• VMG Consumer VI is the sponsor’s largest consumer-focused fund to date
• LP base has expanded to include more investors from Europe
• First deals anticipated once Fund V wraps up deployment

VMG Partners is doubling down on the US consumer market with its largest consumer-focused fund to date. This time it is being done with help from a broader base of LPs, including an expanded presence in Europe.

The San Francisco-based sponsor announced a final close for its VMG Consumer VI on USD 1bn on 13 May, a step up from the USD 850m raised with its fifth flagship consumer fund nearly four years ago. Fundraising for the sixth consumer flagship began some time in 2Q24 with modest growth in its base of LPs, all of which are institutional investors, said general partner Robin Tsai in an interview with Mergermarket.

The firm is looking to expand modestly both its LP base, and to a lesser extent, founder-reach within Europe. This direction has been shaped in part by the amount of interest VMG has received from foreign brands looking to break into the US market.

“I think there are beautiful brands being built everywhere, but I would say the concepts coming out of Europe have started to gain more traction now compared to previous years,” said Tsai.

VMG has four main sub-sectors it plans to deploy: food and beverage, beauty and personal care, health and wellness, and pet products and services. However, much of the focus will remain within the US.

With this new fund, VMG will maintain its focus on themes that are more easily ported into new markets. Tsai said that beverage and beauty deals are more scalable globally and more easily marketed across borders, while food is a category to invest in for a more domestic consumer.

“Our beauty businesses go global significantly faster than almost any of our other categories,” explained Tsai. “If we’re going to go international, that’s really where we’d be focusing.”

Tsai anticipates deployment out of Fund VI will begin later this year or in early 2026. This would dovetail with the full deployment of Fund V, which is currently about 80% committed.

Consistent strategy

The size of VMG’s funds have gradually grown since its debut fund launched in 2005, but the strategy has stuck to familiar contours.

“I do think that your fund size can sometimes dictate how you move in the world, and we weren’t looking for a huge step function change in that because we believe that what we have going on right now is working,” said Tsai.

At the same time, the bigger size of Fund VI does provide VMG additional dry powder to keep pace with the rate of change in the consumer space.

In recent years, Tsai said that the overall speed of growth in the space has accelerated, driven by fierce competition among sponsors, including venture investors. The ready availability of cheap debt only added fuel to the fire.

The industry has shifted towards prioritizing organic growth as rising interest rates have curbed some of these tailwinds. VMG hopes that having a larger pile of dry powder in this environment will open up opportunities to shoot ahead of peers in what remains a very competitive space.

“If you are able to break out, you have an unfair advantage now because you don’t have these small businesses that are hemorrhaging money, that just keep plowing money into marketing,” said Tsai.

“So the bigger you are, the more of a war chest you have to actually just keep propelling your sales and you can still do this profitably,” he continued.

VMG has a flexible growth equity model, writing checks between USD 10m to USD 200m in companies with revenue from USD 10m to USD 500m. Tsai said that USD 20m equity checks were the most common at the smaller end of the spectrum.

VMG also provides LPs an opportunity to co-invest just as it does with the venture-oriented technology fund. The sponsor declined to comment on what fee structures typically are attached to these co-investments, but said that they are done on a case-by-case basis.

“We would love to if it makes sense,” explained Tsai. “We do try to really understand what gets them excited as well, but we want to make sure that we are showing them things that they would like to do, and obviously after being vetted by us.”