Huge congratulations to Michael, Carter and the team at Freshly who we’ve been fortunate to back since their earliest days
Freshly Inc. announced that it has been acquired by Nestlé USA. The deal values Freshly at $1.5bn, including potential earnouts contingent to the successful growth of the business. This transaction was signed and closed on October 30th, 2020.
We’ve been fortunate to back them from their early days and we would like to take a moment to look back on our journey together.
We first met Michael Wystrach and his co-founder, Carter Comstock in 2015 when they had first started Freshly and were raising their Seed round. Over the past five years, it has been incredibly exciting to watch the company grow and develop from a small commissary in Phoenix, Arizona into the largest ready-to-eat meal subscription service in the United States of America.
From the very beginning, we were captivated by their passion and vision to provide people everywhere with fully prepared, nutritious meals that make it easy to eat healthy food. Both founders were busy professionals who were motivated by their own personal experiences of trying to find a way to eat healthy while not spending hours shopping and in the kitchen. So, they started Freshly to bring healthy and wholesome meals to busy people in the smallest towns to the largest cities.
While we believed in Michael and Carter, we also saw the opportunity that Freshly had to create a new market category, which they could capitalize on by using a “direct to consumer” business model, which had been successfully used by Dollar Shave Club, another White Star portfolio company. While many food companies delivered the emerging “grocery box” model, our thesis was that people were getting so busy that ready-to-eat food delivery where the customer did not have to take time to prepare anything was more compelling in the long run.
We knew that Freshly would have mass-market appeal and were not surprised when the business quickly took off. As the company rapidly grew, they moved headquarters from Arizona to New York, and for a time operated from our office in midtown following the initial seed investment we made in February 2015. Soon after settling in NYC, and off the back of incredible execution, it did not take them too long (4 months later) to raise a $7m Series A led by Highland Capital. We also increased our stake in this round and wrote more about that decision in a blog post HERE.
The pivotal moment came in early 2016. Freshly was going full steam ahead and needed additional runway before raising its Series B. Our partners, Eric and Jean-Francois flew to visit Freshly’s first food processing facility and saw first-hand the huge potential business moat that was underpinned in everything Michael and Carter are leading. The facility was working around the clock to fulfill the skyrocketing demand, utilizing several cooling trucks parked outside to improvise for lack of additional storage. A new facility had just been secured to move from a 10,000 sq. ft facility into a 60,000 sq. ft facility in Phoenix, and Freshly needed to start building the new site very quickly.
Following the visit and seeing the exploding demand from customers across the West Coast, we did not hesitate to lead a $3m Series A extension for the next stage of the company. Several months later, Freshly raised a $21m Series B led by Insight Venture Partners with re-investment from each Highland Capital and White Star Capital, and we watched the company expand across America, triple in size year-over-year and improve on all metrics.
Our relationship with Michael and Carter has evolved beyond Freshly. They’ve become great friends to White Star while serving as mentors and advisors to other direct to consumer founders in our portfolio, like Butternut Box, an up and coming fresh dog food delivery company in the U.K. And as fate would have it, White Star met one of its Partners, Nick Stocks, through the work we did in Freshly’s Series B round. It seems like Freshly is really the gift that keeps on giving ☺.
In June 2017, capitalizing on its success, and fast growth, Freshly successfully raised a $77m Series C round led by Nestlé SA, with again the re-investment of all previous investors into the financing round. In addition to our direct investment by our first fund, we were able to provide the opportunity for our Limited Partners to co-invest directly in Freshly through various Series C extension rounds, completed in 2018 and earlier this year, enabling them to be part of this amazing growth story and realize substantial returns in excess of their Fund I investment.
Freshly is our second billion dollar plus exit in the direct-to-consumer sector after Dollar Shave Club, which was acquired by Unilever in 2016, and a 7th exit out of 18 portfolio companies in Fund I. In total, we invested 10% of White Star Fund I in Freshly between Seed and Series C, resulting in multiple of 12.2x our investment with an overall IRR reaching 65%.
We congratulate the company on this major milestone and are overjoyed to have been a part of it!
Check out our recent Foodtech deep-dive largely inspired by our exposure to the space through our investment in Freshly. In it, we explore the landscape of products and services across various subsectors, from online groceries and food delivery to next-gen food and kitchen tech. We are excited about not only the growth of the space in general but also anticipate other great stories like Freshly to start making headlines.
If you are building anything in the Foodtech space, please feel free to get in touch with firstname.lastname@example.org
About White Star Capital
White Star Capital is a global multi-stage technology investment platform that invests in exceptional entrepreneurs building ambitious, international businesses. Operating out of New York, London, Paris, Montreal, Toronto, Tokyo, Singapore and Hong Kong, our presence, perspective, and people enable us to partner closely with our Founders to help them scale internationally from Series A onwards.