Like many well-intended companies before it, Brand New Brands, Mill Valley, CA, believes it has found the ideal formula for success when it comes to functional foods. To date, this secret formula has eluded a majority of companies, many of them producing functional foods that were either limited successes or outright failures. What Brand New Brands brings to the table is a new paradigm for functional foods. But this is not the only thing people will be watching.

What also draws attention to the company is its founders. They include Greg Horn, former CEO of GNC, who has an impressive resume in the nutraceutical, supplement and healthy lifestyle areas; Pete Mattson, a prominent food formulator, who has worked with most of the large food companies to develop new products, like the Frappuccino product he developed for Starbucks; and Will Rosenzweig, former CEO and co-founder of the Re­public of Tea, and former senior vice president of Odwalla, who has been involved with functional beverages for the last several years. These gentlemen have very different but complementary experiences in the nutraceuticals market, which many believe will serve the company well.

So if the company is intent on building a "new" generation of functional foods, one has to ask what went wrong with the first generation. According to Mr. Rosenzweig, who has been appointed CEO of the new company, most of the first generation functional foods were either anecdotal in their efficacy or too clinical for consumers. He also pointed out that functional foods by their very nature should be healthy, but that many of the first generation functional foods, because of the way they were designed, engineered and processed, could not be sold in the natural foods channel. "In other words," he said, "Atkins and Benecol don't exist in stores like Whole Foods because the early adopter consumer doesn't perceive these types of products as healthy. Products that come out of the natural channel and then cross over to the mainstream carry a 'healthy halo' with them." He used Odwalla as an example of a brand that successfully crossed over from the natural foods channel to the mainstream, all the while maintaining its healthy image.

So what does Brand New Brands hope to do differently? First, Mr. Rosenzweig said, the company must come to the realization that its strength resides in its ability to innovate, design, launch and incubate products. "We recognize that the large food companies are better at negotiating other maturity stages of a food brand," he said. "If we stay true to what we do best, I believe we can ensure the sustainability of our business and our products."

Another element that Mr. Rosenzweig believes was missing from the first generation of functional foods was value. "We are looking to capture value in the early stage and then make a 'relay race' hand off to a strategic buyer," he said. "We are incubating some of these brands into the portfolios of bigger companies that can then exercise their distribution and category management."

He says what is likely to happen in the functional food marketplace in the future will be very similar to what happened with organic products. "The big companies are growing into healthy food niches by acquisition. This is precisely what happened with the organic products market," he explained. "Entrepreneurially-bred brands were snapped up by the likes of Coke, who bought Odwalla, Dean, who bought Horizon Organic Dairy, and Kellogg's, who bought Kashi."

From the venture capitalist perspective, one of the problems that Brand New Brands solves, according to Mr. Rosenzweig, is that it approaches its business as a portfolio of brands. "It is very hard for an investor to pick one brand to invest in when they see hundreds of opportunities," he commented. "Brand New Brands allows investors to play the odds of a portfolio, which puts capital into the mix from the start."

The other powerful part of Brand New Brands is its investors. "Entrepreneurs like to look for leverage points and for Brand New Brands that happens to be its investors-Degussa, DSM, Unilever, Nestle, Bayer, Great Spirit Ventures-all of which are part of Burrill & Company's Nutraceuticals Capital Fund," he said.

To get off the ground, this past February the company raised $15 million in its first round of financing. The company will use that money to leverage available technologies in the marketplace and use those to create great tasting, convenient, safe and efficacious food and beverage products. In the fall this year, the company plans to launch its first product, which will address the weight management market. Other potential products will target indication areas, such as digestive health, immunity, sleep, energy and women's health.