How An Organic Baby-Food Company Raised $21 Million, Despite The Venture Capital Downturn

What does it take to beat the venture capital slump? In the case of the organic baby food brand Amara, one secret has been investing heavily in a proprietary method of creating shelf-stable food that has made it a favorite of TikTok momfluencers.

Amara just announced an oversubscribed $21 million Series B funding round in a minority financing led by HumanCo, with other backers including Melitas Venture Capital, an early-stage fund that invests in food & beverage companies, and Touch Capital, an investor in consumer brands.

Jessica Sturzenegger, founder and CEO of the San Francisco-based company, said she plans to use the funding to amplify the company’s market presence, increase distribution within grocery and online channels, and expand the company’s production and product lines. In addition to its website and Amazon, Amara is sold in stores such as Walmart and Kroger. “The hardest part for us has just been to keep up to demand,” she says. “As you get bigger as a brand, you have to deliver on operational excellence.”

The investors have a deep track record in the clean-nutrition space. “We are thrilled to be partnering with Jessica and the team at Amara. HumanCo Investments is focused on finding partners that are improving nutrition, and restoring the quality of real food. We’re looking forward to being part of Amara’s mission to bring better options to childhood nutrition,” said Ross Berman, managing partner of HCI, in a statement.

This round follows an earlier Series A, in which the brand raised $12 million in venture capital in 2021. That round was led by Eat Well Investment Group, a vertically-integrated plant based food investment company.

Sturzenegger founded the brand in 2016 with chef Vicki Johnson, with the then-two-person startup relying on a team of independent consultants, including food engineers and a nutritionist, to develop their idea into a direct-to-consumer brand.

Amara invested heavily in building intellectual property such as a branded Nutrient Protection Technology, a proprietary dehydration process designed to preserve the texture and flavor of shelf-stable food when water or breast milk is added. Amara now sells products such as baby food—like the “Kale, potato veggie mash” and toddler snacks, such as “Mighty Sweet Greens Organic Smoothie Melts” online and through more than 1,000 retail stores. The company won the Purity Award from the Clean Label Project, which tests retail products for purity and benchmarks the results, and the Good Housekeeping “9 Best Organic Baby Food Brands of 2024.”

The company’s products have, along the way, become the subject of a number of viral TikTok videos by parent influencers eager to share videos of their tots reaching for more. “The power of word-of-mouth is very impactful in this category,” says Sturzenegger. “One these video platforms, you get to see how creatively they’re using the products and making recipes with our baby food. I’m blown away by the creativity.”

Venture funding has been in a slump, hitting the lowest level in five years in 2023—$248.4— billion, according to the research firm CB Insights. And deal volume has been at a 10-year-low, with just 2,182 deals in the fourth quarter of 2023. However, some brands in the space have done well at finding investment capital. Another baby food brand, Serenity Kids, known for its Ethically Sourced Meat Pouches, just closed a $52 million minority investment.

So how did Sturzenegger and her team beat the odds ? She shared some insights to her strategy with me.

Stay focused on operations. The baby food market in the U.S. is poised to grow from $103 billion billion in 2023 to $161.2 billion in 2030, according to Fortune Business Insights—and that potential for growth has attracted a lot of competition to the space.

“Amara has been able to carve out a niche through its emphasis on protecting the texture and flavor of the foods it makes,” says Sturzenegger. “That’s done because of a great team and also really wonderful suppliers. Our suppliers, like our team, go above and beyond the normal and I think the reason is that they believe in what we’re doing. Mission really comes into play.”

Understand the importance of every team member. Sturzenegger recruited her team through constant networking in her field. “When you’re not one of the Hershey’s of the world with thousands of employees, everyone pulls their weight,” she says. “Every single person who touches the brand has an impact on it, from the director of operations to the truck drivers delivering it. It’s a whole jigsaw puzzle that has to work perfectly, every time, especially as you scale fast.”

Learn to love forecasting. “What the pandemic taught us was really being very close to forecasting and being in high communication with our suppliers,” says Sturzenegger. “We are constantly forecasting, making sure that we sold what we thought we were going to sell last week and that we’re aligned. The online world moves so quickly that if you’re not checking the forecast weekly, you can very easily miss a video that went viral on TikTok—and all of a sudden one of your mixed berries flavor went crazy. If you don’t stay on top of it, you just won’t pick up on it.”

That need for accurate forecasting is heightened by the company’s reliance on organic ingredients, which are not always as readily available as non-organic products and may need to be sourced quickly if demand for a product skyrockets overnight. “That means we need to be embedded and in even more constant communication,” she says.

Stay connected to your financials at all times. “You have to know your numbers and be confident,” says Sturzenegger. “Nobody knows your business better than you do. I’m not the loudest person in the room but for me the numbers and the models and really going to the hard data is what gives me confidence.”

Balance passion with realism. Potential investors expect optimism but they also want to know you’re ready for unexpected challenges. “I always tell our investors I have thought about every possible thing that could go wrong,” says Sturzenegger. “I’ve obsessed over it. I go to the numbers to remind myself of the A,B,C and D scenarios.” As a founder, she says, “The only person that’s going to spend hours on that is you.”