New York is a good place to start if you’re looking to tackle food waste. The same population density that makes it heaven for delivery startups also means that food waste — possibly from those deliveries — is ripe for the taking.
Food waste issues are coming into the mainstream as investors and municipalities realize that there is money to be saved and made in keeping food out of the landfill, and this week the New York City Sanitation Department held the first ever NYC Food Waste Fair in Brooklyn to bring together city officials, chefs, investors, and food waste startups to do just that.
Startups focused on food waste have raised over $250 million in the last three years, according to AgFunder data. There was a slight increase to $133.7 million in 2016 compared to 2015, when they raised around $100 million, according to AgFunder’s 2016 AgTech Investing Report. The technologies that raised funding included e-commerce platforms like Full Harvest, that aim to reduce food waste by selling unwanted but perfectly edible produce. Waste repurposing, and shelf-life enhancement technologies also made up part of that figure.
According to the NYC Department of Sanitation, New York City businesses throw away more than 650,000 tons of food waste every year and the city, along with co-organizer The Foundation for New York’s Strongest, want to encourage consumers and the business community to see that waste as a valuable input to improve soil health, feed people and animals, and create renewable energy.
Ron Gonen of social impact investment fund Closed Loop Fund underlined that waste comes in many forms, not just in the form of food: “There is a significant amount of financial waste in terms of how food waste is handled today.”
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Here are a few takeaways from the event:
Food Waste Innovation is Exploding but Failure is High
“We’re seeing a lot of companies fail and fail quite quickly,” said Eva Goulbourne of the food waste research nonprofit ReFed. “Food waste solution is a competitive market; failures mean that we’re innovating and creating different business models and that’s ok.” Gonen added that many startups don’t anticipate how high their operational costs will be; this is a common issue in New York City in particular where there is plenty of food waste, but labor and logistics costs are high. “The biggest challenges are understanding where the cost obstacles are in the system.”
Investors are Waking Up to Food Waste
Amanda Weeks, cofounder of Industrial Organic, a New Jersey-based company that converts food waste into both clean water and fertilizer, says that her funding meetings have dramatically changed of late.
“I started this company almost four years ago and I’ve seen how much more interest has come to this space, to waste, to food, to biotech and agtech. I think that tech VCs are getting bored with apps and new web software. Now they’re looking at less sexy things,” said Weeks.
Industrial/Organic will open its first facility in Newark, New Jersey this year and has raised $675,000 in debt and equity to date. Weeks said that she credits the media in part for bringing the issue to investors attention. “My ability to get meetings with investors has changed dramatically in the last 18 months,” she said.
Recovery is Popular Among Startups, but Scalability in Limited
Goulbourne said that 25% of the more than 500 companies in ReFed’s innovator database is made up of food recovery startups and 80% of those are nonprofit. Further she noted that many choose to pursue a chapter model instead of a national expansion plan since the logistical burden is so localized and expensive.
Jennifer Grove, founder of for-profit flower recovery startup Repeat Roses said that acknowledging that she was largely a logistics company is what has kept her going on revenue so far. Repeat Roses charges a fee to collect fresh flower arrangements from large events like weddings, then repackages the flowers into smaller arrangements for nonprofits like hospice organizations as well as composting the spent or damaged flowers.
Though Grove started with one rented van, she quickly worked with sustainability consultants to create an algorithm to expedite her trucking and mind her carbon footprint. “How do we shorten the distance and play matchmaker. There’s a lot of logistics work that requires a service like ours,” said Grove, who now operates in 23 states.
As of May 2017, the US had imported $648 million in cut flowers this year alone.
“It is frightening. If you think about the natural resources that go into growing a single stem. Why would you abandon that chain once they’re imported into the country? We want to ensure that all of those flowers are properly disposed of.”
Grove is now seeking funding from sustainability and ag investors with the intention of eventually selling a branded compost product made from rescued flowers.