Positive Food Co., providing freshly packaged salads, heat-and-eat prepared meals and vegan overnight oats, raised $7 million in funding as it goes after the $34 billion fresh prepared foods market.
In 2018, co-founders Schuyler Deerman and James Chan started selling healthy meals at WeWork offices around Los Angeles out of giant Yeti coolers, standing around the kitchens during lunch time.
"At the time, we were in 15 locations, many where you couldn't walk to get lunch, so you had to either order food in or drive off campus," Deerman told TechCrunch. "On days when we did the 'Positive Popups,' people loved it. We gained sort of a cult following because we had healthy meals at an accessible price point."
The pair eventually did more than 100 popups before setting up wholesale accounts with local coffee shops where it was selling meals, which include the Vegan Kale Hemp Caesar; the Roasted Beet, Chicken and Goat Cheese Salad; and the Vegan Peanut Butter Overnight Oats. Then the COVID pandemic hit.
At the time, Positive Food had its meals in 70 coffee shops around Los Angeles. Deerman had watched other meal delivery companies, like Munchery and Sprig, close years earlier and had gotten creative with the company's business model as a result. Now he was watching Positive Food's own orders dwindle to zero in a matter of two days.
"It was devastating, and it was like we were standing there helpless," he added.
He and Chan had to make some tough decisions, including streamlining a lot of the business and costs, and unfortunately letting staff go.
However, there was a silver lining for Positive Food. In January 2020, the company was in discussions with Whole Foods about launching a pilot of its meals in a few stores. It also was in the midst of moving to a new, larger facility to manage that new business.
In March, Positive Food was just a few weeks shy of launching that pilot before the whole world went into lockdown. The pilot didn't happen, and even though the company had to wait another nine months, it eventually entered Whole Foods.
"What kind of saved us was talking with Whole Foods," Deerman said. "Our business went to zero, and then we were moving into a giant new facility. I remember thinking this was either the smartest decision ever or one that will end us. It turned out to be the right one."
In fact, not having much business enabled Deerman and Chan to go heads-down and revamp their business, including updating the menu and packaging and going through U.S. Department of Agriculture approvals. These are some things Deerman believes would not have been quickly possible if their original operations were still in full effect.
During all of that revamping, they made the decision not to go back into the coffee shop business and instead focus on Whole Foods. It has since expanded its locations with them and are now in Bristol Farms locations, including 86 throughout California.
Today, the company announced $7 million in new funding from investors including BlueYard Capital, Western Tech, Y Combinator, Gaingels and a group of entrepreneurs, including Thrive Market CEO Nick Green, Instacart co-founder Max Mullen, Fitbit CEO James Park, Docker co-founder Solomon Hykes, Faire CTO Marcelo Cortes, Season CEO Josh Hix, Exactuals CEO Mike Hurst, Foursquare co-founder Naveen Selvadurai, WordPress co-founder Matt Mullenweg, Timehop co-founder Jonathan Wegener and Behance founder Scott Belsky.
Much of the demand, as of late, for freshly prepared foods is from consumers shifting to healthier lifestyles, which has even prompted grocery stores to provide more ready-to-eat meals to cater to consumers popping in quickly to pick up food.
Positive Food's vertical integration technology is mainly done in-house, including production and a cold-chain logistics network. This enables the company to deliver products directly from its kitchens to stores, which Deerman said is different from other consumer packaged goods companies that have to rely on third parties for production and distribution.
The company also has a proprietary "Monte Carlo Simulation" to plug in point-of-sale data to manage its inventory levels at stores and reduce food waste.
The new funding will be used to expand logistics and new channels beyond Whole Foods that Deerman was not able to divulge right now. He said the company has been growing in double-digits month over month, had zero churn and produced five times as much food this year versus the same time period in 2021.
"We will be expanding into more channels as well as launching in new stores, gaining more engagement, developing more products and going after new opportunities," Deerman said.