Destination salad chain Sweetgreen is set to announce this morning $18.5 million in Series E funding, led by Steve Case’s venture capital firm Revolution Growth. Other investors include Stonyfield Farm chairman Gary Hirshberg and restaurateurs Danny Meyer and Daniel Boulud.
“We do think it has the potential to be the next Chipotle,” Case, of AOL fame, tells Fortune. “The Sweetgreen opportunity is just as big.” He believes the company can be a leader in the healthy segment of the fast casual market, what Case calls the “hottest space in the restaurant category.” Sweetgreen is on track to hit $50 million in revenue in 2014.
The latest round follows a $22 million investment from Revolution last year. Case previously made a personal investment in the company and has backed other food-related companies. “We think there’s going to be a revolution in food,” Case says. “It’s a sector of our economy that is ripe for disruption.”
Part of the latest round of funding will go toward building out Sweetgreen’s team. In the last year the company has hired Karen Kelley as president and COO, who previously held the same position at Drybar; Joel Chrisman as VP of technology from Chipotle; Farryn Weiner to head up marketing and brand innovation from Michael Kors; and Michael Stebner from True Food Kitchen as culinary director.
The capital will also go toward building out Sweetgreen’s seasonal supply chain, its in-school nutrition and healthy eating program for kids, and its store base—it currently has 27 locations with two more set to open next month. Technology is also a priority, with 25% of sales coming from its mobile app—a figure Case believes will eventually reach more than 50%.
Co-founders and co-CEOs Jonathan Neman, Nicolas Jammet, and Nathaniel Ru started Sweetgreen in 2007. The trio met more than a decade ago at Georgetown University, where they ended up taking an entrepreneurship class together. In addition to the Georgetown connection, all three have first-generation immigrant parents who started their own businesses.
The Sweetgreen co-founders decided to start a concept based on healthy food because they believed there was a real need in the Georgetown community. “The options were so limiting,” says Neman. “They were unhealthy and affordable, healthy and really expensive, or they didn’t taste good. None of them had all the different pieces of it.”
The three opened their first tiny 550-square-foot location in August of 2007 just after graduating, and did everything from making salads to washing dishes. They knew they would make it when they survived their first winter after all of the students had gone home for break. In 2009 they opened up two more locations in D.C., and have since expanded to New York City, Boston, and Philadelphia. Next up is Los Angeles.
From the start, the team spent a good deal of its time finding funding, with about 30 people investing a total of some $300,000 for the first restaurant. That evolved into more strategic investments from the likes of Joe Bastianich, Mario Batali’s business partner, and Honest Tea co-founder Seth Goldman. It was enough to keep them going for the next year but didn’t allow them to think far out into the future.
One of their investors was Evan Morgan, who is a partner at Revolution Growth and made the connection with Case. “Up until that point, raising money was part of our DNA,” says Ru. “We saw little blips in momentum every time we went to [fundraise], and the business would slow down. We wanted a little more fuel in the tank and to be more strategic.”
The funding has allowed the three to spend less time raising money and more time on their mission, which Jammet says is disrupting and creating a new era of fast food. Sweetgreen wants its customers to eat locally and seasonally, which means it aspires to be a national brand where not every market is the same. That’s a big move away from fast food, which has historically stressed consistency. At Sweetgreen “the experiences are different, but the quality and the ethos are all the same,” Jammet says. “The salads are going to look and feel different in every city.”
