Meal kit company raised $50 million at a $500 million valuation.
Blue Apron wants to change the way Americans cook for themselves, starting with the groceries. By delivering weekly packages of meal kits to customers around the country, the 18-month-old startup has begun to do just that. Earlier today, the company announced it had raised $50 million in venture funding led by Stripes Group with participation from prior investors Bessemer Venture Partners and First Round Capital. (Fortune had previously reported the company was in the market seeking new funds.)
The fundraise follows a wave of food startup investments. In the first quarter of this year, food startups pulled in $300 million in VC funding, according to Rosenheim Advisors.
Fortune spoke with Blue Apron CEO Matt Salzberg about the raise, fast-moving competition, scaling challenges, and the company’s plans to become a billion-dollar company. Below is an edited transcript of the conversation:
Just over a month ago, we reported that Blue Apron had crossed the milestone of selling 500,000 meals per month. Now it’s up to 600,000 per month. Is the pace of growth accelerating?
We’re already quite a bit bigger than that even. We’re growing at an unbelievable pace. We are only 18 months old as a company, so all of this came from zero 18 months ago. We’re continuing to grow at an increasingly fast pace.
What’s driving that?
At the base level, we have a product that people really, really like. What we’ve provided is fun, so people want to tell their friends and they want to share what they have made on social media and around the office. What’s driving a ton if growth is word of mouth and social media activity. That viral element of our product is what allows us to keep scaling so quickly.
You now have more than 200 employees. What do all those people do?
The biggest component is people running our fulfillment centers. We operate refrigerated fulfillment centers around the country where we get shipments from farms and food suppliers and family-run businesses in bulk. We have teams of people that do receiving and portion and package them up and ship them to customers and that requires hundreds of people on a weekly basis to manage that operation. We have two main fulfillment centers and we’ll be opening two more in the next couple of months.
So I’m guessing some of the new capital will go toward those fulfillment centers. What are your other plans for growth?
The next part is transforming grocery supply chain so we can get better food and more interesting food to people at prices than they can’t get at the supermarket. We’re managing the supply chain to be ultra-seasonal and ultra-flexible. We’re looking to continue to expand geographically. Today, we deliver to 85% of the country and hope to be nationwide by the end of year. We’re thinking about offering additional options that target people based on different meal preferences. Today we accommodate vegetarians, and pescetarians, and people who don’t eat pork, shellfish, fish, or red meat, but we’re thinking about expanding those kinds offerings, as well as different kinds of adjacencies around home cooking that are not just food.
What kinds of adjacencies?
There’s nothing specific now, but a lot could be done around learning and onboarding people into that cooking experience. Helping you set up your kitchen and things like that.
What is the size of the market for this in the US?
We’re tying to build a company with billions in revenue over time. The grocery market in aggregate is almost a trillion dollars in the US, and we think we have a better supply chain solution that is applicable to almost everyone in the country. The product today is really great for couples and young families and we think that our model can be applicable to pretty much everybody who wants to cook, so we’re going after a multi-billion-dollar revenue stream.
Talk to me about the competitive landscape for Blue Apron. There are a lot of meal kit services out there.
We are far and away the largest company that does what we do. We see ourselves competing against companies that are the way that people today currently get their groceries and dinner. For us, the biggest competitors are people like FreshDirect and Whole Foods and Seamless. We’re trying to show people that cooking can be fun and that this is a better way to eat.
What’s the biggest challenge as you scale up?
Taking it from 600,000 to six million or ten million or more meals a month is a big challenge. We have to hire hundreds of people. We have to open up additional fulfillment capacity and really expand our supplier relationships to continue to grow at that pace.
I used to think this kind of product would only appeal to young, urban professionals. But you’re also bringing exotic ingredients and cooking styles to people across the country who are obsessed with the Food Network but can’t find things like baby bok choy in their local supermarkets.
People are interested in food more than they’ve ever been, and they’re interested in cooking more than they’ve ever been. Because of that, and our model, we can create a market for this higher-end style foods that didn’t exist before.