A new venture fund targeting investments in fast-growing small businesses in nutrition, health and wellness has been launched, just weeks after Capricorn Venture Partners announced it was setting up a dedicated fund in the same area.
The Wellness Fund has been set up by Sturgeon Ventures, a London-based corporate finance firm, and will target public and private companies in the “growth phase” in nutraceuticals and functional foods, cosmeceuticals, medical devices and novel food technologies, revealed managing partner Seonaid Mackenzie.
Potential investors include major pharmaceutical firms as well as wealthy individuals and fund managers, she said. “We’ve had some encouraging meetings with drug companies. Several have got drugs coming off patents but very little new in the development pipeline, so they are all looking to acquire smaller businesses that are coming up with new things.”
Potentially, The Wellness Fund could co-invest with other funds set up by firms such as DSM, Tate & Lyle, Unilever and Nestlé, said Mackenzie.
Anxiety over the large numbers of claims rejected under the EU health claims Regulation had made some investors more cautious about putting money into functional ingredients, she accepted. However, the fundamental drivers propelling growth in the market had not changed: notably an ageing population and rising obesity.
David Atkinson is managing partner at Tate & Lyle Ventures - a £25M venture capital fund targeting high-growth companies in renewable ingredients and novel processing technologies. While lots of firms had failed to secure health claims, he said, the few that had been successful had a significant competitive advantage.
A good example was Provexis, the small firm behind Fruitflow - a tomato extract claimed to reduce the risk of blood clots, which can trigger heart attacks and strokes - said Atkinson. Although it was small, it had punched above its weight partly because it was one of just a handful of firms to secure a health claim under the new tougher, regulatory regime.
Provexis, which recently secured a large cash injection from DSM Venturing, had been though difficult times, but was now financially secure, said chief executive Stephen Moon: “A lot of small firms in the functional ingredients market have gone bust as the financial markets have been at such a low ebb and there has been such anxiety about health claims. The fact we have got a health claim has helped us stand out from the crowd, secure financing and compete with far larger businesses.”
The functional ingredients and foods market was also growing faster than the rest of the food market, added Atkinson. “There are a lot of opportunities out there so it doesn’t surprise me that another venture fund has been set up to explore them. There seems to have been a lot of activity in this area lately.”
Capricorn’s new health tech fund launched in October, is aiming to raise euro 100-120M with a focus on drugs, vaccines, medical devices, nutraceuticals and functional foods.