Venture capital

Here’s how S2G Ventures vets potential startup investments

The firm manages nearly $2 billion in capital, and is a leading agtech and food tech investor.
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· 4 min read

Agtech and food tech have sprouted up as pillars of modern tech, and investors are showering novel companies in both sectors with billions of dollars in funding.

S2G Ventures, a Chicago-based venture capital firm, is one of the most prominent investors in the space. Between 2009 and 2021, the firm was the single most active investor in the agtech industry, dominating the pack with 55 deals in that timeframe. And for food tech, it was the second most active investor in 2022, completing 14 deals, according to Pitchbook. It manages a ~$1 billion fund focused on agtech and food tech, and sports a portfolio of over 80 companies in the industries, according to its managing director and COO Aaron Rudberg.

In total, the eight-year-old Lukas Walton-funded (yes, of the Walton family) firm manages nearly $2 billion in capital, Rudberg said, spread across energy, oceans and seafood, food and agriculture; and real assets infrastructure. There’s about $100 million in the oceans and seafood fund, he added, and $300 million in the climate and energy fund.

We caught up with Rudberg to learn how the leading agtech and food tech VC firm decides how and where to place its bets.

“I think historically, there’s been a focus that impact investing has to be concessionary in some nature, and that’s just not fundamental to our belief,” Rudberg told us. “Our belief is you can have an impact and you can generate top-quartile returns for your investors. You’ve got to be able to do both. We look for companies that we believe can do both, and measure [up] against their peers,” he added.

Follow the framework

Rudberg said S2G follows a four-part framework to vet companies in its portfolio called “idea, validation, infrastructure, and scale.”

Seed and early-stage companies tend to fit into the early idea and validation phase, he said, in which grand ideas are filtered down based on their feasibility. Rudberg said in an emailed statement the firm focuses on questions around how repeatable and scalable an idea is—“Is this a one-time issue or is this an ongoing problem that a customer is willing to pay for,” as he put it—as well as prodding founders on capital allocation and consumer understanding.

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Validation is the most time-intensive and critical part of the process, Rudberg said in a follow-up email, as “innovation is almost always ahead of its time,” but a product has to be “in line with a current problem that the customer has, but also is structured within their existing purchase behavior.”

S2G tends to vet Series B and later companies for their ability to build the infrastructure and scale portions of the framework, and take a proven idea to the next level needed to scale their businesses, Rudberg said.

Some of S2G’s investments have included popular consumer brands like Beyond Meat and Sweetgreen, but Rudberg said the firm focuses on “the entire value chain” in ag and food tech. It’s also made investments in farming-focused startups like AppHarvest and BrightSeed, a company that uses AI to research the health properties of compounds in foods.

Rudberg said the company invests with a “patient mindset,” with expectations that it may take longer to see an investment pay off.

“On the agtech side, it takes a while to scale these businesses,” Rudberg said. “I think you have to have a mindset as an investor to be patient and understand that this is going to take more than the typical venture journey of five to seven years. It may take longer than that.”

He said that while the firm tries not to deviate from its investment framework, startup investing is ultimately an art as well as a science.

“I think the unfortunate thing when you’re trying to find companies to invest in, there’s no simple matrix or simple set of questions that you can ask,” Rudberg said. “It is very much a mosaic of different puzzle pieces that you’re putting together to tell a story that gets you comfortable with the risks that you’re taking, because ultimately there’s a probability of an outcome, and hopefully a good outcome that you’re trying to bet against.”

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