Synthesis Capital holds USD 300m final close for debut fund

The firm said in a statement that current challenges in the "unsustainable, animal-reliant food industry" will be addressed by the fund, with the aim of prioritising sustainability and efficiency. Current issues including the war in Ukraine have highlighted the importance of sustainable and efficient food production, the firm said in the same statement.

Costa Yiannoulis, managing partner and co-founder at Synthesis Capital, told Unquote that the fundraise was launched in Q1 2021 and that the fund had a USD 250m target.

Sidley Austin provided legal advice on the fund. The VC did not use a placement agent for the fundraise.

Synthesis Capital was co-founded by Yiannoulis, Rosie Wardle, and chief scientific officer (CSO) David Welch.

"Although this is a new fund, as a team we have been investing in this space for about eight years through building the food tech portfolio at CPT Capital," Yiannoulis said, referring to the investment arm of Coller Capital founder Jeremy Coller. "We are one of the earliest – if not the earliest – investors in this space. After the Beyond Meat IPO in 2019, we saw a lot of new capital flowing into the space, and capital markets started to see alternative protein as an opportunity."

This development prompted the Synthesis team to launch an institutional fund, Yiannoulis told Unquote. "We realised that we had a unique skillset and we were in a unique position with a broad network to find the best startups, so we decided to spin out and raise a fund as Synthesis to leverage additional capital and LPs to bolster our network and to help the companies we work with."

The firm's specialisation was a key asset and differentiator during the fundraising process, according to Yiannoulis. "You need to understand what is going on from a technical perspective, and as we have invested in the space for a while, that is a unique differentiator for us," he said. "Our investors saw that there was a big space where you could deploy a lot of money, but they want us to be making the right bets, and so specialisation and technical expertise are important."

The VC's specialist knowledge is bolstered by the fact that it has a chief scientific officer (CSO) role, in the form of David Welch. "Having a CSO is not as common in venture funds in the foodtech space, although firms involved in biotech sometimes have this," Welch told Unquote. "I have worked in the spaces of classical plant biology, cell therapy and bio-processing previously, and those same enabling technologies that have allowed the creation of new vaccines and therapies are now being applied in the alternative protein space, and this knowledge allows us to assess which companies can scale these products effectively."

The fund is an Article 8 fund within the SFDR and Synthesis has integrated ESG into each stage of its investment processes, Yiannoulis said.

Investors
Institutional investors have provided around 40% of the fund's capital, with family offices accounting for the remainder, Yiannoulis said.

Coller Capital founder Jeremy Coller's CPT Capital and France-based Société Familiale d'Investissements are acting as cornerstone investors for the fund.

The fund is backed by institutional investors, family offices, ultra-high net worth individuals and corporates, many of whom have connections to the food industry or an interest in issues such as food security.

According to a statement, its LPs include Credit Suisse's Climate Innovation fund-of-funds, Sir Ronald Cohen's Dynamic Loop Capital, DisruptAd (part of sovereign wealth fund ADQ), The Nest, Heyi Holdings, trusts associated with the Sainsbury family, Interogo Holding (advised by IH International Advisors), WTT Investment (Tsai Family Office), and the Children's Investment Fund Foundation (CIFF).

Investments
The fund intends to back 15-20 companies with an average equity ticket of USD 15m. The fund will typically participate in Series A and B rounds where companies are raising USD 30m - USD 100m, although it can selectively back earlier or later rounds.

Synthesis CSO Welch explained what this focus means in terms of the development stage of the food technology and alternative protein companies that the firm will be targeting. "In general, when a company in this space raises an A round, they are building a pilot facility to scale out of the lab," he said. "They have scalable technology for a product, ingredient or a service that can be tested on a small scale. At Series B, companies are looking at demonstrating scale between the proof of concept pilot and the commercial stage."

Around 25% - 30% of the fund is expected to be invested in Europe and the firm will typically take stakes of up to 25% in each company.

The fund is around 20% - 25% deployed across five investments: California-based sustainable cultured meat producer Upside Foods; California-based sustainable animal-free dairy and protein producer Perfect Day; Israel-headquartered plant-based meat producer Redefine Meat; California-based bioreactor cloud laboratory platform Culture Biosciences; and Vienna-headquartered Arkeon Biotechnologies, which aims to use ambient microbes to convert CO2 into food.

The fund will remain measured in its upcoming deployment plans, Yiannoulis told Unquote. "The current market correction makes now a good time to invest, but we are not being prescriptive about the timing of our next," he said. "We want to follow the opportunity that is out there, but we will pause and take stock in the next couple of months."

Although exits are not currently a priority as the fund builds its portfolio, the VC has considered potential routes, according to Yiannoulis. "Our exits will depend on the company and the vertical," he said. "If it's a very niche technology, then it will probably a trade acquisition. But an IPO could be right for a cultivated meat company that produces meat, for example, when public market appetite returns. PE has dabbled in this space a bit, but we have not seen a large number of alternative protein acquisitions by PE yet."

People
Synthesis Capital – Costa Yiannoulis, Rosie Wardle (managing partners, co-founders); David Welch (chief scientific officer, co-founder).

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