Why We Invested in Tovala
On a cold day in early 2015, I met David Rabie– yet another eager Chicago Booth MBA student who signed up for my office hours. He pitched a student run angel fund at school.
Over the course of several months, David’s project was confronted with obstacle after obstacle. I was certain the project was dead each time I saw David, but David persisted, and at each visit he had leapt over the previous insurmountable obstacle.
When David requested time to pitch a startup idea, I agreed because he had really impressed me. His idea: a smart steam oven that would cook chef-prepared meals to perfection. I loved the idea, but knew that there is a big gap between good idea and a successful business. Over the course of our next several meetings, David did with Tovala as he did with the project: he made sustained and meaningful progress.
As progress continued, the relationship turned from mentor to potential investor. After David spent months working to refine the product and business, Origin finally made its first investment in Tovala at the end of 2015. Here is a transparent peak into our investment committee discussion:
We learned from our investment in Grubhub that people eat frequently– and millennials are especially willing to spend more for an easier and better eating experience. Food is a gigantic market. The market is so unfathomably large, there are and will be many winners. We like large margins of error.
David had proven that he could execute what he said he was going to do. He recruited a technical co-founder, Bryan Wilcox, who allayed our concerns about hardware engineering.
Instacart had solved the grocery shopping problem. Blue Apron, Home Chef and others took this further, and demonstrated that there is demand from consumers for fresh, pre-measured ingredients to be delivered directly to the home. These companies solve the shopping problem, recipe problem, and make prep easier.
None of these companies had solved the DINNER problem. We suspected and confirmed through diligence that a large number of meal kit subscribers churn. Why? Because preparation and cleaning are WORK. This became apparent when we backed into calculating Blue Apron’s churn.
Tovala solved the dinner problem. Scan and press a button and your meal is ready in 15 minutes. No prep, cooking, or cleanup. Delicious chef-prepared recipes cooked to perfection. Blue Apron is selling measured-out whole coffee beans. Tovala is the Nespresso machine and pods.
Steam ovens are common in commercial kitchens. Wonder why your home-cooked chicken breast isn’t as juicy as the one in the restaurant? That’s because the restaurant is using wet heat. You are busy dehydrating your chicken at home.
When you combine this superior approach with talented chefs who control all the ingredients and the heating cycles, you get a private chef experience at home for cheap. It should be no surprise that the food is fantastic. People who try it are immediate converts.
Why Not Invest?
We invested when the hardware was a hacked humidifier. The food service had yet to be designed and only rudimentary recipes had been created. To be successful, the company had to launch– simultaneously, no less– a hardware business and a food prep business. Both are risky and complicated by themselves, much less together.
We were honestly intimidated by the hardware component. We have little experience investing in hardware. The addition of Bryan on the team dramatically increased the probability of the hardware being a success. But the long engineering cycles and limited ability to update the product as it encounters issues remained a risk. We also concluded that if this risk persisted, there may be options to license the machine and focus on the food.
We also recognized that potential of other food brands producing food under license. Tovala has the potential to evolve into a marketplace.
Initially, the company was going to have grocery stores prepare the food. This meant the food service rollout would be geographically spotty and quality/consistency would be hard to maintain. It would also mean that the company had limits where it could sell the oven bundled with the food service. This risk became large enough that Tovala adopted a model where food was shipped out from its prep center in temperature-controlled packaging.
We look forward to continuing to help David and Bryan build a great and delicious business.
UPDATE: In May 2017, the company smoothly launched the hardware and food service to Kickstarter backers. My previous toaster oven is now decommissioned and Tovala is a critical component of how we feed our family and how we feed ourselves in the office. As of July 11th, you can buy your own oven and meal service on the Tovala website. Read more about Tovala from the WSJ, Inc., Fast Company, CNET, Washington Post, TechCrunch, Chicago Tribune, Business Insider, Tasting Table, and Chicago Inno.
Originally published at originventures.com on July 18, 2017.