Positive Food Co., which supplies fresh-packaged salads, ready-to-eat meals and vegan overnight oats, has raised $7 million in funding to enter the $34 billion fresh produce market.
In 2018, co-founders Schuyler Dearman and James Chan began selling healthy food at WeWork offices in Los Angeles from giant Yeti refrigerators that stood in the kitchens during lunch.
“At the time, we were in 15 places, a lot of places where you couldn’t walk to eat dinner, so you either had to order food or drive off campus,” Dearman told TechCrunch. “Back in the day when we did Positive Popups, people loved it. We gained a cult following because we had healthy food at an affordable price.”
The couple eventually created more than 100 pop-ups before establishing wholesale accounts at local coffee shops, where they sold dishes including a vegan kale, hemp caesar; salad with roasted beets, chicken and goat cheese; and vegan peanut butter at night. Then the COVID pandemic broke out.
At that time, Positive Food served in 70 coffee shops throughout Los Angeles. Dearman had watched other food delivery companies like Munchery and Sprig close years earlier, and as a result, got creative with the company’s business model. Now he watched Positive Food’s own orders dwindle to zero in just two days.
“It was terrifying and it felt like we were standing there helpless,” he added.
He and Chan had to make some tough decisions, including streamlining many businesses and costs and, unfortunately, laying off staff.
However, Positive Food had a silver lining. In January 2020, the company was in discussions with Whole Foods about launching a pilot of its dishes in several stores. He was also in the midst of moving to a new, larger facility to run the new business.
In March, Positive Food had just a few weeks left to launch this pilot project before the entire world shuts down. The pilot failed, and although the company had to wait another nine months, it eventually entered Whole Foods.
“Coming with Whole Foods saved us,” Dearman said. “Our business went to zero, and then we moved to a new giant facility. I remember thinking that it was either the smartest decision or the decision that would kill us. It turned out to be right.”
In fact, the lack of big business has allowed Dearman and Chen to aggressively revamp their business, including revamping their menu and packaging, as well as getting USDA approval. These are some of the things Dearman believes would not be possible quickly if their original operations were still at full capacity.
During all of this remodeling, they decided not to go back into the coffee shop business and instead focus on Whole Foods. He has since expanded his locations with them and is now at Bristol Farms, including 86 throughout California.
Today, the company announced $7 million in new funding from investors including BlueYard Capital, Western Tech, Y Combinator, Gaingels and a group of entrepreneurs including Thrive Market CEO Nick Greene, Instacart co-founder Max Mullen, Fitbit CEO James Park, Docker co -founder Solomon Hicks, Faire CTO Marcelo Cortes, Season CEO Josh Hicks, Exactuals CEO Mike Hurst, Foursquare co-founder Navin Selvadurai, WordPress co-founder Matt Mullenweg, Timehop co-founder Jonathan Wegener, and Behance founder Scott Belsky.
In recent years, much of the demand for freshly prepared food has come from consumers transitioning to healthier lifestyles, which has even prompted grocery stores to sell more ready-to-eat meals to satisfy consumers who come in for quick meals.
Positive Food’s vertical integration technology is mainly in-house, including production and cold chain logistics network. This allows the company to deliver products directly from its kitchen to stores, which Dearman says is different from other consumer packaged goods companies, which have to rely on third-party companies for production and distribution.
The company also has a patented Monte Carlo Modeling system to connect point-of-sale data to manage store inventory levels and reduce food waste.
The new funding will be used to expand logistics and new channels outside of Whole Foods, which Dearman could not disclose at this time. The company has grown by double digits every month, had churn and produced five times more food this year compared to the same period in 2021, he said.
“We will be expanding into more channels as well as launching new stores, attracting more engaged customers, developing more products and pursuing new opportunities,” Dearman said.