For New York City Food Start-Ups, Options Abound

Like a lot of New York career-changers, Jordan Gaspar was weary of the corporate world. In 2009, she abandoned a successful career as a corporate lawyer to start a catering company that served heirloom tomato gazpacho and Indian-spiced chicken skewers to well-heeled clients. Over time the fledgling venture would inspire her to help others step it up from grassroots to cooking with gas.

At the time, the food start-up scene was taking off in NYC — markets like the New Amsterdam Market, Brooklyn Flea and Smorgasburg were giving hundreds of new food entrepreneurs a chance to test out their dreams, and a new website called Kickstarter was helping them reach out to fans for financing. Customer interest in small-batch, locavore food was soaring. And across the country, young brands that embodied the natural ethos were being snatched up by deep-pocketed corporations looking to tap into the trend.

What was missing, figured Gaspar, was something to help the most promising of these new food ventures get to the next level. So along with cofounder Lauren Jupiter, a former consumer products investment banker, she recently founded AccelFoods, an “accelerator” designed to turbocharge promising young food brands. AccelFoods invests in up-and-coming food and beverage brands and offers mentoring from experts including Ed Levine and Tom Colicchio.

“We see ourselves as the next step,” says Jupiter.

She and Gaspar are not alone. Their accelerator is just the latest addition to a comprehensive ecosystem that has been developing in New York to nurture homegrown food ventures and fuel their growth. If the early aughts were all about hot new food start-ups, the second decade is about making them stick like spaghetti on the wall. And as more viable start-ups emerge from this system, investors — who once only had eyes for technology — are beginning to take notice.

“It’s never been a better time to be a food entrepreneur,” says Rachel Hofstetter, the author of Cooking Up a Business, a new book that chronicles the ups and downs and eventual triumphs of 10 food start-ups.

Recently, angel investors have begun swooping in to dispense dollars to cash-hungry food start-ups. Joanne Wilson, a prominent New York angel investor (and wife of Union Square Ventures’s Fred Wilson), has invested in several local food start-ups, including Kitchensurfing, an online chef-for-hire marketplace; pickle pioneer Rick’s Picks; and online indie food retailer Mouth. Toan Huynh, an angel investor who founded a successful “cloud computing” company, now invests in food start-ups, including New York Distilling Co., started by Tom Potter, a cofounder of the Brooklyn Brewery. She and her brother Ken have even bootstrapped their own start-up, Saucey Sauces, which makes a line of Vietnamese jarred sauces based on their mother’s recipes.

“There’s a huge appetite for food start-ups,” says Huynh, a Manhattanite.

Meanwhile CircleUp, a two-year-old website that connects early-stage consumer brands with wealthy investors — as well as potential acquirers such as General Mills and Procter & Gamble — has been making waves in the food space. Among the food companies that have struck gold on the site are Brooklyn-based Little Duck Organics, maker of natural snacks for kids, which raised close to $900,000 on CircleUp last year, and Rick’s Picks, which has hauled in almost $800,000 on the platform. CircleUp, which is based in San Francisco but has a New York office, is itself backed by heavy hitters including Google Ventures and New York’s Union Square Ventures.

Helping whet investors’ appetites are high-profile deals such as the French food conglomerate Danone’s recent stake in Happy Family — a Big Apple baby food brand started by a frustrated mom in 2006. Danone paid an estimated $200 million for a 90 percent stake in Happy Family, which has grown from its original Happy Baby line of squeeze-pouch organic baby food to products for kids and adults. (May we suggest a name change to Ecstatic Baby?)

The corporate quest for fresh brands — and the payday they can bring — is creating new opportunities for food-savvy investors and entrepreneurs. “There is so much focus on innovation and the emergence of new brands,” says Gaspar of AccelFoods. “The time was right for this to come together.”

The program is modeled on accelerators such as Tech Stars and Y Combinator that have become sought-after launching pads in the tech world. With their first incoming “class” of innovative start-ups — which includes Exo, the maker of cricket flour protein bars — Gaspar and Jupiter hope to help create the food world’s Next Big Thing.

In doing so, they build on the foundation of incubators, training programs, shared commercial kitchens and networking groups that have sprung up to help would-be food moguls go from idea to commercial reality. The city’s tech start-ups have long had access to such perks, but the arrival of food-focused facilities marks a new era for New York’s food scene.

Looking to quit your boring banking job and turn your baking skills into a new career? You can join one of several new Meetup groups, like Gourmet Startups (93 members) and Lean Food Startup (182 members). SlowMoneyNYC, a local group that facilitates funding for local, sustainable food and farming ventures, has almost 800 members in its Meetup.

Need hands-on training? Fare Trade NYC, a community and support network for food producers, offers an “Entrepreneur Launch” program designed to help budding entrepreneurs go from concept to store shelves in 14 weeks.

Urban farming more your thing? Enroll in Just Food’s Farm School NYC.

Food entrepreneurs face unique challenges. While the city’s tech start-ups can crank out some code and then concentrate on marketing their app, food businesses have to constantly whip up fresh batches of their perishable goods. And they can’t operate out of dorm rooms or garages, like so many hackers do. Food production by law must take place in kitchens that meet strict city health codes — a costly prospect, to say the least. Building an up-to-code kitchen space can run into the tens of thousands of dollars — out of the question for most budding bread or butter makers. Then there’s the question of distribution: How do you get your product onto store shelves and into customers’ kitchens?

The emergence over the past several years of communal kitchens and culinary incubators that dispense business advice has taken the sting out of starting up by letting soup makers and muffin bakers share costs with soda savants and kombucha crafters. In the past few years, incubators have proliferated across the city: from the Entrepreneur’s Space in Queens to City Cookhouse, a commercial kitchen, and the Union Theological Seminary’s brand new Food Lab and Kitchen Incubator in Morningside Heights.

“We’re a proxy for capital, for that angel investor,” explains Jessamyn Rodriguez, the founder and CEO of Hot Bread Kitchen, a pioneering bakery and shared kitchen space in Harlem that also runs a city-funded incubator program called HBK Incubates. “We help them put off the financing issue for two to three years until they can grow the business and prove the idea.”

Rodriguez knows firsthand how far a helping hand can go. When she first left her job at the United Nations to start Hot Bread Kitchen, a bakery that trains low-income women in commercial baking and equips them for careers, she worked out of a shared culinary space in Long Island City called the Artisan Baking Center. Today, with the backing of the Queens Economic Development Corp., the center has become the Entrepreneur’s Space’s Organic Food Incubator.

“Our experience there helped us understand what our businesses needed to succeed,” says Rodriguez.

Now she pays it forward, at HBK Incubates in Harlem, complete with a 3,000-square-foot gleaming commercial kitchen, where selected food start-ups can use deep fryers and convection ovens — and receive business guidance from HBK’s in-house mentors. To date, 65 small food businesses have fledged through the program. Success stories include Taste of Ethiopia, whose founder, Hiyaw Gebreyohannes, went from idea to national distribution in 18 months.

Another notable alumnus is Hella Bitters, an artisanal bitters company founded in 2011 by three friends: Tobin Ludwig, Eduardo Simeon and Jomaree Pinkard. “Renting even a modest kitchen was prohibitive,” says Ludwig, who started out infusing bitters in Mason jars as a hobby. Pinkard, a Harlem native, applied to HBK Incubates, and they were accepted into the program.

At HBK Incubates, the trio not only found a commercial kitchen with space enough for 35-gallon barrels, but a community as well. They made valuable connections: They were introduced to Whole Foods, which ended up carrying the cocktail-ready Hella Bitters, and they scored an invitation to the Fancy Food Show — an annual confab that draws 18,000 attendees, mostly wholesale buyers looking to place big orders of new products.

“It was a total blessing,” Simeon says of HBK Incubates. “We owe a lot to them.”

Flush off a batch of new orders from the Fancy Food Show, the Hella founders have moved into bigger digs at the Organic Food Incubator in Long Island City, where they’ve installed 550-gallon steel tanks and now rub elbows with a new set of entrepreneurs, including CakeBitesNYC, Kombrewcha and the Splendid Spoon.

“The whole ‘It takes a village’ mentality holds so true for us,” says Ludwig.

Communal kitchens and incubators certainly make life easier for a food start-up. “Before them,” says Simeon, “companies were forced to make their own way through the woods.” But in many ways they are just a new twist on an old model: After all, cooks have shared ovens for centuries. When Simeon was growing up in Berkeley, California, for example, his mother rented oven time from a local baker for her flan company.

But accelerators like AccelFoods and crowdfunding sites like Kickstarter and CircleUp represent a new game for edible-minded entrepreneurs. Indeed, New York–based website Kickstarter — which allows individuals to list creative projects and solicit donations in return for perks or products — has probably done more to fuel the food business boom than any other force. Since it was founded in 2009 by Yancey Strickler, Charles Adler and Perry Chen, Kickstarter has helped more than 2,000 bakers, makers and crafters raise a total of $30 million to launch their food ideas.

Kickstarter and similar sites such as Indiegogo allow entrepreneurs to do more than raise seed money: They also allow them to test their ideas and gauge response. The Hella Bitters founders, for example, raised a modest $2,300 on Kickstarter in 2011 to fund what was then a hobby. “Without that proof of concept,” says Simeon, “we may have never made the leap and pursued bitters as a real business.”

Accelerators can kick those aspirations into high gear and attract professional investors. And food ventures have gained a growing presence in such programs: Plated, a New York–based start-up that delivers the precise ingredients needed to make a meal direct to customers’ doors, went through the Tech Stars program. In January, it closed a $5 million “Series A” round of funding from venture capital investors. HealthyOut, a start-up that filters the city’s vast takeout options for healthy options, is an alum of New York’s Blueprint Health accelerator program. The company has subsequently pulled in $1.2 million from a group of prominent angel investors.

AccelFoods, however, is one of the first accelerators to focus exclusively on food. The company has raised a $4 million fund to invest in the start-ups that enter its program — an initial investment of up to $50,000 with a potential follow-up round of up to $200,000. In return, it takes an equity stake of up to 9 percent in the company — a huge bite for some entrepreneurs, to be sure. Like Tech Stars and other tech accelerators, the food ventures take part in a six-month boot camp that culminates with a demo day in front of professional investors.

Also like Tech Stars and its ilk, there are plenty of industry luminaries involved as mentors and partners. In addition to Colicchio and Levine, they include Fairway Markets scion Dan Glickberg, an executive from United National Foods, the leading distributor of natural and organic products, and dozens of industry experts. And partners such as Fresh Direct and JetBlue have signed on as strategic partners.

Observers say AccelFoods and other programs are welcome additions to the market. But some caution that they’re not necessarily for everyone.

“Entrepreneurs should be aware that very few of these new accelerators or incubators have a proven track record of success — yet,” says Derek Denckla, the co-chair of SlowMoneyNYC, a local food finance nonprofit. “Fewer still,” he adds, “have an abiding concern for social and environmental impact.”

Still, it’s inevitable that a growing number of NYC food start-ups will go on to national fame, and the city’s accelerators and incubators can help them get there. “There’s a sense that this is just the beginning of a new era,” says Jupiter.

That thwacking sound you hear might just be start-up spaghetti sticking to the wall.

Ready to go pro? Find a resource guide of the city’s incubators, accelerators, funding programs and other resources for food entrepreneurs here.