Queso Capital Partners

More Than A Burrito Shop

Chipotle launched the Cultivate Next venture capital fund in 2022, committing $50 million to make investments that aid the company’s expansion and support a more sustainable food system.

Last week, the fast casual chain doubled their commitment, bringing the fund size to $100 million.

Chipotle’s investments are synergistic to building a more robust operation and accelerating towards the goal of 7,000 restaurants in the North American region… Take a look at some of their portfolio companies:

• Hyphen: automating kitchen operations to increase efficiency. Chipotle’s press release states it is collaborating with Hyphen to make bowls and salads through intelligent automation. This will free up workers, per the press release.

• Meati Foods: produces whole food plant-based products from MushroomRoot; Chipotle aims to leverage their expertise to enhance non-meat offerings.

• Vebu: working with Chipotle to build an avocado processing prototype, Autocado.

• Other investments include Greenfield Robotics, Local Line, Nitricity, and Zero Acre Farms

The idea of Chipotle launching a venture fund seems a little unnerving, but the landscape is shifting in corporate venture capital.

Big Business

Corporate venture capital funds are venture investing arms of large corporations. Their aims slightly differ from traditional venture capital funds due to their strategic focus:

• Access to Innovation: The level of deal flow a CVC sees allows the company to be aware of novel industry dynamics and trends.

• Strategic Growth: CVCs are able to access more synergistic opportunities for mergers and acquisitions

• Partnerships: Investments are a great way to seal strategic partnerships with innovative startups that bolster the corporate’s operations

The proliferation of corporate venture capital is a relatively recent development, as 2021 saw a 53% increase in the number of new CVCs (221) according to CB Insights.

The amount of total CVC funding also jumped 142% from 2020 to 2021, and deal count rose 39% in the same period.

Some interesting corporate venture funds that were recently launched include:

• NATO: NATO Innovation Fund (2023). $1B AUM

• United Airlines, GE, JP Morgan: UA Sustainable Flight Fund (2023). $200M AUM

• OpenAI: OpenAI Startup Fund (2023). $100M+ AUM

• Green Bay Packers x Microsoft: TitletownTech (2023). $70M AUM

• Financial Times: FT Ventures (2024). $38M AUM

• Sony: Sony Innovation Fund 3 (2023). $10M AUM

Investing In A VC Fund During a Downturn

A downturn can be defined as a period following a yield curve inversion or near-inversion.

The visual above has a few moving parts.

The study analyzes 42 years of venture capital fund performance (by vintage) and identifies the factors that lead to outperformance in the VC space.

The blue line represents the trailing 18 month NASDAQ return, while the light yellow bar represents top quartile VC funds by TVPI. The red dotted line represents increasing economic uncertainty, while the green dotted line represents decreasing economic certainty.

Key Takeways:

• The best performing vintage years for top-quartile VCs are during a downturn. 3-4 years after a yield curve inversion, the TVPI for the top 25% of VC funds exceeds 4X. The model projects that 2023/2024 vintage year funds will achieve “golden year status”.

• The largest top quartile managers have raised huge funds over the past year, which will impact their ability to remain top quartile. Many of the most reputable VCs have raised megafunds, and statistically speaking, megafunds tend to deliver lesser returns than smaller, more nimble emerging managers.

Now is a golden period of opportunity for individuals looking to invest in the private markets, specifically VCs. Emerging managers with domain expertise or a defined edge are excellent long-term investments, and mainstreet aims to be a provider of top-notch offerings in this space.

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