VMG Catalyst, a Venture Capital Firm, Raises $400M for Retail Tech – WWD

The future of retail lies in tech. That’s the premise VMG Catalyst — the venture capital arm of VMG Partners — is betting on anyway. 

The venture capital firm closed a $400 million funding round today, bringing the total amount raised across its two funds to $650 million. VMG Catalyst plans to use the latest round of funding to invest in new technology for digital businesses, such as software and supply chain platforms that will power retail brands in the future. 

“We see tremendous opportunity at the intersection of retail and technology and look forward to supporting the Catalyst team as they back more companies focused on powering the next generation of consumer businesses,” said Michael Mauze, general partner at VMG Partners. 

“In just a few years, VMG Catalyst has become a key player in the commerce venture capital space,” he added. 

In fact, since VMG Catalyst’s launch in July 2019 — founded by partners Carle Stenmark, Brooke Kiley and Jeff Truong — the VC firm has worked with 22 companies across all investment stages, including beauty brand Necessaire, Latin American e-commerce platform Nuvemshop, post-purchase customer platform ParcelLab and software business Specright, among others.

“We’re primarily focused on digital businesses,” Kiley told WWD. “We’ve invested in a lot of businesses that have been omnichannel from Day One. With that strategy, we’ve built relationships throughout the consumer ecosystem. So whether that’s retail, Fortune 500 conglomerates, really large strategic brands, manufacturers, smaller up-and-coming market brands, our tentacles are everywhere in the consumer world and we leverage that network to then invest in the technology and software that powers that ecosystem. So the next generation of iconic brands and iconic retailers will be supported and made because they invested in enabling technologies, because they’re able to build a business that is more efficient and adapts quicker to the consumer needs and just overall acquires customers better when they leverage cutting-edge technology.”

VMG Catalyst continues to actively grow its portfolio of brands under the leadership of talent partner Brianna Rizzo, who helps facilitate introductions between brands. Under her leadership, Rizzo helped launch VMG Catalyst’s inaugural Commerce Council. The Council — which is made up of founders, digital experts and other senior-leadership members from some of the brands Catalyst partners with, as well as other well-known national brands — works to grow the firm’s ecosystem of brands alongside continued funding efforts. Kiley added that the fund looks for brands to invest in that are differentiated in their respective spaces and have large community followings. 

Meanwhile, VMG Catalyst is part of the VMG Partners franchise, which stands for “velocity made good.” VMG Partners, a retail private equity firm, was founded in 2005 and today includes both VMG Catalyst and VMG Growth. The firm has $2.5 billion of assets under management across both branches and has invested in more than 30 brands in the wellness, food and beverage, beauty, pet care, consumer services, e-commerce and supply chain spaces.

VMG Growth, which is on its fifth funding round, has raised approximately $850 million for later stage growth equity consumer brands. The list includes fitness brand Solidcore, beauty brand Drunk Elephant, Quest Nutrition, personal care brand Sun Bum and food brand Perfect Snacks, among others. 

“Our deep understanding of both the voice of the customer and the pain points facing brands and retailers of all sizes allows us to invest with the conviction and speed that we believe is required in today’s fast-moving commerce landscape,” said Carle Stenmark, general partner at VMG Partners. “We’re excited to support the visionary entrepreneurs who are working to solve these pain points and disrupt the way we interact with products and services, and how they arrive on shelves.”

VMG Catalyst’s latest funding round comes as the IPO market for smaller brands has come to a close, thanks to continued inflationary pressures, fears of a recession and stock market volatility. Corporate M&A activity is also down, compared with 2021, but on par with 2020 levels, according to the most recent quarterly report by Pitchbook-NVCA Venture Monitor. 

Funding in the U.S. venture capital space was also down in the second quarter of this year, compared with 2021 — roughly $121 billion, compared with nearly $139 billion during the same time period of 2021, according to the same report — but the funds are still greater than pre-2021 quarterly totals. 

Some of the early 2022 VC fundraising momentum can be attributed to a ripple effect: fundraisers that were already in the works before the current market volatility began. It was also a byproduct of a strong environment for seed-stage investing, which Kiley said seems to be relatively insulated from uncertainty in the later-stage investing marketing. 

“With the public markets and how they’re performing today, it has definitely affected the late-stage investor,” she explained. “It’s [also] started to affect the growth-equity investors and it’s starting to affect the venture investors. But if you look at the earliest stages — the pre-seed and seed [rounds] — it’s not really affecting the market that much, just yet. 

“We’re just not seeing a lot of [investing or M&A] activity right now,” Kiley continued. “We were in a crazy market in the back half of 2021, where people were rapidly doing deals and now we’re seeing longer diligence periods and really thoughtful investing focus on unit economics and not just growth anymore. [But] I think in the third quarter, fourth quarter we’ll probably see a little bit more activity. There is still a lot of money in the private markets. 

“The demand over the last decade has been high,” she added. “But there was definitely a very fast-paced environment in [the back half of] 2021 for moving very quickly. Investors were paying very high prices; diligence timelines were really short. It was a very founder-friendly environment and now we’re getting back to a venture-friendly environment where the investor has the chance to do all of their diligence, talk their time and build their relationship with the entrepreneur. My instinct is that it will be an acquisitive market over the next two to three years, especially because there are a lot of later-stage private companies that have pretty robust balance sheets that raised opportunistically in 2021 because valuations were high and capital was cheap.”