How Launching Freshly Outside the Venture Capital Hubs Led to Greater Success in the Long Term
By
Copper, climate, cotton, citrus and cattle: that’s what Phoenix is known for. The largest city in Arizona has not historically been a hotbed of activity for startups.
But that’s where Freshly was born and, in retrospect, it worked to our advantage. Far removed from the venture capital flowing into Silicon Valley and New York City, our unrealized dream of investments in Freshly’s early stages — however challenging at the time — ultimately molded us into the company we are today.
I came up with the idea while trying to solve my own problem: I wanted to eat better without needing to do any of the work.
We established Freshly in the back of a restaurant I co-owned with my parents: I was in the worst shape of my life, stuck in an endless cycle of sleeping poorly and feeling sluggish. For advice, I turned to Dr. Frank Comstock, a nutrition-obsessed doctor and father of Freshly’s co-founder, Carter Comstock. And he didn’t mince his words: “You eat awfully — of course you’re heavy and don’t feel great.” So we hacked together a solution with the help of chefs at my family’s restaurant.
Incorporating Dr. Comstock’s guidance on nutritious ingredients, the chefs would prepare a week’s worth of amazing meals that I would take home in to-go containers that I could quickly heat up and eat. There was no shopping, preparing, cooking, or cleaning; everything I needed to be healthier was in those containers with the help of a microwave. Sixty days later, I was 20 pounds lighter and feeling better than I ever had in my life. That’s when people started asking me to help them.
A light bulb went off in my mind, paving the way for the creation of a company dedicated to making it unbelievably easy to eat healthy.
Relying on our Network
From that point forward, Carter and I did everything you could imagine and pitched anyone who would listen to us to invest in our company. I think we averaged 1% success on any response, while the “I’m interested” responses stayed stuck at 0% for a long time. While in the trenches, we would have done nearly anything to have a venture capitalist give us seed funding, but in hindsight, not investing in Freshly was probably the best move for our business at the time.
We eventually turned to friends and family to help us get off the ground. Despite being a capital intensive business, we ran it extremely thin and raised only $400,000 over two years. The funds came from one family member, one close friend, and one of our first customers, all of whom, to this day, are our biggest fans. Our investors were in no way reckless, and they were putting hard-earned money into Freshly — the loss of which would have had a severe impact on their lives.
Despite the hardships, that period not only taught us to spend wisely but also to never consider failure as an option.
That knowledge always served as fuel, pushing us to work ever harder and never accept “No” or “We can’t” as an answer. While we’re both already fairly persistent by nature, this experience made us that much more focused and determined.
Bootstrapping the Business
We stretched every dollar as far as it could go — we didn’t pay ourselves for the first two years, racked up personal debt, drained our savings and lived on less than $5 a day for three months, eating eggs and beans three times a day, while constructing our first kitchen in Phoenix. (Trust me, no one was happier than Carter and I when the kitchen opened because we could eat Freshly meals again).
During our first year of operation, we worked 16 hours a day, six days a week. I can honestly say I never asked anyone to put in those hours — that was just what it took to get the job done for our customers, and everyone knew it. We were all in the office because we believed we could build a company that was going to change the way people ate food. We also knew, however, that it was only going to happen one day at a time and it definitely wasn’t going to be easy.
So we worked as a unit, taking ownership of our areas of expertise and focusing on getting a little better every day. There was no pointing fingers, no complaining, and no job too big or too small for anyone on the team — we were all cooks, dishwashers, customer service representatives, delivery drivers and cleaners. We all agreed to do whatever it took to deliver on Freshly’s promise of eating healthier made easier to our customers.
Our bootstrapping to get Freshly up and running paid off when Highland Capital Partners led our Series A in 2015, which is right around when we decided to relocate our headquarters to New York City, while maintaining our original kitchen in Phoenix. A year later, Insight Venture Partners led our Series B. When we did our secondary round of funding, however, it was not founders selling existing shares. Instead, Carter and I begged our first three investors to take a little money off the table. Despite their objections, we practically forced them to, in turn helping them more than double their original investments with cash returns all while retaining over 90% of their shares.
Both Carter and I recall that as one of our proudest moments and the first mark of success for Freshly. Our trio of original investors believed in us when all the odds told them they shouldn’t have and their support — both financially and emotionally — allowed us to get there. No matter what happened going forward, we felt proud to have delivered on a great investment for them. That fiduciary responsibility to our investors and culture of careful spending has been permanently embedded into the fabric of Freshly.
Developing Authentic Values
We didn’t formally write down our core values until 2018 — after a Series C round led by Nestlé—and when we did, it was actually fairly easy to agree on them. Having lived them for so long, they were already in the DNA of every Freshly employee: Mission, Improvement, Customer, Respect, Ownership a.k.a M.I.C.R.O. The little things we do everyday — from the way we treat each other to how we approach our work — help Freshly make a huge difference in the lives of our customers. It is how we have built and run this company since the day we delivered our first meal.
One of my favorite lines from Freshly’s Core Values Manifesto is as follows: Being transformative and disrupting an industry takes heart, tenacity, and a touch of insanity. From my point of view, there’s never been a truer statement.
When we finally earned the interest of investors, we didn’t look at them as checkbooks. Rather, we viewed them as partners who were going to help us continue building our business, with the goal of making it easier and more affordable to eat better. And we looked for investors who embodied those same principles that make us, us.
Freshly wasn’t built on money, but on the core values we’ve lived since day one.
Looking at the company we’ve evolved into today, I am proud not only of the investors we brought on to Freshly, but our rapidly growing team because of the heart, tenacity and touch of insanity that is present in each person here. Arizona may not be a hub for venture capital, but our origins and setbacks taught us critical lessons and helped us prioritize being a responsible and meaningful part of society — not just the VC world. Freshly is better off because of where we started, and what we went through to get here.
