Siddhi Capital, a growth equity firm known for providing operational expertise to food and beverage brands, recently closed its $135 million Fund II, doubling the size of its previous fund. In light of ongoing inflation and high interest rates, Siddhi Capital has decided to “move upstream” with its second fund, focusing on fewer and larger deals in the consumer packaged goods (CPG) sector. The firm aims to invest in deals with high margins and a strong emphasis on generating positive cash flow. This strategic shift comes at a time when the venture capital landscape is facing challenges, with many startups experiencing difficulties in fundraising and some having to resort to down rounds in 2023.
According to industry experts, LPs are now more inclined to support funds with a proven track record of success. Siddhi Capital has been able to retain nearly all of its LPs from the first fund for its second raise, thanks to its outstanding performance and access to high-profile deals in the industry. The firm’s ability to deliver consistent returns and secure lucrative investment opportunities has helped build trust among both existing and new backers.
Melissa Facchina, one of the co-founders of Siddhi Capital, highlighted the evolving landscape of CPG exits, noting a significant shift in the metrics required for a successful exit. Companies are now valued based on factors such as margin, cash flow positivity, and scalability, rather than just revenue numbers. Acquirers are increasingly looking for deals in the range of $75-200 million, as opposed to traditional targets of $25-50 million in annual revenue. In Fund II, Siddhi Capital plans to focus on growth-stage businesses in the food and beverage categories, with a smaller portion allocated to food technology ventures. The firm also aims to expand its investment reach into health & wellness, beauty, personal care, pet, and alcohol sectors.
Siddhi Capital’s portfolio includes notable companies such as Super Coffee, Cirkul, Magic Spoon, Immi Ramen, Mid-Day Squares, and Momofuku. These companies are distinguished by their mass market appeal and ability to address specific consumer needs. Facchina stressed the importance of investing in products that resonate with the everyday consumer, rather than niche offerings. Companies like Magic Spoon and Immi exemplify this approach by offering nutritious snacks and convenient meal options that cater to a broad audience. Siddhi Capital’s shift towards a more traditional private equity model involves investing in a smaller number of companies but with larger check sizes, reinforcing its commitment to supporting scalable and market-ready businesses.