Tech Cash Pours into Food Startups; while Kickstarter Stays Course
Today’s Wall Street Journal released an article on the flow of new investments into artisinal food businesses. These are enterprises that would have been laughed out of town by VC’s a couple years ago. The WSJ piece cites coffee companies like Blue Bottle, Sightglass and Stumptown, Dandelion Small Batch Chocolate (who owes a large debt to Bay Area tech-like startup TCHO chocolate*) and a grilled cheese restaurant called The Melt, as well as Unreal Brands, the candy company I discussed recently on this blog. There’s a lot of Silicon Valley bubbly insiderness to the whole “movement.” For example, Sequoia backed The Melt, whose CEO is the creator of the Flip video camera (bought by Sequoia’s portfolio company Cisco); Twitter’s founder Jack Dorsey is backing Unreal etc. etc.
The food investment thing is a lot of VC vanity mixed with a bit of sincerity about what the Dandelion Chocolate founder describes as “a reaction to an industry that has been consumed by mass-market, low-quality goods.” I have to admit I enjoyed watching Michael Moritz of Sequoia squirm in this Forbes video interview a tiny bit as he defended the Melt investment. (As an aside, the French would laugh to see him claim (at 1:00) that Grilled Cheese Sandwich is an American invention—Croque Monsieur anyone?) I think he spoke the truth when he said “Life would be boring if we didn’t do this.” That’s OK. Just admit it and don’t beat up these companies the same way as you might a tech company.
I’d dig deeper and say that the rapid acceleration of support for food and consumer projects on Kickstarter is the other large catalyst for these investments. Why? Because those crowdfunding dollars are starting to signal the profound consumer interest in indie ventures and products, including food. Blue Bottle coffee got its start 15 years ago at a farmer’s market, like many up and comers we see at Grommet. If they were starting out today, Kickstarter would have been a natural launchpad for funding Blue Bottle, and it would not take 15 years to get attention.
Thus it’s all the more interesting to see Kickstarter described in PEHUb as eschewing any association with commerce: “The company has publicly stated that it does not want to be a retail channel and limits teams to offering “rewards” to their donors in what Kickstarter calls “single quantities or a sensible set.”
Kickstarter’s recognition of what it does well is pretty starkly contrasted with these interesting, but not-in-their-wheelhouse, VC investments. I’m all for more sincere funding flowing into consumer products, but I prefer the more organic Kickstarter model to the too-aggressive VC one. The curious and understanding Kickstarter backers will still be there when the VC’s move on. This “patience begets results” insight is oddly summarized by Blue Bottle investor and Digg founder Kevin Rose, who is now at Google Ventures. He is talking about the founder of Blue Bottle Coffee, who is maniacal about controlling quality (selling superb coffees that take several maddening minutes to pour, for example) at the obvious expense of growth. Rose says:
“If anything we need to be more like him. Sometimes we need to slow down.”
Good luck with getting your VC colleagues on board with that, Kevin.
*TCHO was our second Grommet way back in 2008…it is so great to see them having penetrated national distribution in Starbucks, speciality food stores and airports. The company was founded by the Wired magazine co-founder Lou Rossetto and he developed it much like a tech company, with beta releases and such.
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