Ask any young founder of an organic food company — and if they’re being honest with you — nearly all of them will tell you that their goal is to be acquired by a large CPG company.
Moving forward, however, their answer may soon be “to merge into a SPAC.”
SPACs, short for Special Purpose Acquisition Company, are publicly-traded, “blank check” entities that offer companies an alternative way to go public, instead of pursuing the traditional initial public offering (IPO) route.
And the most high profile SPAC within the organic industry is HumanCo Acquisition Corp., which just went public last month.
HumanCo Acquisition Corp. (HumanCo SPAC) has a specific focus on the health and wellness sector, and its management team — comprised of a partnership between HumanCo and CAVU Venture Partners — carries a serious pedigree.
HumanCo is led by founder/CEO Jason Karp, who just sold Hu for a reported $340M and used to run Tourbillon Capital Partners, a $4B hedge fund. Alongside HumanCo co-founder/president Ross Berman, the two have over 40 years of professional investment management experience, as well as being operators and board members of multiple consumer businesses.
Helmed by well-known industry figures Rohan Oza and Brett Thomas, CAVU Venture Partners is one of the most successful investors in the better-for-you CPG space. It has achieved nine exits in five years and invested in Beyond Meat, Thrive Market, Vital Proteins, Oatly, REBBL, Once Upon a Farm and many others.
The board of HumanCo SPAC also includes several notable individuals: Brian Kelley, the former president/CEO of Keurig Green Mountain and the former President of Coca-Cola’s North American operations; John Foraker, who took Annie’s public and later sold it to General Mills for $820M, is the co-founder/CEO of Once Upon a Farm; Dean Hollis, former president/COO of the Consumer Foods and International division at ConAgra Foods, is currently the chair of the board of directors of both Hain Celestial and SunOpta; Kat Cole is the president/COO of Focus Brands, former president of Cinnabon and former vice president of Hooters of America.
SPACS INCREASING IN POPULARITY
Doing an IPO can be complex and cumbersome, whereas merging into a SPAC is an easier way to raise capital and allows a company to maintain control while avoiding the vagaries in the IPO marketplace. Additionally, a company will have a trusted ally — in the management team and board of the SPAC — to help grow the business after it is already public.
Even though SPACs have been around for a long time, they have been gaining real traction and attention as of late for two primary reasons.
High-profile figures are now involved in them, such as billionaire hedge fund manager Bill Ackman and legendary baseball executive Billy Beane. Furthermore, prominent deals are getting done in the space. Betting site DraftKings and electric vehicle company Nikola now boast valuations of $20B and $7B, respectively.
THE DNA OF HUMANCO SPAC
For HumanCo SPAC, this is not an opportunistic Wall Street veteran seeking to capitalize on organic’s popularity.
As someone who became very ill in his 20s with several autoimmune diseases and ultimately used food as a way to cure himself, Jason Karp not only lives the lifestyle but has taken a stand in his businesses.
At Hu Kitchen, the restaurant he launched and operated in New York City for many years with his two co-founders, brother-in-law Jordan Brown and wife Jessica Karp, it was predominantly an organic menu, and GMOs were prohibited. Hu’s wildly popular chocolate is also USDA certified organic.
Furthermore, when he ran his multibillion-dollar hedge fund, his principles remained.
“I told my investors that I don’t care how much money I could possibly make, I am not investing in Monsanto,” acknowledged Jason Karp.
Similarly, with CAVU, this is anything but a quick flip.
“We invested $25 million from our $250M fund into HumanCo Acquisition Corp. before having any idea what company we’ll be partnering with. We are committed to building a business for the long-term and are incentivized to help change the value of the company,” said Brett Thomas, co-founder of CAVU.
HumanCo SPAC is currently looking at businesses involved in food and beverage, personal care, supplements and fitness technology, and has until December 2022 to complete a deal. In terms of size, the ideal target company has an enterprise value between $800 million to $2 billion.
There is no question that HumanCo SPAC, with its proven management team and board of directors, offers an organic food company the unique opportunity to tap into its deep operating experience and vast network. Plus, it could help elevate a company’s brand to an entirely new level and allow it to reach many more consumers.
Yet, it also provides something else of equal, or greater, importance.
“This is how I live, and it’s my passion. I can relate to these founders, and they can have confidence that if they partner with us, I won’t destroy the mission for the sake of profits,” said Jason Karp.
(Disclosure: HumanCo Acquisition Corp. (HMCOU:NASDAQ) is a publicly-traded company, and I do not own shares in it. This article should not be construed as investment advice.)
Max Goldberg, Founder
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