AUSTIN, TEXAS — Operators first, investors second. That’s the mantra of CAVU Venture Partners, a recently launched investment firm co-founded by three food and beverage industry veterans with a focus on better-for-you consumer brands. Investments have included Bai, Health-Ade Kombucha and Chef’s Cut Real Jerky. The name CAVU comes from a pilot’s term, “ceiling and visibility unlimited,” which means perfect flying conditions.
|Clayton Christopher, co-founder and partner of CAVU|
“That’s really what we aspire to bring to our partners and the companies we invest in,” said Clayton Christopher, co-founder and partner of CAVU Venture Partners. “One of the things that I see too often is a lot of entrepreneurs are getting capital, but they’re not getting smart capital.”
As the co-founder and former chief executive officer of Sweet Leaf Tea, Mr. Christopher understands firsthand the challenges of launching a brand without proper guidance.
“The early capital we got with Sweet Leaf was not smart capital,” he told Food Business News. “While it was helpful to get the capital, we could have grown a lot faster and a lot more efficiently had we had more people sooner on our board and on our team that had been down that road before and had the experience.”
In addition to Sweet Leaf Tea, Mr. Christopher co-founded Deep Eddy Vodka and Rhythm Superfoods. Another CAVU partner and co-founder, Rohan Oza, previously was a marketing executive at The Coca-Cola Co. and Glaceau.
“Rohan has spent his entire life in the trenches; I’ve spent my entire life in the trenches,” Mr. Christopher said. “We put a lot of our own money in this $160 million fund that we have, so we feel very convicted that when you have the experience that transcends the boardroom, it’s a huge insurance policy.
“A lot of the firms out there pride themselves on being good at picking winners, whereas we pride ourselves on building and creating winners.”
Flying high with High Brew
In late April, CAVU announced a $4 million investment in High Brew Coffee, an Austin-based ready-to-drink cold brew coffee brand, which also landed a distribution deal with Dr Pepper Snapple Group.
“We’re big believers in the cold brew coffee category, that it’s here to stay,” Mr. Christopher said.
Beyond that, he has a personal history with David Smith, founder and c.e.o. of High Brew Coffee. The two co-founded Sweet Leaf Tea in 1998 and sold the business to Nestle Waters in 2011.
“We’ve known each other since kindergarten,” Mr. Christopher said. “We’ve worked all our lives together, so partnering with High Brew and David through CAVU just made great sense. David’s a super-sharp business leader. He’s obviously a lot smarter now than he was when he started Sweet Leaf Tea with me.”
Launched in 2014, High Brew Coffee grew 270% in its first year and is set to grow another 200% this year, Mr. Smith said. The shelf-stable ready-to-drink beverages are distributed in 14,000 retail outlets and available in such flavors as Mexican vanilla, salted caramel and dark chocolate mocha. A line of dairy-free lattes will debut this summer.
|David Smith, founder and c.e.o. of High Brew Coffee|
“We’re just over two years old, and the brand in 2015 achieved what it took us 10 years to get Sweet Leaf Tea to,” Mr. Smith told Food Business News. “The investment money is helping us to finish building out the sales and marketing organization as well as bring these new products to fruition.”
During a sailing trip several years ago, Mr. Smith first discovered the benefits of cold brew coffee, which is 67% less acidic than traditional hot drip coffee, contains more caffeine and has a bolder, less bitter flavor profile, he said.
“When I first came back and was trying to figure out what to do next, I had seen some of the cold brew concentrates at a trade show and realized how it was very similar to what we were making on the boat,” he recalled. “They were delicious and high-quality products; they just weren’t that convenient. That got my gears turning. I thought, if somebody could deliver all these attributes from a cold brew coffee but put it in a convenient package that’s ready to drink on the go and doesn’t have to be refrigerated and doesn’t need to be mixed with anything else, that sounds like a great opportunity. That’s really when the light bulb went off.”
His goal as he began formulating the product was “to create the antithesis of Starbucks,” meaning less sugar and fewer calories than the brand’s bottled Frappuccinos and similar products on the market.
“The ready-to-drink coffees that have been around, the Starbucks Frappuccinos and those products in the bottles and cans, have been around for almost 20 years now, but there hasn’t been a lot of competition,” Mr. Smith said. “There have been several brands in the past, but I felt like those were ‘me, too’ products that were heavy on the dairy and the sugar. More of an indulgent dessert in a bottle and less coffee forward in the functionality of actual coffee.”
In an ironic twist, Starbucks recently introduced ready-to-drink cold brew coffee in the retail channel, a move Mr. Smith said is helpful in driving awareness within the category.
“Most of the consumers we speak to think they understand cold brew, but when you ask them what it is, they describe an iced coffee,” he said. “A lot of work and education is still to be done for overall consumers in the United States, and I think Starbucks getting into that segment helps all of us in space educate those consumers more quickly.”
Ready for take-off
CAVU Venture Partners primarily invests in early- to mid-stage companies with $50 million in revenue or less, Mr. Christopher said.
“What we look for is a passionate entrepreneur that has a learners’ mind-set versus a knower’s mind-set,” Mr. Christopher said. “Knowers scare me. Because I used to be one once, and they’re really dangerous to their business.”
The firm is particularly interested in better-for-you products because “we definitely believe that health and wellness is no longer an upper-class aspiration,” Mr. Christopher said. Other brands in the firm’s portfolio include Good Culture, an organic cottage cheese brand; Thrive Market, a membership e-commerce platform specializing in natural and organic products; and Wtrmln Wtr, a cold-pressed beverage made with fresh watermelon and organic lemon. The latter brand recently netted an investment from pop star Beyonce.
“The product is just lights out,” Mr. Christopher said. “There was Gatorade, and then there was coconut water, which was kind of like Mother Nature’s Gatorade. Wtrmln Wtr is the wave of the future, the next evolution. It’s higher in electrolytes and lower in sugar than coconut water, and it tastes delicious.”
Leveraging that operators-first mindset, CAVU even co-founded one of its investment brands, Mighty Swell, a premium sparkling juice-based cocktail beverage.
“Once you’re an entrepreneur, you’re kind of always an entrepreneur,” Mr. Christopher said. “You can’t get it out of your blood. That was a company we co-founded with two entrepreneurs, so we literally helped them work on the idea, on the concept, we worked with them on naming products, developing all the packaging and graphics. I was there for the distributor meetings, made introductions, helped them recruit the c.e.o. for that company … I wouldn’t be surprised if within the next two years another company comes out of CAVU that we most likely will co-found with an experienced entrepreneur. I love doing that. I can’t just be an investor and armchair quarterback.”
His advice for entrepreneurs?
“When you take an investment from a firm, it’s like getting married,” he said. “There really has to be a high level of trust, and entrepreneurs should do as much background checking on the firms and the people who are going to be sitting on their board as the due diligence that’s done by the investor.”
He added, “There are a lot of wonderful firms out there and certainly plenty that have very high standards of integrity, but I’ve seen too many times and heard too many stories where there’s been a loss of integrity and very adversarial relationships, where they’re way more focused on profits versus what’s the best thing for the company and founders.“There should always be a win-win scenario. It never should be one-sided.”