Kate Farms, the supplier of a plant-based liquid meal formula used by hospitals and healthcare providers around the country as a nutritional supplement for patients who cannot process solid foods, has raised $23 million in a round of funding.
The new money will allow the company to ramp up its production as it looks to meet significant new demand from both consumers and healthcare providers, according to chairman and chief executive, Brett Matthews.
Founded by Richard and Michelle Laver, who initially developed the formula for their daughter, Kate, a child whose cerebral palsy meant that she couldn’t eat solid foods or process the tube-feeding formulas available on the market, Kate Farms has grown into a business that serves hospitals around the country.
Matthews, whose son suffered from upper respiratory and autoimmune issues, was first introduced to the company as a customer. “My son was very sick… and food was really critical to his healing. I knew a lot about the products and food as medicine and really jumped in and invested.”
From that initial investment, Matthews’ responsibilities with the company expanded, first as chairman of the Kate Farms board and then, eventually, stepping in to become chief executive of the company.
Throughout its history Kate Farms has raised capital from individual, rather than institutional, investors, and the new financing is no different. Capital came from a slew of heavyweight investors, including: David Roux, the co-founder of Silver Lake; John Hammergren, former chairman and chief executive of McKesson; Gregg Engles, former chairman and chief executive of the plant-based dairy replacement company, WhiteWave Foods; and William and Kristin Loomis, the former chief executive of Lazard and the founder and executive director of HHV-6 Foundation, respectively.
That clutch of high-powered founders and executives joins backers including Pete Nicholas, the founder and former chief executive of Boston Scientific; Robert Zollars, the former President of Baxter International, chairman of Diamond Foods and EVP of Cardinal Health; and Celeste Clark, the former executive team management member at Kellogg’s Global Nutrition.
The money, which closed late last year, is being used to ramp production as the company races to meet increasing demand caused by the COVID-19 epidemic and the government’s response. Kate Farms is donating $1 million worth of meals to Meals on Wheels programs across Southern California. The Santa Barbara, Calif.-based company said that would equate to roughly 225,000 meals for people who need it.
The company’s plant-based, non-GMO meal replacements have been clinically proven to improve nutrition among children and adults who need tube-fed meals. One study was published in the journal of the American Society for Parenteral and Enteral Nutrition based on clinical trials conducted with Atlanta Gastroenterology Associates, according to Matthews.
“We can improve weight gain in the pediatric market,” Matthews said. “And we can improve tolerance.”
The market for medical conditions that require tube feeding numbers around 700,000 in the U.S., with another 150 million people who could use the company’s products for less severe nutritional issues, Matthews said. It’s a roughly $3 billion market in the U.S., and $10 billion globally.
But Kate Farms has its eyes on a much bigger prize. As the company noted in a statement, the consumer market for plant-based dairy replacements was $21 billion in 2017 and is expected to top $37.5 billion by 2024. And over the next decade, meat alternatives are expected to grow from $4.6 billion in 2018 to $85 billion by 2030, according to UBS Investments
“Our focus right now is on the medical side of it, but you could see where this could evolve,” said Matthews.