Stanford Food Summit 4

logoStanford hosted Food Summit 4 on October 30th with the caption of “growing pathways to careers in food systems.” Below is a quick recap of the most interesting nuggets I gleaned from the event, following four main themes.

1) Growing food locally

PlantLab: Gertjan Meeuws, Co-Founder of PlantLab, shared the rationale behind this Netherlands-based vertical farming operation. He began with the premise that, contrary to popular belief, plants don’t like nature, and that it doesn’t necessarily make the most sense to grow crops where nature is kind, and transport them to the cities in which we live. The presentation was compelling (and Gertjan’s TED talk gives a great summary). Where I am left hesitant is understanding why this model is economically feasible compared with alternatives that have been shown to cost too much (due to energy to provide artificial lighting).

LYFE Kitchen's criteria for sourcing ingredients

LYFE Kitchen’s criteria for sourcing ingredients

LYFE Kitchen: Laura Keller, my friend and former classmate shared LYFE Kitchen’s admirable sourcing guidelines (see photo), aggressive roll-out plans (~250 locations within the next five years), and how those two often come into conflict. They’re reportedly working with a vertical grower in Chicago in order to ensure a year-round supply of local produce as they expand outside California. I’m interested to watch the growth unfold! (this blog previously covered LYFE when they first opened in 2011)

2) Getting healthy food into schools

Miguel Villarreal: It’s always a treat to hear Miguel speak about the unbelievable change he’s been able to drive in the Novato Unified School District Food and Nutritional Services (FANS) program. The two victories he highlighted: 1) Removing 400 pounds of sugar per day (32 tons per year) from the schools over the past eight years and 2) Pushing forward a City of Novato ordinance that junk food trucks can’t park and market unhealthy food outside the schools. Miguel was highlighted as a Jamie Oliver Food Revolution Hero in 2011 and has worked on many other initiatives in addition to these.

Stanford Dining: I’ve long been a fan of the Stanford Dining Halls and their commitment to sustainable food purchasing. Sustainable Food Program Manager Dara Silverstein shared with the group the buying commitments Stanford Dining has committed to. It’s a pretty cool list and shows the progress they’ve made in replacing conventional sources for many ingredients (and also illustrates which operations are capable of supplying such a large-scale customer)

3) Getting people into the kitchen

Homemade: Founders Ai Chloe Chien (another GSB classmate) and Anna Rakoczy shared the early results of Homemade: the weekly cooking program they launched this summer to empower those with diet-related health needs to free themselves from “dieting” and develop healthy cooking habits for life. Both Chloe and Anna left lucrative jobs on the table (for Chloe, residency following her joint degree from Stanford Medical School and Stanford GSB, and for Anna, a career as a lawyer, and the former 2008 Australian Young Lawyer of the Year) to follow their passion for empowering healthy eating habits in others. Though only three months old, the program has had early success (“weight loos of up to 25 pounds in three months”) though by their own admission the long-term impact of diet-related weight loss matters more than short-term results. More impressive to me than the weight loss is that they’re proving that the business model works. They’ve found customers willing to pay ~$160-180 per week to participate (for 2 hours of group cooking and meals to take-home), an impressive feat on its own.

Sodium Girl: Jessica Goldman Fuong, blogger and cookbook author, was an awesome panelist with an inspiring story. Having been diagnosed with Lupus (an autoimmune disorder that affected her kidneys and brain), Jessica turned to a salt-free low-sodium diet and assembles recipes and tips via her blog and cookbook which prove that a low-sodium diet can be full of flavor. When asked for her advice on getting people into the kitchen she says she always starts with the ambience, “trick out your kitchen, make it fun, bring in color, and love to be in it.” I love this approach. Perhaps there’s room for innovation in terms of making our kitchens the best space in the house, and the healthy cooking will follow.

Jesse Cool: Restaurateur, author, teacher, and vocal sustainable food advocate, Jesse Cool also offered her advice in terms of how to get people cooking, especially kids: “build early and easy successes in the kitchen. Have kids make a baked potato, and poof! They’ve cooked! I like to teach them that you don’t have to be afraid of foods, of fats, of sugar; that it’s all okay in moderation. And to just try.”

4) Finding innovative uses for communal spaces

Off the Grid: I’d never heard founder Matt Cohen speak before and I was really engaged by his innovative approach to affecting the food system. Drawing from his experience with open food markets in Asia and Africa (and their primary role in community-building vs. secondary role in selling food), Matt took a look around San Francisco with the lens of, “what are unused communal spaces, and how can they be repurposed to create community?” Starting with the massive and often-empty parking lot in Fort Mason, Matt launched Off the Grid in the summer of 2010. Week 1 saw 300 attendees, and the count doubled every week to reach the 6-8K weekly attendees the Fort Mason event currently hosts. His advice to the audience: “look for more underutilized spaces, because there are many, and think creatively about what you can do to build community in those spaces.” If it promotes healthy, local eating and small businesses at the same time, even better.

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Loving this kale salad

Thanks to Christopher Gardner, Antonella Dewell, and the speakers and panelists for putting together an awesome event! And special thanks to Stanford Dining for this beautiful, massive, dream-come-true kale salad…!

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Packed auditorium for Stanford Food Summit 4

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Feeding 100 Trillion Friends: Produce or Pills?

Photo 1_microbiomeIf you’ve participated in foodie dinner table conversation in the past year, you’ve likely heard the term “microbiome” more than once.  Due in part to exceptional expository pieces such as Michael Pollan’s “Some of My Best Friends Are Germs,” the popular lexicon now includes some incredible statistics about the body’s ecosystem of 100 trillion bacteria. For instance: a count of the cells within the human form will yield a tally of nine non-human microbes for every human cell. Moreover, 99% of the total genetic information in our corpus is microbial. We’re taught to think of life as a turf war between “us” humans and “them” germs; yet, it turns out that “us” is mostly “them.”

And many of the bugs inside us – the denizens of our microbiome – are doing us quite a bit of good. In babies, Bifidobacterium Longum helps stave off pernicious bacterial infections, while Lactobacillus Johnsonii aids in the digestion of mother’s milk. In adults, Bacteroides Thetaiotamicron and Escherichia Coli (different from unsavory strains of E. Coli) are critical to digesting plants and extracting vital vitamins from our food. Moreover, our internal bacteria can even determine our susceptibility to arthritis, our predilection for metabolic disorder, whether we are fat or thin, whether we develop the type of arterial plaque that causes heart disease, and even how we think. Whoa.

Knowing this, we have begun to own up to the need for a paradigm shift concerning microorganisms. As one author puts it: “We are moving from a multi-decade focus on killing ALL bacteria via soaps, detergents, antibiotics and hand sanitizer, to a new understanding of the complex bacterial system in our bodies and in the world around us.” Famous fermenter Sandor Katz further elucidates this point in Michael Pollan’s Cooked: “’To declare war on ninety-nine percent of bacteria when less than one percent of them threaten our health makes no sense. Many of the bacteria we’re killing are our protectors.’”

So how do we best cultivate our individual microbiomes to effect benevolent health outcomes? One way to preserve your gut ecology is to avoid the haphazard consumption of antibiotics. Antibiotics are the “nuclear option” in regulating our foreign fauna: they wipe the slate clean, eliminating good bacteria along with bad. Similarly, it’s good to lay off the Purell and antibacterial soaps. But what about promoting the growth of undersized friendly germ colonies, or sowing new communities that aren’t currently present in our bodies?

Is this the domain of food, or medicine? How might we optimally shepherd the hardy, cunning, and inexhaustible soldiers of our internal infantry? If control is the most valuable currency we can amass in our daily grapple with the swirl of feral nature, then this is a major question indeed.

Food

Photo 2_microbiomeWhat we eat for our own nourishment also happens to be the fuel for our microbiome. And the bacteria that enter our body along with our food often become a part of the microbiome. Indeed, the evolution of our internal microbe colony has historically depended heavily on the consumption of a variety of “living” foods.

Today, food safety regulations all but ensure that the living elements of our food are annihilated in the course of preparation, packaging and delivery. Much as we use the blunt instrument of antibiotics to destroy bacteria in our bodies, we use heat (Pasteurization) or high-pressure processing (HPP) “kill steps”, engender abundant acidity, thoroughly dehydrate, and seal our food in protective packaging to ensure that microorganisms are obliterated. We codified these safety procedures to ensure that we eliminate a short list of pernicious pathogens (such as e. coli, salmonella, and listeria) that sometimes exist within the large community of microorganisms that are present on raw food.

By requiring that our packaged food be heated, acidified, and desiccated, we are rendering it “dead” in every sense. Valuable enzymes, vitamins, minerals, and antioxidants are forever lost. And so are the myriad harmless and benevolent microorganisms that we have benignly ingested for centuries. Accordingly, processed food fails to stir up microbiome magic.

“Living Food”

Lately, there has been a resurgence of food as medicine for the microbiome. Michael Pollan’s latest book, Cooked, offers a robust look at a productive class of artisan fermenters that create living foods as varied as cheese, yogurt, kimchi, sauerkraut, miso, prosciutto, pickles, etc. (Cooked also delves eloquently into the science of fermentation, a mind-blowing process wherein humans cultivate microorganisms that transform foods for us.) Fermented foods contain beneficial live cultures known as probiotics, while other foods contain prebiotics, the nourishing molecules that sustain probiotic organisms.

(Important side note: many mass-produced “fermented” foods are not actually fermented by living organisms. They use chemical processes to mimic the effect of microbial action. For instance, supermarket pickles are pickled by vinegar, not microbes. These non-living foods are cheaper to make and more uniform in taste. But they lack probiotic function.)

Contemporary artisan fermenters have benefited from a revolution in financing and distribution options. For instance: after reading Cooked, I wanted to eat more “living” food, so I ordered some delicious Real Family Foods sauerkraut through Good Eggs, a grocery delivery service that brings a diverse array of goods to my doorstep. A few weeks later, I received an email from peer-to-peer lending platform Kiva Zip with a request to help finance a loan to Real Family Foods. I contributed $25, and within a few days the $2,500 loan was fully funded by 41 of Real Family Foods’ customers. The loan is being used to obtain USDA Organic certification. This case study highlights how easily the modern consumer can vote with their dollars for shifts in the food landscape – without ever leaving home. I supported one of our oldest food production techniques by using some of our newest technology, all in the interest of making my buggy friends happy.

Yet, the exact relationship between which foods we eat and how those foods impact our microbiome is still somewhat murky. We know that fresh organic produce (some exemplars are onions, garlic, and leeks; and, broadly, vegetable fiber is excellent) and fermented foods work wonders. Highly processed foods are bad, as is sugar (for instance, you don’t have to refrigerate honey because bacteria cannot live in a pure sugar solution), and antibiotic-laden meats will shock your gut ecology. Beyond that, it’s hard to say. And there is real risk in consuming raw foods that may be tainted by deadly pathogens. (Note: one of the many remarkable aspects of fermentation is that the fermenting microbes create an acidic environment that is inhospitable to pathogens. Only the good guys can survive.)

Medicine

Photo 3_microbiomeThe traditional role of Western medicine is to react to developed or emerging sickness. The medical establishment has been slow to develop preventative measures or guide patients on how to maintain health, particularly when it comes to food. Layer on to this that our understanding of the microbiome is rudimentary at best, and you can see why most physicians probably don’t have polished advice for their patients when asked: “So, how do I jump-start my internal ecosystem?”

Precision Therapeutics

However, many are looking to the biotech community to develop targeted therapeutics that will help the microbiome flourish. Second Genome is the early leader in this category, and has taken some $19 million in venture financing. But the leaders of Second Genome know that creating therapies for any single person will be difficult given the unique nature of each microbiome. Second Genome CEO Peter DiLaura acknowledges the need for precise therapies: “’We are really focused on the interaction between the microbiome and the host…when we think about therapeutics, it’s about impacting the interaction that is beneficial for disease.’” The company is using DNA sequencing technology to customize solutions, but the cost of doing so is onerous. Peer company Vendata Biosciences is pursuing similar solutions.

At this point, not only are such interventions too costly for mass adoption, but they generate the same slew of privacy concerns that other DNA sequencing technologies have raised. (NPR has an entertaining and illuminative story on this topic, and the accompanying cartoon video on the microbiome is definitely worth a watch.) Nonetheless, endeavors such as the American Gut Project and uBiome are nobly pressing forward to map our collective microbiome, much as the precedent Human Genome Project did in spite of concerns voiced by its detractors.

Right now, the best microbiome solution offered by medicine is inelegant, highly effective, and not for the squeamish. Fecal microbiota transplants (or fecal bacteriotherapy) are exactly what they sound like: taking stool from a person with desirable microbiomic traits and – ahem – sharing it with a person with health issues. The results of the procedure have been inarguably positive, and accordingly the FDA has green-lighted the therapy.

Food or medicine?

The “answer” lies somewhere betwixt the two domains: both food and medicine play a role. With food, cultivation of your microbiome is just the latest in an endless list of reasons to eat more fresh produce and trustworthy raw food. And integrating fermented products into your diet makes good sense: humans have been eating ferments for as long as we’ve been around. Our co-evolution with fermenting microorganisms is a clear synergistic success story.

As far as medicine goes, truly targeted microbiome treatments are not cost-competitive enough to supplant the crude fecal transplants being used today. But those transplants are saving lives in acute disease states. Their applications should be increasingly tested in preventative care.

There are also over-the-counter supplements on the market that purport to service your microbiome. Walk through your local store and you can find a multitude of probiotic pills or “probiotic-enhanced” foods. But any consumer should be seriously skeptical of supplements, and I suggest opting for real probiotic foods instead. Probiotic supplements might be appropriate after a course of antibiotics to catalyze a rebuild of your microbiome, but I suggest doing research on products before buying them.

In the meantime, stay tuned to scientific advances addressing the microbiome, and pay attention to credible literature on what probiotic and prebiotic foods are best suited to positive health outcomes. The next chapter in our long history with our tiny friends is sure to be an interesting one.

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Event recap: Panel on Online Grocery Delivery – Good Eggs, LolaBee’s Harvest, Plated, Webvan, and Free Spirit Farm

2013 09 23 110Last month I worked with Local Food Lab to put together a panel focused on the online grocery delivery business model, in its various manifestations. We had the pleasure of hosting the event at the Dutch consulate’s beautiful space on the 31st floor of 120 Kearny thanks to the Netherlands Office for Science and Techology. Full recap below.

Panelists:

History + context

Moderator Austin Kiessig

Moderator Austin Kiessig

My partner at Edible Startups, Austin Kiessig, moderated the event. He kicked off the presentation by providing some history and context on the online grocery delivery business model: the early 2000s Webvan boom and bust, Webvan competitor PeaPod’s position as the top Google search result for “online grocery delivery” (followed by Safeway and Walmart), and the role of AmazonFresh: Amazon is currently the #1 ecommerce grocery site able to operate with the luxury of selling groceries at a loss to deepen relationships with customers (cue warning siren for competitors…). AmazonFresh expanded to LA this June and plans to roll-out to 20 additional markets in 2014.

As context for the conversation, Austin cited the 2012 Kantar Retail report entitled, The Future of Online Grocery Shopping in the US…Is Here. The report reveals the lack of online penetration in groceries compared with other categories: online sales constitute 27% of computer hardware purchases, 24% of music and videos, 10% of clothing, 7% of home furnishings, and just 1% of food, beer, and wine. Reasons shoppers cite for not buying food online are delivery fees, lack of trust in selecting fresh items, ability to explore and buy items not on the shopping list, and enjoyment of the in-store experience. Given the lack of traction thus far, the consumer biases against buying food online, and the distribution challenges of delivering fresh food among a geographically dispersed customer set, how are the new models planning to succeed?

Webvan learnings

Gary Dahl, former VP of Distribution at Webvan, sat on the panel. As context for Gary’s role, Austin quoted the Webvan Wikipedia page, “While the company was popular, the money it spent on infrastructure far exceeded sales growth, and the company eventually ran out of money.” For example: Webvan placed a $1 billion order with engineering company Bechtel to build its warehouses, then bought a fleet of delivery trucks, 30 Sun Microsystems servers, dozens of Compaq computers, several Cisco Systems routers, more than 80 21-inch ViewSonic color monitors, and at least 115 Herman Miller Aeron chairs at over $800 each. Gary represented his former employer candidly and with a good sense of humor. When each panelist was asked to characterize their company as a food company, a logistics company, or a technology company, Gary responded, “#4 – bankrupt.” Although he did contest the ridicule of their Aeron chair spend – “great engineers at that time wouldn’t sit in anything but them…”

When asked what’s changed between 2001 and today to make online groceries more feasible, the answer was that Webvan was ahead of its time, and certainly ahead of consumer willingness to buy food online. Of course in hindsight it’s easy to point out mistakes that were made. TechCrunch, courtesy of the former founding head of technology at Webvan, recently covered the online grocery space and cited three lessons learned by the demise of Webvan:

  1. Targeting price sensitive customers with what should’ve been an upscale offering
  2. Investing in complex, customized, and costly infrastructure
  3. Succumbing to pressure to get big too fast

Online farmers’ markets (Good Eggs and Lolabee’s Harvest)

The “online farmers’ market” model offers customers the ability to buy groceries online from a disparate community of producers which are coordinated via a third party and delivered weekly to doorsteps. I covered LolaBee’s earlier this year and remain very much a fan of their offering. They expanded delivery to the East Bay this June and are continuing to invest in growing the business.

Toby Hastings, Free Spirit Farm

Toby Hastings, Free Spirit Farm

To highlight the perspective of the food producer on this model, Toby Hastings, founder of Free Spirit Farm, joined the panel. Toby runs a seven acre farm in Winters, CA producing fruits, vegetables, and eggs. He sells his produce via Lolabee’s, as well as directly to Bay Area restaurants. He shared the challenges for a farmer in marketing products, specifically for low batch, seasonal crops that are not dependably available week-to-week. The online platform lets him market exactly what he has in stock each week. Toby is making a name for himself in the farming world, having been named in Zagat’s SF Food World Up-and-Comers top 30 under 30. He also was the only panelist representing a venture that’s currently profitable (and has been profitable every year since inception). Who would’ve thought that the farmer would win that honor?

Good Eggs, another Bay Area-grown online farmers’ market, is also growing aggressively, currently piloting their model in Los Angeles, Brooklyn, and New Orleans. Rahmin shared that the New Orleans pilot has met with early success especially due to the strong local sense of community around food. Rahmin echoed the role this model can play in supporting and enabling local food producers. For example, Josey Baker is an SF producer that began selling 100% via Good Eggs which allowed him to expand. Good Eggs isn’t yet profitable but plans to have the SF market reach profitability within six months.

Recipe delivery boxes (Plated)

Plated is one of a number of recent food startups delivering ready-to-cook ingredients and recipes directly to your door (others include Blue Apron and PlateJoy). Plated began on the east coast but launched in San Francisco this September and has done a great job getting their brand out there. Seriously, I see their materials everywhere from my office to a private cooking lesson I did in a chef’s home with some colleagues a few weeks ago (by the way, highly recommend Chef James…). I tried out Plated a few weeks ago, and although I was skeptical of the $15 per serving price point, I was blown away by the quality of produce included in the order. Glenn from our panel is the man in charge of sourcing high quality ingredients around the Bay Area and it seems like he’s doing well so far.

Wooing the fickle online grocery shopper

Coming full circle, the main challenge faced by online grocery startups is the lack of current penetration today. These companies will have to continue converting and wooing brick-and-mortar food shoppers. How will they do that? When asked by the moderator what is the most surprising thing they’ve learned about online grocery shopping behavior, the panelists’ answers provide some insight:

  • Lauren, LolaBee’s: There is often no discernible rhyme or reason to the orders her customers place. She frequently cannot imagine a meal coming together from the collection of groceries. She believes there’s lots of room out there to guide customers into crafting meals while they shop online. That’s certainly an advantage of online shopping: the ability to search recipes online while making your selections. A lot easier than scanning through pinterest pins in the produce aisle… (PlateJoy helps meet this need with meal-planning services, as does Design My Meals, which auto-loads your CSA box inventory into your virtual pantry to pull recipes based on what’s in your kitchen)
  • Toby, Free Spirit Farm: Customers don’t like branching out and trying new things. They’ll choose an apple over a quince very day. But it’s easier to get people to try new things online versus in the store; it’s less intimidating. You don’t have to know how to pick out a ripe piece, you don’t have to make the decision on the spot, with others shoving around you. Featuring new products online helps customers experiment (especially when paired with a recipe guiding them on how to use the new ingredient.
  • Gary, Webvan: Gary’s most surprising observation from customer shopping behavior is that most people start to think about dinner at ~4pm. In the online world it’s really hard to deliver on that. Plated requires orders by Monday at noon for a Tuesday delivery, which seems like an impressive turnaround to me. But you’re out of luck if you want to go online at 4pm and get groceries delivered that night.

Thanks again to NOST for the amazing venue. The Netherlands Offices for Science & Technology links local science, technology trends, and R&D (in agriculture and food, among other areas) to their counterparts in the Netherlands. Check out NOST’s recap of this panel on their blog as well.

Also thank you to our food sponsors for the evening: Kama Food Lab and Rip van Wafels!

Panelists from left to right: Glenn, Lauren, Rahmin, Gary, and Toby

Panelists from left to right: Glenn, Lauren, Rahmin, Gary, and Toby

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What “Big Ideas” In Food Get Funded In Silicon Valley?

Much has been written about the ascent of Silicon Valley (SV) as the go-to global incubator for transformational change.  SV has become the Jerusalem of the techno-optimist religion. In venture capital doctrine, the absolution of humanity’s sins begins with seed financing for the next spate of Big Ideas. And in an America where the federal government no longer functions (quite literally), Silicon Valley has taken on new gravity. It is ground zero for ingenuity as cathartic salvation.

The unsustainability of the modern food system is one of humanity’s biggest problems. So, it’s worth taking a look at which Big Ideas in food the leading SV venture capital firms (VCs) are voting for. Where are VCs placing their bets for the salvation of food? (Note: this piece will focus on venture capital financing, but not crowd-funding, angel financing, or later-stage private equity financing, all of which also play an important role in advancing Big Ideas in food.) SV’s rising focus on food has already received attention from the mainstream press.

Before diving in, it’s important to bear in mind a few truths about the VC business model. To have a chance of being funded by a VC, a company must “walk and talk” like a high-growth technology firm. VCs look for: a) billion-dollar marketplaces; b) game-changing innovations; c) short innovation cycles that can quickly lead to high-margin revenue; and d) a promising path to “liquidity” (meaning the sale of the VC firm’s equity shares in the company). One problem cited by food entrepreneurs is that food businesses often don’t fit this profile. So as you peruse the ideas below, it’s also important to consider what’s not being financed. But, more on that later.

Agriculture Inputs: Information, Resource Management, Seeds

VCs love agriculture input innovations. Why? Inputs undergird all of food production, and thus represent massive marketplaces. Plus, VCs understand the imminent scarcity of inputs such as water and petroleum-derived fertilizer. If technology can reduce or supplant the need for threatened resources, it can probably be monetized. (However, because such technologies often hinge on bets about unforeseeable commodity price trends and/or government distortion of markets, they bear resemblance to some of the “cleantech” investments that burned VC firms in recent years.)

VC graphic 1

A good place to start is with the recent sale of The Climate Corporation (CC) to Monsanto for over $1 billion. Having liquidated for about ten times the $109 million in venture funding the company has received since 2007, CC is rightly hailed as a successful venture investment, and was backed by big-name firms such as Founders FundKhosla Ventures, Google VenturesNEAIndex Ventures and Atomico. CC is a “Big Data” company that processes historical and real-time weather data with predictive algorithms, and then intelligently prices crop insurance and weather informatics for farmers. CC produces something that tech-oriented VCs can understand, and they’ve cracked into the multi-billion dollar insurance and business intelligence marketplaces. While we may not think about risk management and production intelligence as agriculture inputs, farmers certainly do! CC is an important case study because it shows VCs that they can make money playing in agriculture.

Another interesting information-seller is Solum, which produces soil sensors and an accompanying analytical platform aimed at reducing fertilizer inputs. The company provides farmers with detailed knowledge on the health of their soil to enable precise decisions on how much additional application is needed to maximize crop yields.

VCs have also focused on companies trying to reduce water use. The Roda Group financed mOasis, a company developing a polymer gel that retains soil moisture and reduces watering intensity in arid climates. Both Banyan Water and PureSense offer technology platforms to economize water application on irrigated landscapes. And Khosla Ventures backed NanoH2O, a membrane technology company that lowers the cost of desalination (and brings farmers one step closer to using abundant salty water for their fields).

Seeds are an additional big focus of VC firms. Kleiner Perkins has two non-GMO seed companies in its portfolio: Kaiima and VoloAgri. Both are trying to coax better productivity out of crop lines without directly altering genetics, a la Monsanto.

Note that what all these companies are really selling are data-derived intelligence or intellectual property that could shift entire marketplaces. They are high-risk, but potentially high-return, with global applicability.

Ag Production & Food Processing: More Efficient Protein, Process Automation

Another concept that VCs love is substitutes for conventionally produced animal protein. If you know anything about how resource-intensive it is to raise a cow, you realize it’s probably possible to produce protein far more efficiently. Furthermore, the market for proteins is large and growing as more middle-class consumers come online worldwide.

VC graphic 2

The animal protein alternatives market is currently dominated by next-generation plant-protein synthetics that closely mimic real meat. The most “buzzy” among them is Beyond Meat, which leads a class of startups investing heavily in food science and processing technique to bring the flavor, texture, and visceral eating experience of their substitutes as near as possible to “the real thing.” The promise for VCs is that these companies will make delicious products with a much lower production cost, thereby carving out a large fraction of the global market by virtue of a favorable price point. Also in this vein is Hampton Creek, an egg substitute with exceptionally promising early market traction, and Lyrical Foods, which is going after cheese.

Further down the pike are companies attempting to grow real animal cell cultures (and ultimately complex animal tissue compounds) in a lab. Rather than originating from a cow in a field, your hamburger would come from “in vitro cultivation” in an industrial incubator. Again, the investment promise of companies such as Modern Meadow is that they will someday streamline production and drop costs – although today, a single “cultured” burger costs $325,000.

(Keep an eye on one more animal protein substitute: farmed insects. While I am not aware of any insect companies currently being financed by institutional VCs, they are thriving on crowd-funding sites such as Kickstarter.com.)

Another well-attended class of ventures is those that are automating processes in the semi-structured environment of food production. For example, Blue River Technology is using computer vision technology to automate in-field weeding and plant selection processes, which have historically relied on manual labor or excessive application of chemicals. Primary backer Khosla Ventures envisions a future where autonomous robotic vehicles diligently roam every agriculture plot around the world. A similar company is Rowbot, which is focused on fertilizer application.

And not far off will be a series of investments in flying drone vehicles used in food production. I don’t know what these will look like, but some have ventured a guess.

Storage, Distribution, and Consumption: Supply Chain Traceability, Numerous Consumer Applications

VC graphic 3

Information is of paramount importance in distribution. Since supply chain traceability is of interest for food safety, cost control, and consumer education purposes, VCs have bolstered technology company HarvestMark, which can help track fresh food items down to the package level.

Further along the supply chain is the intersection of food and consumer purchases. Because “consumer Internet” (the intersection of internet technology and the traditional consumption of goods and services, the latter of which composes over 70% of U.S. GDP) has been such a massive area of investment for VCs, the ecosystem of ventures that allow people to seek out, buy, and consume food is extremely robust. Instead of trying to catalogue notable investments in this space, I will refer readers to Brita Rosenheim’s exhaustive map of “Food Tech and Media” companies. For ongoing coverage, Food and Tech Connect monitors this space very well.

What’s Being Left Out?

Anything that is regionally oriented, serves a small market, or fails to provide an “exit opportunity” for VC investors is unlikely to be funded. The reason such investments are left out is because the business of venture capital is to make money, and do so relatively quickly. VCs raise investment funds from limited partners (smaller investors), and promise to “close” a pool of funds and deliver returns within five to seven years. What that means is that even a company that receives investment early in the five-to-seven year life of a fund doesn’t have a tremendously long time to grow and go public, be bought by a competitor, sell to a private equity firm, or otherwise recapitalize to “liquidate” equity shares. If the “exit opportunity” never manifests, the VCs can’t make money, and they won’t make the investment in the first place.

Contrast the five-to-seven year exit timeline with the life cycle of most agriculture and food businesses. Pistachio trees take seven years to mature after planting. Converting land from conventional to certified organic takes at least two years (and probably closer to four in practice). Building sales and distribution in a physical sales network takes much longer than in an e-commerce network. VCs simply aren’t willing to wait for many food businesses to generate a competitive return on their investments.

And, even if VCs waited, a competitive return may never appear. Most parts of the food value chain generate modest profit margins. Contrast the 15% operating margin of Kraft Foods (a mature and profitable food company) to the 34% operating margin of Microsoft (a mature and profitable software company). For a VC chasing “superior” returns, the profit profile of a business matters a lot.

So what “progressive food” business models are unlikely to be courted by VCs? Big Ideas that are a bit ahead of their time (such as vertical farming); “low-tech” agriculture production technologies; local foodshed farming operations; regional food processors or distributors; artisanal “mom and pop” food manufacturers; most restaurant chains; retailers targeting “food deserts”; niche cooking or nutrition education platforms; and most publications or blogs. VC is not interested in Slow Food or Slow Money. And it’s important to recognize that many of the changes needed in the food system simply don’t fit in the “techno-optimist” paradigm. For those changes, alternative investment channels are springing up, but may never develop at all. Future posts will address complementary avenues of investment in other parts of the food system.

In the meantime, cutting-edge food start-up incubators such as Local Food Lab and Accel Foods, and investment enablers such as CircleUp, are trying to close the broad gap between new food businesses and institutional VC financing. As more Big Ideas (and laudable Small and Medium Ideas) in food continue to emerge, stay tuned to the evolving infrastructure of support for food companies.

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Rip van Wafels: SF-based startup brings a new coffee routine to American consumers

logoRip van Wafels unveiled a brand-new website this month (featuring awesome infographics) detailing the unique, ritual consumption of its product. Beyond creating a deliciously authentic Dutch-inspired stroopwafel (two thin layers of wafel surrounding a caramel filling), is determined to redefine the American coffee break. Founder Abhishek “Rip” Pruisken describes how placing their wafel over your coffee can enrich your entire day:

btyStroopwafel460x320“We believe that a short break goes a long way. It’s important to unplug and relax from time to time to put things into perspective. A Rip van Wafels with coffee allows you to do just that. So we are not just selling a product, we aim to improve people’s lifestyles as a whole via their coffee breaks.

Americans are willing to wait in line for 20min get a quality cup of coffee. We believe they are also willing to wait 2 min for their coffee to cool down. While it cools, the steam will heat the filling and infuse the aroma of the coffee in the wafel. The ritual makes coffee a more engaging experience.

Our product is also healthier than the baked goods in coffee shops, with only 150 calories and 8g of sugar you can indulge responsibly.”

I’m pretty sure this ritual needs a name (Strooping? Wafeling? Or, probably my favorite Dutch word ever, swaffelen? Yes, there is a word for that…) but I’ll leave that question to the experts…

I love the website’s timeline of the founding of the company. It’s a pretty cool story (go Brown! I’m feeling lots of alma mater pride) and encapsulates the playful brand voice. It also does much of my job for me in summarizing how Rip (and co-founder Marco) built this company from the ground-up:

  • 2006: Where are the wafels? Amsterdam native Rip Pruisken arrives at Brown University. Rip heads to the dining hall for koffietijd—a mid morning coffee break enjoyed with a warm wafel. Finding decent coffee but no wafels, Rip is horrified to learn that most America is without his favorite snack.
  • 2009: Starting out of a dorm room? Three years and 1,625 wafel-less koffietijds later, Rip’s had enough. He buys a waffle iron and begins pressing the first batch of homemade stroopwafels in his dorm. His cookies are inedible. Undeterred, he tries again…and again.
  • 2009: Visiting Wafel Factories in Holland? Rip visits Holland to learn from the wafel masters.
  • 2010: First Sale on the Main Green. Rip sets up shop on the campus Main Green and slings handmade wafels to kids on their way to class. One strange day in late April, hundreds of confused-looking students pour onto the quad clamoring for a bite. He can’t keep up with demand.
  • Etc…
Founder Rip Pruisken

Founder Rip Pruisken

From there, Rip raised preliminary funds from a kickstarter campaign in the summer of 2010, recruited a co-founder (Marco De Leon), joined and won the Brown Entrepreneurship Program startup competition, traveled around the country promoting the product, and relocated to San Francisco. They’ve proven so popular here that Rip van Wafels has just recently moved into a brand new office!

Rip’s not the only one to have identified and attempted to remedy our country’s lack of stroopwafels (and our ever-busy, Starbucks to-go excuse of a coffee break…). However he’s the only one approaching the market via the coffee shop scene (e.g., Honey Stinger makes a stroopwafel aimed at the cyclist market, though I’m not sure I really see the product-market-fit there…). Although Rip van Wafels has a strong presence in Bay Area coffee shops, there’s a ton of opportunity for growth: both geographic as well as product line. On what’s next for the company, Rip shares,

“Specialty coffee and tea varieties differ in flavor profiles. We will be developing new Wafel flavor varieties to compliment the flavor profiles of these hot beverages.”

Rip is leading the company in its fundraising efforts (which, as of last Monday is officially legal to share publicly via the JOBS act) and, although they’ve gotten a majority of their commitments for funding in place, they’re happy to meet with investors who are passionate about coffee, consumer products, and/or food. You can reach out to Rip directly via email.

If you’re in the Bay Area, here’s a list of coffee shops where Rip van Wafels are sold. If you’re not in the area, you can order the product online. Or, even better, let your local cafe know that they’re missing out on providing the ultimate coffee break experience.

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Careers In Food System Change: Where Should You Start?

By Austin Kiessig

I have had many career path conversations with people who are fired up about changing the food system. These conversations are often tricky. The food landscape is complex, and there are many different ways to plug into the ecosystem of affiliated industries we collectively call “food.” Navigating that ecosystem can be overwhelming.

In my opinion, the easiest way to make sense of the job landscape is to apply filters. Perhaps the most potent filter is passion. I believe people do their best work (particularly if it’s entrepreneurial) when they are in tune with their unique zealousness. Finding it takes some self-reflection. Career-seekers need to begin with the question: What about food fixates you? Then, they can dig into specific opportunities.

I want to introduce a framework for mapping passions for food system change against the “value chain” in food production. We’ll call it the “Food Change Career Matrix.”

Let me note before starting: the matrix outlines a way to think about driving change in the food system. It assumes you think something is wrong in the system and you want to work on changing it. So this is a way to structure a conversation about how people and organizations are (or are not) driving change today.

The Food Change Career Matrix

Slide1

Dimension 1: Whom Do You Want To Impact?

Dimension 1 was inspired by my realization that food stretches across every level of Maslow’s Hierarchy of Needs. Food is simultaneously a basic physiological necessity, an element of safety and security, an expression of love and belonging, an instrument of esteem and respect, and a sophisticated symbol of self-actualization. And I think one can rightly discern a person’s priorities by understanding where they fall on Maslow’s Hierarchy. As go the priorities of the people, so go the priorities of the food system (and the broader economic system). I find that most people tend to have a visceral connection with driving change at one (or a few) levels of Maslow’s Hierarchy. For simplicity’s sake, I’ve reduced Maslow’s Hierarchy from five levels to three.

The priorities for a local, regional, or national food system depend greatly on the economic status of the people served by that food system. Let me illustrate through a set of examples:

a)   People in the global “impoverished class” tend to worry about caloric security. Much of their daily energy is directed towards fulfilling basic needs: are they physically safe? Do they have clean water to drink? Do they have enough food to avoid starvation and malnutrition? In short, their next meal is not guaranteed, and the food system is oriented to provide as many calories as possible as cheaply as possible.

b)   People in the global “middle class” tend to be preoccupied by the integrity of their food. Finding enough calories to survive is not the most pressing issue; rather, people with disposable income now have choices over how to fulfill their caloric needs. The issues of wellness and status emerge: food is both a source of nourishment and a symbol of “doing well.” A bell curve emerges in weight: some people under-eat, and some people over-eat. The role of the food system shifts from producing enough calories to serving a mix of nutritional demands from consumers.

c)   People in the global “upper class” tend to treat food as symbolic, instrumental, and part of lifestyles and contexts. Caloric security is moot, and food consumption becomes a reflection of sophisticated individual preferences and social behavior patterns. Restaurants, retailers, brands, and novelty matter. In a vast sea of purchase options, consumers use their money to vote for particular food systems, forms of nutritional richness, or their unique social station. The role of the food system is to provide many options across a wide spectrum of preferences.

Different people are passionate about driving food system change at different levels of economic development, and none is “better” or more worthwhile than another. Someone may see value in helping feed the poor, for instance, but they may see more value in developing sophisticated food systems in “upper class” societies that can then be replicated across less-developed economies. Indeed, many disruptive technologies and systems originate as experiments in wealthy economies.

Dimension 2: Where In The Food Value Chain Do You Want To Work?

When we picture food production, there are different stages along the path from field to fork. Segmenting the stages and studying what occurs in each is another effective filter in understanding where change can occur.

a)    Agriculture inputs: soil, water, seeds, fertilizers. Resource development and management.

b)   Agriculture production: farming, tools and technologies used in growing, agricultural systems.

c)    Food processing: converting food from a raw state to a consumable state, and creating a brand identity.

d)   Storage & distribution: getting food to market. Includes commodities.

e)    Consumption–retail: points of sale where people buy groceries and bulk foodstuffs.

f)     Consumption–restaurants: points of sale where people buy prepared food in a social setting.

g)    Consumption–cooking/other: points of consumption where people eat at home or in other settings.

I think there are also career options outside the strictly defined food production “value chain”:

h)   Food education: nutrition, general health and wellness, food policy, food systems.

i)    Investing: providing capital to food-related entities.

Examples: The Matrix In Action

Food Careers image 09.24.2013

A career-seeker might start by considering the personal resonance of each dimension, and then do research on which companies fit into applicable parts of the matrix. Some illustrative examples are below:

  • Food safety + Agricultural production: Kickstart International manufactures hand-operated water pumps for farmers in developing economies. These pumps obviate the need to carry buckets of water to the field by hand. They also displace the use of pumps powered by diesel generators, which are both expensive and environmentally unfriendly.
  • Food integrity + Food processing: Stonyfield Organic introduced tasty, affordable, organic yogurt to the mainstream marketplace. Stonyfield was one of the first organic food products to be carried by WalMart, which had a resonant impact throughout the entire dairy industry.
  • Food culture + Storage & distribution: Farmigo is a software company that connects farmers to consumers. Shoppers can use Farmigo software to order a basket of customized of high-value goods from local area growers and artisanal food producers. Products are delivered to shoppers’ doors or to a centralized pickup location.

A Valuable Starting Point

The matrix can help people dig into what they feel most strongly about changing in food, and where they might apply their unique backgrounds, talents, and passions. It’s a way to structure thinking and conversations.

I welcome your feedback on this tool and any suggestions for improving it.

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Event recap: San Franola Summer Food Summit

San Franola co-founder Matt Teichmann kicks off the summit

San Franola co-founder Matt Teichmann kicks off the summit

This is a shamefully late post but better late than never. I wanted to share some musings from an event last month: San Franola Granola, a local freshly-roasted granola producer, hosts quarterly food summits with the goal to “bring together some of the best minds in the space and have a productive conversation about the future of food and what that means for us all” (from the San Franola recap of the event). Sounds like pretty good mission to me!

The summer summit (held at Sourcery’s soma offices) featured speakers Katie Fitzgerald, business development associate at CircleUp, and Nate Miyaki, fitness author and coach. The speakers addressed pretty distinct topics so I’ll cover them individually.

Katie Fitzgerald, CircleUp

Katie Fitzgerald, Senior Associate, Business Development, CircleUp

Katie Fitzgerald, Senior Associate, Business Development, CircleUp

CircleUp is a crowdfunding platform enabling accredited investors to identify and invest in mid-sized consumer and retail businesses. It’s gotten a lot of press over the past six months (WSJ, PandoDaily, VentureBeat) and fills a previously-unoccupied niche in the funding ecosystem, enabling funding for companies that are too small for private equity dollars and too limited in terms of growth potential for venture capital.

Katie shared that, to date, CircleUp has facilitated the funding of 18 companies with a total of $18M. However it’s not easy to get onto CircleUp (and they’re clearly attracting a lot of attention): only 2-3% of companies which apply make it onto the platform. Katie didn’t share how many companies are eliminated because they don’t meet the size requirements (CircleUp focuses on companies with $500K-$1M in annual revenue) or because their business model or product falls short (more here on how CircleUp informs its decisions). She did share that, more recently, CircleUp is open to working with companies under this revenue threshold provided the team has a strong entrepreneurial track record (and even better if they bring some of their own investors to the table).

Rip Pruisken, founder of Rip van Wafels, enjoys the speakers

Rip Pruisken, founder of Rip van Wafels, enjoys the speakers

One question Katie got (which I’m sure they often get) is, “where do you send companies that don’t make it onto the platform?” Katie had a few suggestions: small business loans, friends and family, and kickstarter. Although CircleUp is filling a niche for a select small group of consumer products companies, the majority of food startups face the same funding options they always have, with the exception of kickstarter. Katie was quick to disclaim that “it’s hard to convince consumers to pay upfront for a granola bar.” I guess that’s true, unless you’re Exo and you have the insect hook – in that case it seems you can do pretty well on kickstarter

Companies CircleUp has worked with/are working with in the food space include:

Nate Miyaki, fitness coach

Nate Miyaki

Nate Miyaki

Nate is a former professional wrestler, a bodybuilder, an author, a fitness coach, and a nutritionist. His website offers his training and nutrition tips and sells his books.

The gist of his message, which I couldn’t agree with more, is that there’s a preponderance of confusing, misleading, and, in many cases, conflicting messages about what we’re supposed to eat. Nutrition standards are set by lobbyists and influenced by big food companies: the ADA (recently renamed to be the Academy of Nutrition and Dietetics) is the largest US organization of food and nutrition professionals and has a significant voice in shaping the national discourse around nutrition. It also boasts corporate partners and sponsors including Kellogg, Mars, ConAgra, Coca-Cola, PepsiCo, and General Mills. One of my favorite illustrations of how misleading nutrition studies can be is detailed in the Columbia Journalism Review piece, “Survival of the Wrongest.” Seriously, it’s a fascinating read.

So what to do in a world of mixed messages about what comprises a healthy diet? From Nate’s experience, there’s not a “one-size fits all” answer. For people who are more sedentary (exercise <3 days a week), he is a strong advocate of the paleo diet: Hunter-gatherer-inspired with fish, meat, vegetables and fruits but no grains, dairy or refined sugar. However for more active people, especially cross-fitters engaging in substantial anaerobic activity, he’s seen disastrous results from the paelo diet including a lack of energy, a lack of libido, and the confusing “skinny-fat” syndrome. For people engaging in serious exercise Nate recommends more carbohydrates (root vegetables, tubers, rice) to fuel demanding exercise. Read all about his nutrition guidelines on his website.

Thanks San Franola for getting a great group together for beers and discourse! The next summit will be held on Wednesday, November 13th from 6-9pm at the Four Seasons SF. Email food@sanfranolaco.com to get on the list.

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