January 10, 2018

Sonoma Brands announced the closing of their second fund at $60 million, along with a shift in mission from incubation to making outside growth equity investments in exchange for minority stakes in innovative companies.

Initially launched in January 2016, Sonoma Brands has been the vision of Jon Sebastiani – former managing partner of Wines.com, former president of Viansa Winery, and founder of KRAVE Jerky. The formation of Sonoma Brands (named for his hometown), served as the next venture for Sebastiani after Hershey agreed to acquire KRAVE in January of 2015 for $220 million. Founded in 2009, Sebastiani grew KRAVE, which sells specialty meat jerky in flavors such as Chili Lime and Black Cherry BBQ, to sales of $35 million in the year prior to its acquisition.

Backed by a capital investment by limited partner, private equity fund, Velocity Made Good (VMG) Partners, Sonoma Brands began as an incubator with plans to invest a minimum of $500,000 per investment in several small to mid-sized brands, building out management teams for collaborative action with the goal of driving growth, brand awareness, and the creation of strategic value for stakeholders.

Through this first fund, Sonoma Brands made investments in Dang Foods, maker of all-natural coconut chips, SMASHMALLOW, producers of premium marshmallow snacks, and ZÜPA NOMA – maker of ready-to-sip chilled superfood soups. With the expertise of Sonoma Brands’ team and their experience in the CPG space, the fund was able to offers entrepreneurs not only capital, but a seasoned team of brand builders to advise on the disruption of stagnant categories.

“The founding of Sonoma Brands stemmed from my passion for this region that yields vast culinary expertise. Our first fund served as a proof of concept for our team’s strategy and entrepreneurial background that differentiates us as investors and brand builders” said Sebastiani.

SMASHMALLOW

Now, within two two years of launch, Sonoma Brands announced the closing of a second fund at $60 million, and a new $10 million capital investment in its portfolio company, SMASHMALLOW, which has been spun off into an independent entity. Of the funds invested in SMASHMALLOW, half were committed by Velocity Made Good (VMG) and the remaining half were invested from Sonoma Brands’ fund.

“With our first fund, we saw incredible, fast-moving growth from our portfolio brands, such as SMASHMALLOW, which has taken the marshmallow far beyond the traditional jet-puffed marshmallow with its overall snackability, simple ingredients and fun flavors,” said Sebastiani.

Founded only in August 2016, SMASHMALLOW has seen meteoric growth. The brand, which now has 45 employees, will be launching in Target and Walmart in the coming months, and has announced the appointment of former vice president of finance for Plum Organics, former CFO and interim COO for Krave, and former CFO at personalized nutrition startup Habit, David Lacy, as its new CEO. Speaking with Project Nosh, Lacy expressed his expectations of sales topping $30 million by the end of the year for the company, which is planning the launch of new flavors and a new line of products.

“We are thrilled to have such a strong and talented team, led by David’s expertise, to steer SMASHMALLOW into the company’s next chapter and continued, limitless growth,” said Sebastiani. “Our aim with Sonoma Brands’ second fund is to continue this momentum to work hand-in-hand with truly groundbreaking brands that will excite consumers and fill gaps within the market.”

Future So Bright

Moving forward, Sonoma Brands intends to invest between $5 million and $12 million in companies with proven revenue of between $1 million and $15 million, and plans to have about seven open investments, reports Project Nosh. However, the fund will not rule out making smaller commitments as low as $1 million, or larger co-investment deals in businesses with revenue of upwards of $30 million over the next 18-36 months.

Although all investments will be made under the CPG umbrella, and most will be in the food and beverage space, the fund remains open to the possibility of also investing in tech or personal care companies.

“As we look at companies, especially on the early stage, we see that founders and management teams are really the rock stars,” Sebastiani said. “Even though the product, the packaging, what’s inside the bag, we all know and understand there has to be a ‘wow factor’ and you have to be investing into a brand that’s in a big category, I think often times the founder, him or herself, is such a critical part.”

-Lynda Kiernan