Under a magnifying glass: Manna Tree’s $141m debut fund

While a deal per quarter is the aim, the firm has no plans on closing an investment ‘virtually’.

Manna Tree Partners, after closing its $141.5 million inaugural fund last month, aims to put capital to work every quarter even in the pandemic downturn, Ellie Rubenstein, CEO and co-founder of the Vail, Colorado-based firm told PE Hub.

Fundraising for Manna Tree’s debut pool of capital, which invests in healthy and sustainable ingredient companies, launched in January 2019 with a $100 million target, Rubenstein said.

Although initial documents in September 2018 show the fund had a previous target of $25 million to invest across five companies, its aspirations quickly increased due to investor interest.

“We did not want to go any further, given the check sizes of the deals we saw,” Rubenstein said.

The GP kicked in 5 percent, with more than 25 percent of the capital already deployed across four investments, said Ross Iverson, CIO and co-founder of Manna Tree.

The latest was a $15 million minority investment in Verde Farms, an organic beef producer for retail, club and food-service customers.

The sponsors saw logic in doing multiple rounds of fund closings: it established the PE firm with investors.

“When you are a first-time fund it’s hard enough to raise dollars,” Rubenstein said. “Smaller closings allow the investors to see how you perform.”

The 31-year-old, much like her father David Rubenstein, the Carlyle Group billionaire, spent a lot of time on the road fundraising: 323 days to be precise. David, an LP in the fund along with his daughter and co-founders Ross Iverson and Brent Drever, holds a 10 percent stake in Manna Tree.

The fund charges the standard 2 percent management fee and 20 percent carried interest rate after an 8 percent return hurdle, Rubenstein said. The firm charges a fee on co-investments, she said.

Investing amid covid-19

Manna Tree is betting on ‘clean label’ businesses: companies manufacturing less-processed products with simple or natural ingredients.

But not just any healthy food business will do.

Target companies should be in operation for more than four years with a minimum of $10 million in revenue. “In order to get returns in five to six years you need a company that has scale,” Rubenstein said.

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Ross Iverson of Manna Tree Partners

The Vail, Colorado-based firm has allocated 20 percent of the fund to early-stage growth companies generating under $25 million in revenue. But the firm prefers $25 million to $75 million revenue companies that need capital to grow their distribution network, Iverson said.

In addition, Iverson wants the firm’s investment to be the last round of funding into a company before an exit.

The firm plans to continue the pace of dealmaking despite covid-19 and will close a deal this quarter, Rubenstein said.

“Consumer demand for food is not going away,” she explained.

The manager has a three-year investment window and can write checks in the $15 million to $50 million zip code, according to Rubenstein.

The firm can go up in check size in cases of co-investments, Rubenstein said.

While a deal per quarter is the aim, the firm has no plans on closing an investment ‘virtually’.

“We will only close after meeting them [the management team] face-to-face and seeing the plant run at full capacity,” Iverson said.

Small and diverse beginnings

Manna Tree’s existing investments include pasture-raised egg provider Vital Farms and MycoTechnology, a plant-based protein manufacturer.

The plant-based meat space, generally, has seen investor attention. Companies like Beyond Meat, which debuted in the public markets last year, reported better-than-expected first quarter earnings. Shares of Beyond Meat have skyrocketed more than 390 percent since its $25 per share IPO price.

Much like other food suppliers, Manna Tree’s four portfolio companies benefited from consumers stocking up on food amid coronavirus.

“Since our [businesses] are smaller, they tend to be nimbler and more resilient,” Iverson said, clarifying that none faced any shutdowns.

Manna Tree’s businesses during this time have also relied on co-packers, or outsourced contract packagers to handling packaging needs, Rubenstein added.

Launched in May 2018, the PE firm is still relatively small, operating with a 10 member team including six women.

The firm wants to make six to eight more investments out of Manna Tree Partners Fund I, which comprises 133 limited partners from 18 countries.

Fifty-one percent of the firm’s investor base is made up of family offices. The other half includes private wealth managers, corporate venture partners and high net worth individuals.

Approximately 60 percent of the fund is owned by persons outside of the U.S., according to Manna Tree’s Form ADV. Thirty percent of investors are women.

Action Item: Check out Manna Tree’s Form ADV.