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Prelude Growth Partners' latest consumer products fund shows there is white space ahead for niche pockets of the sector, the growth equity firm's co-founders tell Axios Pro.

Why it matters: The fund's close comes as consumers grow more anxious about spending.

Driving the news: Prelude Growth raised $600 million for its third fund targeting consumer products, the growth equity firm said Tuesday.

Fund III is more than half the size of its previous fund and will aim to write checks between $15 million and $75 million.

The firm declined to share specific investors. 

Catch up quick: Prelude Growth, launched in 2017 by co-founders Alicia Sontag and Neda Daneshzadeh, is now managing $1.3 billion in assets, the firm says. 

Past investments include fragrance brands Phlur, which just sold to TSG Consumer, and fragrance brand Sol De Janeiro, condiment makers Fly By Jing and Bachan's, and food brands Banza and MadeGood.

This interview has been lightly edited for length and clarity.

Sontag: "Our strategy remains consistent with the strategy with which we originally launched Prelude Growth — there is a new, modern consumer with very different preferences than the prior generation, seeking transparency, authenticity, sustainability, health and wellness, community."

There isn't a lot of liquidity in the market right now. How did you raise the fund?

Daneshzadeh: "Historically, we have always raised our funds in a very rapid fashion, and this fund was no different. We raised it in about two-and-a-half months."

"I think we got tremendous support from our existing LPs, who continue to be the vast majority of Fund III."

How are brands reaching consumers in the current landscape?

Sontag: "The majority of the brands we invest behind are omnichannel. Born on [direct-to-consumer], some sort of A-plus retail partner [like] Target or Costco or Sephora, and then typically an online marketplace, whether it's Amazon or a category-specific marketplace."

Are there categories you might expand into?

Daneshzadeh: "We're constantly looking at a broad array of categories within consumer. In Fund II, we entered the aesthetic med spa category."

Consumers are very anxious about their wallets right now. What impact does that have on your investment strategy?

Sontag: "The categories [we invest in] are 'all-weather' categories."

"In a really, really tough macroeconomic environment, typically, like electronics, home repairs, furniture — bigger-ticket purchase items — slow down because consumers can pause."

Broadly speaking, private equity has backed out of consumer at large. Why are you confident exits will be there?

Daneshzadeh: "We are focused on investing in subcategories with strong consumer tailwinds. These categories are exactly where larger private equity and global strategics want to invest in."

"We've had five exits for a 7-year-old fund in the last four years. We are very optimistic about the continued interest in these subcategories."

Prelude Growth co-founders on "all-weather" bets in consumer products

The firm just raised $600 million for its third consumer products fund.

Photo illustration of Neda Daneshzadeh and Alicia Sontag with a pattern of Prelude Growth Partners logos between them.

Neda Daneshzadeh and Alicia Sontag. Photo illustration: Axios Visuals. Photos: Courtesy of Prelude Growth Partners

Prelude Growth Partners&#x27; latest consumer products fund shows there is white space ahead for niche pockets of the sector, the growth equity firm&#x27;s co-founders tell Axios Pro.Why it matters: The fund&#x27;s close comes as consumers grow more anxious about spending.

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Prelude Growth co-founders on "all-weather" bets in consumer products

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