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Even with Y Combinator pedigree we initially struggled with fundraising. That was a blessing in disguise

The cofounder and CEO of Tovala explains how the company has benefited from the unintended frugality of its early days.

Even with Y Combinator pedigree we initially struggled with fundraising. That was a blessing in disguise
[Source Photo: rawpixel]
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When my co-founder Bryan and I first launched Tovala— the first-ever smart oven paired with a subscription meal service—we had a lot of ideas and very little cash. Although we’d won a business plan challenge at the University of Chicago Booth School of Business, we spent most of the summer and fall of 2015 with our boots on the ground, taking as many investor meetings as possible. No one wanted to be the first investor, which made raising initial capital a chicken-or-the-egg problem: we needed money to hire people and make progress, but we also needed to show progress to raise money.

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Even once we became a part of Y Combinator in early 2016, we still didn’t see an influx of venture capital as we faced challenges within the greater startup landscape and specific to our business.

In the startup space, we first encountered reluctance towards early-stage hardware. Our proprietary smart oven is an essential component of the Tovala experience, fulfilling our promise of a fresh, frictionless meal. However, investors’ general wariness towards new hardware (particularly in 2016) became a barrier we needed to overcome and made it take much longer to sell in our ecosystem of software, hardware, and meal delivery.

In our industry, there were multiple biases to overcome. Blue Apron had recently gone public with underwhelming results, deflating previously high enthusiasm for the meal kit category (a category which we’ve since distanced ourselves from). A few notable startups similarly combining hardware and consumables had also recently folded, which increased investor skepticism about the feasibility and longevity of businesses with a Keurig-like model.  And Amazon’s acquisition of Whole Foods made investors hesitant about betting on any other company in food or meal delivery. While we have always felt confident in our game-changing solution to the “what’s for dinner” dilemma, the timing of other startups’ failures and the potential of Amazon entering the market made fundraising significantly more challenging.

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We also have enough hindsight (and humility) to admit we made mistakes during early fundraising. In initial meetings, we leaned a little too heavily into the scrappy startup image, showing up with our lone prototype that was practically handmade and meals packed in Tupperware. We realized we weren’t making the future of Tovala real enough to our audiences. When we raised additional seed funding six months later, we came prepared. With our first Tovala meals in branded packaging, an early version of our app live, and a fleet of ovens at our makeshift offices we ensured investors could see the future we envisioned.

Now in 2021, we’ve raised multiple large rounds of funding, including our $30 million Series C in February of this year. (Joe Mansueto, owner of Fast Company’s parent, is an investor.) Looking back, I know that initially raising less money was actually a benefit to us. It not only made us scrappier and more resilient, but it still shapes the way we think about our product, design our spaces, and model our process for working together. Here’s how:

Product

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To keep costs low, we spent much less than competitors on our initial oven design. We asked ourselves what was absolutely essential to our value proposition—getting dinner on the table seamlessly – and focused only on the must-haves for making that happen. We chose to forego fancy aesthetics and unnecessary features because what mattered, and still matters, is solving the core problem as effectively as possible.

Spaces

Unlike some competitors, we couldn’t build a large-scale kitchen facility before launching. Even more than not being able to, we realized we didn’t want to. The saying is true: you don’t know what you don’t know. We wanted the opportunity to learn before making a big investment. Instead, we talked to dozens of potential partners and eventually found one willing to rent us space and equipment. Four years later, we’re now in the process of building a state-of-the-art, 250,000 square foot facility in Utah, in addition to our two other facilities in Illinois. We can operate three Tovala-owned kitchens because we took the time to learn how to scale operations efficiently and thoughtfully, and the money we saved initially helped make this possible.

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Process

In the early days our team was small, fast, and focused because we didn’t have any other choice. When we launched, we had less than 20 employees, with one or two people per entire department. One team member designed everything from packaging to the website, one team member developed and maintained our app, and two people oversaw culinary development.

We were also working with a limited amount of time. We had raised enough money to launch in May of 2017 and operate until the end of the year. By that August, we knew we had to start raising our Series A – and we had just three months of customer data to build a story around. Within this small window of opportunity and time, we had to move as quickly as possible and every decision needed to prioritize growing our business.

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Today, we still choose to be fast and focused because it’s how we operate best. We empower our team members to take ownership and responsibility over wide swaths of work and we ask them to keep the growth mindset central to every decision they make. Even if our departments are substantially bigger, the small but mighty mindset remains.

Marc Andreessen once wrote “Generally speaking, act like you haven’t raised nearly as much money as you actually have.” Early on, we never had the luxury of raising too much money and we’re all the better for it. We learned to never get too comfortable, and we like it that way. For startups forging their path, remember that less can certainly be more.

David Rabie is cofounder and CEO of Tovala, a smart-oven-paired subscription meal service.