By Suzy Strutner, managing editor
⏰ 4-minute read
- Apeel Sciences gradually acquired $110 million in venture capital funding with a smart solution to a big problem.
- Founder James Rogers built relationships with VCs that grew over time -- along with their firms’ investments.
- Apeel had used its funding to find new uses for its food-preserving product, a process that’s far from over.
Finding money to launch your startup can feel as difficult as finding a fresh avocado in an East-Coast grocery store, but at least avocados grow on trees. But it doesn’t have to be that way — not if you know the ropes.
In 2012, James Rogers invented an edible spray that keeps fruit and vegetables fresh for longer, without bad-for-you chemicals. His company, Apeel Sciences, aims to not only save grocery stores the cost of throwing out rotten produce but also lift up struggling global economies by allowing farmers in, say, Nigeria to export finicky crops like the cassava root before they go bad.
Obviously, that’s not a cheap endeavor. The startup’s major goals required major funding.
Rogers got the idea for Apeel while pursuing a Ph.D. in materials engineering. He then developed an invisible coating that, when sprayed on or used as a dip, keeps fruits like strawberries from spoiling using the same molecules found in fruits with longer shelf lives, like lemons. He got the company off the ground with a $100,000 grant from the Bill and Melinda Gates Foundation.
Then, it came time to try for venture capital funding. It worked: Since 2013, Apeel has secured $110 million in investments from various VC firms. One of those is Upfront Ventures, an L.A.-based group that invests mostly in local, early-stage companies.
Rogers and Upfront founder Yves Sisteron chatted onstage at this week’s Upfront Summit, recounting the Apeel story together. Their conversation shed light on the investor-founder relationship and offered hints at how to win over said investor in the first place.
Apeel makes an invisible spray that maintains freshness in avocados and other fruits.
Apeel-ing to VCs
Sisteron met then-newbie founder Rogers in 2013 on a recommendation from the CEO of another company Upfront had invested in. Sisteron drove to Santa Barbara to determine whether Apeel was worth Upfront’s investment.
Sisteron said he was drawn to Rogers’s unique solution to the problem of world hunger. Apeel aimed to feed hungry populations by making food last longer, not by producing more food.
“[Rogers] was going after a big problem, and a problem that wasn’t really being addressed then,” he said. “… And he was approaching it from an angle that really no one had approached it from yet, which was to reduce waste as opposed to increasing supply, production, efficiency [of food and in food supply chains].”
Rogers showed his VC visitor 3-D time-lapse videos of fruits that had been treated with Apeel’s freshness-preserving solution and those that hadn’t. Strawberries that received a coating of Apeel’s spray lasted two to three weeks, while the others shriveled beside them.
Sisteron found the evidence “impressive.” After his visit, Upfront invested in Apeel’s seed round, the common term for the first batch of money a startup takes from venture capitalists.
Avocados stay fresh with Apeel -- time-lapse videos demonstrated the product's prowess to VCs.
With the seed round complete, Sisteron continued visiting Apeel’s three-person office every month for a year. His check-ins served as a way to not only advise his new portfolio company but also determine whether to contribute Upfront’s money during Apeel’s next funding round in 2014.
A relationship with lasting freshness
Experts will tell you that the average VC looks for specific traits in a founder. Sisteron was no different.
“As VCs, we know that you can want to change the world, have a great solution to a problem, have the science … and you want the founder that can pull it off,” he said.
His year of visiting Apeel grew his confidence in its founder: Rogers had a Ph.D. from the University of California, Santa Barbara, which has one of the best materials engineering programs in the country. He was also a “charismatic leader” with an ability to hire and lead teams.
Finally, Rogers was an athlete.
“Part of it is that he has a sports background,” Sisteron said of his support for Rogers. “[He was] captain of the football team in high school and college, so the competitive spirit … frankly, that’s what convinced us to lead the Series A [round of funding].”
That Series A round equaled almost $6 million for Apeel. Upfront has participated in both of the company’s fundraising rounds since.
A scientist by trade, Rogers meets with leaders, including VCs, regularly in his role as CEO.
Lastly, the fact that Apeel is working to make fresh food available to more people ties into Upfront’s investment thesis, Sisteron said.
The firm is “trying to find solutions to big challenges around food supply,” he continued. “… With Apeel, we’re addressing a big issue.”
Today, Apeel continues working with small farms and its local food bank to get fresh food to more folks. It has also struck deals with grocery chains like Costco and Kroger, which started selling Apeel avocados in more than 1,000 stores this past fall.
Apeel-treated produce appeared in German and Danish grocery stores last year, too, after the company partnered with one of the largest distributors in Europe.
“The partnership comes at a time when food waste in Europe has reached a staggering 88 million tonnes annually, with associated costs estimated at 143 billion euros, and builds on Apeel's successful introduction in the U.S.,” read the press release around the collaboration.
Sounds like a fresh crop of long-lasting success.