How are today’s food entrepreneurs different from those of the past? And why are Silicon Valley venture capitalists chomping at the bit for a taste?
Backed by San Francisco Twitter founders Evan Williams and Biz Stone and their company Obvious Corp, Beyond Meat has created an eerily accurate chicken substitute. Hampton Creek Foods, also based in San Francisco, has come up with a product called Beyond Eggs, an egg yolk substitute made from plants. Salt stand-ins are similarly coming down the line, as are printed meats.
In the last year, venture capital firms in the Silicon Valley funneled about $350 million into food projects, and investment deals in the sector were 37 percent higher than the previous year, according to a recent report by CB Insights, a venture capital database. In 2008, that figure was less than $50 million. That money is just a slice of the $30 billion that venture capitalists invest annually, but it is enough to help finance an array of food startups.
Silicon Valley certainly seemed to have a penchant for food startups in 2013. In addition to Obvious Corp, there’s Khosla Ventures (the ones behind Beyond Eggs) and Breakout Labs, run by PayPal founder and venture capitalist Peter Thiel. There’s SV Angel, Kleiner Perkins Caufield & Byers, and True Ventures as well. And celebrities from Hollywood (Matt Damon), to pro football (Tom Brady) are getting into the action, as is Bill Gates and others from the tech world.
Food: Good Business or Good PR?
What gives? Some investors say food-related startups fit into their sustainability portfolios, alongside solar energy or electric cars, because they aim to reduce the toll on the environment that comes with producing animal products. For others, they fit alongside health investments like fitness devices and heart rate monitoring apps. Still others are eager to tackle real-world problems instead of building virtual farming games or figuring out ways to get people to click on ads.
Krysia Zajonc, CEO and Co-founder of the Local Food Lab in Palo Alto says, “I think VCs are interested in food startups right now because of a confluence of trends, growing consumer demand for a transparent food value chain, a more mainstream understanding of the resource waste associated with conventional food production, and the fact that in many cases the VCs themselves have experienced something that has caused their eating habits or those of their close family and friends to change—a personal reminder of the many addressable pain points associated with food.”
Of course, venture capitalists have shown interest in food before. Restaurant chains like Starbucks, P. F. Chang’s, Jamba Juice and, more recently, The Melt, were backed by venture capital. Recipe apps and restaurant review sites like Yelp have long been popular. But this newest wave of startups is seeking to use technology to change the way people buy food, and in some cases to invent entirely new foods. Investors are also eager to profit from the movement toward eating fewer animal products and more organic foods.
Khosla Ventures is backing other food and agricultural companies besides Hampton and their eggs. They’re also supporting the artificial salt company Nu-Tek Salt, and the fake meat company Sand Hill Foods. Breakout Labs, meanwhile, has invested in Modern Meadow, a company that aims to “print” lab-grown meat and leather. All of these companies are challenging the common advice to eat whole foods and vary your diet.
Technology Comes to the Kitchen
Household dynamics around food are also changing with technology. Prepared meals and grocery delivery is set for a revolution. San Francisco-based Chefler brings healthy meal plans to the homes of busy professionals, while San Francisco’s Good Eggs brings farm-fresh groceries to your door. And soon, AmazonFresh will also make grocery deliveries in San Francisco, as they already do in Seattle and Los Angeles, angling for a highly sought-after share of a market that already includes Google Shopping Express and eBay Now.
Trips to the grocery store could look very different in the coming months. Local Mission Market, an upcoming project in San Francisco’s Mission District (see their Kickstarter video), will be a locavore’s dream with its focus on fresh, locally sourced, quality goods. They’ll have an open demo kitchen and recipe cards to help customers make the most of the ingredients, but they’ll also have online ordering, delivery and pickup services, and an in-store app that assists with pricing and labeling bulk goods. And they’re taking a cue from the Apple store and will have roaming cashiers for mobile payments—no long lines.
Betting on the next big thing? Odds are it will be food-related.