Demand for ‘natural’ drives new $50M fund for early-stage Canadian tech companies

Natural Products Canada (NPC) has launched a $50-million investment fund for early-stage Canadian companies developing naturally-derived alternatives to synthetic products. 

“Our unique investment thesis focuses on the tremendous demand for sustainable replacements for synthetic products coming from nearly every segment of industry,” said CEO Shelley King in a statement. 

While NPC has already invested in 13 companies since it was established in 2016, Natural Products Canada Ventures (NPC Ventures) is the group’s largest investment envelope to date. Previous NPC investments maxed out at $500,000, but now NPC Ventures plans to make 16-20 investments of up to $2.5 million in Canadian companies developing biologically-based innovations for application in the cleantech, ag-tech, biotech, human and animal health, and water tech sectors.

The fund is led by Kristi Miller, founder and former national managing director of First West Capital, a firm that raised and invested more than $250 million in over 100 businesses. Miller believes there exists a “tremendous opportunity for Canadian companies to meet this exponential demand for ‘natural’.”

“The demand is coming from big corporations all over the world,” Miller told Research Money in an email. “From what we eat to the cars we drive, virtually every industry is seeking cleaner and greener products.” 

Miller says she was drawn to the fund because “it takes me back to my entrepreneurial roots and aligns with my personal values to leave the world a better place for my children.” Further, Miller believes there is “real potential to have triple bottom line returns: capital and strategic support for Canadian early-stage companies, ROI for the investors, and products that are better for people, animals and the planet.”

Eligible companies are developing products that could provide a natural alternative to synthetic products, such as those produced by food and beverage manufacturers looking to transition to so-called “clean label ingredients” by getting rid of synthetic preservatives, colours and flavouring. The market for natural alternatives also includes companies seeking to replace petroleum-based plastic with compostable plastic as well as health and beauty products, alternative proteins (think: Beyond Burger) and many more. 

Some of the companies that are eligible for the fund will already be members of the Natural Product Innovation Cluster, which NPC spearheaded in 2019. The cluster gathers small- and medium-sized enterprises, research institutes, corporations, investors, government departments and service providers for the purpose of developing and commercializing naturally-derived products and technologies, for which NPC provides advisory, networking and scouting services.

NPC Ventures is an independent fund, however, and will be looking for opportunities from other sources as well.

The Natural Product Innovation Cluster is one potential source of deal-flow, said King in a conversation with Research Money, but not the only one. NPC currently works with over 800 “opportunities” at various stages of development, of which about a quarter are members of the cluster. While not all of those opportunities are seeking investment, NPC helps de-risk those that are. 

The strategic vision for NPC Ventures was first developed 18 months ago, and NPC has been working closely on the fund with an anchor investor for the last 12 months. NPC Ventures has secured a non-binding term sheet with this investor. King expects the investor to be publicly identified when the first fund-raising round closes this coming fall. 

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