- BetterBrand—a Los Angeles-based startup making high-protein, ultra-low-carb bagels—has raised a $6 million series A round and says it is on track to break even by the fourth quarter of this year following dramatic growth in retail accounts such as Whole Foods.
- The round was led by VERSO Capital with participation from returning VCs such as Gaingels, Seven Seven Six, and Craft Lane Capital and individuals including Kyle Vogt, Chris Hollod, and Jeff and Glenne Azoff.
- It was also backed by Sean Thomas of the Wendy’s family, and actors Patrick Schwarzenegger and Emmy Rossum.
BetterBrand launched direct to consumer later in 2021 before moving into retail in Q3 2022, generating $1 million in retail sales in its first five months on shelf at Whole Foods with its flagship Better Bagel, founder and CEO Aimee Yang told AgFunder News (AFN).
“We’re seeing interest from the low carb and keto community, athletes who love the high protein content, health conscious consumers, the diabetic community and parents who say all their kids will eat is white bread. This gives them more protein and fiber.”
The $6 million capital injection—bringing its cumulative funding to $10 million—will help the startup move into new product categories and new markets including Canada and Europe, said Yang, who has also picked up distribution at Sprouts, Gelson’s, The Fresh Market, Bristol Farms, Giant and Target.
26g protein, 5g net carbs per bagel
Made from a base of wheat protein isolate, modified wheat starch, and modified starch, Better Bagels contain 26g protein, 5g net carbs and <1g sugar per 105g bagel, compared to 10g protein, 50g net carbs and 9g sugar for a typical 100g white bagel, according to USDA’s food search database.
The company has chosen not to file patents around its proprietary process, preferring to keep its formulation and process as trade secrets, said Yang.
“The unlock is the RS4 or modified wheat starch [a form of resistant starch that is classified as a dietary fiber and resists digestion in the small intestine, usually fermenting in the colon] in combination with wheat protein isolates. This replicates the viscoelastic properties of wheat flour in common use, without the refined carbohydrates.”
While the ingredients are listed on labels, she noted, BetterBrand has a proprietary process: “If you were just to take this mix to a co-manufacturing facility and you tried to make a bagel, it would be a disaster. We have specific controls around mix time, dough temperature, cooling, and the overnight process that allows yeast and enzymes to work on the dough to achieve the elasticity and the mouthfeel we want.”
Frozen and chilled
BetterBrand manufactures its products at two co-packers and is now bringing on a third to meet growing demand, said Yang, who plans to unveil 16 new SKUs in the coming months.
While the $11.99 price tag for four frozen bagels is steep, the products have been flying off shelves, she said: “You’re getting 26g of protein for around $3, so that compares favorably to protein bars, shakes and some other products.
“We did a couple of TPRs [temporary price reductions] to encourage trial, but what was encouraging was that we didn’t just get a spike in sales, but saw a continued upward trend [after the promotion ended], which means trial was leading to conversion.”
The products are currently shipped and sold in the frozen aisle, where they have a nine-month shelf life. However, some retailers are testing them in their chilled food aisles, where they have a four-week shelf life, said Yang. “Sprouts is testing them in refrigerated bakery and Target has recently started testing us in its refrigerated dairy section.
“We thought about adding preservatives and additives to extend shelf-life so we could sell them in the ambient aisles, but ultimately we decided not to because we want to protect the integrity of the product and keep a very clean label.”
Breakeven by end of the year
Investors in the series A round were impressed by the brand’s velocities and margin structure but also by the company’s efficient use of capital, claimed Yang, an accountant who worked at Ernst & Young in various roles before gaining an MBA in 2020 and launching BetterBrand in 2021.
“Investors were impressed by how efficiently we were operating because we don’t have high fixed costs and we started generating revenue very quickly. We’re on track to hit breakeven in Q4.”
