• Morrison Shafroth

Beyond Meat’s Impact Investing Windfall

How do you turn Beyond Meat’s initial public offering—the most successful IPO in nearly two decades—into an impact investing windfall?

For Honest Tea Founder Seth Goldman, an early investor in Beyond Meat, it started “when our oldest son convinced my wife (Julie Farkas) and I to become vegetarian. He was 13 at the time, had been vegetarian for three years, and he kept asking questions we didn’t have good answers to—questions like ‘Why do people have dogs for pets and cows for food?’”

While Goldman and Farkas were happy to become vegetarians from an ethical point of view, they were disappointed from a culinary perspective. “I joke that veggie burgers are a conspiracy by the meat industry to discourage people from becoming vegetarian,” said Goldman, because once people try one, they go back to meat.

But when Farkas read about a company seeking to replicate the taste and texture of meat using only plants, Goldman thought this veggie burger might be different. He reached out to the company founders and in 2013 the couple made their first investment in Beyond Meat.

Goldman’s investment strategy tapped into a knowledge base built from establishing Honest Tea, an organic, Fair Trade beverage company with a sustainable approach. And he sought to to double his impact in these investments by investing both in a for profit account and side-by-side through a philanthropic donor advised fund account at ImpactAssets—a nonprofit financial services firm founded to increase flows of capital to the world’s greatest challenges.

For Mark Van Ness, a founding Board Member at ImpactAssets, Goldman’s investment in Beyond Meat sounded like a delicious opportunity. It was also perfect timing for Van Ness, the Founder and former Chief Executive Officer of Sperry Van Ness (and Publisher of Real Leaders).

“When I was introduced to Beyond Meat, my doctor had recently advised me to go vegan” to treat a painful rheumatoid disease of the spine. “Two weeks after I changed my diet, all my pain went away.”

Soon, Van Ness had also made an investment in Beyond Meat through his ImpactAssets account. “I was intrigued with Beyond for the health benefits, but also because I was concerned about the negative impact a meat-based diet has on climate,” he added.

By shifting from animal, to plant-based meat, Beyond Meat addressed four growing issues attributed to livestock production: human health, climate change, constraints on natural resources and animal welfare. “I thought, ‘this is a good thing to invest in,’” said Van Ness.

To Tim Fruendlich, Founder and CEO of ImpactAssets, the Beyond Meat investments represented a potential quantum leap in impact. Freundlich, who has been at the forefront of the burgeoning impact investing sector for nearly two decades, had worked with Goldman at Calvert Foundation. There, Freundlich conceived of and launched an impact investment-based donor advised fund that eventually was spun out to form ImpactAssets. His insights and expertise also helped create an ecosystem for social enterprises to thrive–from the 4,000-person annual Social Capital Markets (SOCAP) conferences to Impact Hub, the world's largest network focused on building entrepreneurial communities for impact at scale.

But the Beyond Meat investments were potentially beyond all that. “These were early prototypes of a new kind of philanthropy,” said Freundlich—a philanthropy that would put charitable assets to work as a critical source of risk-tolerant catalytic capital to early-stage impact investments.

Today, those Beyond Meat ‘prototype’ investments have become an engine of growth for ImpactAssets and one of the most innovative approaches to combine philanthropy and impact investing.

In the first six months of 2019, ImpactAssets became a “Billion Dollar Impact Investing Unicorn” when it more than doubled assets from $483 million at the end of 2018 to $1 billion as of June 2019 and grew to more than 1,250 client accounts.

The organization has also ramped up its Custom Investments program—investments like Goldman’s and Van Ness’ Beyond Meat purchases. Since that program’s launch in 2011, the firm’s donor advisors have sourced and recommended $92.47 million in close to 600 direct investments into private mission-driven businesses, impact funds and nonprofit organizations at roughly $150,000 average per deal.

Meanwhile, Goldman, Van Ness and many other ImpactAssets clients are creating a “virtuous cycle” of philanthropic impact investing that has the potential to grow with each new investment that’s made to help social entrepreneurs build businesses with impact. Investing in this way, “gives you the opportunity to recycle that money in a philanthropic way and in the case of Beyond Meat, really exponentially increase the amount of philanthropic dollars you have to invest,” said Van Ness.

“Our first investment with ImpactAssets was in Happy Baby, an organic baby-food producer,” added Goldman. “When Happy Baby sold (to Danone in 2013), we put some of those proceeds back into Beyond Meat. It’s a virtuous cycle that keeps going.”

Beyond Meat listed its IPO in May at $25 a share and ever since investor appetite for the company has been insatiable, driven by a potent combination of product demand, investor buzz and strong company performance. For Goldman, Van Ness and ImpactAssets, that has meant lofty returns. The initial investment in Beyond Meat of $1.1 million turned into $16.9 million by the close of trading on the IPO’s opening day. Lately, depending on the price of Beyond Meat’s stock, that investment could be worth $40 million to $50 million.

Freundlich says that while Beyond Meat is “at the extreme end of the spectrum from a financial return perspective,” he sees steady demand for more investments of this kind, no matter the returns.

“We believe we should enable and inspire our donor investors to both grant and invest quite aggressively and with a sense of impatience,” he said. “Donors want to deploy their philanthropic capital affirmatively to create good in the world right now.”