NotCo raises over US$ 70 million and attracts founding father of Mercado Livre
Over the past three months, NotCo’s founders have met with the company’s board. On the agenda was the discussion of whether there would be a need to extend the Series D round of US$ 235 million carried out in July last year and which transformed the Chilean foodtech into a unicorn valued at US$ 1.5 billion.
“We were having access to more capital and there was a question whether or not we should accept it,” says Matías Muchnick, co-founder and CEO of NotCo, when NeoFeed🇧🇷 On the one hand, new funding would mean diluting more equity. On the other hand, there was the awareness that this was a rare opportunity at a delicate moment in the venture capital market.
The answer was officially given this Monday, December 12, when NotCo announced to the market the raising of another US$ 70 million. The contribution is led by Princeville Capital, which makes its first capital injection in the foodtech. Who also debuts in captable is the Argentinean Marcos Galperin, founder and CEO of Mercado Livre.
The extension of the round was accompanied by other investors who were already part of the business such as Tiger Global itself, which led the contribution of Série D, L Catterton, Kaszek, Future Positive, The Craftory and DFJ Growth, in addition to Bezos Expeditions, by Jeff Bezos.
“We decided not to waste this opportunity to put more money in the bank and stay out of the market for the next five years,” says Muchnick, who cites the geopolitical landscape and macroeconomic issues as obstacles that make 2023 “scary”. “The market is worried about what will happen.”
This new injection maintains the previously agreed terms, which means that there was no down round – which is when the market value of a company decreases from the sale of equity at a price lower than that realized in the previous round. “If it were not so, the round wouldn’t have happened,” says Muchnick.
According to the entrepreneur, Princeville, which with NotCo is making its first investment in a company in Latin America, had already shown interest in entering the operation in previous rounds. This was just not done because there was no agreement regarding the size of the check or the round carried out.
The money will be used to guarantee greater financial security for the company. “We’re going to put more money in the bank and stay out of business for the next five years,” says Muchnick. Thus, the tendency is for the next funding to occur with an eventual IPO.
In order not to appeal to investors anymore, NotCo plans to become a profitable company in two years. “We changed the way we think about growth,” says Muchnick. “We will sacrifice growth for increased margins.” The original plan was to breakeven only five years from now.
What can help to do this is the growth of the B2B front, which will receive greater attention from this contribution and may represent up to half of the business in the next five years. The startup’s foods are already part of the menu of chains such as Burger King, Shake Shack, Starbucks and Dunkin Donuts.
In addition, in February this year, NotCo entered into a joint venture with Kraft Heinz, controlled by 3G Capital and Warren Buffet. Headquartered in Chicago and with a development center in San Francisco, the initiative aims to create plant-based versions of Kraft-Heinz foods.
NotCo’s current product line features vegetable protein substitutes for dairy products such as milk, cream, ice cream and protein chocolate milk, in addition to a line of mayonnaise options that do not use eggs in their formula and vegan versions to replace beef. and chicken.
Present in 12 countries, the majority in Latin America in addition to the United States and Australia, NotCo does not plan to enter new markets in the coming years, following the current policy of not betting on aggressive growth to preserve cash. This does not mean, however, that the company will stop expanding.
Brazil is an example. Around here, the startup has already invested BRL 150 million and this year it expanded its operation to states such as Rio de Janeiro, Paraná, Rio Grande do Sul, Minas Gerais, in addition to the Federal District. For 2023, the focus is to take the products to the Northeast region, which is still underserved by NotCo. In all, there are 2,000 points of sale in the country.
What should also be done next year is the opening of a new office in São Paulo. The structure will be larger and will house an experimental kitchen for testing new products.
Competition in plant-based has become fiercer in recent years in Brazil. NotCo had to compete against giants like JBS, BRF and Marfrig, in addition to Fazenda Futuro, valued at more than R$ 2.2 billion.
Other smaller startups also began to bother. One of them is The New, controlled by Lever VC, the investor in the giants Beyond Meat and Impossible Foods.
Also in the running is Typcal, formerly of 100 Foods, which recently received a seed investment led by Futurum Capital. The check also included the participation of the Olympic medalist and former coach of the Brazilian men’s volleyball team Bernardinho, who also invests in NoMoo, a vegan dairy product.