Backed by a roster of top strategic advisors and investors, including actor Leonardo DiCaprio and circular economy pioneer William McDonough, a young venture capital firm has just announced the final closing of its first fund of $45 million. Called Regeneration.VC, the company focuses on seed and Series A investments in circular and regenerative approaches to consumer industries.
Why focus on this segment? According to Smith, consumer supply chains account for 45% of global emissions. At the same time, climate-friendly apparel and consumer packaged goods offer a $4.5 trillion business opportunity, he says. The fund focuses on three areas: design (packaging and materials), use (products and brands) and reuse (reverse logistics and marketplaces).
“Consumers have the power,” says Michael Smith, General Partner and Co-Founder. “We can greatly improve the planet through our purchasing decisions.”
A circular technosphere
A significant source of inspiration for the fund came from McDonough’s work on the circular economy – the reuse or extension of the life of materials in products. (McDonough is now a strategic advisor). For the fund, this means investing in companies that make or use such materials, as well as recycling, repairing and reselling products.
The process involves a “circular technosphere”, in which technology allows materials to move and flow through the supply chain, and a “regenerative biosphere”, or natural carbon sink systems, such as trees – a carbon cycle flow, during which things are returned to the earth, regenerating the soil and drawing carbon from the atmosphere. “We marry technology with biological processes,” says Smith.
For Smith and co-founder and general partner Dan Fishman, a variety of changes in regulation and consumer sentiment are driving big changes in the behavior of big brands. Already, many large companies, from Nike to Unilever, are committing to circular strategies by 2030. And the EU has recently issued regulations regarding circular economy plans. In addition, several US states are working on rules related to the circular economy. To deal with all of this, “big business knows they have to do something,” Smith says. “And that’s a meaningful way to engage in that process.”
As for DiCaprio, he is both a strategic advisor and an investor, serving as what Smith describes as a “sounding board” for the fund. Smith says he can’t reveal how much DiCaprio has invested, but describes him as “a major investor.” According to Smith, he and Fishman have known DiCaprio for some time. They approached him very early on, about two years ago, and, Smith says, he signed on as an investor early on.
Boosting start-ups
Partner assessment of the investment landscape led them to early-stage companies. During their research, they found that most investment in the sector currently targets early-stage companies. What was missing was money for companies that had just gained market acceptance and revenue, but needed capital and expert advice to take it to the next level. “We come to supercharge that,” Smith says. They set up their basic framework in November 2019 and started raising capital in February 2021.
Regeneration has already invested in five startups, as of April 2021, with a sixth to be announced soon. This includes companies such as Cruz Foam, which transforms aquaculture processing waste streams into a certified alternative to compostable polystyrene, and Arrive, which offers rental and resale as a service to retailers and brands around the world. entire. The plan is to invest in approximately 17 investments, with a typical investment size of $1 million at seed stage and $1.5 million to $3 million for Series A. Half of the capital of the funds will go to initial investments, the rest to follow-up. investments as businesses grow.
Ultimately, “we want to see dozens of funds doing what we’re doing,” Smith says. “We plant our flag with the idea that this is a place you should care about.”