnan says.

The portfolio companies appear equally pleased with their S2G relationship. Tim Heydon, president and CEO of Shenandoah Growers, says,“S2G has an outstanding combination of people and mission.  As we set out to raise growth capital, we sought partners that shared our vision of innovation.”