It seems not a month goes by without news of the latest food-related outbreak, whether it’s romaine lettuce contaminated with the E. coli bacteria or packaged chicken infected with salmonella.
Food safety is a growing problem, sickening millions and costing businesses billions of dollars in damages. In the U.S. alone, 48 million people are stricken each year by foodborne diseases, with 128,000 hospitalizations and 3,000 deaths, according to estimates from the Centers for Disease Control and Prevention.
And the situation appears to be getting worse due to a number of factors, including an increasingly global and complex supply chain that makes end-to-end food traceability more difficult and amplifies the spread of disease-causing organisms.
Food companies are facing pressure to up their game and make their products safer to eat. Consumers, increasingly anxious over what they put into their bodies, want to know where their food comes from, how was it made, and what it contains. On the regulatory front, President Barack Obama in 2011 signed into law the Food Safety Modernization Act (FSMA), which mandates fast and effective food tracing.
All this is leading to greater investments in food safety startups that can held food companies meet government regulations, satisfy consumers, stop recalls and avoid millions of dollars in lost products and brand damage.
“We see a huge opportunity to bring true visibility to the entire food supply chain and eliminate many of the black holes that exist today,” says Geordan Hankinson, a principal at Renewal Funds. “Right now, there is a lack of consistent data standards across the supply chain, making it hard to generate actionable intelligence and spot these outbreaks before they happen.”
That’s why his firm, along with Tyson Ventures and others, have invested $31.8 million in FoodLogiQ. The company is a software-as-a-service platform that tracks and traces food as it winds its way through the food chain. Once a bad product or ingredient is identified, the software makes it easier to locate, whether it’s on a store shelf or in a restaurant. The ultimate goal is preventing an outbreak and making sure no one gets sick.
“Traditionally, if a quality issue arises, someone is on the phone for the next two days calling all the store locations and trying to figure out where the case of moldy bread ended up,” Hankinson says. “With FoodlogiQ, that can take minutes instead. This is about farm-to-fork traceability. Every day there are quality incidents that are managed on the FoodLogiQ platform that never reach the public. There is a real sense that the use of this product leads to reduced quality issues that would impact the public, so there are huge social and environmental benefits.”
FoodLogiQ customers include a who’s who of the restaurant and grocery business, including Five Guys Burgers and Fries, Panda Restaurant Group, Buffalo Wild Wings, Chipotle Mexican Grill, IPC/SUBWAY and Whole Foods Market. They are using FoodLogiQ to enhance the traceability of the food they serve, but also to accurately source products with specific attributes, such as organic or non-GMO or pesticide-free.
For companies making higher value claims that their food is all organic or does not contain certain hormones, being able to verify those promises is critical, especially in an age of very informed consumers who have better access to data than ever.
One of the things Hankinson loves about FoodLogiQ is its network effect.
“Once a major brand signs onto FoodLogiQ, it can pull all its suppliers onto the platform,” he says. “That means the company can scale very quickly and significantly.”
Other emerging venture-backed food safety startups include:
- Ataraxis, backed by S2G Ventures, has developed a near real time platform that tests for the presence of antibiotics and other adulterants in meat including beef, poultry and pork.
- ImpactVision, which has raised about $3 million from Acre Venture Partners, the Yield Lab and logistics giant Maersk, is using computer vision and machine learning to automatically assess the quality of food in factories and elsewhere.
Pegged at about $15 billion by Grand View Research, the food safety market is benefiting from a series of tailwinds.
“Regulatory pressure is mounting, consumers are more aware of what they eat, and retailers like Whole Foods are trying to drive to a higher standard,” says Mathieu Guerville, a director at UL Ventures. “So it’s a market that’s growing because there is a need to verify everything. Nobody wants to destroy their brand equity because of a contamination outbreak.”
UL, along with Spero Ventures and S2G Ventures, invested $18 million in SafeTraces. The company provides on-food traceability solutions that can trace a product throughout the supply chain. These invisible, edible, flavorless, digital DNA barcodes are applied directly on the food, enabling producers, processors and distributors to trace the food itself, not the just packaging.
For instance, SafeTraces can be added to lettuce during the washing process. If an outbreak occurs, the lettuce can then be traced back not only to the grower, but to the lot or batch, in a matter of minutes, not days of months, Guerville says.
“When the latest E. coli lettuce outbreak happened, the industry really struggled to find the root cause,” he says. “The reaction time was pathetic. When a windshield wiper gets recalled, the car company knows exactly where all the vehicles are and how to reach the owners. But with food, which we put in our bodies, we have absolutely no idea where it’s from or what condition it’s in”
That’s why SafeTraces is significant, he says. The traceability solution enables food companies to gain full transparency into the origin of what they sell and ultimately reduce recall costs. For instance, the last time there was a major romaine lettuce scare, millions of pounds of lettuce were destroyed as a precaution. But with a solution like SafeTraces, the next time there is an outbreak, it’s possible only a few hundred pounds will need to be removed from grocery stores and restaurants.
Beyond tracing the source of outbreaks, food companies also need to do a better job ensuing that their product are safe and free of pathogens from the outset. After all, the average cost of a recall can exceed $10 million in brand damage and lost sales, according to a study by the Food Marketing Institute and the Grocery Manufacturers Association.
Any technology that can test for pathogens faster, cheaper and more effectively has a bright future. That was certainly the thinking behind Clear Labs, which has raised $45 million in total from Menlo Ventures, Wing VC, Dentsu Ventures, Felicis Ventures and Khosla Ventures.
“What drew me to Clear Labs was that its next-generation sequencing technology was clearly better than the exiting food testing technologies that were in place,” says Greg Yap, a partner at Menlo Ventures.
Essentially, Clear Labs is bringing the world of genomics to the food safety industry. The company says it has built the world’s largest food genomics database, which is comprised of millions of entries. Clear Safety collects hundreds of millions of data points per analysis that can be used to understand the entire microbial makeup of a sample.
“In the past, with old technologies, you could only ask one question at a time, like: Is there salmonella in this chicken?” explains Yap. The problem, however, is that there are thousands of types of salmonella, so testing for all varieties is expensive and time consuming. By the time you get the answer, an outbreak may have already started as the food moves further through the supply chain.
“With Clear Labs, you can ask all the questions simultaneously and quickly get the answers,” Yap says. “That’s a real leap forward. For the same price of just one test using the old technology, you now get all the information, faster and cheaper.
But even Yap concedes that even superior technology is not always a slam dunk in the food business.
“The food industry is very conservative, so the rate of technology adoption can be quite slow,” he says. “So really have to get it right and prove the technology works. The makes the sales cycle longer, but once you get in, the barrier to entry becomes that much higher for the next guy.”
Tom Stein is a VCJ correspondent from Palo Alto, California. He can be reached at email@example.com.