Food Startups Hungry for Cash

Dealflow  |

The passage of the JOBS Act set off a storm of capital raising by companies based on technological developments – robotics, targeted advertising and cloud computing to name just a few. But at the same time, changes have been taking place in businesses that handle perhaps the most basic human necessity – food.

Innovations in culinary technique have collided in a big way. While many people continue to enjoy an old fashioned pot roast or a fast food burger, other choices have emerged at a blinding pace as the food show craze and “foodsurfing” have alerted consumers to a wide range of choices they would not have had access to 10 years ago. Sometimes it’s a matter of information – a lot more people know about the 3 Sisters Cafe in Indianapolis thanks to professional chow hound Guy Fieri.

Technology has also affected cooking techniques. While it’s long been possible to spend a fortune on a steak, only relatively recently did diners have the opportunity to spend $6,000 on a Densuke black watermelon slice or enjoy concoctions liked smoked beer or any number of food emulsions, gels and foams. At the same time, cooks and farmers alike have availed themselves to new technology for both food prep and raising capital. The website now provides a database of investors with specific culinary interests. Food-related companies can search through information that includes investor biographies, locations and investment history. Investors include individuals who are primarily focused on the cooking industry, but many investors have a wide range of interests in both cuisine and startups, such as 500 Startups founder Dave McClure, Wordpress co-founder Matt Mullenweg, Techstars CEO David Cohen and Lotus founder Mitchell Kapor. 

Money is pouring into food. Recently Germany’s food delivery company Delivery Hero raised about $350 million, bringing its total for the year to over half a billion dollars. France’s just opened a crowdfunding portal for culinary projects. In the U.S., Goldbely can deliver almost anything, anywhere.

Dinner Lab offers a matchmaking service where upand-coming chefs can find adventurous diners who are searching for new eating experiences, and many startups are working to deliver healthier and more interesting meals than the old pizza that arrives in a wilted cardboard box. Yogurt maker Chobani, whose revenues have passed $5 billion annually, is sponsoring a food-centric incubator in New York.

These businesses – large and small – are eager to use the Internet to find both investors and customers. It’s difficult to compete with a established food providers, but even in the highly competitive ice cream market, one company used online marketing to expand. While the ice cream business is dominated by large corporations, New York-based Phin and Phebes’ raised capital on CircleUp to expand an operation that started in the founder’s kitchen.

The company’s competitive analysis indicates that some popular – and costly – frozen confections contain filler ingredients like corn syrup, suffer from having much air whipped into them or are unreasonably priced. In order to keep costs down, the company uses co-packing providers to ready its ice creams (such as Banana Whama and Vietnamese Iced Coffee), while investing in quality ingredients – all the while completing a seed round on the funding portal. In a more local-oriented capacity, Mile High Organics styles itself Colorado’s only GMO-free grocer and positions itself as offering higher ingredient quality than Whole Foods (WFM) .

The company’s platform allows users to browse food choices and arrange free delivery to home or office with no minimum order amount. The founders are Volta Industries founder Steve Markowitz and Michael Joseph, while investors include Dave McClure and Brad Feld. Wholeshare is raising capital to build out its group ordering business. Retail consumers do not typically have access to wholesale buying opportunities, but Wholeshare allows consumers to aggregate their orders and shop in a group. Users sign up in groups of five to 50 and arrange for delivery of an order. This allows for users to get better prices, and the person who coordinates the order receives a commission on it.

Plant Growth Net Zero Aqualife is raising capital for its shrimp cultivation business. While shrimp are popular (and costly), health and safety problems have plagued the traditional shrimp cultivation business, which has at times had to shut down completely because of environmental issues that have made consumers ill. The company offers a safer, more efficient means of harvesting shrimp, and a potential buyer could raise Plant Growth’s pre-money valuation from $10 million to $37 million.

Iroquois Valley Farms started out in 2007 as a vehicle to invest in mid-sized family farmer business – a sector that has suffered from corporate competition for decades. The company supports sustainable agriculture in Iroquois County, Ill., where it has acquired over 1,800 acres to transition to organic production. The company has raised over $4 million towards a $6.9 million goal for obtaining more land.

Edyn is raising funds on AgFunder for a device that will help gardeners and growers of all levels, from backyard amateurs to professional farmers, keep track of environmental conditions that affect crops. The company’s wireless “smart gardening” monitor is a small yellow device that measures soil quality, moisture and other factors that impact plant growth. The device not only provides raw data but also offers specific recommendations based on the information. Home Depot has ordered 12,000 units for delivery in 2015 according to the company.

Another company raising capital on AgFunder, aWhere, closed an oversubscribed $7 million round in September. The company offers big data analytics for farmers based on the premise that the smaller farmers that grow and harvest most of the world’s crops have limited access to climate data that could be used to optimize their harvests. The aWhere platform offers localized climate data to over half a billion farming operations seeking to optimize their food production.

Humans aren’t the only ones with dietary needs, and Whole Life Pet Products provides a “farm to friend” pet food alternative that the company says helps pets avoid the same problems that plague their owners – weight gain, allergies and illnesses. The company’s platform connects animal owners with suppliers like Stahlbush Island Farms, Agri Beef Co. and the Red’s Best fish marketing business.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:



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