Connections Newsletter #1

Mar 22, 2023 | Newsletter

Thank you for believing in the mission of Interstate Fusion Ventures and helping us by connecting the coasts to Northeast Ohio. This newsletter will highlight our year along with some portfolio company spotlights and provide a glimpse into 2023, from a Venture Capital perspective.

To provide some context, please take a look at this article Crunchbase VC Funding 2022. This excerpt from the article was especially true. “Venture and growth investors scaled back their investment pace significantly in the latter half of 2022. To be fair, 2021 was a tough act to follow. Fast-growing startups were showered with capital.”

As a result, we stayed with our investment strategy, dug in, and continued to play the long game, by enhancing relationships with our partners in Silicon Valley and the East Coast. We worked diligently with our founders and increased our focus on capital efficiency. Most of our companies raised additional capital, with several choosing to bridge as opposed to a priced round until economics become more favorable.

All in all, our year was filled with change, exciting portfolio announcements, and the launch of our second fund. In April, we completed the rebranding from Akron Fusion Ventures to Interstate Fusion Ventures and the response has been very well received. The biggest reason behind this was to emphasize our model is not restricted to the borders of Akron, Ohio when looking for the best investment opportunities. With Cleveland recently being named one of the Best Cities for Entrepreneurs – Cleveland #9, this only reinforced our decision.

Throughout the year, we delivered more content for you such as VC Roundtable Highlights, which sparked conversations around essential issues facing Venture Capital markets. It was an intriguing dialogue with many insights that were shared with our LPs and founders. In addition, we kept you updated with newsletters, LinkedIn Posts, other social media, and our Founders Spotlight Zoom featuring company updates and the fundraising efforts of 7 of our portfolio companies.

Here are some highlights from several of our companies:

Pod Foods founders

Pod Foods

Pod Foods is a tech-enabled, data-driven full-service distribution solution, reaching retailers and brands via a B2B wholesale marketplace. Named of the 10 Most Innovative Food Companies – 2022 by Fast Company, Pod Foods is revolutionizing the relationship between brands and retailers. In addition, to staying true to its mission of helping emerging brands with distribution, Pod Foods launched Pod Foods Capital.

Their growth trajectory is impressive and below are some recent highlights from Co-Founder Larissa Russell:

“In the pipeline, we have a 1,200-store chain looking to launch with us immediately in the first 200 locations, among others. This account referred us to a $1.5B brand for immediate launch. They also want to transfer 60+ products to Pod Foods distribution to start and expand from there. This and other opportunities are accelerating pipeline progress – we are 6 months ahead of forecast, and as it is currently pacing, we will 3x+ the business top line in 2023.”

Number of Active Brands chart

“Since we now have a large enough catalog of brands to support expanded delivery sizes, all new accounts are also profitable from day 1 and improve blended unit economics – which means we unlock EBITDA positive in 12-18 months.”

Fund Investment History in Pod Foods

Fund 1’s initial investment was in July 2020 based on a $16M pre-money valuation and had our pro-rata follow-on in August 2021 at $30M pre-money and $40M post. Fund II invested in their most recent bridge round with a $40M valuation cap. They are currently in the process of closing Series B with a $46M valuation. There was also significant SPV participation.

Society Brands team

Society Brands

Society Brands is a tech-enabled consumer products company building a global growth platform, acquiring eCommerce brands, and evolving them into household brands. Society Brands’ goal is to become an E-Commerce Proctor & Gamble. They are an eCommerce aggregator that brought in $200M of venture debt in March 2022 and closed a Series A Round valued at $100M valuation later in the year.

Some recent highlights from Society and projections for the year ahead from Founder Michael Sirpilla:

“The equity markets in 2022 were tough for many but thanks to our friends/family & VC investors we had a solid year. Bill Manby is a really important partner to us and the first VC (Interstate Fusion Ventures) to invest in Society Brands. He was a big believer in Society Brands in our early stages”.

Society Brands Additional Coverage Highlights

2023 Outlook for Society Brands

“Although the economy is going through uncertain times, we find ourselves in an incredible buying market. Multiples for e-commerce brands have decreased significantly but e-commerce is trending higher than ever before. As we continue to look at new acquisitions we will primarily focus on ‘high-value’ brands that consumers will likely purchase regardless of the economy.

We will be prudent with the effort of controlling costs and keeping significant cash on the balance sheet. We will be aggressive in deploying the rest of the $200M credit facility on solid acquisitions with the strong possibility that we will be a billion-dollar company by early 2024.”

Fund Investment History in Society Brands

In December of 2021, Fund 1 invested in the Seed round and converted it into their Series A at a $100m valuation. We received a 25% discount which occurred less than 8 months after our original investment. To date, it is our largest SPV.

Biohm Health product line

BIOHM Health

The mission of BIOHM Health is to empower individuals to take charge of their health through solutions that harness the power of microbiome data. Recently, they announced the following equity financing Biohm Health raises $7.5M. This funding will help accelerate their growth with research, artificial intelligence (AI), and product development.

Products are now available in Sprouts Farmers Market and their collaboration with University Hospitals (UH) Cleveland Medical Center and Case Western Reserve University School of Medicine is published in the journal Gastroenterology. Their DataMap platform enables novel, efficacious ingredients from a proprietary dataset. This ingredient, BIOHM FX, powers over a dozen products with many more coming in 2023. The new AI platform will accelerate and enhance this development process.

Sprouts Farmers Market - Biohm Health products

Fund Investment History in BIOHM Health:

Fund I invested in the convertible note round in March 2022 that converted at a 25% discount into the $46M valuation round, earlier this year.

Interstate Fusion Ventures logo

Interstate Fusion Ventures Update

Fund I (2020 Vintage)

  • 21 total portfolio company investments
  • 1.5X TVIP (total value to paid-in capital) **
  • Over $9M Total Value on a little more than $4M invested with a 27% Deal IRR **
  • Added 5 core businesses to the Interstate Fusion family.
  • Companies are located from coast to coast including Silicon Valley, Seattle, Austin, New York City, New Jersey, and NE Ohio.
  • Invested alongside venture giants such as Citi Ventures, M12 (Microsoft’s VC arm), Fall Line Capital, and DST Global, as well as old friends including Unshackled, Moment, Valley Growth, and JumpStart.
  • Fully onboarded with Carta to provide secure, real-time reporting of investments, capital account statements, and tax documents, including K1’s

** Year-end results are currently being finalized with Carta

Fund II (Currently Raising)

  • Added 3 investments with a projected markup of approximately 1.2x by March 1st
  • In due diligence with several strong companies led by proven founders and partners with recent startup exits ranging from over $100M to $1B+
  • Reached first close by end of last year and targeting second by end of Q1 2023.
  • We are currently fundraising and all new commitments help us build out the team, add to our portfolio and continue to make our vision a reality.
  • Fully digital and secure onboarding and reporting platform through Carta.

SPV Summary

  • 7 SPVs have raised over $1.4M
  • Giving access to our LPs to our investments, at the terms, we negotiated in $5k increments

Our Team is growing!

  • Expanded our team to include Apurva Desai – CEO Sarvian, as our newest Partner in Interstate Fusion Ventures. He is a Digital technology and media executive and entrepreneur with CFO experiences in global media, mobile, and Internet companies in Silicon Valley, the Midwest, and Asia.
  • Thomas Lenehan – Chief Investment Officer, The Wallace Foundation, has joined Fund II as a personal investor and a member of the Advisory team. He was born and raised in Akron, Ohio, and is an experienced investor with a history of managing institutional pools of capital (formerly served as Deputy Chief Investment Officer with The Rockefeller University for ten years), as well as making direct investments into companies through his prior tenure at Vista Equity Partners and Stone Point Capital. Tom has very high conviction in the team and strategy at IFV and a passion for NE Ohio.
  • We are currently recruiting a super-talented and focused Principal to help oversee management and operations, freeing up time to focus on fundraising. She is extremely experienced and qualified with a strong connection to impact investing, venture capital, and NE Ohio.

In Summary

Interstate Fusion will continue to leverage our Northeast Ohio model and target companies able to grow toward larger valuations, raise significant follow-on funding and create exit opportunities at significant multiples for our investors. We are focused on companies that have industry-defining technology, strong leadership teams (as well as investment partners), and a proven product/market fit.

Thank you again for being an investor and believing in our mission. As always, please let me know if you have any questions.

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