Coronavirus has made many venture capitalists weary of investing in early-stage companies with ideas that still need scaling up.
But VCs focused on certain industries have continued to write checks. That includes Evolv Ventures, a $100 million fund backed by Kraft Heinz.
In July, Evolv led a $6.9 million Series A round in Joywell, which makes sugar-free sweeteners from exotic fruits.
The company falls squarely within Evolv's criteria for investment. Evolv Founder and Managing Partner Bill Pescatello told Business Insider that the fund aims to make investments of between $2 million and $5 million and prefers companies with open funding rounds ranging from Series A to Series C.
"For me, the number one thing is financial returns," Pescatello said, adding that he and others who manage the fund also invest their personal money in companies. At the same time, the fund is involved in "bringing in companies that are solving problems for Kraft Heinz," he said.
Evolv looks for startups in four areas: Food technology, industrial, retail technology, and consumer technology and insights.
"We're very heavily technology-focused investors," he said, adding that Evolv works with startups that have used tech to improve some aspect of food manufacturing or retailing.
Pescatello has evaluated around 1,500 companies over the course of roughly two years at Evolv. Other investments over the past year include Fabric, which has built robot-run warehouses for filling grocery orders for delivery, as well as automated checkout provider Zippin.
Here are Pescatello's top suggestions for startups interested in pitching the fund.
Contacts and creativity are more important than ever
Matching startups to investors is often a game of schmoozing and getting to know founders in-person. But the pandemic has complicated business travel, forcing investors to use other ways of evaluating startups.
Pescatello said he's come to "rely a little more on references" who know the startups Evolv is considering, increasing the power of a good contact or someone who can attest to a startup's prowess.
Still, there are some experiences that Evolv has had to replicate digitally. Before it invested in Joywell, Evolv participated in a virtual taste test of its products, which involved the startup express mailing a styrofoam box of its products to the fund before it provided a guided test via video chat.
"Video chats and doing things online has never been more important," Pescatello said.
Be ready to work with a big company
Evolv doesn't limit the companies it invests in to working exclusively with Kraft Heinz, Pescatello said. "You'd be really damaging the value of a company" by not letting it approach other firms in the same industry, he added.
But Evolv does refer portfolio companies to teams at Kraft Heinz who could benefit from their work, something other venture funds that aren't part of a big food company can't do. The fund connected Parsable, a startup that makes software for managing workers and tasks in factories, with Kraft Heinz's in-house manufacturing team after investing, Pescatello said.
"We're investing for the fifth-largest food company in the world," he said. "That is an incredible advantage."
Value experience inside and outside the food industry
Food startups have to strike a balance between offering new ideas and knowing the industry, Pescatello said.
On one hand, startup founders who come from the world of technology are likely to bring new ideas. And, since many aspects of the food industry rest on long-established technology and habits, "you get real value from a new founder coming" into the space, he said.
At the same time, management teams at successful food startups also contain people who have food industry experience, even if the founder has a technology or media background. "You'd be very foolish if you didn't surround yourself with experts who know that area," he said.
