New Rubio fund to deepen its spread from seed to later stages

Rubio Impact Ventures closed its second fund last week at €110mn, almost 40% over target. It added a new seed facility to invest in earlier-stage companies.

Rubio’s first fund of €40mn, which partner Helmer Schukken says now seems modest in comparison, proved that impact and financial return can go hand in hand. Indeed, the fund drove several exits and follow-up investments in fast-growing impact companies such as Olio, Samasource and Sympower.

“That’s why we stepped up the pace with our second fund,” Schukken says, “to find more gems among the hundreds of prospects we now receive yearly and have an even greater impact in vital areas.”

With the larger fund now sealed, Rubio plans to invest in about 30 ‘champions of change’, focusing on three main impact themes: circular solutions, healthy living, and people power. Since opening the new fund in late 2020 Rubio has already backed 11 companies, from seed to series A, and hopes to maintain that yearly pace.

Fair coffee brand Wakuli, cultivated meat pioneer Mosa Meat, and an app called Litterati encouraging people to collect and tag litter are just three of Rubio’s second-fund ventures. With a bevvy of companies on the roster investors could see what to expect, and as the October 2021 deadline loomed Schukken says the fund was attracting attention.

“Securing early commitments was great because it attracted others to the fund, plus institutions have detailed procedures so it took them longer to decide. The end result was nearly 40% over target, which really validates what we’re doing.”

Helmer Schukken

Freshly roasted impact

Schukken says Wakuli ticked the boxes because it had a clear theory of change, measurable impact and a proven market. The Dutch company buys coffee beans directly from farmers and sells the end product, roasted and ready, to its customers in Europe.

An estimated 12 million farms and 25 million families depend on coffee production for their livelihood. Recent data indicates that 44% earn barely enough to live on and 22% live in extreme poverty. They become trapped in a cycle of under-earning and under-investment, notes Rubio, because their produce is traded as a commodity.

This is confirmed in a recent study about responsible coffee sourcing by the Columbia Centre on Sustainable Investment: “While all of the companies have established sustainability commitments or projects relevant to producers, none are able to guarantee that all viable producers in their supply chains earn a living income.”

Wakuli confirms that there is a disconnect in fair trade certification which disadvantages many smallholders: “Certificates are expensive, take a lot of time and don’t guarantee extra income.”

According to the Coffee Barometer 2020 less than 25% of ‘standard-compliant coffee’ is actually sold as certified. That means 75% is sold as ‘conventional coffee’, so farmers are missing out on their sustainability premium despite the extra time and money that goes into producing it that way.

Wakuli stresses that it is not against certification per se, but simply wants to do better. Its decision to partner with uncertified coffee farmers and cooperatives is quite deliberate and forms part of the company’s self-declared ‘different view’ of the industry. Its model rests on customers being able to make this distinction.

In just thirty months, Wakuli has built a 15,000-strong subscriber base for its brand of direct-sale sustainable coffee. It wants to expand in Europe and recently launched on the German market. In return, thousands of farmers receive a higher price per kilo – in many cases boosting their income by at least 25%.

Impact fund 2.0

Rubio thinks the success of its fund 2.0, despite opening in the middle of the Covid pandemic, highlights growing market interest in start-ups that “go beyond just talking about purpose and impact to actually having it as an integral part of their business model.”

Investors in the predecessor – including the European Investment Fund, ASR and several Dutch family offices – took little convincing to participate in the second fund, most of them doubling their initial stake.

“Low interest rates are freeing up more money for investment and institutional investors are turning to us to deploy their capital in impactful ways,” Schukken tells Impact Investor. “That’s super positive and exactly what we wanted when we started six years ago.”

The bigger war chest means Rubio can invest more and deepen its spread, from seed to later stages. It also means they can build a team with more expertise to support portfolio companies’ management and growth plans.

This frees up time for Schukken to focus on Rubio’s energy transition and circularity activities. He studied civil engineering and ran a brokerage called GF Energy before setting up Zonline, a platform for home owners that he sold to Sungevity Inc.

New seed facility

“We’ve also added a new seed facility to invest in earlier stage companies with a solid proof of product,” the managing partner reveals, conceding that there is more risk but “higher upside potential with more scope for Rubio to add value.”

The companies often need hands-on support to make a “bigger, better, faster impact” than going it alone, he adds. It is the natural next step for impact venture funds like Rubio.

Schukken thinks it also boosts investor confidence when they see the sector become more professional and that results are as good, if not better. “It dispels the trade-off myth; impact and return can strengthen each other,” he says.

New investors include Triodos Green Fund, institutional investor Candriam and several wealth managers and Dutch entrepreneurs who can share their experience of growing successful start-ups.

We’ve assembled a really good mix of interested parties and ‘big capital’ to take impact investing to the next level, where it benefits the environment and society even more.”

Helmer Schukken

Wakuli’s co-founder Lukas Grosfeld is on the same page. He is convinced Rubio’s growing network of experts and co-investors will help his fair coffee venture reach its impact goal of connecting 1 million households and 50,000 farmers by 2025.