For startups looking to tackle food waste and other complex global problems, there is an expanding … [+]
Imagine buying five bags of groceries, paying for them, then throwing two directly into the trash. Unfortunately, that’s reality — Americans throw out roughly 40% of the food they buy.
One trillion dollars’ worth of food, about a third of the world’s production, is lost each year before it can be consumed. All that wasted food accounts for 1/12th of the globe’s greenhouse gas emissions since decomposing food results in heat-trapping methane. In the developed world, the majority of food is wasted in the home and at restaurants. In the developing world, problems stem more from poor infrastructure. A lack of roads and electricity can cause food to spoil before it ever gets to a home.
People want to see change here. The challenge for entrepreneurs is to harness that momentum while remaining focused on the point at which they can have a real impact. For those that succeed, the potential market is vast but first, founders will have to make peace with partnering, including with governments, foundations and NGOs without whom their impact is guaranteed to be limited.
For example, Apeel Sciences founder James Rogers has focused his company on the grocery store, where produce often goes to waste. He’s come up with a plant-derived coating that extends shelf life to give produce a better chance of getting eaten. He likens his product to the coating on stainless steel that he studied as an undergrad. Rogers took the atypical route of partnering first with farmers in Africa, where poor transport and storage links lead to high rates of spoilage, before bringing his product to the U.S. Avocados coated with Apeel’s protective layer were able to stay on the shelf twice as long, boosting sales and margins dramatically for a smaller supermarket chain. The product is now being used by Costco and Kroger. Apeel raised $70 million in 2018 from venture capitalists but its first funder was the Bill and Melinda Gates Foundation, which provided a small grant.
“If we can even make the slightest dent in this, it’s a huge business,” Apeel’s Rogers recently told CNBC’s Jim Cramer.
Sensing that, more players have now jumped into the field, including big food producers and retailers, local governments and not-for-profits. The first 10 months of 2018 saw $125 million of venture and private equity funding go to food waste startups and nearly three-quarters of those in the space are for-profit, market-based players, according to food waste partnership ReFED. That mix of public and private money and social and capitalist goals isn’t all that unusual in the public policy sphere. But for technology entrepreneurs, it means navigating a landscape of funders, partners and customers they may not be accustomed to.
Linking up with organizations that salvage food waste, from food banks to recyclers, is one way startups are taking that message to heart. Spoiler Alert has raised $2.7 million in funding from venture capitalists and a philanthropic foundation to link food distributors to discount food sellers and nonprofits who will take soon-to-spoil food off their hands. Its software helps food companies manage unsold inventory and suggests ways to divert food from landfills.
The Boston-based, venture-backed company piloted its approach with meal kit company Hello Fresh starting in 2017 and diverted two-thirds of Hello Fresh’s unsold food from landfills while doubling the portion donated to charity. Spoiler Alert also works with food distributor Sysco and says its partners have a wide range of motives for trying to reduce waste.
“Sometimes we’re working with companies to achieve zero-landfill goals, sometimes it’s food donations commitments,” chief product officer Emily Malina told produce trade website The Packer. “In other cases, it’s more around reduction in shrink and improvement to the overall business.”
Similarly, InspiraFarms has garnered investment from a diverse group that includes private investors, the venture arm of a French multinational and the OPEC Fund for International Development. The company is using the funding to expand its on-site cold storage and food processing products that reduce post-harvest spoilage in developing nations where access to such facilities is limited.
For startups looking to tackle food waste and other complex global problems, the good news is they have access to an expanding group of organizations they can partner with. The challenge for their founders will be understanding how to leverage that diversity to achieve meaningful scale and impact at the point where they can be most effective. At stake: A hungry and warming world.