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The appeal of investing in certified B-Corps

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Rohan Oza and Brett Thomas, co-founders of CAVU Venture Partners, join Yahoo Finance to discuss what they find compelling in venture investing and break down the company's criteria when selecting brands to invest in.

Video Transcript

JULIE HYMAN: We're going to stick with the topic of venture capital and migrate a little bit more over to the consumer side, and not as sort of tech-pure as we were just talking about with Joe Lansdale. I want to bring into the program co-founders of CAVU Venture Partners, Rohan Oza and Brett Thomas.

They invest in a number of different companies, including Thrive Market and Once Upon a Farm. And they were investors in Beyond Meat. Thanks for being here, guys. Appreciate it.

You guys also are invested in the companies I mentioned, B corporations. And that's a theme we've talked about intermittently here on the show, companies that sort of have as their mandate on a legal basis to account for all stakeholders, not just shareholders. And so let me bring you in first, Rohan, and ask, is that something specifically that you are now looking for from some of your portfolio companies?

ROHAN OZA: You know, the one question you decided to pick is actually better suited to my business partner. So I'm actually going to flip it to him. He's behind what we're doing in the B-Corps, so I'm going let him run that play.

JULIE HYMAN: Copy that. Brett, take it away.

BRETT THOMAS: Awesome. Yeah, absolutely. I think as you see what's going on in the world today, I think millennials, Gen Z, and other generations are realizing that doing good and making money aren't things that are mutually exclusive. And so I think as the world and the consumer and humans become more conscious as a whole, I think you're now starting to see all this demand in the brands that we support and believe in.

MYLES UDLAND: And so then Rohan, let's just talk a little bit about companies you've been involved with. And kind of the conversation that we were having with Joe as well, is I think when you think about venture investing and where tech is today, there's a perception of what people who are allocating money are actually interested in. But I would ask, as someone who's in that space, what are you seeing today that is compelling to you, and sort of how are you thinking through opportunities as they exist right now?

ROHAN OZA: Sure. So when Brett and I formed CAVU five-plus years ago now, five or six years ago, the headline we had was to democratize healthy living for all humans. It was kind of a bodacious statement. But it was, we were living a healthier lifestyle. We wanted to eat better. And we felt that thesis should apply to Americans across the country.

And what's happened since COVID is that that thesis has really exploded and has accelerated at an unprecedented pace. So people's desire to feel, if you want to call it bulletproof, is bigger now than ever before. And so everyone wants to put into their system something that's going to make them feel better, make them feel stronger.

And so you've seen the advent and explosion of nutrition, plant-based diets, lower sugar, higher-protein products. Even the way people get their food now, grocery-- you know, Thrive Market is a deal that we have been involved in that really epitomizes democratizing healthy living across the country, because the bulk of their products are better for you and sold in the middle of the country.

And Thrive has experienced incredible growth during this time period. So our thesis five years ago is even more relevant today because of COVID. And I think it's where we look to invest in. It's kind of our belief better-for-you products in your system leads to better feeling for people.

BRIAN SOZZI: Brett, this one's for you. Pepsi-- PepsiCo, really-- they're really focused right now on managing expenses really tightly. Coca-Cola is undergoing a massive transformation, cutting out a lot of brands. Does that hurt the potential exits on some of these brands you're invested in, if these two companies are watching every penny they're spending?

BRETT THOMAS: It's a great question, and something that we study at length. You know, I think traditionally if you look at CPGs, they have a legacy of brands now that have been popular for generations but the consumer is now realizing that aren't great for you from a health perspective. And so you know, they have been acquiring companies over the last five, 10 years, so-called challenger brands, right? Young startups that are better for you.

The issue, I think, is right now a lot of these large corporations are cost-cutting. I think some of them are believing that they've had a resurgence due to coronavirus, right? That's accelerated pantry-stuffing and helped earnings for the short-term. I also think they're back to trying to innovate again.

But at some point, their legacy brands-- they're going to have to do something, whether that's innovation or going back into the acquisition mode. So there may be periods of quietness where they don't acquire. But we do expect them, at some point, to come back in order to kind of move on with where consumers are and kind of transfer their portfolio over to better-for-you over time.

JULIE HYMAN: So we've talked about a couple of the sort of overarching trends that are driving what you guys are looking at, whether it's B-Corps, whether it's the sort of healthy living trend. Rohan, when you're looking, though, specifically for what companies that you want to get into-- I mean, your background's in marketing. You are good at branding and figuring out the brands that are going to pop.

What's the special sauce that you're looking for? And then also, once you find that, then what are you bringing in? What do you think is the most important thing then for a brand to do?

ROHAN OZA: So what Brett and I look for-- and it's kind of the CAVU special sauce, really-- is category disruption. What brands are coming out there, and what are they disrupting, and why the heck do consumers need those brands?

You need to be the first to market. You can be a fast follow-up. If you're number six kombucha to market, you're toast. So for us, we're looking at what is different, what that product is doing.

So one of the other investments we had was Bai. Bai basically delivered a great-tasting product with one gram of sugar and a bunch of antioxidants. It was kind of a no-brainer to come off diet sodas or high-sugar sodas.

And Bai went on to become a $300 million company in revenue in less than five years. So I think that what we look for are truly differentiated products that-- not just in food and bev, but in anything that helps people feel better about themselves. So that's part one.

Then part two, we bring a bunch of value-add, because we have an in-house agency actually that helps with packaging, design, influencer marketing, digital content creation. And so we actually bring a bunch of value to these brands that we identify, because we want to help accelerate their growth.

We don't want to run those companies. Smart founders run them. But we bring a value-added edge that very few other people bring.

JULIE HYMAN: And Brett, finally, I'm also curious where you're looking. Right? I'm sure you guys get pitched an awful lot, you know, and it's probably tougher to do it now. But are you going to farmer's markets? Are you looking on Instagram? Where are you looking for these next emerging brands?

BRETT THOMAS: We look everywhere. And I know that's a very broad answer, but you know, we look for data points, right? And I think when you hear about a new brand through a friend or on social media, you kind of engage a little bit. But then you get another data point where someone else may be talking about it or you encounter it at retail or at a farmer's market, and you start to connect the dots.

And I think with CAVU, we primarily focused on food and beverage. That was the original thesis in terms of health and wellness. And over the last five or six years, that definition has expanded. So you know, we've moved into, from just primarily food and beverage, to personal care. Because not only what you put in your body, but also what you put on your body in personal care and beauty.

And we've expanded into human performance. We made an investment in a brand called WHOOP, which I'm wearing one right now. And I think the world is expanding that definition of what health and wellness means. And given that we were authentic about it since day one in terms of democratizing healthy living for all humans, our subset of categories and verticals has expanded over time.

JULIE HYMAN: All right. Thanks, guys. Appreciate it. Apparently, Myles Udland is a WHOOP fan, he just revealed to us.

Rohan Oza and Brett Thomas, Co-Founders of CAVU Venture Partners. Guys, thanks for spending some time with us this morning. Appreciate it.