Unreal, a candy company based in Boston, says it uses 25 percent less sugar than other candy on the market.
What if the next big thing in tech does not arrive on your smartphone or in the cloud? What if it lands on your plate?
Nick Taranto, one of the founders of Plated, which sells ready-to-make dinner kits, at its Brooklyn warehouse.
That idea is enticing a wide group of venture capitalists in Silicon Valley into making big bets on food.
In some cases, the goal is to connect restaurants with food purveyors, or to create on-demand delivery services from local farms, or ready-to-cook dinner kits. In others, the goal is to invent new foods, like creating cheese, meat and egg substitutes from plants. Since this is Silicon Valley money, though, the ultimate goal is often nothing short of grand: transforming the food industry.
“Part of the reason you’re seeing all these V.C.’s get interested in this is the food industry is not only is it massive, but like the energy industry, it is terribly broken in terms of its impact on the environment, health, animals,” said Josh Tetrick, founder and chief executive of Hampton Creek Foods, a start-up making egg alternatives.
“There are pretty significant environmental consequences and health issues associated with sodium or high-fructose corn syrup or eating too much red meat,” said Samir Kaul, a partner at Khosla Ventures, which has invested in a half-dozen food start-ups. “I wouldn’t bet my money that Cargill or ConAgra are going to innovate here. I think it’s going to take start-ups to do that.”
In the last year, venture capital firms in the valley have 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 start-ups.
“Consumers are interested in sophisticated experiences that are beautifully delivered, which we’ve seen happen on the Web and with products like the iPhone,” said Tony Conrad, a partner at True Ventures, which was an early investor in the coffee company Blue Bottle. “Now, we’re seeing that happen with food and beverage.”
Still, some tech analysts and venture capitalists are skeptical that these companies, with their factories and perishable products, can reach the scale and market valuations of big Internet companies.
“I don’t see a multimillion-dollar business coming out of any of these companies,” said Susan Etlinger, an analyst with the Altimeter Group, a firm that advises companies on how to use technology. “The majority of Americans will not likely be able to participate, they’re simply too expensive for them.”
Venture capitalists have strayed from pure technology to 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 start-ups 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 food. They face a contradiction, though, because that movement also shuns processed food and is decidedly low-tech.
“It’s not Franken-food,” Mr. Kaul of Khosla Ventures said. “We’re careful not to make it sound like some science experiment, but there is technology there.”
Hampton Creek Foods, based in San Francisco, uses about a dozen plants, including peas, sorghum and a type of bean, with properties similar to eggs, to make an egg substitute.
Mr. Tetrick, its founder, started the company after working on alleviating poverty in sub-Saharan Africa. He hired a protein chemist, a food scientist, a sales executive from Heinz and a contestant from the television show “Top Chef.” Two large food companies are using the egg substitutes in cookies and mayonnaise, and he said he planned to sell them to consumers next month.
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