Funding for startups has seen a significant dip in the past quarter, with investor sentiment falling 23% compared to the first. Cheddar News speaks with Brooke Kiley, co-founder of VMG Catalyst, about the current investment climate and what sectors are still thriving despite the economic downturn. 

Closing Bell

How VC Firms Are Investing During the Economic Slowdown

it's not just the economy that's in a downturn. Global funding. The stirrups is in a slowdown as well. An investor sentiment following 23% in the second quarter this year compared to the first. Well, according to analytics firm CB insights, but BMG catalyst says it's committed more than ever to backing innovation announcing a new $400 million fund this week, doubling the amount of its first fund three years ago. And joining me now is Brooke kylie, founding partner at BMG catalyst, which is the venture capital arm of the MG franchise that's been around since 2005 Brooke, thanks so much for coming on the show, Congratulations. What are some of the sectors that are of interest to you at BMG Capital right now thanks so much for having me um some of the areas that we've been spending time in really mimic where the consumer is demanding innovation from brands and retailers, vertical supply chain is one of those areas where consumers are really asking for more transparency and efficiency um and really an investment into sustainability from a lot of the brands and retailers that they buy from. Um so two of the deals that we've done recently have actually been in the food and beverage category. So we're really excited about those categories specifically and in times of uncertainty like this because uh consumers will continue to buy produce and and um and other products like that. So I'm curious to Brooke the data that you have there just because we know that some of the prices for for food produce, you name it up double digits when we look at the inflation report, but your data must indicate obviously that americans across all spectrums. Is that the case will continue to spend? Uh Yeah, definitely. And I think really where we're making uh where we're doubling down and and and have conviction is that it's it's really the efficiency of some of these brands and retailers that need to increase one of one of our investments that we closed um a few weeks ago and announced yesterday as a company called a fresh which enables grocery stores to um order produce better. Um And another kind of fresh perishable products um in the fresh sector there's an incredible amount of weight and there's also an incredible amount of under ordering. Um And so you have a lot of like this fluctuation with overstocks and under stock but if you can insert technology in there that will lead to more efficiencies and and ultimately um hopefully will drive better margins for the grocery stores and and ideally pass through some of that savings on to the consumer. So certainly I think some sectors obviously as you're outlining here might have a better chance at succeeding in the current environment Brooke but just by and large to when you when you pick companies within certain categories or sectors in this current economic environment, what are some of the factors that you want to see during the due diligence process when it comes to the health of the business and the growth opportunities? Yeah, I think investors more than ever are focused on unit economics in the past few years, growth has been the the kind of king of of all metrics. But now investors are not focused on this growth at all costs, mindset really looking at efficient unit economics and making sure the business can sustain itself without a lot of venture funding. I'm having that mindset of this could be my last round and how can I get to profitability one day is is really important and and kind of new perspective that the market is taking. Um and so that that's probably the most important metric for us when, when we look at evaluating businesses, but obviously balancing that with healthy growth and making sure that there is product market fit and and um really a good trajectory going forward. Um Well, I know I'm, I'm reading here, you recently led the closing of a $20 million series a round for milk movement at double O. S. There. I like to play on words. It's a dairy supply chain software company. What do you like about this company? We had a lot of fun with the puns there. Um We we really like this business because there is, you know, Gary is an incredibly large category um with a lot of complexities. So to get your milk and other dairy products from the farm to yourself and then ultimately to your table requires a lot of constituents. Um and there are a lot of inefficiencies there. So milk movement and all of those stakeholders to connect to each other and most importantly for us as consumers and make sure that the milk and other dairy products that they arrive on time on shelves and with good quality control. Now, in terms of new trends that you see emerging, are there any that you're able to kind of pinpoint here in this current environment? Uh yeah, I kind of mentioned sustainability is an area that we're really focused on and and consumers are really asking brands and retailers to have more transparency around the ingredients that they're putting in their products and where those ingredients are coming from. So whether it is the, you know, the chemical that go in your moisturizer that you put on your face or on your body, or maybe it is the cotton that's used to make your favorite t shirt and where that is being harvested, we're saying that consumers are demanding a lot from brands and retailers um and excited to see how technology can enable that to pull forward. All right, Brooke Kylie, founding partner at the MG catalyst venture capital arm of the VM G franchise, thank you so much for coming on