The healthy meal kit service Sun Basket has closed $42.8 million in Series D funding led by August Capital. It also raised $15 million in debt financing from Trinity Capital Investment, which brings the total new funding to $57.8 million. In total, it has raised over $113 million.

Sun Basket is part of the crowded meal-kit market that by Packaged Foods estimates includes more than 150 players in the U.S. The company has differentiated itself by going after the nearly $40 billion organic food market with its healthy meal-kits that cater to special dietary needs like vegan, gluten-free and pescatarian. "It is sticky business model, because we are solving an unmet need," said Adam Zbar, founder and CEO, Sun Basket. "It is challenging if you want to cook paleo or gluten-free."

Meal-kit businesses have proven to be operationally complex to build and scale, and as such there has been declining interest from investors. Since the initial boom in 2015, VC dollars going into meal-kit companies has slowed. In the first half of last year, investments in online food delivery and meal-kits shrank by 46 percent to $239 million, according to AgFunder, an online investment platform for food and agriculture technology.

Zbar was candid about the challenges of raising money in the current environment. "This is the hardest fundraising I have ever done, but at the same time it is the most rewarding," he said. "A lot of our other competitors are not getting funded, which means consolidation is likely to happen. So, there will be less competitors, and we will have lower costs to acquire users."

Of course, the elephant in the room is Blue Apron's dismal performance on the public market. Before its IPO, the company had raise nearly $200 million and was widely considered the leader in the space. But since its initial public offering last year, the company has lost almost 70 percent of its value.

But Blue Apron's disappointing showing had no impact on August Capital's decision to invest in the company. "At the end of the day, Sun Basket's success is not tied to Blue Apron at all," said Tripp Jones, general partner, August Capital. "Adam and his team's goal is to build a very large, profitable and category defining business. If they do that, it does not matter what their perceived peer group does, they will deliver a tremendous amount of value to all shareholders."

Last year, Reuters reported that Sun Basket had hired Bank of America Corp. and Jefferies Group LLC in anticipation of its own IPO. The company declined to comment on any future plans to go public.

One of the reasons Sun Basket's investors might be optimistic is because in just three years the company has hit an annual revenue run rate of $275 million. It owes this to offering a premium product that has been able to price at 30 percent higher than competitors, which allows for better margins. It also achieved higher retention rates, which according to Second Measure, a firm tracking consumer activity based on credit card spending records, is three times higher than other players in the space.

With this latest round of funding, Sun Basket plans to continue to add more personalization based on  transaction data, dietary needs and preferences with the goal of being the "Netflix of Food." "Right now the experience is personalized based on diet, but imagine if you could have a service that helps personalize your meals based on diet, taste, level of difficulty and budget," said Zbar.

In order to support more options at scale, Sun Basket said it will shift its model from being recipe driven to ingredient driven, or what it is calling a pantry model. At present, its chef creates new recipes each week and procurement is tasked with finding the necessary ingredients. With the new model, it will create a pantry with 500-1000 ingredients, and it will use technology to match those them against a database of recipes.  

"Today, every week our procurement team is literally chasing around different ingredients, because it is driven by different recipes," said Zbar. "Having a pantry model will simplify our supply chain and will provide our users with more choice."

To enable further growth, the company is launching two new facilities to expand its capacity to build a $1 billion business. It has already replaced its East Coast fulfillment center with a 200,000 square feet facility, which is six times larger than the previous one.  It also plans to replace its Midwest center in the first quarter, and it will double in size to a 100,000 square facility. These facilities will allow it to serve the continental U.S.