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Food waste-to-fertilizer startup gets WISE(rg) on scaling with $50m funding

June 29, 2016

Food waste is a hot topic these days. A simple Google search for the term will reveal countless programs, initiatives, and websites dedicated to helping us send less food to the trash and make better use of the scraps and discarded food items that would otherwise accumulate in landfills. The US Department of Agriculture and the Environmental Protection Agency have even teamed up to cut the amount of food waste produced in the US in half by 2030.

The private sector is also taking note after the Fink Family Foundation established, ReFED, 30 high profile business, nonprofit, foundations, and government leaders, dedicated to reducing food waste by 20% over the next years. Entrepreneurs and investors also have a role to play and so far this year, a few startups have attracted investor dollars, including AgFunder alumnus California Safe Soil, the waste-to-fertilizer startup, which raised $5.9 million in January. Food waste composting service Atlas Organics raised around $1 million with a group of 31 angel investors in January 2016 and that same month, UK food waste meter technology Winnow closed a $3.3 million Series A.

WISErg is by far the most capitalized startup in the food waste game having raised $33.4 million in venture capital so far this year, bringing its total funding to nearly $50 million. The most recent round was its $16.4 million Series B last month which came only a few months after the Washington-based company completed a $12.3 million venture round in April 2016.

Founded in 2009 by ex-Microsoft employees Larry LeSueur and Jose Lugo, the Redmond, Washington-based company’s platform boils down to one question: Why do food scraps have to be garbage?

WISErg has developed a machine called the Harvester that takes discarded, expired, or otherwise compromised food from supermarkets and other locations and stabilizes it so that it can be transported to a nearby WISErg facility. The new capital will be used to expand into new markets on the West Coast, including facilities in California and Oregon.

At the facility, the food waste is cooked into an organic certified fertilizer product that can be used in a wide variety of operations including everything from large-scale crop farming to backyard gardening.

“We are seeing unheard of efficacy of this product,” LeSueur recently told AgFunderNews. “We’ve been very quiet about it because a lot of people don’t believe us. We are on thousands of acres across Washington, Oregon, California, and Mexico. It doesn’t matter the crop or the soil type. We are seeing yield increases of 15 to 30 percent.”

He also reports seeing not just an increase in yields, but an increase in quality and uniformity as well. It’s not just about producing more for LeSueur. It’s also about ensuring that the additional yield is up to snuff.

One reason for the product’s popularity is what he views as an increasing interest in soil stewardship among farmers.

“We’ve been seeing receptiveness from all types of growers, whether they are organic or conventional, where they are starting to care about their soil health and they are willing to look at applying organic methods,” he explains. “They are much more in tune with the biological health of the soil and because of that they are receptive to looking at other inputs beyond pure chemicals.”

It hasn’t been completely smooth sailing for WISErg. One of the company’s biggest challenges is navigating the patchwork of federal, state, and local food safety regulations that impact the processing of food waste.

“We are working with regulators and doing a lot of education to show that we see it as a resource stream and that our process involves an unprecedented level of food safety compared to compost or other manure management solutions for fertility,” explains LeSueur. One particularly effective tactic for the startup involves bringing regulators to the facility to show them the process from beginning to end. In most cases, this addresses their anxiety over turning food scraps into crop inputs, he says.

Although a serious concern, food safety has not posed the biggest concern for WISErg.

“I would say our biggest challenge has been existing distribution channels in agriculture. There’s a lot of education we’ve had to do and we’ve had to think differently. There isn’t a one-size-fits-all,” says LeSueur. “In some regions, its large corporate growers that we work with. In others, we have made significant investments into regional distributors, while in others we are looking at buying programs. Our objective is to offer the grower the value and if that can be in combination with a partner, then we are excited. If it is working with a grower directly, we are excited to do that as well.”

Regardless of the distribution channel, the reception among producers and the ag community appears positive. LeSueur reports that the company has a waiting list and doesn’t have to engage in as much cold calling to market its products.

For potential buyers that may need a bit of convincing, the conversation is less about the benefits of WISErg’s product compared to traditional composting or other solutions and more about what it can do for the buyer’s business.

“What we like it to be more about is how you can manage inventory. That comes back to data—if we can help them reduce waste inventory by 5 to 10 percent, that’s a very meaningful number and it can help them pay less for disposing of the material,” he explains.

Although the Harvester is certainly a focal point for the business, its data services are equally as useful for clients. After all, and as LeSueur points out, you cannot meaningfully change a behavior if you aren’t also measuring it.

“From a data standpoint, we can identify trends associated with temperature, i.e., your HVAC is not working and produce has a shorter shelf life. We can identify training issues for prepared products like excess trimmings in the meat department.”

Although each customer’s data is protected by a confidentiality agreement, WISErg is able to see and compare trends across the industry. This allows them to then recommend best practices to stores based on what has worked well—or worked poorly—at other locations engaged in a similar business.

LeSueur didn’t spill all the beans on the trends that WISErg sees, but he could tell us the number one cause of food waste among the company’s clients.

“The handling practices. How perishables are managed and handled is the number one opportunity for grocers to improve their margins.”

Are you a food waste startup or VC interested in food waste technologies? Get in touch: [email protected] or tweet me @lo_manning.

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