Food waste recapturing software startup FoodMaven has completed a $10 million bridge financing round with Tao Capital Partners and members of the Walton Family to reach $10 million.
The Colorado-based startup initially closed its Series A on $8.6 million last year.
Earlier investors include former Whole Foods co-CEO Walter Robb, who joined FoodMaven the day after Amazon dismantled Whole Foods’ board. As part of the recent financing, Isaac Pritzker of Tao Capital Partners will join the board of directors as an observer.
FoodMaven sells high-quality local, oversupplied and imperfect food from distributors, manufacturers and producers to restaurants and institutional kitchens at a significant discount through an online marketplace.
It’s Not Waste; It’s Lost
And it wants to change the way that our world thinks about the 40% of food that goes uneaten each year. Instead of describing it as food waste, which could conjure some unpalatable images for folks of food lying in dumpsters, FoodMaven wants you to think about it as lost food.
AgFunder Co-Investment Fund III is now open for investment. Closing June 15, Spots are limited.
“One of the biggest challenges we discovered is that no one wants to buy food waste. It’s been a lot of work to get people to understand. That’s why we call it lost food; it’s not distressed food, it’s just food that’s in a distressed context. It has taken time at the restaurant level to deliver that message,” FoodMaven chairman, founder, and CEO Patrick Bultema told AgFunderNews.
The funding will be used to help the company with a rapid expansion campaign as it gears up for a $50 million to $70 million Series B round early in the second quarter of this year, according to Bultema. This primarily involves making continued acquisitions, which is a key part of the Colorado-based startup’s strategy. To this end, the company acquired a local meat processor Anderson Boneless Beef last week.
“I knew that we would learn the most if we did everything from the ground up, so we built everything in Colorado from the ground floor, including buying trucks and facility-based logistics,” Bultema said. “There are all these mid-tier food distributors and we realized that to buy existing food distribution centers gives us better speed-to-market and natural synergies than trying to stand them up ourselves. We also have a wide range of fleet trucks, from semis to smaller delivery vehicles.”
Dallas is the next market within its crosshairs, with four more acquisitions and metro area launches on the agenda. It eventually hopes to tackle 150 new metro services areas.
The company is also investing heavily in its technology, including AI for its pricing optimization and matching technologies. FoodMaven adopted a “zero landfill policy,” which means it has to find an end game for all of its inventory. This includes everything from sending food unfit for human consumption to pet food companies to working with zoos. When all other options are exhausted, FoodMaven turns its recaptured food to pig feed. Roughly 20%-30% of its inventory is donated for hunger relief.
As it locates and redirects lost food, the company is also using technology including blockchain to build a data infrastructure to measure the underworld of lost food and create a system for arbitraging lost food.
“We are creating data structures and warehouses that just don’t exist. We track pricing, availability, and locate what is falling out of the food system. Everyone has their own proprietary pots of data, but they often lack transparency. We don’t hide price quotes and we offer complete price transparency.
FoodMaven Believes Logistics is the Key
“We understood from the beginning that you have to do the full logistics to recapture lost food. So one of the things that our technology does is coordinate logistics and bring agility to a system that is otherwise lacking. We optimize it to enable efficient, nimble logistics that we can extend as we go into new metro service areas and make new acquisitions,” Bultema explains. “There are many regulatory and legal compliance issues that you cannot address without logistics and part of the problem is that there aren’t existing logistics for lost food, so providing a software platform to connect people, and thinking it will fix this problem, is naive.”
FoodMaven takes possession but not ownership of the lost food it finds and takes a share of the revenue from the ultimate transaction. Any donation-based tax credits go back to the supplier.
Instead of creating a software platform to connect food growers with food distributors and restaurants, FoodMaven is taking a more large-scale, systems-based approach by targeting large outfits like foodservice support company Compass Group as well as institutional kitchens like universities and hospitality services.
“We are engaging at the industrial level with the industrial food providers because they can move at a much larger scale to really match our visibility and to address all of this food product getting lost while moving it at big volumes. Not just hundreds of restaurants, but one big strategic restaurant that has tens of thousands of in-points as well as event venues, hospitals, and universities. It’s taken real time to build up credibility with these folks because they are not quick to make trivial deals.”
It also works directly with farmers and counts one-third of its lost food capture as local food. While working with big fish in the foodservice industry is a key component of its model, Bultema sees the importance of helping farmers generate revenue that would otherwise be lost as they face increasingly tougher economic conditions.
Although local food is a strong movement, it often depends on farmers working directly with restaurants to coordinate purchase and delivery–something that farmers don’t always have the spare time to address. Several startups have tried to create a variety of tech-based solutions to recapture the 40% of food that goes uneaten or discarded each year. As the food waste plight gains more and more attention among consumers, VCs are also eager to back startups with solutions to solve the problem. Food waste startups raised over $125 million in 2018, while grant funding in the space grew 70%, according to a recent report from ReFED.
Most of the food waste technologies that have caught VCs’ attention involve devices that help detect spoilation in food before it’s too late, including Wasteless’ dynamic pricing algorithm, Spoiler Alert’s unsold inventory management software, Hazel Technologies produce shelf-life increasing tech, WISErg’s food waste-to fertilizer products, and AgShift’s produce ripeness app.
When it comes to technologies that can connect farmers with produce seconds to restaurants and other foodservice outlets that would repurpose them, however, finding the right combination of technology and logistics has been a challenge especially when it comes to scaling.
There is at least one other startup attempting to tackle the issue at scale. Full Harvest, a B2B marketplace focused on reducing food waste, describes itself as an Airbnb for surplus produce. The San Francisco-based company does not actually touch the produce, however, but coordinates the full end-to-end logistics of that sale.
Two other San Francisco-based startups include Imperfect Produce, which delivers imperfect produce to consumers, and Souper Seconds, which created an app to connect chefs and other food manufacturers to produce that didn’t make the supermarket cut.
“It’s not easy, what we are doing. And part of what is hard about it is to get the big players in the food system to count you as credible. I understood that we have this 1950s style food system that is dominated by entrenched power players. I knew to pull this off at industrial scale and to have a seat at that table we had to get significant folks to help us gain access to that market,” Bultema says. “It’s not trivial to have Walter Robb invest the day after they disband Whole Foods, or to have multiple Walton Family members, Tao Capital Partners, and the Pritzker family onboard.”