ZeroCater Hits $100 Million In Sales With Only $1.5 Million In Funding
This past Wednesday I read an article on CNBC announcing that ZeroCater had surpassed $100 million dollars in revenue and now serves tens of thousands of meals per day. With all that is going on in the foodtech space, this may just seem like another startup success story, but one important detail makes the ZeroCater story different: CEO Arram Sabeti built his four-year-old, $100 million dollar company with no venture capital and a mere $1.5 million in funding.
Last month, in my article Healthy Corporate Lunch Plays A Big Role As Online Food Delivery Ordering Overtakes Phone Ordering, I described the growth in the healthy business lunch sector. Companies like Zesty, EatClub, and Farm Hill are doing very well, but last week’s news seems to puts Arram Sabeti and ZeroCater ahead of the pack — and that on a bootstrapped budget. As an entrepreneur, who bootstrapped my own foodtech startup to over $100 million in revenue, I was intrigued by ZeroCater’s success story, so I reached out to Sabeti to learn how he achieved this huge milestone in just four years. Here is how our conversation went.
Zalmi Duchman: I read that you worked at a Ben and Jerry’s store shortly before you launched ZeroCater. Can you tell me how someone goes from working a nine-to-five retail job to running a $100 million dollar company in less than four years?
Arram Sabeti: I’ve worked a lot of odd jobs: I’ve worked in a machine shop, I’ve been a security guard, I’ve even worked in a clean room assembling tiny medical devices under a microscope. I used to joke with coworkers at these jobs that “I’m only doing this until I decide to start a billion dollar company.”
I’m not sure why, but from my earliest memories I always assumed I’d start a company. That intention just needed a nucleus to crystallize around, and for me that was reading about what was happening in Silicon Valley — specifically Paul Graham’s essays. That’s why I moved to the Bay Area. I only worked at Ben & Jerry’s for two weeks because it was the recession and I was broke.
Duchman: Clearly you had the vision to jump into corporate lunches and catering at the right time. Right now there are many players in the space with big pockets, such as Grubhub, EatClub, Zesty and more. Without raising large capital, how do you plan to compete and stand out as more and more offices move to these platforms?
Sabeti: ZeroCater was the first company in this space, and I remember being pretty worried when the first couple competitors popped up. Some time later a friend asked me “Whatever happened to those competitors you were worried about?” I hadn’t thought about them in months. “Oh, they shut down,” I told him. In Y Combinator they tell you that companies are rarely killed by competitors. It’s far more common for companies to implode.
Venture Capital would be a very different industry if it was trivial to convert money into success. Though we’re the least funded, we’re also the biggest company in our space by a significant margin. Our competitors haven’t had much success for the same reason that no one thought to start this company earlier: it looks easy from the outside, but it’s actually incredibly complex to manage; especially at scale. The stories we hear from people that’ve tried our competitors all go roughly the same: lots of promises, little follow through.
Duchman: Out of all the food tech stories yours is really the only one without large institutional funding. As an entrepreneur who has bootstrapped your way to $100 million in revenue, what is one thing you can point to where you know if it didn’t go your way you would be out of business, or maybe worse: that you’d be beholden to institutional investors?
Sabeti: I had about seven thousand dollars when I started ZeroCater. Cash was tight for the first eighteen months and I was often close to running out of money.
They say startups don’t get easier, and I’ve found that’s mostly true, with the exception of when I moved away from living so close to the edge that losing a single customer would have meant not making rent. Those were the worst times by far, and everything since has been relatively easier.
Duchman: As an entrepreneur who is not only building his own business but also bringing much needed revenue to many small businesses around the country, how much does that affect your job? I mean not only do you need to worry about your 100 employees who count on your for a paycheck, but I’m sure many of the caterers and restaurants you deal with are small businesses growing on the back of ZeroCater. Can you speak about how you handle this responsibility?
Sabeti: It comes down to having people you trust. That might be a cofounder, or anyone capable that cares as much as you do. I’m always looking for an ownership mentality when I interview. I’ve been lucky to surround myself with people who care deeply about building something insanely great. In our company values we call it “being a beast.” If you can’t find those people you will not survive.
It’s true that the mom-and-pops we work with rely on us, but that’s one of the gratifying things about working at ZeroCater. We threw a party for our vendors recently where I met some of them for the first time. I got into a conversation with the owner of a taquería. His accent was a bit strong and I was having trouble understanding him. Halfway through the conversation he pulled out his phone and started playing me a video of him and his family in a hot tub. I was incredibly confused until he said, “This is the first vacation we’ve been able to take in ten years, and it’s because of ZeroCater.” My heart grew three sizes.
Duchman: I can tell you first hand that it’s one thing to get to $100 million in sales over a five or ten year period and a totally different thing to be running a company doing $100 million in revenue a year. Are you happy if in the next five years you have a nice business generating lifestyle cash for you, or is this something you to make even greater than it is today?
Sabeti: Actually, given the nature of startup growth curves we’re not terribly far from $100 million per year. Most of the sales we’ve done are recent.
When I was raising our seed round four years ago, and we were doing a tiny fraction of the sales we’re doing now, I met with a VC who suggested I turn it into a lifestyle business. To be honest, I was offended for reasons I didn’t fully understand at the time. It felt like he was selling me short.
My goal in life is not to be comfortable. The world is still far from what it should be, and I feel a responsibility to see what difference I can make. I admire people like Elon Musk and Larry Page. After achieving massive business success they asked themselves what the world needed most. Larry is trying to organize the world’s information and cure aging, among other things. Elon might be singlehandedly responsible for making us a multi-planetary species.
I don’t think I’m particularly talented, but one of the principles I operate under is “Assume you can.” People are capable of vastly more than they think — if they’re willing to plan a little and work hard for years at a time.
Duchman: I believe it’s very important to have a co-founder. Do you have a co-founder?
Sabeti: I don’t have a cofounder, though I agree with you. I had a friend who was quitting his job at Facebook to start a company. He told me “Everyone says I should have a cofounder, but you seem to have done okay.” I said something like “No. Stop. Don’t.” Much of what I did was unnecessarily difficult and not worth emulating.
Duchman: What company using the ZeroCater platform has had the most success with you?
Sabeti: I don’t know about the most success, but I’m particularly proud of having fed Jon Stewart and Stephen Colbert and their staffs. They’re incredibly nice people. We feed some of the most amazing companies in the world, and I wish I could call them all out here.
Duchmn: ZeroCater offers all types of meals, but with companies really thinking about preventive health now since health insurance premiums are so expensive, what trends do you see? Can you envision a future when a company pizza party is no more? Or maybe only whole wheat pizza if the company is paying the bill?
Sabeti: I’m health conscious for a practical reason: I need a lot of energy to do my job; so I eat well, and do CrossFit 3–4 times a week. We’ve always been focused on creating balanced, healthy meal plans, so that hasn’t changed.
One danger of the ‘diet’ mentality is that there’s a fair amount of evidence that it doesn’t work. People who make resolutions to eat healthy often end up oscillating between extremes of eating rabbit food and junk. Balance and moderation are important, and an occasional pizza slice goes a long way in helping make long term changes. This is why we’ve focused offering a greater variety of meals than anyone.
Duchman: What is one piece of advice you would give an aspiring entrepreneur looking to start a business today?
Sabeti: Don’t expect it to happen unless you’re taking concrete steps toward making it happen.
Duchman: Do you believe we are in a food tech bubble?
Sabeti: Anyone that can definitively answer questions like that is probably better off running a hedge fund, but no, I don’t think so. Food is the biggest industry in the world at $1.6 trillion dollars. Software is eating the world. Naturally, it’s going to eat the more information driven businesses first: atoms are a schlep, but arguably the larger opportunity.
Smart entrepreneurs like Sabeti can succeed and build fast growing startups with very little outside capital. Entrepreneurs who are passionate, who work with trends and anticipate what’s coming have an advantage over even the most well funded companies. The story of Sabeti and ZeroCater should inspire all entrepreneurs looking to build their own startup success.
You can find me on Twitter (@ZalmiD) and learn more about my work at www.ZalmiD.com
Follow Zalmi on Forbes
Originally published at www.forbes.com on August 24, 2015.