How Squared Circles is hoping to build the next generation of food & wellness brands

The project first began a little over three years ago when Lukas Derksen, who hailed from the creative firm Sid Lee, began angel investing in brands alongside entrepreneurs Alexander Gilkes and Osman Khan. One of its early investments was in the hair wellness brand Nutrafol. They decided to formalize the program into an incubation studio.

Over the years, however, Squared Circles decided to take a more hands-on approach — instead of acting as an incubator and investor for external brands, the studio is now focused on launching and scaling its own businesses. With that, the company just raised a $40 million Series A led by L Catterton.

“The pitch to the partners that we’re building with in the future is: OK, how do we actually build these things all the way to launch — and even Series A — without actually giving up necessarily any more of the cap table people?” said co-founder Derksen. He joined the Modern Retail Podcast and spoke about Squared Circle’s growth so far.

Currently, Squared Circles has incubated two brands — cooking oil startup Algae Cooking and skin care company Magic Molecule. It has plans to launch other brands too in spaces like “nutritious food products tailored to the GLP-1 generation” and “delivering functional medicine to children in tasty alternatives,” according to its website.

According to Derksen, all of these ideas come from data. “We start very much from a consumer insight place — and that’s something that we strive for every single time,” he said.

The focus now is to continue launching new products and getting them ready to market as quickly as possible. Though VC funding isn’t as plentiful as it was a few years ago, Derksen said there is still an appetite for certain areas.

“The two categories that have been outspending on disproportionately are health and wellness and food and beverage,” he said.

Here are a few highlights from the conversation, which have been lightly edited for clarity.

Keeping a low profile
“We’ve actually been, I would say, very much under the radar by design over last couple of years. [This is] because we’re always true believers that our actions and the things we put into the world just speak for themselves, rather than some others who might be very pompous and trying to sell people on a vision before there’s actually really something under the hood. That’s why it’s such an exciting moment to speak to you — we’re really at this moment in time where we now have three businesses in market… We’re getting to a point where this is all taking shape.”

A focus on data
“We start very much from a consumer insight place — and that’s something that we strive for every single time. There are a lot of startups that fail, in our humble opinion, because they start with thought first and then try to find the consumer. And we put that on his head. We always start with a consumer insight first, and then build the IP and product around it. And so we at Squared Circles spend our time mining insights constantly.”

What people are buying in this current economic moment
“I think what we’ve seen is, particularly with this consumer, that even in downturns — economic struggles, what have you, inflation — the two categories that [shoppers] have been outspending on disproportionately are health and wellness and food and beverage. Especially food and beverage in service of health and wellness. So, food is medicine. And what’s interesting is that, I think, currently food and beverage — food and beverage plays, pre-money — is a really difficult place to raise money in. But I think science-backed health and wellness, [companies that are] really playing into the longevity outlook of this consumer, I think [that] is still a place where we’re going to see a lot of movement and a lot of investment happening.”