NEW YORK — “Food is the new tech” is a refrain uttered often that appears to be becoming truer as more small business venture capitalists, incubators and accelerators focused on food and beverage continue to emerge. One such company is Food-X, a business accelerator that every quarter selects 10 companies to invest in and mentor through the difficult and challenging startup process. This past March, Food-X introduced its latest class of start-ups it is supporting (see slideshow).
To be a part of the program, executives from each company relocate to New York for three months. They receive $20,000 in cash at the start of the program and a $30,000 loan on completion of the program. Each week the start-up executives meet with industry members to test, validate and accelerate the startups’ business model. The final two weeks of the program are spent refining each businesses pitch for the Food-X Demo Day, where potential investors are gathered to hear from the new businesses and possibly take a stake in the venture. In return, Food-X receives a 7% equity stake in each company.
Three hundred food-related startups submitted applications to become a part of the most recent Food-X program, said Andrew D. Ive, managing director. The pool of 300 were narrowed to 50 and then Food-X executives spent a great deal of time doing due diligence on not only the proposed business models, but also the people behind the ventures.
|Andrew Ive, managing director of Food-X
“We are looking for people who will drive their business no matter what,” Mr. Ive said. “Then we are looking for companies with a certain wow factor, something that makes us think if they can achieve this it will be a phenomenal business; it makes us think it will be world changing if it happens, but if it doesn’t happen the idea will cease to exist.”
Placing large and small bets
One such example cited by Mr. Ive is FreshSurety, Orlando, Fla., which was accepted into the most recent class of companies. FreshSurety technology may be used to offer retail and food service operators “certified freshness” of produce and meat products.
“They have a technology that will allow every box, tray and pallet of food to be tracked in terms of not just the normal stuff like G.P.S. and temperature, but it also measures the gases being released as the fruit or vegetables starts to age or deteriorate and can determine freshness,” Mr. Ive said. “The technology has the ability to track the freshness of products through the entire supply chain.”
The FreshSurety system measures temperature, moisture and such metabolites as ethylene and V.O.C.s to monitor the ripeness of each carton using low-cost, disposable sensors powered by externally supplied radio frequency energy. When queried, each sensor reports individual carton status over a local WiFi system designed for the cold chain environment, according to the company.
“It (FreshSurety) is a way of matching freshness to distribution,” Mr. Ive said. “It also tracks where products are sourced from and when it was shipped in and whether the companies did a good or bad job distributing it.”
To work, the system requires sensors to be attached to each tray and each pallet, Mr. Ive said.
“It’s a big bet, because it needs a retailer to beta test it,” he said. “A retailer needs to believe in it and implement it throughout the supply chain. It’s the kind of proposition that will be the industry standard in five years or not exist.”
Another business included in the current Food-X class is ProTings, a company that manufactures a snack product Mr. Ive said is a cross between “muscle milks and healthy snacking.” While the product categories the company is targeting are attractive, Mr. Ive said the owners of the business were a key part of Food-X’s decision to include them.
“These guys are passionate about their business,” he said. “We (the Food-X selection committee) were really blown away by their belief in the business. They will knock down walls to make ProTings huge and successful.”
Thinking outside the box
Mr. Ive started his career working with Procter & Gamble and left the company to lead several startups. He sees the increased interest in food and beverage startups as being primarily consumer driven.
“Two decades ago, consumers and producers were focused on the lowest cost calories and getting foods rich in various carbohydrates and proteins at the least possible price,” he said. “What has happened in the past 10 years is consumers have become more conscious of the decisions they are making around food. Therefore they are more discriminating in terms of what they buy and what they consume. This consumer-driven awareness is driving what retailers are stocking and merchandising. This, in turn, is affecting the supply chain in terms of consumers looking for more local, sustainable and artisanal products.
“The large food companies are seeing this and are getting in on the act. They are becoming more aware of the shifting consumer choices.”
A byproduct of Food-X is the attention the accelerator is receiving from large, established food and beverage companies.
“I think the larger companies are looking for businesses like Food-X to help them through the cultural shift they need in their organizations to be more responsive and develop the kind of infrastructure culturally to make changes quickly,” Mr. Ive said.
He said Food-X is talking to one food and beverage company about helping to improve its culture in becoming more innovative.
“They want us to help them think outside the walls of the organization in terms of product development, creativity, packaging design and so on,” Mr. Ive said. “These companies are phenomenal at manufacturing, distribution and marketing, but have shown to be slow in tapping into the consumer zeitgeist of demand.”