How I Raised $650 Million For My Food-Saving Start-Up | Founder Effect

i actually never stopped to think i just knew that food's gone bad what does that mean food goes bad because water evaporates out and oxygen gets in and and i remember reading that and thinking oh my god i've seen this problem before some people have a talent for connecting dots and some dots are bigger than others james rogers learned that one of the main causes of global hunger isn't that we as a species aren't capable of growing enough food is that so much of it goes bad before it can be consumed if he could find a way to stretch that out he might be able to make a dent in world hunger james thought that if we could slow the process of steel from oxidizing why can't we do the same for a ripe avocado all set all set very cool there are three numbers to look out for in this story 2000 the amount james spent on his home lab 50 000. the amount the bill and melinda gates foundation invested in appeal and 2 billion the company's total valuation for cnbc make it i'm nate skid this is founder effect james grew up playing sports with his brothers but he always had an interest in learning how things worked in middle school he was able to choose between a traditional science fair or the invention convention and he always chose the latter i remember doing like a an automatic fish feeder uh one year you know huge problems you know that needs solving and uh you know i remember doing a never lost golf ball that would like make a noise he could find it in 2014 he was accepted to carnegie mellon where he studied material science engineering and played football as an inside linebacker and one of the earliest lessons he learned in a class on transportation was how rust forms oxygen reacts with iron forming iron oxide which over time destroys the iron metallurgists had figured out this clever trick that if you incorporated certain atoms like chromium for example into the steel then when that oxygen atom came in the chromium atom would react with it and it would form this little chromium oxide barrier around the outside and that barrier would sit there and it would block more oxygen from getting in and that was the innovation of stainless steel after graduating in 2017 james realized he needed to go to grad school but he wasn't necessarily after a degree he wanted a mentor and that was a big unlock for me because i realized that if i found a person whose interests matched mine i could kind of go be an apprentice for that person and and you know learn um you know from from their experience and their work and that's what i ended up doing i i i was introduced to a professor at uc santa barbara by the name of ed kramer james wanted to see if he could lower the price of solar power by creating a paint that could turn sunlight into energy the problem was that the paint reacted differently each time it was applied so my six and a half years of my life were spent developing techniques to to watch the paint dry at a molecular level the title of his phd thesis was the role of solvent additives in the structural order of bulk heterojunction solar cells i'm not exactly a new york times bestseller but james also began taking business classes if he landed on a world-changing idea he needed to learn how to bring it to life every other week james would drive the six hours from santa barbara to lawrence berkeley national labs to use their specialized equipment and it was on one of these long drives where farmland stretched as far as the eye could see that he landed on the idea that would eventually change his life it was one of these drives where i was listening to how we're gonna feed 10 billion people and i just looked around and basically as far as i could see in every direction was food and it was that that little grain of sand that got in there and i just couldn't get it out so we started looking to the issue of food waste and was surprised by how little progress had been made so do you what do you do after you get your your phd do you do do you go into your garage and start formulating this i remember i had the idea i remember thinking why isn't someone do i had the thought like why isn't someone doing this well if someone's not already doing this then you know someone's already tried it and it doesn't work i just slowly kept looking into all the reasons i thought it wouldn't work until i i couldn't come with any more reasons it wouldn't work when you say it what do you mean the idea that that we could use food to give food more time that idea that's what i'm wondering is like you're in this you're driving you see this you're like wait a minute there's a lot of hungry people there's a lot of food what's going on here i actually never stopped to think i just knew that food's gone bad what does that mean like what does going bad mean the simplest answer came back food goes bad because water evaporates out and oxygen gets in and and i remember reading that and thinking oh my god i've seen this problem before in my undergraduate transport class at carnegie mellon and i've seen it for steel steel used to go bad oxygen would react with iron and form iron oxide which is rust that red stuff that flakes flakes off and the iron would go bad now granted it was over longer periods of time than a strawberry here's how a peel works produce is either dipped or sprayed with an edible coating that keeps oxygen out and water in dramatically slowing the decaying process james built a lab in his bedroom to start testing his hypothesis using spent coffee cherries from a nearby farm but his operation quickly outgrew the space so in 2011 he and his brother headed to home depot to purchase supplies to build a proper lab in his garage how much do you think you spent building out that first lab in that garage what would you ballpark it at the lab part probably i don't know two hundred dollars in two by fours and then i bought some used lab equipment off of there's a company that does it's like ebay for like used lab equipment probably a thousand dollars worth of used lab equipment so you know a couple thousand dollars to set up the first lap but to fully prove his concept he needed to find some money so he started making calls to potential investors well i started by trying to talk to investors kind of all said it sounds like a good idea come back to me when you have the technology and it was kind of like i wouldn't need to talk to you if i had the technology so i ended up writing a grant to the bill melinda gates foundation about the idea and they thought it was interesting enough to write a 100 000 check i used that money to get to get started and then with that money you know we had a little bit of momentum was was the bill and melinda gates seal of approval worth more than 100 000 investment hands down yeah hands down that's the whole thing in the beginning right like i think that's like the the art there's a book somewhere i think it's called like the art of the start i think that's where the art is like how do you go from nothing to anything to like a teeny bit of something that's that's really it it's the fact that an organization with scientific credibility thinks it's an interesting enough idea to invest some some money is is worth is absolutely worth more than the money from there the money flowed i went to a gentleman's house we had lunch and at the end of the lunch he said well this sounds great i'd like to write you a check and and it was the first time i'd ever heard that and i i said oh that that sounds great you know i'll get you know when i'll get you know i'll get back to the office garage i'll send you the paperwork he's like oh i don't need any i don't need any paperwork i'm just gonna write you the check now and was like this guy's gonna write me a 50 000 check out of his personal checking account i've never i've never experienced anything like that before in my life james poured about one million dollars into his work and four years later had concrete evidence that his idea for a food-based coating to extend the life of produce could work now all he needed was a guinea pig he was picking up some spent coffee cherries when he told the farmer about his idea and he said oh that's a really interesting idea could you do anything for my finger lines we're like what the hell is a finger line and we bring some of these finger limes home with us and we realize the reason he's asking us because it only lasts about five days we realized that actually this was the perfect fruit fly for our experiments because it goes bad so quickly that you can see differences between the formulations really really rapidly we started working furiously uh on these on these finger lines and i remember that we developed you know formula that that got them from you know five days up to 20 days this was to them hugely exciting because they used to have to overnight ship these things to the restauranteers that were you know using them and now all of a sudden instead of having to pick pack and ship on the same day they could pick one day they could treat the next day they could ship them the next day but cool looking as they are finger limes aren't nearly as popular as say avocados we started talking to to grocers about what it would mean if they had an avocado that lasted twice as long and and what that would mean for their business and we learned a ton we learned that you know today they order the avocados to the store and they're not all the way ripe because if they order them all the way right they're going to throw a bunch away and but then they don't sell as much when they don't order them perfectly ripe they're a big waste category and consumers you know have challenges and they bring them home in 2018 appeal landed its first paying customer in a northwest arkansas grocery store chain called harps appeals coating is applied at packing houses which are basically drop-off points where thousands of farmers send their produce to be packaged and shipped to a final destination but once we had the equipment installed with our first supplier and we were delivering the product to our to our grocery partner and they were seeing the results i never forget those beginning texts you know from the store manager saying like wow you know we're getting three extra days of ripe time on our avocado and just like as other grocers saw how appeal extended the shelf life of produce they began asking about the product now appeals numbers are staggering the company has about 400 employees and has raised over 650 million dollars in outside investments its product is used by 70 grocery chains with over 22 000 stores across north america and europe are you gonna oh are you gonna go public or right now the focus is just build build build you know the we we've plenty of capital in the bank and it's just let's take advantage of you know the opportunity that we have in front of us so there's no no plans what was the biggest money mistake that you made along the way do you think well it's funny to say this out loud i remember having lunch with you the guy that wrote the first check that i told you about i remember him asking me the question he said james if you had twice as much money could you go twice as fast and i thought well if i had twice as much money i could probably go more than twice as fast like right now i'm being really deliberate and doing everything like one experiment and then do the next one and then the next one i remember him saying that you need to ask yourself the question we didn't give you the money to hold on to it in the early days it was ironically not understanding the value of speed not understanding the the value of actually the money was so you could go faster not so that you could go um slower so that that in the early days stands out as something that i just didn't appreciate you know i never had and i've never had a budget before do you see the the complexity of building and operating the company being outside of your purview or interest area i i think that that's spot on i i i'm not doing it alone today to be very to be very clear the only reason that we've been successful has been because of the team that we've been able to build even from the early days having the right people on the bus that were here to figure it out and build it for nothing and you know then to bring on people who'd seen the movie before he'd seen that stage of the business had led it through a certain stage of growth and so i'm doing that now building that team it's the only reason that we're able to sit here and have this interview as people are people are running the company

Channel: CNBC Make It

Views: 552,011

Keywords: CNBC Make It, Make It, CNBC, How To Make It, Entrepreneurs, Starting A Small Business, Business Success, Small Businesses, Finance Tips, Career Tips, Work Hacks, Lifehacks, Money Management, Career Management, Managing Business, founder effect, Patreon, content creators, creative people, how to get paid, artists, youtubers, food saving, start-up, start up, apeel sciences

Id: IuSppv0uOCI

Length: 12min 51sec (771 seconds)

Published: Sun Apr 24 2022