Back to the Roots doesn't want to be the next Uber; it'd settle for being the next Kraft Foods, however.
The San Francisco-based mushroom kit maker, co-founded in 2009 by Nikhil Arora and Alejandro Velez, didn't attract a Unicorn-style investment in its first round of funding, announced Tuesday. But its investor list, who collectively ponied up $2 million, does include several heavy hitters in the worlds of food and social enterprise--making its multi-national aspirations a distinct possiblity.
Among others, high-profile entrepreneurs including Stonyfield Farms founder and Chairman Gary Hirshberg, Blake Mycoskie of Toms and Chris Gallo, the owner of E&J Gallo Winery placed a vote of confidence in the company and its commitment to simplicity and transparency in food. Even the Omnivore's Dilemma author Michael Pollan and the CEOs of Jamba Juice (James White) and Annie's (John Foraker) got in on the action.
According to Hirshberg, they made a smart investment in a category that's ripe for growth. "I tend to prioritize [investing in] organic companies and, almost without exception, my returns on deal after deal have far exceeded the market," Hirshberg tells Inc.com.
He cited Annie's, Applegate, Happy Family, and Late July as companies that broke ground in the organic food category, plowing the way for market acceptance of organics, and, according to Hirshberg, provided great returns for investors.
And he expects the same returns from Back to the Roots.
In 2014, organic food sales reached $35.9 billion, an 11 percent gain from a year ago. By contrast, in 1997 the category weighed in at just $3.4 billion. This kind of market opportunity gives entrepreneurs a lot of room to grow.
Arora and Velez, who started growing mushrooms in a bucket of used coffee grounds, now have 11 products in major retail outlets--including Whole Foods, Target, Costco, and Home Depot. In 2014, the company pulled in just under $5 million in revenue, and they hope to double that figure in 2015.
"They've had no qualms about presenting game-changing, disruptive products," Hirshberg says. "They've brought them to some of the biggest retailers, and done really well. These are not easy accounts to get. It's not just the inspired vision, but the chutzpah to go in there and close the deal."
The founders' tireless vision has impressed several big names over the years. Arora says the majority of their investors have been long-time supporters, including Michael Pollan, who unexpectedly visited their mushroom farm one day with a friend in 2011. After the tour, he asked if he could stay in touch and has been supportive ever since.
"Pollan has taken the food movement and boiled it down to mindsets that are really accessible to a lot of people," Arora says. "We want to do that same thing but boil it down to products."
They started with take-home mushroom growing kits and expanded to herb gardens in a can and mini water gardens. Most recently, Back to the Roots launched ready-to-eat products like cereal and breakfast toppers. The company went from two products in four years to eleven products in the last month. Their next challenge, according to Arora, is to deliver sales on the new products.
Hirshberg adds that he wants to see the co-founders demonstrate some focus in their thinking, which often requires entrepreneurs to check their enthusiasm a bit. He advises succeeding with a few products before expanding, refining execution in-store, and providing excellent customer service.
"Nikhil and Alex started with $5,000 and a bucket of mushrooms," Hirshberg said, "They've proven they can have the vision and sell it to large distributors, but now they have to prove they can execute."