Will Phillips spends a day embedded with Midnight Venture Partners in Austin. The vlog shows how a specialist fund that invests only in consumer packaged goods (CPG) brands operates and how it decides what to back.
00:00Intro — the bet on being a specialist fund
- Most VC money right now is pouring into AI, with huge generalist funds writing big checks into a handful of companies. But venture runs on the power law, and the best returns sometimes come from specialist funds that dig deep into one overlooked category.
- Midnight VP: Austin-based, investing only in consumer brands (the products you pick up off a grocery shelf). They raised a $23M first fund and backed brands like Olipop, Recess, and Magic Mind.
- The team's philosophy: "founder friendly." VC has a bad reputation for being predatory, so they aim to be the brand of investor a founder brings problems to rather than hides them from.
- The core proposition: "what matters is not the frequency of correctness but the magnitude of correctness" — one or two overwhelming breakouts per fund produce the entire return. The question this video asks: what founders does a specialist fund bet on, and what does it see that others can't?
01:50Gym session — meeting the team
- Will starts the day working out with the team at an Austin gym, The Collective (he hasn't trained in a while because of filming — "these guys are crushing me").
- The team: Ryan and Alex met in college, and Ryan met Chris in college too. In 2021 all three quit their jobs to start the fund.
02:47Alex Bodney interview — a VC's grind is no different from a founder's
- Early on they took no salary at all for a long stretch — the stress of watching a bank account shrink every month.
- The insight: "if someone had handed us the whole $23M up front, we would have been worse stewards of that capital." Taking it all during the 2021 bubble would have meant deploying too aggressively at high valuations, and the portfolio wouldn't be as good as it is now. The grind made them more grateful.
- Will's observation: the good people in VC are just like founders — they're entrepreneurs too, and they go through the same pain raising their first capital. Alex: that empathy was the early secret sauce. "Midnight is a venture fund, but it is also the entrepreneurial journey of Ryan, Chris and me."
05:06How a VC fund actually works (whiteboard explanation)
- Midnight has a $23M first fund. A fund isn't forever — it runs about 10 years. The first few years go into new brands, then they double down on the winners and wait for exits. Throughout, the investors' (LPs') money is completely locked up.
- Most funds commit to a stage (a seed fund writes small seed checks, a growth fund writes big ones). Midnight commits to a thesis instead — consumer brands only. Seed through Series B, checks of $500K–$4M, for 2–4% ownership.
- When they want a larger position in a particular brand, they occasionally use an SPV (special purpose vehicle) — a separate raise for that one investment ($2M–$20M).
- How a fund makes money (beyond the 2% management fee), three ways: ① a portfolio brand IPOs ② it gets acquired by a larger company ③ they sell the stake early to a bigger fund or investor (secondary).
- A power-law example — Olipop: valued around $200M a few years ago, now $1.85B. Even a small stake in a winner like that is a big share of a $23M fund.
- The math LPs want: roughly 3x the money over 10 years — $23M in, about $70M out is the bar for a strong fund. GPs get there not by being right often but by being enormously right once or twice.
07:31Granola — AI meeting assistant (sponsor)
- Will is on calls with founders every day. The sponsor, Granola, is an AI notepad that transcribes and organizes in the background of a call. Its 'look again' recipe in particular surfaces "the questions you should have asked but didn't, and why," which raises the quality of the conversation (with a first-month-free link).
08:22Term sheet negotiation (a working scene)
- One portfolio company is negotiating a term sheet and isn't happy with the terms → the situation is about constructing a competing term sheet that is friendlier to the company, the founder and the management team. It has to be resolved while preserving relationships, and it becomes a spider web of who knows whom and who is angry at whom.
- Alex: last week, Monday through Friday, he spent 20–25 hours on the phone on this one deal. "Can a Monday look like this? Yes. Does every week look like this? No. The 7am gym is the only fixed thing; everything else is fluid."
10:15Ben Davis interview — the hardest part
- "There are a lot of good deals. The challenge is always ranking opportunities against each other." And he restates the principle that magnitude of correctness, not frequency, is the only thing that matters — with one or two breakouts per fund, early mistakes (bets that don't work) are survivable. A failure doesn't mean the team did something wrong; it's the nature of the game.
11:20Rigby investment meeting — a pouch product
- Six years deep in one category (gum and pouches), looking for something that would push the category forward, they brought a pouch product to market.
- Midnight's question: use of funds? → scaling through a new manufacturer, entering two new segments, and customer acquisition (the funnel is validated and repeat purchase compounds, so they want to be more aggressive).
- What's the evidence in the D2C metrics? → acquisition and velocity are climbing fast beyond just ad spend → customers love the product and it's resonating in the market, with consumption use cases on daily, monthly, three-month and six-month cycles.
12:22Rebel Cheese investment meeting — dairy-free cheese
- Growth since the last visit three months ago? → e-commerce went from roughly $600K this time last year to about $1M this year (on margin alone).
- The key question: are you a vegan cheese company or a dairy-free cheese company? → dairy-free. 74% of their customers are not vegan. Why: it's an artisan premium product (not competing with slices and pre-shredded), and the new mozzarella is high-end too. Most customers aren't vegan — they're people avoiding dairy or unable to eat it (health, environment, animal welfare).
13:24Will's mid-day debrief
- Watching back-to-back meetings: a founder walking in is a big deal, and even seasoned founders raising a Series A (these ones were on Shark Tank years ago) get very detailed questions in front of a CPG VC.
- What the Midnight team does well: they make the founder feel like an equal in the conversation, so they can ask effective due-diligence questions while the founder still answers honestly and without pressure.
14:16Chris Aydam interview — two contrasting deals
- The first company: a category-defining product → most attractive to a strategic acquirer (M&A), which is the type of investment Midnight prefers.
- The second opportunity: product-market fit already proven, a founder they've known for four years, execution continuing and revenue climbing → roughly a $25M revenue run rate, growing fast.
15:00H-E-B store visit — "my investments, on the shelf"
- At H-E-B, the largest grocer in Texas, they find Midnight portfolio products on actual shelves: Olipop, Recess, Leisure Hydration (in-store as of last week), and the snack brand FitJoy. That's the appeal of consumer investing — the tangible reality of "I own a piece of this business" (as against luxury goods you never use).
- (A joke: the real OGs mess up competitors' shelf displays, but "we play fair so we don't" — Chris: "I did all of that in my twenties.")
16:40Advice for founders
- Chris: "There are no rules. You can build anything you believe has value. If you believe it, just do it."
- Will: small steps over time — "one day you'll look up and be surprised how far you've come."
- The most practical piece of advice: "Make sure you're prepared, personally and financially, to take zero salary for at least two years." (It starts as motivation and turns abruptly practical.)
- The close: Midnight lived it too — not quite two years unpaid, but on about $35K a year, joking that they were "balling."
📌 Bottom line
- A day embedded with Midnight Venture Partners, an Austin consumer-goods specialist VC ($23M first fund, investors in Olipop, Recess and others), showing how a specialist fund operates and what it bets on.
- Fund structure: a 10-year life, $500K–$4M checks from seed to Series B (2–4% ownership), committed to a consumer thesis rather than a stage, with returns coming from IPOs, acquisitions and secondaries, targeting 3x the money (~$70M).
- The governing principle is "magnitude of correctness, not frequency" — one or two breakouts per fund (Olipop going from $200M to $1.85B) carry the whole thing, so early losing bets are absorbed as the nature of the game.
- What they judge on is a category-defining product (attractive for M&A) and already-proven PMF and growth (run rate), and what differentiates the team is an empathetic, founder-friendly culture that treats founders as equals. Their advice to founders: if you believe it, execute — but be prepared to go two years without a salary.