A Denver-based startup is proving that there’s serious value to be found in food that otherwise would be headed for the landfill.
FoodMaven, which sells oversupplied and imperfect food to restaurants and food service providers, has closed a $15.3 million Series B funding round.
The company said Tao Capital—the investment firm for some members of the Pritzker family, which is behind Hyatt Hotels—and the “company’s Series A investor” led the round. While the company did not disclose the name of the investor, a member of the Walton family (of Walmart fame) led the company’s $8.6 million Series A in 2018. Fine Line Group, the family office of developers and philanthropists Sasha and Ed Bass, also participated in the Series B.
The Colorado-based startup is attempting to help redirect the approximately 40% of U.S. food that’s wasted by obtaining goods that might have imperfections or not meet agreed-upon specifications from suppliers ranging from farmers and ranchers to supermarkets. It then connects those suppliers with buyers like restaurants, hotels, and universities. The model creates revenue for the suppliers, who otherwise wouldn’t have a market for these products, and also gets the buyer—who is often dealing with razor-thin margins—a discount. FoodMaven also donates 20% of what it doesn’t sell to non-profits like soup kitchens or homeless shelters.
Ben Deda, who became CEO of FoodMaven in September, said that the company runs on a consignment model: It takes possession of the product rather than ownership and negotiates a cut of the sale with the supplier.
Deda was previously the company’s COO and has a background in scaling companies of various sizes across a number of different of sectors. Patrick Bultema, the company’s founder and former CEO, has retained his chairman title and is focusing on the company’s broader vision and mission.
At the time of its Series A, FoodMaven said it anticipated a $50 million to $70 million series B in 2019 that it would use for a nationwide expansion, and in January the company raised $10 million that converted into this Series B. But Deda said the company decided it wasn’t ready to take FoodMaven across the country. It instead opted to raise a smaller amount and is moving beyond its home market to initially just the Dallas-Fort Worth, Tex. area, where the company plans to make an acquisition in the next few months.
“To really show this solution is something that scales, we need to take it to another market,” Deda told Fortune.
Deda says the model has to be based on local distribution in order to get food to the right buyer quickly. “It’s about helping to restore the local food community,” Deda said. “We’ve lost the efficiency that comes with the local food economy.”
Deda says FoodMaven has found that one of the most successful fits on the buyer side is higher-end restaurants that can deal with variability in availability and volume—something chain restaurants don’t have the flexibility to handle.