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Systems Innovation in Food

Systems Innovation in Food


WILL ROSENZWEIG: Everyone and
welcome to edible education. This is our 11th class meeting. If you’re just
coming in I’d love it if you’d sit-in the front here,
just to fill in the seats. It just makes it a
little bit easier on our guests to relate to you
in this very big auditorium. I’ll just remind you, this
is a technology free zone. So if you’re here in
person, please give us your full attention. If you’re at home
watching on your computer, you’re allowed to
use your technology. Does anybody know what this
is, this week, from my garden? What species this is? I hear artichoke. Wrong. Anybody? That is a leak about
to burst into flower. That’s from the allium
family, the onion family. That, to me, that’s a picture
that’s all about potential. So the theme of tonight’s
session is potential. We actually ended up kind
of serendipitously lucky. I originally invited
two other guests. One, unfortunately, had
to go to a family funeral and the other had
to fly to Italy. So we actually get my very– don’t tell them this– special
guest, Kristen Richmond, who’s a graduate of Berkeley,
and will tell you this story– her amazing story– from idea to impact, tonight. And we’re going to focus on
systems innovation tonight. We’re going to try to
pull together everything we’ve been learning, all these
disparate issues in the food system, and we’ve been
looking at all the challenges and opportunities. Tonight, we’re going to
pull it all together for you into a really coherent
business model and venture. Given that this is now
in the business school, we’re going to come
full force into how all of these dynamics
that we’ve been studying turn into a real value
proposition in the marketplace and in society. Before that, a couple
of announcements. So I have posted the
readings for next week and the following
week on b courses. OK. There’s just several
light readings. Next week, we have
Corby Koomer coming, who is a celebrated journalist,
probably one of the most famous food journalists, around. Very thoughtful man, flying
all the way here from Boston to talk to us about his
work in food security. We’re also going to have a
special guest, Mark Ryle, who is the CEO of project
Open Hand, which is one of the really
interesting, long term, nonprofit providers of
meals here in the Bay Area. And then following
that, Michael Pollan has agreed to join us
for the final class. And he’s going to be joined
by another Berkeley alum named Liz Carlisle who’s written a
wonderful book called Lentil Underground. So I’ve given you one of
Michael’s most recent writings that appeared in civil
etes about where do we go from here in the food movement. And then I’ve given you the
prologue of Lentil Underground. I’ve also posted the
final assignment, which I hope you find
enlightening, inspiring, and maybe a little
bit challenging. I’ll outline it for you. The idea of this
last assignment is to pick a topic during the
course, a specific subject that you particularly
are interested and passionate about,
and talk about why it’s important to you,
maybe how learning about it has changed your own behaviors,
or attitudes, or perspectives. And then talk about
like what commitments you’ve made to that
change, and what commitments you’d like to see
implemented in the broader culture and society. This is all written
out for you so you don’t have to write down. Then the second part of this is
really the fun challenging part is that you find somebody in
your circle of relationships, like you’re a friend
or a relative, who doesn’t necessarily
share your views. So somebody that you can be sort
of agreeably disagreeable with, you know. And your job is to share
with them what you’ve learned about food and
hopefully come to some shared understanding, or at
least to come to learn what their perspective is. And you’re going to
capture this conversation and write about
what you’ve learned. So you can read the assignment. You can read the rubric. We’ve given you
till April 20, which is the following Friday
after the last class. You have several weeks
to get this done. And if you have any questions,
contact the teaching team right away. OK. So I’m really looking
forward to that. This should be a really nice
follow on to the last paper you wrote. Let’s see. Oh I’d like Rohini to
just spend a few minutes. Rohini, as you know, is
the GSI for this course. And she’s also a
public policy student. And every week she enlightens
me about bills that were passed or laws that are made or just
really consequential things that are happening in the United
States, despite this class. So what I wanted to do
is ask her to spend maybe three or four minutes
just reporting on what happened last week. And I’ll give you this
beautiful picture behind you. ROHINI BANSKOTA: Hey, everyone. I hope you had a
good spring break. And while we were away,
two really big things happened in the
world as food and ag. The first one is kind
pictured up here, in Kansas. The governor called, it was
so-called, the Tyson Bill. And basically, it
loosens a lot of rules that govern how chickens are
raised and slaughtered, giving more power to the corporations. And the second issue is that
really relates the class that we last had, that
Mary Nestle talked about, Michigan gave
Nestle the right to water extraction rates. And the reason why these
two issues are really big was that they received
enormous amounts of public comments against both
of these issues from happening. But they still passed. So for example, in
the Michigan issue, they got around
86,000 public comments against giving Nestle
the water rights and only five comments for it. But the deal still
came into action. So it’s just too big
things to pay attention to, that happened while
we were off enjoying the beginning of spring. PROFESSOR: Thank you. Thanks for that update. Two more things. HAAS just announced a
sustainable Food Initiative, which is very exciting. I’m really happy and proud
to be associated with it. Tomorrow night in this
very room at 6:00 PM, we’re going to have a
Berkeley entrepreneurs forum, which is a
special evening dedicated to entrepreneurship. It’s open to the community. You’re welcome to come. You can sign up. I think the CRB or the
entrepreneurship website has an Eventbrite. It’s co-hosted by
food at HAAS, which is a very dynamic club here,
if you’re not already involved with it. And we’ve also now
gotten approval for a course in the fall called
food innovation studio, which is going to be, it’s intended
to be a graduate program on how ideas turn into
innovations and businesses. We’ll tell you a little bit
more about the pre-story to that when Kristen
gets up to talk to us. But I just wanted to
be sure to invite you to that tomorrow night– 6:00 to 8:00. And there’s a
mixture beforehand, and then there’s a panel with
five really interesting people in the food tech innovation
space joining us, and I will be moderating. So one of the key
themes in the class has been about learning
to see systems, and learning how and where
to intervene in a system. And we have been using this
backdrop of Donella Meadows’ Dancing with Systems
as kind of a theme song throughout the semester. And so I thought it would
be really interesting tonight to talk about
how one actually designs an entrepreneurial
intervention, if you will– mixing the language
of public policy and business a little bit
to create a new solution for a pressing problem. So I thought I would try
to explain what I mean by food systems innovation. And this to me is a coordinated
approach to solving a problem. A lot of times,
people in business, they try to build a
better mouse trap. So they’re trying to build
a better product or a better service– people use the word platform
very frequently now. But what I’m thinking
about in food systems innovation is something that
not only provides a new product with distinct
competitive advantage– like, maybe better taste, better
price, better convenience, better outcomes– whatever the key selling points,
or points of differentiation are– but also a coordinated
way to innovate across the culture, and the
society, and the supply chain. So what’s interesting
with systems innovation is you could
think about not only thinking about how to change tastes, say
through product and education, you could also try to
shift the cultural norms by working in the community. You could work on
shifting habits by providing models
and incentives, you could shift laws,
policies, regulations. You might do clinical
studies to produce evidence that shows that your
solution actually generates better health outcomes. You can do all
kinds of things that would contribute to
the effectiveness and the attractiveness
of your solution. And what you’re going
to hear about tonight is the way a remarkable
company does that. And we’re going to
be focusing tonight on a case study on
Revolution Foods, and how it’s approached
systems innovation. Revolution Foods, as
you’re about to learn, is actually a company that began
here at Berkeley– it actually began in a social
entrepreneurship class that I had the pleasure of
being in about 12 years ago. And it went from idea to
literally conception and birth during the school year. And its co-founder and
CEO is with us tonight. She’s going to talk to you
about how she has systematically and proactively
designed the business to incorporate the
values that we’ve been talking about this year– better health, better
personal health, better planetary
sustainability, better justice– how these values are actually
designed into the business, and operationalized for
competitive advantage. So that’s where we’re
going to focus on tonight. So I’m going to show
you a quick video. Before I do that, I’m just going
to mention that Kris Richmond got her MBA here in 2006. Her co-founder, Kirsten Tobey,
is also an alumna of Haas, and both of them
have been incredibly generous in coming
back here to teach, and share, and
mentor, and coach. And to me, when I think
about my life’s work, what Kris and Kir have
done over these last 10-14 years has just been
absolutely remarkable, and something of which
we should all be proud. So let me start by showing
you just a one minute video. The context for
this video is that– this video was made by Citibank
at no cost to the company, because Citibank was very
interested in highlighting community centric businesses
that they were partnering with. So to me, not only was
this a wonderful exposure for Revolution Foods, but
it was brilliant marketing. If you were just to be
sheerly tactical about it, this was an amazing way
to get national exposure as a tiny company. And one of the things we talk
a lot about in entrepreneurship is, as a small company– as a challenger brand– how do you punch way
above your weight? How do you look like a much
bigger, more established, more formidable force
in the marketplace than you actually are in
terms of your age, or scale? And this is a perfect
example of that, so let me share it with you. And then, give a warm
welcome to Kris Richmond. [VIDEO PLAYBACK] – Over 20 million kids
every day in our country lack access to healthy food. – For the first
time, American kids are slated to live a shorter
lifespan than their parents. It’s a problem that we can
turn around and change. [MUSIC PLAYING] – Revolution Foods is a company
we started to provide access to healthy, affordable,
kid-inspired, chef-crafted food. – We looked at what are the
aspects of food that will help set up kids for success– making sure foods are made
with high quality ingredients, and prepared fresh every day. – Our collaboration with Citi
has helped us really accelerate the expansion of our business
in terms of how many communities we can serve. – Working with Citi
has also helped to fuel our innovation process,
and the speed at which we can bring new products
into the grocery stores. – We’re employing 1,000
people across 27 urban areas. And today, serve over
1 million meals a week. – Until every kid has built
those lifelong eating habits, we’ll keep working. [END PLAYBACK] WILL ROSENZWEIG: Kris Richmond–
please give her a warm welcome. [APPLAUSE] KRISTIN RICHMOND: It is
wonderful to be here, you guys. As Will said, it all
started for me, and for Kir, and for Revolution Foods– literally in this room. So in 2004, I was attending math
camp before business school, and I was sitting right
about where you’re sitting, and Kir was sitting right
about where you’re sitting. And one of our good friends
introduced us and said, you know what, you
guys haven’t met yet, but you should definitely meet. You have a lot of
the same interest, and you’re in the same
business school class. 12 years later, we have the
most amazing partnership you can imagine. We have been working
together hand in hand to start Revolution Foods,
and to grow the business. We’ve also had five kids
between the two of us– she’s had three girls,
I’ve had two boys. So we’ve not only kind of
grown our respective families, but we’ve grown our
company and our impact. And it’s a really
special night for me to be here because I both have– it’s amazing– I’m
going to look back on this– but Will,
who was my professor of social entrepreneurship,
where we literally crafted the business plan for
what would become Revolution Foods. Piloted it, met our first
investors, DBL and Dick. Which brings me
to my next point, we have our seed
investor, Dick Beer’s, here, who literally got us
off the ground, financially. So without Dick contributing,
we never would have been here. There are people who
believe in you from day one, and really give you a
start to build your dream. And that’s represented
here in this room, and I have chills
all over my body. So you guys know
what our mission is because you just
saw that video, but we have been committed
since we started Revolution Foods to dramatically
increasing access to healthy, affordable,
delicious, nutritious food for all kids. We say building
lifelong healthy eaters by making kid-inspired,
chef-crafted food accessible to all. And there are two very important
parts of that sentence. One is the health
aspect, and how important the quality of what we feed
our youth and families is. The other piece is the all at
the end, which really speaks to our commitment to
access, and to making sure that our nation’s most
underserved communities have access to the highest
quality food possible. And that’s what brought
us together here at Haas. Kir and I went through our first
year– took our core classes– but very early on realized that
we both had a shared vision to start what would
become Revolution Foods. We both had come from education. I actually started my career
on Wall Street as an investment banker, but then moved a few
years in to Nairobi, Kenya, to start a school
focused on students with learning disabilities. And as part of my job,
the education team there let me teach two classes. And so I had super firsthand
experience with the correlation between how healthy
students were, the access to
meals and nutrition that they had, or not,
and how they performed in and out of the classroom. So it was very clear to me this
very basic link of nutrition as a lever to set
students up for success. Kir had been a classroom
teacher since the day she graduated college, so she is
a lifetime educator and teacher prior to starting
Revolution Foods. She actually taught
food systems change when she was at Brown University– she taught it in a
volunteer sense– but a very deep connection. The second piece that
we both knew was– as we started
researching this, we looked at what does
the market look like? So we quickly learned that
school meals in particular– and we’ve since expanded
even beyond school meals– but school meals in
particular is a $20 billion addressable market in the US. And when we were
looking into this, there was not one for-profit
entity that was prioritizing quality and nutrition for kids– not one. So you do the math and you say
$20 billion market, no quality players– you go talk to consumers and
find very quickly in schools– whether you’re talking to
principals or teachers– you find very
quickly that they’re completely dissatisfied
with their options. Then, you go into
the lunchroom and ask students is the food that
you’re being served– do you like it–
does it respect you? And the answer across the
board was absolutely not. It’s disgusting, we
know it’s not healthy. But not only is it not
healthy, it doesn’t taste good, it doesn’t look good. My chicken bites are
still frozen inside, my breakfast pizza is
dripping oil on my shirt. I can go on and on. But basically, we
knew right away that there was a
huge unmet demand. So then, that led us to
building the financial model and the operating model for
what would become Rev Foods. And just a quick show of
hands, who in this classroom is or wants to be
an entrepreneur? Quite a few hands. So I always say when I’m talking
about the founding story, always run a pilot if you can. Because as much as you feel like
it may not be representative of your aspirations
and where you want to go with the business
model, the learnings– even at a tiny
scale of prototyping something, and seeing how, in
our case, kids related to food. Seeing how teachers
accepted us, seeing how the lunchroom
line would work, and how students
flowed through it. And then, finally,
bringing investors to that little pilot in
Oakland, and saying this is the impact we can have. Imagine this times a
million was a huge part of us getting funded. So I am very adamant about
telling folks please run pilots when you have an idea. Mock it up, prototype
it, get it going, because you can learn as much
or more doing that as you do in the visioning stage. So just to walk through
a few of these slides– and then I would
love interactive Q&A, because that’s my
favorite part– to get to what you guys want
to talk about, and what Will wants to talk about. My title, Bucking The Trend
of Food as a Privilege– clearly, a huge focus for us. When Kir and I
were starting out, there were a few
very dire statistics that we were reading
that inspired us to get going quickly. And a lot of you are
aware, just sitting in this class, of the
magnitude of health issues in this country as
they relate to poor nutrition. Number one– I’m sorry, my
slides a little off here– but obesity will cost
the US health care system more than one trillion
over the next five years. Number two– and this one is the
was the most staggering to us, and remains the most
staggering– overall, one in three children
born after 2000 will be diagnosed
with type 2 diabetes. In the communities
that we serve– in our urban, underserved
communities across the US– that number is closer to 50%. So completely preventable
and incredibly serious. And then last, but not least–
you heard this in the video– but for the first time
ever, children in America are slated to have a shorter
lifespan than their parents due to poor nutrition,
where that exists. We set out with a real vision
to create a scalable solution to this issue. And I really emphasize
scalable because I think it matters a lot. You can solve problems on
a very localized level, or you can decide
to solve problems on a global or extremely
scalable level. And it does really play into how
you set up your organization. For us, we felt like this
was a huge problem that merited a huge solution. And for the record, I
believe that child nutrition, and community nutrition,
and school nutrition actually deserves
multiple solutions. So as we talk about
systems change, we’ll talk about how we
partner with nonprofits all over the country. In some cases, we partner
with other for-profits to really look at who has a
core competency in what area, whether it’s gardens in
schools, whether it’s nutrition education, whether it’s adult
cooking classes and family cooking classes, or whether
it is literally getting 2.4 million healthy
meals into students bellies every single
week around the country. So we wanted to create
a scalable solution, and that led us to choose to
become a for-profit entity. We wanted to raise
capital at scale, and felt that we could do
that, because the model itself had a very clear
revenue stream coming in, a very clear– I say clear– but
at that point, we were modeling the cost
stream associated with it. And we felt like we could create
a very sustainable and healthy financial model to deliver
upon a scalable solution. So that led us into the
land of raising money from values-based investors. That’s a whole other topic
that we can talk more about. But one of the benefits
I had in Will’s class– and certainly in meeting Dick– was connecting with, I
would say, the first wave of investors who are calling
themselves impact investors. Today, you go to a
conference in Chicago on impact investing, and
Carlyle Group, and TPG, and KKR, and Bain– every big financial company
under the moon, I feel like, has an impact investing arm. That’s really important to know. My second tip for
aspiring entrepreneurs is there’s lots of capital
out there for great ideas There’s an actual
shortage of deal flow, so it’s a great time to be an
entrepreneur with a systems changing, values-based approach. Because investors are
looking for that– they’re looking for that
kind of systems change. And everyone who’s invested
in Revolution Foods has invested on
the theory of doing good business by doing well for
our stakeholders and community. And you see countless
examples of companies who are working on
those same things right now across
multiple segments. So we set out to create a
scalable model to revolutionize community and school nutrition. So there are a
few movements that inspired us along the way– when you think about
starting a movement. One of them– I put up here
the seat belt movement. So when I was a kid growing up
in San Antonio, Texas, not so common that everyone knew you
gotta to put on a seat belt to protect yourself
when you get into a car. Statistics weren’t that
well-known around health risks, et cetera. But today, you
really wouldn’t dream of getting into a
car, in most cases, without putting on a seat belt,
because you know the risks. Data awareness
education led to that. Uh-oh, you can barely see this. This is a smoking secession
movement, largely driven by teenagers. The last one– it’s a
little bit hard to see– but the last one is recycling
and the environmental awareness movement. And this one was probably
most inspiring to us because it’s driven by kids. And I don’t know how many of
you guys went to the March For Our Lives protests recently,
but I took my little boys who are 8 and 11 now, not only
because I believe in the issue, but also because I wanted to
drive home the idea that youth voice really matters. And perhaps it is the
most important thing in driving movements
across our society. So you see the
recycling movement– this is a classic example
of the little kid coming home and saying
mom, dad, grandma, grandpa, don’t throw that
away– that hurts the Earth. We have to recycle, and
later, we have to compost. So movements that are driven by
youth and by community really inspired us. So where are we today? So we are– and I’ll talk about
the systems change element in a moment– but we are now serving
2.4 million healthy meals per week across 30 cities,
across 2,000 schools and community sites
all across the country. And that ranges from k-12
schools, district schools, charter schools,
after school programs. I was actually on the phone
with the head of the YMCA nationally, today. Boys and girls clubs,
Head Start programs, community feeding programs. So we’re really entering
into the zone, now, of what I call city-wide wellness. Where there is a
community program to be served, whether it’s on
a basketball court at a park, whether it’s in a church,
whether it’s at a community center, whether it’s an
elementary school at San Francisco unified,
that’s where you find Revolution
Foods creating access to healthy breakfast, lunch, and
suppers every day of the week, pretty much every
day of the year now. So, really exciting, again,
when you think about the impact. When we started, we were
serving school lunches. That impact– and to
Will’s earlier statement– that platform access is so
much larger than it was. So just as an example,
in our first year, we served 70,000 healthy
meals in one city. This year, we will serve 150
million meals in 30 cities. We’re about a $160
million company overall– that’s our revenue line. And in some ways,
I stand up here and I say, wow,
we’ve grown so large. In other ways,
we’re tiny compared to some of the large food
companies and large CPG companies. You mentioned Tyson,
you mentioned Nestle– $60 billion dollar companies. We’re tiny compared to them. But the inspiring part of this– and again, it’s taken
me about a decade to be able to stand
up here and say this– is that even at $150 million in
revenue, $150 to $160 million, you can actually have
a catalytic impact on the bigger system. That’s really exciting, and
I’ll talk more about that. The other thing that
is not showing up here is we’re a b corp. So does
anybody know b corp here? A few of you? OK. So b corp is a movement
that started right alongside Revolution Foods,
and right alongside the impact investing movement. B corp is a way for a
for-profit company to certify, and say our values– which for us, are the quality
of meals we serve our kids, the fact that there’s no
artificial anything in the food we serve– no artificial
colors, no artificial flavors, no high-fructose corn syrup– the quality we serve our kids,
and the way we treat our team– the way we treat our employees– and the focus on access. So making sure that
Revolution Foods is always targeted to the broader
community, and students who need us the most, and
families that need us the most. That’s really baked in
to not only the mission that I’ve talked about– if you were in my
office in Oakland, you’d see it across the walls– but actually our
investors have approved and have signed on to that
being part of our governance. So it’s really important. Years ago, this didn’t exist. Our governance says that
when we make a decision, we both consider the financial
impact and the impact to community stakeholders. Again, our team, our
kids, our families. I’m going to make an argument,
though, that there’s not really a trade-off between financial
value and social and mission values. Probably one of the things that
kept me up most at night when I was just starting
was this question– and I got asked on every panel– oh, my gosh– how
many times are you going to have to trade-off
your social mission values to create
more financial value? And Kristin, aren’t you
raising money from these VCs– aren’t you going to
get pushed into a wall eventually where
you’re going to have to lower your food quality,
maximize your margin, and there goes Rev Foods
authenticity out the door. What actually has
happened– and again, what is so promising for
all of you in this class– is that– it’s my
favorite saying, and it drives my team
crazy, probably because I say it so much– is that
what’s turned out is our values have actually created
our value financially. And I say that
because it’s really authentic brands that
connect with consumers, and offer a real transparent
value proposition, and stand and live
by those values– translates directly
into the differentiation and financial value
of the company. It also translates into the
talent that you can recruit. So, Will, I love that
you said how do you punch above your weight
as an entrepreneur? How do you have a billion
dollar brand with a $150 million company? Part of that is
having these values that you live by, that
are born in your DNA. You see a lot of
big food companies out there saying we’re going
to back up and figure out how to be values-based, and
figure out what our mission is, and figure out
how to incorporate great values into our company. It’s really hard to do– really hard to do if you don’t
start with that in your DNA. And talent sees that. And so we have consistently
been able to recruit leaders across the company who, really,
could go anywhere and do anything, and have decided to
come and work with Revolution Foods, because they
believe so much in building a legacy for themselves
in terms of impact. And contributing
everyday to something that’s so tangible,
and inspiring for them. They also believe in
the equity value– back to values
create your value. They believe in the equity
value of the company that we’re building
through building an authentic,
differentiated brand. So we took the leap. A couple of things
I wanted to mention is something else that companies
in our space weren’t doing– and I feel like a lot of
companies still don’t do– is listen to their consumers. So we didn’t sit in our
Anderson auditorium in Haas and say we know exactly
what kids in West Oakland want to eat, we know exactly
what kids in Newark, New Jersey want to eat, or
in DC, or Houston. We actually went out and
listened to students, and said what is important
to you and your food? It is a two way street. We may have great food standards
that we stick to in our supply chain and clean label. But that means nothing unless
the product in the food is accepted, and really delights
the students that we serve. So that’s a really
important part of our model. And again, once you create– and we’re always in the
process of doing this– we will never have
it completely nailed, because it’s a daily iteration–
but once you create a menu bank of beautiful products
that are not just healthy, but they’re also amazingly
culturally diverse– again, from Houston to
Oakland, to DC, to Louisiana– you are able to create an
asset for yourself that is extraordinarily valuable, as
well as driving health impact every day of the week. Oh, so these are pictures I
took while we were at Haas, so I wanted to put these up. This was a school
right down the road that we went to when
we were starting. This is what students
were eating before we came into the picture. We wanted to chronicle what food
looked like in the community at that point. And here is an
example of our food. And I’ve already gone
through our food standards, but again, really
focused not only on the health aspect of
it, and the quality of it, but the design piece. So one of the best days
of my career of 12 years was last April– so it
was exactly a year ago. We received data from UC
Berkeley and the nutrition Policy Institute,
confirming that the approach of our nutrition
for school meals, and the approach of our healthy
meals in terms of design, were positively driving
academic outcomes. So clear validation
of the approach and the outcomes
for kids in schools. So really important from
an impact standpoint. Also, really important from a
growth standpoint, because when you’re going to speak with
the mayor of Indianapolis, or the mayor of Boston, or
the superintendent in Houston, and you can say Dr.
[INAUDIBLE],, Revolution Foods is an important investment
for your school or your city. It goes from being sort of
a nice to have– like, oh, I know that’s the right thing to
do– to an absolute imperative. Meaning, if I’m not doing this
for my community right now, I am selling short my kids, and
their future, and their health, and their academic outcome. So really important
to think about how to validate your approach
through third party, objective data, because it
makes a world of difference when you’re out growing,
selling, and again, building a mission-driven brand. Also really important in
the current administration, because you think about
what’s going on in Washington, and thinking about all
the trade-offs that are being made and considered. And when you can
say, again, investing in healthy meals and healthy
food for our urban communities is not a nice to have– it’s actually a super
high ROI, very low cost investment relative to
the health of the community– that speaks to a very
different mind than people who just naturally
say, of course, it’s the right thing to do. It speaks in a very quantitative
fashion when you are in any kind of policy debate. One of our students. So again, just put this
up to show our evolution. People often ask me did you know
this was going to be so big? And I thought we started really
knowing it in our first year when we were sitting in
this tiny little office in Emeryville, and we have
this tiny little kitchen. We’re producing 300 meals a
day, and we’re getting calls from principals in Chicago,
and Houston, and DC, saying I’ve heard that there
is a company that is actually creating healthy, delicious
meals for an affordable price. So I knew at that point– and I
think Kir knew at that point– that this was a big idea. And we kept investing
and we kept growing. Very exciting. But now, we are across
California, Texas, Louisiana, up across the Eastern
Seaboard in the Mid-Atlantic, and New York, New Jersey,
Boston, New England. We’re still not in the Midwest
or the southeast in Florida, so there are a couple of areas
that have a lot of density that we want to get to
in the next year or two. And then– I’m so sorry,
my slides are messed up, but I’ll just talk
you through this one. I thought this would be
interesting for this class. This was our bid for the school
district of Philadelphia. So instead of just coming in and
bidding on the school district of Philadelphia, and saying
we have a healthy solution for your community. And this is a
school district that had had horrible
quality food for kids, and we knew that there was a
superintendent in place who wanted to do better. And so we really
thought very carefully about how do we do this
in a compelling way. So we came in, we mapped out the
highest need food desert areas in the city of Philadelphia,
and directly transposed– we directly put the school
sites in those areas of highest needs. And went to the
superintendent and the mayor, and said these are the
communities that we want to serve in Philadelphia. We’ve mapped this,
we know the needs are highest, we know the
volume will be highest, so it helps our distribution
and doing it successfully. But we want to really
track impact and results in your highest
needs communities. And I think this is
one of the reasons that we won the bid
was, again, speaking to the why behind what we do. And then this is Luis–
this is not just a picture of a handsome guy, this is
an amazing man who helped me launch DC– and we launched it together. And a great example of someone
who came into Revolution Foods as entry level. He was washing dishes,
was helping assemble food, and has since been
promoted about seven times. Now, he leads a
huge team of people, and is one of our most
key managers and leaders. And I put Luis up
here because this is what healthy job
creation looks like, and more importantly,
career creation. So again, living
by those values. We hire from the
communities we serve, and we really invest in
development of people. And again, we don’t
do that because it’s like a great statement of
values to put on the wall. It actually is a full circle– comes back to impact
the quality of food, because these are moms,
dads, aunts, uncles, grandparents of
the kids we serve, so they care doubly as much
about the quality of food. It also completely
curbs attrition costs. And you guys probably
know food has an awful reputation for
incredible attrition of team members. And so we have a
better retention rate. We’re able to invest in
training and keep those people, we’re able to produce a
higher quality product, we’re able to work
with cities who want to invest in us
because we’re creating jobs in zones where there is
incredibly high unemployment. Minimum wage, most
people without benefits, now are coming in. We work with job force
employment agencies across the cities we
serve to help coach people when they come in for a
job to understand here the spectrum of jobs. Here’s what it looks like,
whether you’re a driver, or whether you’re a
linebacker, or whether you’re a production manager. Here’s what it looks like,
and here’s the ladder for your career creation. And as a result,
two years in a row we were named the second fastest
growing inner city job creator in the United States. So, lots of jobs, and again,
healthy community building, which is part of
the whole circle. So I talked a little
bit about platform. Will mentioned platform, so this
is a good slide to think about. So once you’ve built a brand– and in our case, really
speaking to the city-wide wellness that we’re serving. And then, once you’ve
built capabilities– so we now have this incredible
infrastructure nationwide of culinary centers,
refrigerated distribution, clean label supply chain–
largest clean label supply chain, certainly in schools– product design, incredible
relationships, and touch into the community,
then how do you think about expanding from there? And how do you
think about building what we call adjacencies–
it’s a very consulting term– but what are those
adjacencies that you are uniquely
positioned to create, where you can serve
the community. In our case, going from schools
to thinking about how can we bring teachers and
families healthy meals. So I don’t know if you guys use
the meal kit services like Blue Apron, and [INAUDIBLE]
and those– very expensive– not very
accessible for most families that we serve. So how do you create a version
of healthy meals utilizing your infrastructure, your
competency, your supply chain, your product design,
your authentic brand, to be able to deliver
high quality nutrition, and in an affordable
format, to the families and the communities you serve. So that’s what we’re
working on right now, and it’s incredibly exciting. It’s an approach that
no one has taken yet. And again, we’re
in this great place where we don’t have to invest
millions more dollars to do it. We can basically do what
we’re calling micro tests across the community to figure
out where is the unlock where we will drive trials– so people buying the product– and repeat– so people
coming back for the product– in a way that, again, impacts
community health positively, solves problems for families
out there that everyday families face, and also creates
financial value for the company. So this was my
systems change slide. [LAUGHING] So I’m going to talk a little
bit about systems change, and then we can kick off
with Q&A and a discussion. But again, a decade later,
standing here looking back, and thinking about how
does a company, that’s relatively tiny compared
to big food across the US, create systems change? And there’s a few ways, in
the case of Revolution Foods, that I think we’re
starting to move the needle in a meaningful way. So we’ve talked about healthy
meals and healthy food driving academic
outcomes in our schools. That’s number one. We’ve talked about
the infrastructure that we’ve built to provide
a fresh food manufacturing environment across the US in
a way that, previously, not much access to healthy food. A lot of access to cheap,
processed, packaged, low nutrient food. So creating hubs of
fresh food manufacturing with clean label supply
chain with the associated distribution to be able to
drive city-wide wellness in a way that wasn’t there. Supply chain. When we started, we couldn’t
even find a cereal– this is a true statement– that would work for our schools. When I say that would work– no artificial
colors and flavors– real food– a reasonable sugar
level, not off the charts– delicious, and affordable
enough to serve in our schools. There was not one
product that worked. Every product had
high-fructose corn syrup, or it was a tiny little
boutique Whole Foods brand that didn’t even come
in food surplus packages. So what did we do. We created our own product. We worked with copackers–
with different manufacturing companies out
there– to say we’re going to commission a
product that we design with students to
deliver on the value that we needed to deliver on. So we’ve done that
across the board for hundreds and hundreds
of products, in addition to our truly fresh– our
produce, and our protein, et cetera. But I’m talking about custom
products that weren’t available when we started, that are a
critical part of breakfast, lunch, and supper. So now, there exists a clean
label k-12 and community wide supply chain
where you’ve got clean, no artificial anything,
affordable, delicious products for families and kids out there. The other one I’ll bring
up is around policy. So procurement policy. So when we started– again, we had no idea
that this was out there– we quickly learned– especially
in Texas, and Louisiana, and Illinois, and New Jersey– we weren’t winning bids, and
schools couldn’t work with us. And we said what’s going on? You guys want– the
community was coming to us, saying we want healthier food. They brought us in to
build capabilities, but we’d get to the bid
cycle and we’d loose. And what we figured out was
that there was, basically, an urban myth, if you will, out
there that procurement officers in institutions– in
this case, schools– had to choose the lowest
price bidder, no matter what, even if it’s the worst
quality you can imagine. They said and felt that it
was USDA policy that low price wins, no matter what. So how do you come in
with a challenger product when there’s an environment
where a quality product can’t win– if you can’t be the
lowest price provider? So we went all the way up to DC. And this was during the
Obama administration, and you guys can imagine
Michelle Obama was a huge help to us in this. We met with her personally
and talked it through, and with Secretary Vilsack. But we went all the way
up to DC and we said we’re going to clarify this. Is this the case
that, on one hand, the USDA is saying we
want healthy school meals, and we want great quality food
for communities across the US. And on the other hand,
there is this unspoken rule that cheapest bidder
wins everything. And we uncovered very quickly
that there was no stated policy that said this. That this was something that
was interpreted and passed down, and was stopping communities
from being empowered to prioritize health outcomes
for their kids and families. And so, at this point,
now we know when we go into a new community– in countless cities
we’ve addressed this, and said, actually,
that isn’t the case. Actually, you can choose
the quality bidder, and actually, it’s a lowest
responsible bid environment, which means communities are
empowered to prioritize health outcomes– that could be
nutrition education, that could be the quality of food,
that could be cooking classes. Again, they can define it–
the communities are empowered to say we want to
prioritize good health outcomes and academic
outcomes for our kids. And that opens up the playing
field for competition. And ultimately, in many
cases, for Revolution Foods to come in and successfully
win with a quality product. Affordability is
still very important– I don’t want to make
it sound like it’s not. But there was room to innovate
and improve, and serve the community better
within the means of budget. So those are some of the key
systems changing elements that I wanted to speak to. And we can keep digging in, but
those are a few that are beyond what– you might think, oh,
a straightforward business model– catalytic impact of systems
change associated with it. Thank you. [APPLAUSE] WILL ROSENZWEIG: We’ll put
that up as a commercial. KRISTIN RICHMOND: Great. WILL ROSENZWEIG: Thank you. That was really inspiring. What did you think? If you’ve got
questions or comments, please come over to
them mics and line up, because I’d really
like to make this as interactive as possible. While you’re doing
that, I’ll kick off. You make it sound so easy. You’re always so
ebullient and positive. But being with Dick through
12 years of board meetings, we know that it’s not
as easy as it looks. And one of the things you
didn’t go into detail on– given that this is in
the business school, could you just
explain a little bit about the costs structure,
the national reimbursement rate for meals, the
margin pressures? Because this issue with access,
and quality, and affordability is a really high hurdle,
given the constraints. This is not like
gourmet ghetto pricing. So maybe explain just a
little bit about that, and then we’ll get
to the questions. KRISTIN RICHMOND:
And by the way, Will, thanks for the reality check. I happen to love my job, so
I’m extraordinarily positive. However, I could
sit here and talk for even longer about
the failures we’ve had, and what we’ve learned, and
how we’ve rebounded from it. Many, many, many failures. And even thinking
about fundraising– finding the right
investors– but you also get turned down a million times in
the process by the wrong folks. So a whole other discussion. But in terms of
the cost pressure, intense cost pressure. And I think, for us, we had to
get to a certain scale point to be able to do what we
do for big institutions. So we knew right away– and it sometimes just
happens this way– that your early adopter
customers are typically ones that can afford
to enter early, can make quick decisions, and
are more innovative in nature. For us, that was a lot
of the charter schools– that really allowed us
to get our feet wet, and charge a little
more than we’d be able to do in a
big, public district. We simply wouldn’t be able to
do it in a big public district. So for years, we
built on a platform of those early adopters. Having a ton of impact,
but not getting the shot to serve San Francisco Unified,
or Boston Public Schools, or YMCA National,
because we simply didn’t have the
economies of scale in our supply chain for our
product costs to come down. We simply didn’t have
the operating blueprint. So if I think about
what we know today about waste management,
and efficient operations, and efficient distribution
routing, and line balancing, ergonomics– this is where we get into
Lean Six Sigma-type work– we didn’t know that to start. And so it really took
growing to a certain scale, bringing on a world
class operating team, maturing, and driving economies
through our supply chain to be able to win
the big contracts. And that’s OK. That’s the way it works, and we
learned a lot in the process. But we’re still under
intense pressure. This is a– WILL ROSENZWEIG: What
is that number? $2.42? KRISTIN RICHMOND: The current
school meal reimbursement rate is now over $3. WILL ROSENZWEIG: Oh, it is. KRISTIN RICHMOND: It’s like
$3.13, so it’s a little higher. But if you think
about it, that $3.13 has to include not only the
meal that a school gets, but any associated
labor overhead. So we’re not able to
charge $3.13, that’s the maximum amount
that a school has to spend on every lunch served,
so we charge a portion of that. So if I think about serving
that chicken teriyaki dish that you guys saw with a fresh
peach, and a rBST-free milk, you’re doing that in the
dollar the $1.25 cost zone. It gets really daunting, and
that’s why you’ve got to then think about– from my end– hiring incredible supply chain
and operators to help you cost engineer the model. WILL ROSENZWEIG: And just
to add a little bit to that, it’s been amazing
to watch people from very sophisticated
jobs in very big companies be willing to take
meaningful pay cuts at a certain stage
of their own career to come work for a company that
has this mission and values. And so, again, that’s another
form of competitive advantage– the culture– the leadership becomes
a competitive advantage. And one of the
things that’s always struck me being
around the board table is that every Revolution Foods
board meeting, for 12 years, begins with a commitment to
how the company is delivering impact, first and foremost. And that’s always been
a grounding drumbeat for the business. No matter what investors
are at the board table, whether they’re big
shot venture capitalists that are world famous,
or whether the Secretary of Education is on the
board, or whatever. It’s always– however the
company has just grown from being, at the very beginning– which I should also just
mention and put a point on is that it’s a
women led business. And I have to say– and Dick
can back me up on this– but in their early years, it
was all women on the management team. You guys really suffered from
a lack of diversity there. But in my opinion– I sat on a lot of
boards for many years, and it was the best run
company I’ve ever seen. And there was just
really something that incredible about that. So I think you’ve demonstrated
so many proof points that are now so salient
in the conversation that we’re having
in the culture. So let’s have some
questions from class. Yep, it’s on. Go ahead. I guess it’s not on. Hold on one second. Can you turn it on– are you on? OK, try it now. STUDENT: My name is [INAUDIBLE]. My company is [INAUDIBLE]. The figures that you
mentioned for 2006 is my [INAUDIBLE] right now. [INAUDIBLE] KRISTIN RICHMOND: Oh, yeah. That’s a great question. WILL ROSENZWEIG: Repeat it
just in case it didn’t do it. So how do you approach
impact investors, how do you tell your
story, how do you get them interested
and committed? KRISTIN RICHMOND:
So some of the firms I mentioned are much bigger. But I think when we were
first raising funds, it was really
critical that we had a very tight financial model
built, that very clearly laid out our assumptions, and
the operating performance that we expected to have. I think it is so critical to
be able to articulate that clearly, and then track
against that very clearly. Will’s right, we start every
single meeting with impact. And we go deep into
financials and performance. And I think when you’re
first starting out, it’s always, for
investors, about market size, and opportunity,
and quality of team. I feel like those are the
two things that are universal in what they’re looking for. But then right under that is
how believable and credible is the financial model. And I think, in the early
days, there’s more latitude to say here is what
our assumptions are, and here are the
variables that we’re still building out and playing with. And you spend a lot of time kind
of honing in those variables, but you keep focusing on the
big market and the growth opportunity. When you’re at our stage at 12
years old and you $150 million in revenue, there’s a lot more
pressure on predictability, and making sure that
you are crossing a line to profitability. You’re either
squarely profitable or you have line of
sight to profitability. So that’s just the nuts and
bolts financial side of it. But I’ve always felt that being
able to articulate that really clearly has helped
us tremendously in our fundraising. People get really
excited about the impact. And it’s clear– we’ve been
reporting on impact statistics since the day we started– but being able to couple that
with the financial aspects has been key. WILL ROSENZWEIG: Let me add
a couple of things to it. So from an investor’s
perspective, we’ve been an investor in the
company for almost 10 years, probably. And so what we look for is
a team that can articulate a vision, and then execution. So you’re always looking
for that creative tension be between being able to really
think big, and then execute. So vision and execution
are really critical. Also, a business
model design that’s integrated so that, as the
company scales, the impact scales– there’s not a trade-off. This is not a model
like– well, we’re going to go serve
food over here, and then we’re going to give
away pairs of shoes over here to this other
community to do good. This is a completely
integrated model. Everything that they do–
every choice that they make adds to the overall
value, capacity, and asset that they’re building. So you look for that
integral design, and then you look for ambition. But not pathological optimism,
which a lot of entrepreneurs suffer from. They have delusions of grandeur,
but they haven’t built up from the bottom. And I think what’s
been just so amazing about Revolution Foods is
they really take it seriously. And again, Dick could
back me up on this, but I don’t think I’ve ever
seen a company that comes so close to its projections. And there’s been years
where the board says you need to actually
stretch more, because you’re
getting too close. And then, they’re like, you
don’t understand how much we already stretched to get that! But there’s
something about that. And also, you have
to think about trust with your stakeholders, your
investors, your partners, your suppliers. You make commitments and
then you deliver on those. So you have to continually
build that trust, and then that just leads to
getting access to the assets. Like, that Citibank
ad is a result of that kind of performance,
year after year. That a brand of that
stature and magnitude would take a chance on putting
a little company like this on TV and celebrating them
as the benchmark. KRISTIN RICHMOND: The
last thing I’ll say is about team, because
Will brought this up. I think, in the beginning,
you’ve got a vision– you know this as
you’re doing it. A lot of people are
wearing a lot of hats, you’re doing a generalist role. As you get a little bigger, one
of the first things investors look at is do you have the right
experts for the right expertise areas. So it’s like, do you have
the world-class operator, do you have the
world-class CFO, do you have the world-class
product excellence head. And so that becomes
a really big deal. And as you grow quickly,
it’s pretty much for sure that you’re not going to
have the team that you started with as you grow. Some of them, you
will absolutely, and then some of them
will evolve and move on, and you’ll bring in
more seasoned leaders for that stage of growth. So, certainly at our stage, the
quality and composition of team relative to the stage
of growth is critical. WILL ROSENZWEIG: And your
job is to manage that gap, because if you get
somebody that’s used to a much bigger
company and a much larger infrastructure,
they won’t be nimble enough to work as an entrepreneur. So you’re always balancing
this real tension between getting somebody
who’s been where you want to go, but not so
far out in front that they can’t work in the
system that you have there. So it’s a very
interesting dynamic. And in full
disclosure in candor, there are a lot of
people that didn’t work. KRISTIN RICHMOND: Oh, yeah. WILL ROSENZWEIG: I
remember that first CFO. Anyway, we won’t
go down that path. KRISTIN RICHMOND: A lot
of people didn’t work, and a lot of people I
wish I had hired sooner. So I always tell
people hire sooner than you think you
need the talent, because you’ll just
surpass that level and wish you and hired sooner. WILL ROSENZWEIG: Thanks. Dick, go ahead. Yeah. This is Dick Beers. DICK BEERS: I just want to
make a quick observation. Kristen mentioned to start with
a prototype, and get it going, and all that. I couldn’t agree more with
that, because before investing with Rev Foods, I worked
in new business development for Time Warner for 35 years. And so, in that time, I always
felt you have to get started. But once you do, it’s
always much tougher than you think it’s going to be. It just is always the case. So to me, in addition
to the plan and all, I think the great
thing about Rev Foods– and what I always look for– is are they flexible
enough to make change? A lot of things I’ve seen crater
because this is the way it is– I’m sticking with
it, that’s it– as opposed to being flexible,
moving on your feet. And the other one is are they
tough enough to be persistent? Because flavor of the month–
oh, god, this is really hard. We’re going to start a
family, how do we do this? And we could just go on
and on with the anecdotes. When there were problems
in Washington DC, Kristen and her family moved
the next day to Washington DC– for how long– and
they made it happen. And then, the last
point I want to make is on Will’s point of what an
exceptional leadership team they have. I’ve been stunned. I think this is probably
a lot to do with women leadership– no narcissism. And it’s stunning, after a
corporate life in New York, to see this great spirit. KRISTIN RICHMOND: Oh,
well thanks, Dick. STUDENT: Hey, there. Never been too tall for
a microphone before. So this might be a little bit
of comparing apples and oranges, but in going back to
investor-based questions, investors are not donors. But my background is in
the arts nonprofit, music and performance sphere. And hearing you talk
about ecosystem funding, and the messaging that appeals
to those kind of investors. In the arts nonprofit,
music nonprofit world, the foundations have shifted
to ecosystem thinking. A lot of the organizations
want to be shifting to ecosystem thinking,
and reframing [INAUDIBLE] nonprofit sector, and
thinking about how it engages with other worlds. Individual donors
are much more tied to the tangible, familiar
project-based funding. And so I’m wondering– as much as we can compare
apples and oranges– if you’ve had that experience? And it sounds like there’s
been an evolution in the food industry, and in social
impact fundraising, and in entrepreneurship too. Is there’s anything
that you’ve learned about relating to that
kind of donor or investor, and how you can shift
them more to an ecosystem, or is it about finding the
right people who are already aligned, but don’t
already see themselves as part of that sector? That’s a big, broad
question, but I just was curious about your
experience in that. KRISTIN RICHMOND: Yes. That’s a great question. And huge transformation
since I started. So just thinking about
something Dick and I worked on in the early years,
we were trying to get funded by
Gates Foundation– we were trying, trying, trying. We were trying to connect
to everyone we could. And at that point,
they were really just doing grant funding. And so, we were looking for
for-profit equity investment, but with a clear
social impact mission. And at that point,
it wasn’t happening. They had a PRI project-related
investment arm, but that didn’t really
make sense for us in what we were doing. The landscape has
completely shifted. So now, you have
foundations who are making– so we have two of
them I can think of– Emerson Collective is one,
the Walton family is another. We actually have
three or four of them who are making equity
investments in Rev Foods. So again, they’re
looking for a return, but they’re very values focused. At the same time,
they’re saying to us what other grants can
we make that would catalyze food transformation
in urban communities? So we’re like, OK. We believe that there are
50 schools in Oakland that could serve healthier
food to their kids if they had refrigerators. And those refrigerators
cost $2,000 each, and why don’t you think
about making a grant to the school’s–
not to Rev Foods– schools own the equipment– to basically buy
the infrastructure to allow them to
drive health outcomes. And we’ve had multiple funding
relationships like that, now. That have combined grant
funding and equity funding. Same thing on creating jobs
in inner city communities. So when we went
into New Orleans, Kellogg Foundation invested
in Rev. They invested equity, they gave us debt, and they
put several hundred thousand dollars to work in grants
for New Orleans schools who were looking to
transform the food they were able to feed their kids. And it wasn’t paying us
on a meal by meal basis. No foundation will fund
that because that’s silly– it’s like the operating cost. But it was
infrastructural things that would allow them
to be more successful. And the last thing I’ll
say is not funding, but it’s winning
partnerships for Biz Dev. The other thing I’ll
say is our big contracts that we’ve won with
big districts, Boston being the most
recent one, I believe we won because we came in
with ecosystem partnerships. So it wasn’t just Rev Foods, it
was Rev Foods plus FoodCorps, plus share our strength,
plus commonwealth, plus the local dairy
company in Boston that was delivering
for us, and creating more jobs for people in the
area that they’re located in– so, total ecosystem bidding. And we differentiated
ourselves over and over, so you are right on
with that thinking. WILL ROSENZWEIG:
What a great example. Have you got a question too? STUDENT: Hi, Kristen. Thank you for being here. My question is actually very
similar to the first two, but I promise I’ll
diversify a little bit. So you mentioned this
several times in your piece, but the whole idea
that impact investing– like, double bottom
line, long-termism didn’t really explode
until very recently. And I’m not sure when your
first funding round was– whether that came a
little before or after– but I’d love to hear how your
relationship with investors, with VCs– VCs relationship with their LPs
has evolved with the growing of this movement–
and how that’s shifted your relationships with– WILL ROSENZWEIG: Can I
tell my favorite story? KRISTIN RICHMOND: Sure. Go ahead, Will. WILL ROSENZWEIG: Well, when
Kristin and Kirsten were just about to graduate, they were
negotiating their first term sheet to get their first
investment from a venture fund that was actually created– it was called the Bay
Area Equity Fund– as a double bottom line fund. And it was funded through some
of the pension money of some of the East Bay counties. And it had an explicit
mandate about creating jobs in inner city communities, and
so it was a bold and ambitious community-based finance. And it also had the
challenge that they had to find businesses
that could actually deliver on what they were looking for. And so, Kristen and
Kirsten were negotiating with that fund for their first
investment beyond the angels. And Kristen was in my
office, and we were going over the term sheet– I was coaching her on how
to negotiate the term sheet, and she went into labor with her
first child right in my office. That’s how dedicated she was. [LAUGHING] I had this bouncy
ball in my office, and she was sitting on it
because she was very pregnant. And she was like, uh-oh. And we said, oh, we better
call Kristen’s husband. KRISTIN RICHMOND: Steve. Yeah, we’re like– WILL ROSENZWEIG:
But just to show you how dedicated she
was– so that’s why I always say like I’m
the midwife of the company. [LAUGHING] But from there, they
closed that financing. You can take the
rest of the story. KRISTIN RICHMOND:
No, that’s true. And I always say to Will, how
many venture capitalists have birthing balls in their office? I don’t think many. WILL ROSENZWEIG: Only when
you’re married to an OBGYN. KRISTIN RICHMOND:
Right, only when you’re married to an OBGYN, Will. I think, to the short-termism,
long-termism LP structure, it’s a really good question,
and it’s one that’s playing out for me right now– in full transparency. But generally, when I
think about the fact that we’ve been in
the game for 12 years, and every single investor
has stuck by our side. And I’ve had
multiple rounds where we could have bought
out earlier shareholders with an incoming shareholder. And people have
passed, and said we’re going to stay in until
the next big liquidity event happens for the company. And I think that’s been a
real testament to the fact that the investors that we’ve
worked with are not as tied up in this idea of you have
to turn a business in three to five years, with LP pressure
breathing down their neck to turn the investment. But that is a very
important part of fundraising, which is
definitely ask that question. I am so direct with
potential investors around what is your hold
period, what is your experience. Because what you
really want to know is how many other
folks have they invested in, and
held the investment, and supported the company,
and supported the team to the time that was right
for the company to exit? Now, having said that,
as an entrepreneur, you’ve got to be really
smart about understanding the needs around the
table, and saying, ooh, I need to be ready with
a solution for those investors who are going to need to exit. So that’s something I’m
thinking about, right now, and really strategizing around. What is the right liquidity
vehicle for whoever of our amazing investors–
who have stuck by our side, through and through– to exit? And some won’t. But I think it’s an
important question. WILL ROSENZWEIG: 10 years ago,
there was a lot of concern that there was always going to
be a trade-off, like Kristen mentioned, between
doing things that are going to generate financial
return versus social impact. And there’s something
called the ERISA laws which govern the fiduciary
responsibility of the people who manage
these big pension funds. And two of the largest
pension funds in the country are CalPERS and CalSTRS, which
are our California teachers and California employee funds. And I remember speaking
with the people at CalSTRS, who were investors
in our fund about Revolution Foods. And this illustrates what the
schizophrenia of capitalism was like. Here we are– they’re
representing all of the teachers pensions– and they’re like, we
absolutely love this company, but don’t talk to
us all about impact because it’s going to push
us over this funny edge around our fiduciary
responsibility. Those rules have been
rewritten since then. And now, there’s more
comfort, to the point that, as Kristin mentioned
earlier, all of these big money managers– BlackRock Bain,
TPG– now, they’ve all got billion dollar funds
focused on these issues. Whether they’ll actually be
able to meet the expectations that investors have– this is going to take a
long time to prove out. So just to add to
what you said, I’d say if you’re going
to be an entrepreneur in this integrated
mission driven space, you’ve got to be committed
for the long-term. And one thing that
Kris didn’t say was you have to become
really good at managing people’s expectations. You have to actually
retrain the culture, but also at the
same time, you have to prove the case over,
and over, and over again. STUDENT: It’s really interesting
that you mention CalSTRS, because I just wrote
that letter to Apple. I just thought that
was really interesting. But thank you. KRISTIN RICHMOND: Thank you. That’s a great question. WILL ROSENZWEIG: Come on up. These are great
questions, thanks. You’re up there– OK,
we’ll go to you next. STUDENT: Hi, so I
have a question that’s at the other end
of the spectrum. So you’re talking a lot about
funding and raising money. But I guess going
back 10-12 years ago before you started all this,
how did you make the jump? How do you say that
I have this idea, and I want to put
my life into it? And then, how do you
fund that, and then make those decisions to
say I’m in a place where I can jump into this headfirst,
and dedicate my life to it? KRISTIN RICHMOND: Wow. That’s a great question. I think if I were to
really think about– because, of course, when you’re
sitting here at Berkeley, opportunities abound. You’ve got companies, and
nonprofits, and consulting firms, and banks, and
everybody on campus trying to recruit you. So there is a big
opportunity cost. But at the same time,
I remember Kir and I– I remember looking at her,
and talking to each other, and saying, you know what,
this idea is big enough, and the opportunity
is big enough, and the impact is big enough–
and the timing felt right– that even if we
bombed miserably, we wouldn’t regret one
day of going after this. And so, I think there’s
something about that passion and commitment for the
actual topic and content area that really pushed us far. I also felt like we
would learn a ton. So the analytical side of
me started looking at it, and was like, well, I’m going
to learn how to raise money– well, I’m going to learn
how to build a team– well, I’m going to learn how
to create an operational system that I never would have. And it felt like the career
pathing and learnings would be bountiful
enough, again, that even if it
didn’t work, I would be a more advanced
professional and human being for having done it. So I think number one was
the mission, and impact, and the fact that
the actual content area and the opportunity
felt too good to pass up. Secondly was this idea
of you just learn so much by going for it. So I think those two
are a really important. Having said that, we did
not have independent wealth. As Will said, I had
my first little baby. And my husband and I were
a hard working couple, and we were very clear with our
investors in the beginning– with DBL, and with
Dick, and everybody– we have to draw a salary. We have to make
something, we have to be able to
support our families. So I think there’s also a
personal decision point, too, of how do you manage
your own finances. And I would say– and I’ve learned over time– I don’t think any of us are
greedy based on the topic areas we’re looking at– also speak up for what you need. And for what will keep you
motivated, and sustained, and in the game. WILL ROSENZWEIG: Just to add a
little more color commentary. You can see in Kris
this ability to hold the vision and the optimism,
but also really pragmatic. So I remember the
conversations where you guys were assessing the risks. What does failure look like,
how much risk can we take? So there was really a
very pragmatic assessment on that part. And then, as you
just mentioned, it was like a collective decision
with your partners too. And one thing that Chris
does every year, that I think we all respect, is
she goes away on a trip, religiously. There’s nothing that stops
the trip with Steve each year. And nobody questions it in
terms of her commitment. KRISTIN RICHMOND: I
think you have to live while you’re doing this. So one of the big things is that
the entrepreneurs who I know, who have burnt out–
they put things on hold. It’s like, oh, I know
I want to have kids, but I’m not going to do
it for another four years. Or I know I want to
train for a marathon, but I don’t have
time to do that– I’ll do that when I finish this. Or I know I want to
take that trip to Nepal, but I’m not going to do it
because I can’t possibly take two weeks off. Those decisions will
eventually get you. Like Kir and I always say,
you’ve got to live your life, because you’re already going to
be working really hard– that’s a given. So you’ve got to live your
life as if it’s your life, and not put off the things
that are important to you. And then, when you build
a much bigger team, you also set an example. So now, when I think about that
trip, it’s as much for my team as it is for me. I don’t want people not seeing
their CEO going on vacation, because then how do they feel? Is anyone really going to feel
like they have the permission to go on vacation if I’m
not role modeling that? And I think that’s important as
you think about your leadership trajectory. What messages are you sending,
what are you role modeling, and then how are you sustaining
your own spirit and self. WILL ROSENZWEIG:
Another testament to the great program
here at Berkeley is that Kristin and Kirsten
are, as co-founders, both still running the company. KRISTIN RICHMOND: Yeah. WILL ROSENZWEIG: Which
is really extraordinary when you look at the
trajectory of growth. Generally, the company
outgrows the founders at a much earlier point. So the growth that we’ve seen
in each of them as leaders has really been
remarkable and inspiring. STUDENT: Hi, thank you
so much for coming. Your company sounds so
amazing and revolutionary. KRISTIN RICHMOND: Thank you. STUDENT: I just had a
more specific question about the sources of the food. So obviously, you have a very
small margin of economic– you have to do $1 meals. And we studied a lot about
sustainable agriculture and sustainable local farms. Do you feel like
you’re able to source from more sustainable farms
and more local farms– or because of the
scale issue, you need to get it from larger
scale agricultural companies. KRISTIN RICHMOND: Yeah. We actually do both. There’s a prioritization
hierarchy. And for us, the
prioritization is clean, real, no artificial food
in anything we do. So, real food for every
child at a rate that is affordable enough
to actually get to the child in whatever public
school system or community we’re serving. So that means with those really
strict standards that we then have to look at
sourcing, and how much can we do within our sourcing
parameters to meet those goals. And it changes over time. So when we first started,
we were clean label– we’ve always been
clean label only– but we were not able to
incorporate a lot of organics. We had specific partners who we
worked with– like, Greg Massa, and Massa rice out
here, I’m thinking, has been a wonderful partner
who really grew with us. Gary Hirshberg– met
him through Will– Stonyfield Farms’
organic yogurts– we never could have afforded
that at an early stage. But he saw the brand
value, and he literally said where else are
70,000 public school students across the US going
to be able to eat Stonyfield every day? So you’ll find
partners like that who work with you
at an early stage, and make the price
point affordable so that you can even go beyond
to the next level of standard. Now that we’re getting
bigger, we actually have, again, enough purchasing
power to help farmers, and to say we’re just going
to place a forward contract on something. And say if you can produce
100,000 apples in this price range, in this time
range, we will buy them. So we’re able to be a
little bit more creative now than we were to incorporate
more local, more organic, more seasonal than we might have been
able to do in the beginning. The other thing is it also
depends on area of the country. California is a
whole different story than Denver in the winter,
or than DC in the winter. So part of it is also– for us, there’s some
geography elements to it. But the cool thing
about getting bigger is that you actually
create more flexibility to work with a broader
range of partners. WILL ROSENZWEIG: Got
a question over here? We’ll have a couple
more, and then we’ll do our attendance question. Maybe you can get that ready? STUDENT: Thanks for sharing
your time with us, tonight. And I have a
question, because I’m a little curious about
the topics of trade-off. Because we know that there
are many scientific studies– like, neuroscientists
are doing the studies on how people’s brains are
perceiving the colors– maybe which colors will motivate
people’s purchasing decisions. And maybe this is
not very moral– like, how people and children
will eat more unhealthy food. And this is not very good for– it’s a negative effect
to your program. So how do we think
of this thing? Maybe there is a trade off
between the financial outcome and the community outcome. So I want to know your opinion. Thanks a lot. KRISTIN RICHMOND: Yeah. I think part of what we’re doing
is trying to change behaviors, in a lot of cases, when
we go into a program. So part of that– and I
think the best way to do it– is by serving incredible,
delicious fresh food that really respects the students
and families we’re serving. And I think there’s a little
bit of a misconception that people love the processed,
lower nutrient food– it’s they love junk
food, et cetera– not always the case. Certainly, we’re trying
to undo certain habits. But in a lot of cases,
there is an acknowledgment that if I had access
to delicious food that actually smelled good,
tasted good, looked good– especially when it takes in
input from students or families that are like, if you created my
grandmother’s pizzaiola recipe, I would love that. So I think part of it is
that culture of respect. But then, part of it is also
engagement and education. So being able to interact. We have a food truck
right now that’s going around our communities. We have chefs doing
cooking classes, where we are having
students out in the parking lot of their school– plate a rainbow. So to your point
about colors, creating beautiful, colorful
meals, and then going home with recipe bags,
and bags of produce and food to their families to
recreate the same recipe. So that engagement and education
is a big part of it too. WILL ROSENZWEIG: I
remember in the early days, too, you had that Iron Chef
competition with the kids from Oakland. They would come to
the culinary center, and they would get a
little bit of instruction from the chef culinary
director of Rev Foods. And then, they would
be put in teams, and then they would
design the meals. And then, those
would be a source of inspiration for
what would then be rolled out in the school. So this kind of
eater-centric design has been very successful. KRISTIN RICHMOND: Yeah. Thank you. WILL ROSENZWEIG:
Did have a question? STUDENT: Hello. You partly already
answered my question, but you mentioned earlier that
your company works with kids directly, and asks them
what they want to eat, and what they want to see. And I’d imagine that,
for a lot of these kids, this is their only way that
they learn about healthy eating. When they go home, they might
not be able to eat at all, or they might only be
able to eat junk food. So I was wondering
if your company has other ways that they
educate these kids directly about healthy eating, and
incorporates your mission into what they’re learning? KRISTIN RICHMOND: Yeah. So that is a lot of our talk
about this idea of ecosystem partnerships. So we have chefs going into
schools every day and taking– we actually have this going on
in a very robust fashion right now across Louisiana,
Tennessee, Texas, and DC– huge food feedback
sessions right now. So we have chefs
going into schools, asking opinions,
designing, iterating, and doing kind of product
prototyping with students. And then, to your point, we do
have a whole host of nutrition partners who work with us. So there’s an amazing
nonprofit called FoodCorps, who is like a sister or
brother organization to us. They’re a nonprofit,
but they’re funded by a lot of the same
foundations that fund us. They have a full-time
food coach who is funded to come
into the school and teach nutrition
education on a daily basis, and champion garden projects,
and champion cooking classes, and reinforce, on a day to
day, minute to minute basis the why behind the healthier
food that students are eating. So there’s a whole
host of partners we have like that who work
throughout the student day, and school day,
and even family day, to reinforce the mission
and the importance. The more we can do that, the
better– there’s never enough. WILL ROSENZWEIG:
Question up here. We’ll make this the
last one tonight. STUDENT: I have two questions. First off, thank you
for coming today. And it was great seeing you. I actually saw
you on Monday too. But my question was
about expansion– like a five year plan– where you see yourself. You were talking about
how, in the United States, you’re on the rim, going from
California to Texas, Louisiana, and then back up again. So how do you plan to
expand to the Midwest? WILL ROSENZWEIG: Did you
bring your investor checkbook tonight? STUDENT: Ah, not today. [LAUGHING] KRISTIN RICHMOND: We are
raising money for our Chicago and Florida facility. [LAUGHING] We’re doing
a couple of things. One– again, with
operational evolution– we’re looking at how we
can serve a broader reach through our facility footprint. How we can kind of invest less
in more bricks and mortar, and have a broader reach. So a couple of things going on. We’ll probably plant facilities
and culinary centers, one in the Midwest, and
one in Florida just because of the density. But then, what happens to
Kansas City, and Alaska, and Minnesota, et cetera. So for that, we’re
actually looking at designing a
product set that is– we call it broadline because it
will be sold into Sysco and US Foods, and the
aggregator companies that are distributing to these
institutions every day. So instead of serving
lower quality product, they’ll actually have Rev
Foods clean label product in their trucks, distributing
it to a school in Kansas, for instance. So we’re looking at
both bricks and mortar expansion, or culinary
center expansion, but we’re also looking at
elevating our product and shelf life technology so
that we can serve through other
distributors, that way, we can have a much
broader reach. WILL ROSENZWEIG:
Well, let’s have a big hand for Kris tonight. Thank you so much for coming. [APPLAUSE] So great to have you here. I loved how all
that came together. So here’s the
question for tonight. Take out your iClicker. It’s a tough one. Let’s see how you did. And you don’t have to change
your answer tonight when you see what everybody else said. How about that? [LAUGHING] Are you ready? OK. Pretty good. Yeah, playing around with us. Well, thank you. [SIDE CONVERSATION]

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