In the competitive food and beverage industry, 30,000 new product SKUs are introduced every year, according to Chobani Incubator Director Zoe Feldman. In this episode of Mastering Innovation on SiriusXM Channel 132, Business Radio Powered by The Wharton School, Feldman discussed how the Greek yogurt maker’s startup incubator supports businesses — equity free and with a specific mission. Chobani CEO and Founder Hamdi Ulukaya started it more than a decade ago, Feldman said, to give back to the entrepreneur community. Feldman and team have traveled to 10 U.S. cities in two months to generate interest in the incubator and spoke with, by Feldman’s estimate, about 1,000 entrepreneurs, with an eye to making the sector more diverse and inclusive and also democratizing the global food system.
Feldman has VC experience and an operational and finance background, which is valuable when it comes to the challenging task of narrowing a pool of hundreds of applicants, twice a year, into cohorts of six or eight food and beverage businesses. To be seriously considered for a class, Feldman said, a company has to have a product with “DNNA,” which they define as “delicious, nutritious, natural, and affordable or accessible.” Past groups include Banza and its chickpea pasta, Cannonborough Craft Sodas, and Thaifusions.
An excerpt of the interview is transcribed below. Listen to more episodes here.
Zoe Feldman: As a VC, I looked at 300 deals a year, and I think I got reasonably good because sometimes everything starts looking kind of the same. Term sheets look similar and cap tables look similar. Pitch decks look similar. But this was very, very difficult. And so we pulled in a lot of people at Chobani to help us. We really whittled down from 600 really reasonably to about half that and then we sort of kept cutting in half, cutting in half, cutting in half, and we brought about 100 products for our tasting, which we did with about 40 internal Chobani employees. And then after that, it was very difficult to get from 40 to 20, from 20 to 10, and from 10 down to eight. That was incredibly challenging.
Saikat Chaudhuri: Well, I imagine one of the factors, given what you were saying that you were looking for, is to promote diversity, right? Gender diversity as well as other underrepresented minorities. Did this factor in your decision-making as well?
Feldman: It did in the sense that we over-indexed and that wasn’t necessarily intentional. I’m an LGBT, I identify as an LGBT person, and we’re unicorns in the VC world. Being a woman in VC is challenging enough and now, thank goodness, a lot less unique than it was, but certainly being LGBT is very unusual. So I’ve felt for most of my career, not that I had to find LGBT representation in my industry — because I didn’t and quite frankly I never have — but it was important to me that people knew that representation mattered to us. This country is very diverse and there are a lot of different kinds of people, not just race and ethnicity and gender, sexual orientation. But are you first in your family to go to college? Did you recently immigrate to this country? Are you a refugee? Obviously, very important to Hamdi and to Chobani as I’m sure you’ve read about a lot in the press. So are you from a rural area? Did you not go to college? Are you a veteran? Anything that really was just maybe less likely, especially in the food industry, which is not incredibly diverse, because difference of opinion and perspective is so critical. I saw it in venture for years. You fund what you know and you fund the people that look like you and that’s unconscious.
“A lot of these founders, what they want is just a sense of community.” – Zoe Feldman
Chaudhuri: That’s right. It leads to biases.
Feldman: Bias. Right, so unconscious and conscious biases, and I just thought it’s time to really offer people a seat at the table and give folks an opportunity who may have not been able to have a chance for a variety of reasons, most of which are probably out of their control.
Chaudhuri: Yeah, makes a lot of sense. Now out of this process, can you share with us some of the examples of products that may have come out of this? It might be top secret? Or perhaps from your past experience here?
Feldman: All the companies are public. If you go to our website, which is chobaniincubator.com, you’ll see the prior cohort. So we’ve had, this is our fifth cohort that we’re wrapping up tomorrow. And everything from companies you definitely have heard of and have seen on the shelves like Banza, which is chickpea pasta — those founders are actually upstairs right now talking to the current cohort, thank you, Scott and Brian — to Chloe’s fruit pops to Kettle & Fire. And then some brands that are smaller. So in the current class, we have Afia Foods, Mason Dixie Biscuit company out of D.C. We have Cannonborough Craft Sodas out of Charleston and five other businesses that are really just tremendous. So a lot of them are regionally relevant.
We have a company from Seattle called Thaifusions. That’s a woman named Toi Borthwick who’s in her early 70s. She immigrated to the U.S. She met her husband in Thailand and immigrated to the U.S. And they started their family business in Seattle because she had nowhere to buy fresh Thai ingredients. And she was making her own fish sauce in her backyard. And that’s her and her husband and their son, Max, who founded the business. And my whole team fell in love with her, and they have a partnership with Williams-Sonoma.
And you look at why people create these businesses, and you just think they miss the taste of home or they want to give back or they want to support their communities, and it’s pretty extraordinary. So the number of products, at this point we have 37 companies that have been part of the incubator and a fun fact is the total enterprise value of these businesses is high and the amount of capital is $60 million. I think it’s reasonable to say the enterprise value is somewhere around $250 million to $300 million.
Chaudhuri: Yeah, quite a large number. Now at what point do you back off? I mean to what extent do you get involved in scaling, for instance, these businesses? Where is the point at which you let them take over? Especially because you don’t have equity in this, so you may continue supporting it, but you may be looking for the next set of ventures that you want to support?
“I think it’s reasonable to say the enterprise value is somewhere around $250 million to $300 million.” – Zoe Feldman
Feldman: I literally got a text message at 11 o’clock last night from somebody from a class from two years ago. I wasn’t even here. So it’s never going to go away, it never ends. And what Hamdi always says, and I love, love, love, love what Hamdi always says, “You’re part of the Chobani family now.” And he really means it. We’ve had the SVP of sales, he still talks to companies from the first cohort from two and a half years ago. Everybody has everybody’s email addresses. We have Slack channels. Thank you to whoever invented Slack because it’s literally made my life infinitely better and easier. It’s just they’re remarkable. And a lot of these founders, what they want is just a sense of community. And what Hamdi and Peter [McGuinness, chief marketing officer] want to give back to these founders, which I’ve seen with my own eyes, I wouldn’t have believed it honestly if I hadn’t seen it and lived it for the past nine months, it’s unique and it’s extraordinary because he really does open up all of Chobani. If somebody wanted to go fly to Idaho tomorrow and go do a plant tour for some reason, they could do it. What I’ve told this class was, I think to me it seems like we’re offering you the keys to the kingdom and all you have to do is open the door.
Chaudhuri: I think that’s fascinating and also impressive in so many different ways. Now let me ask you, you sound like you have a very good process and a fairly clear idea of what you’re looking for. You move through this even though there’s obviously that organized chaos element to it and it’s driven by highly motivated people. Where do you come across challenges? What are some of the things which are difficult about realizing the potential of these entrepreneurs or their ventures?
Feldman: Well, the industry in general is very challenging. There’s been an influx of capital over the past really five years. It’s gotten kind of crazy, and I don’t know what the market’s going to do, not that any of us ever know, but I’m a bit nervous about that in the next six to nine months. So I think for these companies, just the amount of competition on the shelves. There are 30,000 new products SKUs [stock keeping units] being introduced in F&B every single year.
About Our Guest
Zoe Feldman is the current director of the Chobani Incubator, a program that supports companies taking on broken food systems to bring better food to more people. In addition to investment, the Incubator gives startups access to the Chobani network and expertise in order to scale up operations and achieve significant growth.
Prior to Chobani, Feldman spent five years working in venture capital, most recently as the managing director of two different funds focusing on the CPG F&B, sustainable agriculture/ag tech, and hospitality verticals, where she helped shepherd $35mm of capital into the sectors. Prior to the VC world, Feldman spent eight years in a variety of roles at PepsiCo at its global headquarters in Purchase, New York. She has been working with industry entrepreneurs and seasoned executives alike for over a decade to democratize “better food for all.” Feldman is a big believer in building cross-functional communities, in the importance of open communication, and in working together to make the food system a more equitable, accessible and dynamic place. Feldman has an AB from Smith College, an MPH from Columbia University’s Mailman School of Public Health, and an MBA from NYU Stern School of Business.
Mastering Innovation is live on Thursdays at 4:00 p.m. ET. Listen to more episodes here.