A new group of food-based startups are applying tricks learned from the
technology industry to grow a new wave of businesses to cash in on the growing
"foodie" movement across the U.S.
Like tech entrepreneurs starting out in a Starbucks, foodies who find
themselves needing space to prepare boutique treats are turning to shared
programs called incubators and accelerators that help them launch by offering
communal
business spaces and logistical
assistance.
Small food businesses—mom and pop operations selling goods at farmers
markets, food trucks, or at boutique
retail establishments—have proliferated in
the last few years, according to data provided by the National Association for
the Specialty Food Trade. In the New York City area alone, city politicians are
rushing through 22,000 additional permits for mobile food vendors. Due to
hygienic needs, raw material needs, and other factors, new small food businesses
often need help getting started. In large urban markets such as New York and Los
Angeles, startup costs frequently exceed $10,000, and that's where the
incubators and accelerators come in.
"A company can come in, rent space for the day, pack up their things and
leave," says Michael Schwartz at the Organic Food Incubator in New York. "The
not so traditional part is that we have companies who stay here more
permanently." Tenants at the Organic Food Incubator work on everything from
spicy Indian sandwiches to gluten-free breads to soft-serve "ice cream" made
from crushed fruits.
Both incubators and accelerators offer small food businesses the opportunity
to grow within a nurturing environment while defraying large startup capital
costs.
The Organic Food Incubator hosts trade shows to introduce their members to
prominent local grocery chains and distributors; members also have access to
classes, networking event, and consulting assistance for recipes, social media,
and distributors.
Ahkilah Johnson is the co-founder of Manhattan's City Cookhouse, which offers
commercial kitchen rentals along with community cooking classes and business
development opportunities. Johnson says that "I used to do children's cooking
classes in the neighborhood, but could never find space for classes. We needed
space in the community. My day job is in building schools so I thought we could
build a space. We created a center for businesses and for healthy cooking
classes." Incubators such as the Organic Food Incubator and City Cookhouse offer
micro-businesses access to high-end kitchen equipment, space to produce at
scale, and support to grow their business. This can include anything from
packaging assistance to networking sessions with large wholesalers and
distributors.
While most of New York's food incubators are medium-to-large sized commercial
kitchens, several even larger facilities are coming to the city. 3rd Ward, a
Brooklyn community arts and educational organization, is opening a large
culinary incubator and educational center. Also in Brooklyn, a former
pharmaceutical plant is being converted into a 660,000 square-foot culinary
production facility whose rooms will be subdivided among a warren of small
businesses.
While traditional accelerators have been aimed at internet-based startups and
small technology firms, food accelerators are a much newer proposition. Food
businesses traditionally require thousands of dollars in launch capital at the
very least and are subject to much more intensive government regulation. The
large sums that small food businesses need to expand have traditionally been
found through more traditional fundraising methods in the past. One accelerator,
500 Startups, is nurturing mail-order food businesses among others. Culture
Kitchen (which sells make-your-own ethnic cuisine kits) and Craft Coffee. In
exchange for up to $250,000 in seed funding, participating businesses give up 5%
equity.
One accelerator in Arkansas, The ARK, pays special attention to food. Due to
Wal-Mart's and Tyson Food's headquarters being located inside the state, The ARK
is specifically recruiting food start-ups who could benefit from close proximity
to the agribusiness giants. Three of the groups funded by ARK's 15 are food
startups, including a social network for food trucks, a high-tech meat analytics
firm, and an online marketplace for farmers. The ARK offers recipients
approximately $18,000 in funding in exchange for 6% equity and a promise to
relocate to northwestern Arkansas for the duration of the program.
"Not only do food-oriented startups get access to mentorship from top minds
in the food industry, but founders also receive support and resources to
accelerate their businesses during the three-month program, all in preparation
to make investor pitches," the ARK's Jeannette Balleza told Reuters.
Another accelerator specializing entirely in food startups was recently
launched in California as well. Palo Alto's Local Food Lab is unlike traditional
accelerators in that it doesn't offer capital in exchange for equity, but rather
an intensive six-week program for food startups to develop a business plan and
cultivate industry contacts. Recipients include all-brunch food truck Brunched
in the Face, South African-style snack maker LifeBites, and urban
farming education effort
Seeducate.
"Working through (ARK) benefited us by providing mentors and advice related
to the industry we are entering," said Derek Kean of Truckily, a logistics firm
for food trucks funded through the ARK. "Being able to build upon experience and
knowledge from former executives, entrepreneurs and current employees of
companies that have had years of research and, more importantly, 'mistakes made'
was invaluable."
But despite the growing the popularity and apparent need food incubators and
accelerators, they aren't found everywhere: Apart from outliers such as ARK,
most are situated in large cities or in dense suburbs. Only a few food
incubators have sprouted up in smaller communities. Replicating the food
incubator model in rural areas and college towns is the next great challenge for
the growing field.