A couple of weeks ago, Silo, a marketplace for perishable food producers and distributors, raised $3 million in seed funding led by Initialized Capital, the fund founded by Reddit co-founder Alexis Ohanian and Garry Tan. Launched in 2018, the San Francisco-based startup hopes to revolutionize the wholesale produce buying system with its real-time platform featuring vetted buyers and sellers.
Semil Shah from Haystack Ventures, angel investors Kevin Mahaffey and Matt Brezina, and The Penny Newman Grain Company, the grain merchant, also participated in the round.
We caught up with Alexis Ohanian to find out more about why his firm invested in Silo and his views on the foodtech and agtech industry more broadly.
You’re not known for your agtech/foodtech investments. Why did you invest in Silo?
Initialized has actually done many agriculture and food-tech deals, including Instacart, for on-demand groceries; Plate IQ, which helps restaurants manage their inventory efficiently; Eclipse Foods, which is creating a plant-based alternative to milk that can be used to make everything from ice cream to cheese; Terravion, which makes farms more efficient through high-quality, real-time aerial imagery for agriculture and Shelf Engine, which works with grocers, cafes, and small businesses to more efficiently order and manage their food inventory.
Silo hits at a piece of the food system that we’re super excited about, which is the relationship between the growers, farmers and their distributors. For Ashton Braun, this has been a decade-long passion. He spent the early part of his career in Southeast Asia working with coffee growers on their supply chain issues only to discover that what Western consumers see as “Fair Trade” often means untraceable labeling. Then he got some company-building experience at Kite, a pair programming service that relies heavily on natural language processing. The mix of those two experiences — one of building and growing a venture-backed software company plus the deep industry and vertical knowledge is what drew us to this company.
What was your exposure to agtech before Silo?
We’ve been looking at the agtech space for quite some time, but our firm only made that one aforementioned investment prior. Software is clearly going to be the backbone of every industry and we took our time to learn about the space, as well as give it time to mature as more and more people with deep domain expertise developed the skills to solve the problems they understood deeply using software they could build themselves. Ashton’s journey is the perfect example of this.
How do you think building an agtech startup differs from building more general software programs for consumers? (based on your experience with Reddit, as well as investing)
We see a lot of similarities between the way you’d build and structure a company like Silo and other businesses where founders might be selling to, say, airlines or shipping companies.
My partner and co-founder Garry Tan loves companies that are taking what he considers “file cabinet businesses” and modernizing them through software services that are at the quality level you’d come to expect of a consumer product like Instagram (or Reddit, heh!). You might have a smaller number of customers with a business like this but instead, you have to go deeper with each of them.
Food tech seems to be capturing more attention from generalist VC firms and individuals these days such as Impossible Foods’ latest round (in which your wife invested!) Why is that?
Food is life. It’s a basic, everyday need and we’re seeing the stresses that large-scale agriculture has on the planet (and our food system). People far smarter than me, like Silo co-founders Ashton, Jackie and Antonio, have started dedicating their lives to building software and technology to address this and that’s when things get really interesting for investors like us. Here is a fundamental need, with a massive and growing market, that has some of the brightest minds tackling how to fix it with tremendous urgency. That is a great opportunity not just to invest, but also for us to do right by our children who will inherit this system from us.
What key challenges do you see facing food tech and agtech startups as they try to scale?
It really depends on the company. Some of the companies I mentioned in the first question are purely software-based businesses and they have the capacity to scale like software companies because they don’t directly handle or touch inventory. Other companies are also shipping physical products, like Eclipse, and that means they have to master supply chains and distribution.
Are there any food tech or agtech categories that you would not invest in?
None come to mind…
Which technological developments do you think are most relevant and exciting for the food and agriculture industries?
I see the future of food as such: Super low cost, very tasty, very accessible food that is made possible because of automation (e.g., IUNU) or food science (e.g., Impossible, Eclipse Foods).
There will still be many foods produced that will need the outdoors and large farms, but I believe software and automation will help make organic (and maybe even biodynamic) farming practices much more affordable for consumers while still being sustainable for farmers. The trend from Millennial parents is my bellwether since we care more about what we give our children than anything else and it’s clear to me that industrial-scale farming as we know it today is hugely inefficient.
I’m investing in this future personally as I’m setting up a small farm for my family in Florida to grow — organic and pesticide-free — most of the food we’ll eat; I’ve already warned the Silo team that I’ll be a customer soon enough!