Startups in the connected cooking device space hoping to serve up success may have some trouble getting funding.
Cooking The Numbers
Global funding in smart food and drink prep devices increased by 10 times to $33.66 million from 2012 to 2015. The category then surged to nearly $150 million in 2016, according to Crunchbase data. However, investments haven’t kept up. So far in 2017, just $15.75 million has made its way into smart food and drink devices.
In September, San Francisco-based Juicero shut down after hauling in a total of $118.5 million in venture since it was founded four years prior. The self-described inventor of the first home cold-pressed juicing system raised $98 million of that funding haul in 2016 alone. That amounted to about two-thirds raised by the entire space for the year. A slew of investors, including Kleiner Perkins Caufield & Byers, Google Ventures, Thrive Capital, Two Sigma Ventures and Artis Ventures, pumped money into the company. (Two Sigma and Artis Ventures did not respond to requests for comment.)
Then, in October, Mountain View-based tea infuser startup Teforia also shuttered after raising $17.1 million in funding from investors such as Translink Capital and Upfront Ventures. (Upfront Ventures declined to comment.)
But it hasn’t been all doom and gloom in the sector. In February, sous vide Kickstarter darling Anova Culinary announced that Swedish appliance giant Electrolux had agreed to purchase the startup for $250 million. Anova’s mission is to build the Anova Kitchen, which it described as “a kitchen where devices are precise, dead-simple to use, affordable, and connected in a meaningful way.”
Not Well Done
There’s a number of theories as to why Juicero and Teforia didn’t survive, but the price point of each startup’s products likely played a central part.
Juicero’s second-generation juicer sold for $700 before the company cut the price to $400 back in January. By July, the CEO conceded it was still “too expensive.”
Teforia — which had been dubbed the Juicero of tea — was selling its internet-connected tea brewing machine for $1,000.
Some categories are doing better than others. Beer-brewing startups like PicoBrew, for example, are still in the game despite a $549 price point. That Seattle company has raised about $15 million.
So what makes one smart cooking device company more likely to succeed than another?
Mike Smerklo, Co-Founder and Managing Director of Austin-based Next Coast Ventures, believes “a pretty significant change in the way consumers interact in their home and their kitchen” is currently taking place.
His firm was one of a number of venture capital companies that invested in Newark, Cali.-based Brava Home’s undisclosed Series B round in May. The startup – which vaguely describes itself as an IoT and domestic automation company that integrates technology and design to enable joyful experiences in the home, starting with the kitchen – also raised $12 million in September 2016.
“Though it’s super early, Brava is following a model that we think will be successful,” Smerklo told Crunchbase News. “They’re working to build convenient, reliable connected cooking devices and bring in aspects of social engagement over time.”
Smerklo believes the cooking industry is ripe for disruption.
“When you think about how you cook today, it’s largely been done with an oven or a grill or a recipe in a way that hasn’t changed much in the last 50 years,” he said. “But now you can drive temperatures up and down remotely and do a number of things that could not be done before.”
For the mass market to get excited about a smart cooking device, Smerklo believes the product needs to be a few things: reasonably priced, convenient and offer a differentiated experience. One point of differentiation could be increased social engagement, such as interactive cooking classes through your smart device.
“Could you be sitting around a cooking device and taking a cooking class, or getting recipe tips,” he said. “ Those things offer a significantly different experience than me sitting in my kitchen cooking by myself with a cookbook.”
But some are doing well, he points out, such as Seattle-based ChefSteps, which says it’s on a mission “to help people cook smarter” via its website and companion app.
“It helps when companies can provide a product that a consumer sees as providing value for the amount of money they’re paying,” he told Crunchbase News. “And that presents a new way of cooking.”
He agrees with Smerklo that building and tapping into large communities is crucial. ChefSteps, he said, created its own community with cooking videos and then was able to sell into that community.
“Longer term, there’s a lot of innovation coming down the pike,” he said. “In Europe, they’re creating entirely new cooking devices but that hasn’t been brought down to the consumer price point in the U.S. yet.”
Both Smerklo and Wolf agree that Juicero’s problems stemmed from more than its high price points. It was also a product that didn’t appear to do anything very life-changing or spectacular.
“Plus, they kept the consumer captive in their ecosystem,” Wolf pointed out. “They might have had more success if they had opened it up to other people and partnered with say, Dole.”
In the case of Teforia, it started to see competitors marketing the same product at a lower price point, according to Wolf. That became a problem.
Ross Blankenship, managing partner and CEO of Dallas-based venture capital firm AngelKings.com, believes another issue with these types of companies are that many are just building one-off products rather than a platform from which other people can develop.
“People can figure out how to squeeze juice themselves so when needing to cut their budget, an expensive juicer might be considered an unnecessary item in their lives,” Blankenship told Crunchbase News. “But if you can build a platform that’s sustainable and that can weather a storm such as a recession, then you’ll have more success. Founders are thinking too short-term, and saying, ‘Look at my sexy product.’ But they need to think about how they are still going to be in existence 10 or 20 years from now.”
Whether investors continue to bet on this space remains to be seen. In the meantime, it’s clear that startups need to work harder to fulfill bigger needs in the kitchen.