DAILY HARVEST’S CEO REVEALS NEW PACKAGING, TALKS BOOTSTRAPPING

Rachel Drori founded Daily Harvest in 2015 with a mission of providing organic, fruit and veggie-packed foods for people on the go. The company today is announcing new packaging that aligns with its “clean” ethos: Starting in April, its containers will be home and commercially compostable. It will first roll out the new packaging in its harvest bowls, soups, oat bowls, and chia bowls. (The company is also resizing some of its products; harvest and soup bowls will grow to 150% of current size, while the chia and oat bowls will be reduced to about 75% of current size.) Though privately held, Daily Harvest is often noted for its celebrity investors—Serena Williams, Bobby Flay, and Gwyneth Paltrow are all backers—Drori bootstrapped the business in its early days, personally delivering smoothies in New York before taking the business national, in 2016. She spoke with Fast Company about her mission to provide healthy food and  sustainable packaging, and how self-funding her company set the tone at Daily Harvest. Edited excerpts follow:

Fast Company: What made you want to start Daily Harvest?

Rachel Drori: I was working at [flash sale website] Gilt Groupe at the time and I was often sacrificing the needs of myself for my career. I love to cook, and I would have loved to . . . only eat the things that are like homemade and nourishing. But the reality is of life was that I could never do that.

FC: How did you land on a frozen product?

RD: I remembered this conversation with my grandmother, where she said, “Frozen food is actually better for you.” That really stuck with me. And as I started doing research, I realized that, frozen food actually had been proven in many ways to be more nourishing [if] it is picked and frozen at its nutritional peak. In contrast, the stuff you buy in a grocery store that we think of as nutritional was probably picked green, then it goes on this crazy, long journey from farm to warehouse to another warehouse to the grocery store then to your home. I started thinking about the role that frozen food has played: it got women out of the house so she could build a career and cook for her family. Freezing helped ancient societies stock up their foods to get them through winter. The idea was: How do we turn the freezer into the modern pantry?

FC: You didn’t take any outside funding for a long time.

RD: In the beginning I got myself a commercial kitchen in Long Island City, and the first two team members were my right hand and my left hand: I did everything myself. Having worked at a VC-backed startup before,  it was really important to me to be able to shape what the business was going to be. As I went out originally to raise capital, people didn’t get it, or the valuation was going to be ridiculous and I was going to end up owning, like zero percent of the business. So for me, the answer was to bootstrap. I had two team members by the time we raised [money] and we were doing everything and every role, responding to customer service emails during the day and then delivering food at night in our car.

But [eventually] I realized that I was choking off growth—the business was growing faster than I could keep up with. I needed to build infrastructure, I needed to build a team and I couldn’t keep bootstrapping, and that’s when I decided to raise capital.

FC: You’ve raised money from a number of high-profile individuals and venture funds like Lightspeed Venture Partners, VMG Partners, and M13. What were some of the traits you were looking for in investors?

RD: For me it was very much about value alignment above anything else. And this has remained true with every round of funding. We have lived in a world for a very long time where the VC point of view has been growth at all costs. I just took a different approach and I was like, you know what, I’ve seen what happens when you’re not capital efficient. Both of my parents are entrepreneurs, and they just don’t understand [the startup culture of] building a business that isn’t profitable. That’s a conversation that I’ve had to have every single funder. And that’s where that value alignment comes in. Also people who, who frankly believe in what we’re trying to do.

FC: How did your funders feel about your new packaging, which surely costs more than off-the-shelf disposable cups and bowls?

RD: We’re moving to completely compostable, virgin plastic-free packaging, which will hit our margin. But that is about value alignment. That is about us doing the right thing for our customers. That is about us doing right thing for our planet.

FC: What advice would you give aspiring founders around fundraising?

RD: I don’t know if this is happening so much anymore, but when Daily Harvest was starting out, the VC community was pushing people to hire six months ahead of growth. [Founders] never had to prioritize, you could just do everything at once. And I’d say most of those companies have had huge rounds of layoffs. Making hard decisions actually makes you a really good business leader. Teaching people to make hard decisions has taught the entire company how to prioritize and look at things like return on investment, and be able to choose what things are actually going to move the needle.

FC: What’s next for Daily Harvest, and will you have to raise another round of capital to achieve those goals?

RD: We have kind of skirted on profitability for the past few years. The new packaging was a huge project that is going to hurt margins for short period, but it is going to bring us into the future. This is our year to really guide the company toward profitability and we’re really excited about it.

FC: What advice would you give prospective entrepreneurs?

RD: The one thing that’s served me incredibly well is sticking to my instincts. There are all sorts of pressures—board pressures, there’s pressure when you bring on new team members who have a different vision. There’s huge pressure from the investing community. It’s so easy to be distracted. And I’m not saying you should be dogmatic. I’m obviously always open to other ideas and everybody should be. But I do think it’s incredibly important to kind of stick to your guns because if I wasn’t so focused on capital efficiency and customer success in the beginning, we would be in a very different position right now.