How this startup passed our 5-pillar evaluation process
At Hustle Fund, we read through 700+ applications every month. How do we decide when to invest and when to pass? By going through our 5-pillar evaluation process. We look at these 5 elements of a startup:
The thing is, that article is full of theoretical examples. How do we use a 5-pillar evaluation process in our day-to-day processes?
Below is an in-depth analysis of a company that Hustle Fund invested in. We break down each of the 5 pillars and explain our thinking behind each one.
Our goal in sharing this with you is to help you gain a deeper understanding of how VCs think when we hear founder pitches. Hopefully you’ll be able to use this information to raise funding more effectively.
But first, what’s the company?
The company we're evaluating is called Daily Blends. They’re on a mission to make healthy, affordable food available 24/7.
Their solution: a network of smart fridges (think vending machines) that offer a variety of fresh, healthy food products.
Some fun facts:
- The founders – Shriya Gupta and Purva Gupta – are sisters who immigrated to Canada from Asia in 2020
- Daily Blends partners with food brands to fill the fridges
- Fridges are installed in public areas like train and bus stations, hospitals, and universities
I have to admit, I was surprised to hear that we invested in Daily Blends.
Why? Because at first glance this sounded like a complicated, high-overhead, high-risk company with a long sales cycle.
But then I talked to Elizabeth Yin, who led the charge on this deal. Here’s what I learned:
Pillar #1: The Team
When it comes to the team, Hustle Fund wants to see founders with domain expertise.
This means the founders:
- Have a deep insight into the problem they’re solving AND know how to attack the problem because of their experience
- OR have researched the problem a ton (like, for months and months)
This was especially important in the case of Daily Blends. Why? Because their business model is heavily dependent on nailing the unit economics.
Think about it: food is tricky. There are ingredients to source, food to store, fridges to lease, delivery costs, and spoilage concerns (to name a few).
And for Daily Blends, there is also the data to consider. How many fridges in each neighborhood? Where to put each fridge? How much of each item to stock?
Frankly, if the team consisted of anyone other than Purva and Shriya, we may not have invested.
This is because Purva and Shriya are uniquely well-positioned to run this company.
Purva’s background is in the food and tech industry – as a founder/chef of her own company, and also in the hotel restaurant industry. She has a deep understanding of the unit economics and logistics of food. She's also a computer engineer and graduated from one of the top tech institutes, IIT Mumbai, in India.
Shriya is a techie too. She has extensive experience in AI, data analytics, growth marketing, and product development.
Given that Daily Blends is a company with high overhead costs and a bajilion logistics to consider, the founders had to have a deep knowledge of the unit economics of the food industry AND be detail oriented in order to make this work.
This is not a business with room for error.
Elizabeth believed that if the founders got it right, they could eventually have millions of these vending machines all over North America.
She also believed that if anyone was going to get it right, it would be Purva and Shriya.
Pillar #2: The Problem
Healthy food is freaking expensive.
Sure, some restaurants serve healthy food… but for $20+ a meal. There are always food delivery services… but those prices are on the rise, too. I've personally paid a $10 delivery fee for a $12 meal.
There are plenty of fast food restaurants with low prices and late hours, but those options are largely unhealthy.
So if you’re squeezing a meal into a busy day, or unable to eat dinner until late at night, your options are limited.
This is the problem.
There is no convenient way to get pre-made, healthy meals at “fast food prices” in North America whenever you want.
I asked Elizabeth: Is this really a MASSIVE problem?
She says yes. Here’s why:
- People will need to eat food for the foreseeable future.
- People have lots of options, but most options don’t optimize for all three of these elements:
- Cost (restaurants + food delivery are expensive)
- Health (what’s available late isn’t healthy)
- Availability (most options aren't available 24/7)
Pillar #3: The Solution
Daily Blends came up with a unique solution: use existing vending machines and stock them with healthy, appealing food.
We’re not talking about a bag of stale baby carrots. Daily Blends offers meals like yogurt parfaits, chocolate chia granola, caprese pasta salads… things people will actually eat.
And they’re able to offer these meals at around $6. Roughly the same as a happy meal.
The other compelling part of Daily Blends’ solution is its distribution. They partner with venues like malls, hospitals, universities, and transit centers to get their vending machines in high-density areas where people are often in a rush.
Now, there are complicated pieces to the biz:
- How to keep costs down for consumers AND make a profit?
- How to make sure the food stays fresh?
- How to anticipate demand for each item?
- Where to put each machine?
But because of the founders’ background in food and data analysis, Elizabeth had conviction that they could make it work.
Pillar #4: Traction
Now, Hustle Fund invests at the pre-seed and seed-stage level. So we’re used to seeing companies with very little (if any) traction.
But because this business relies heavily on unit economics, Elizabeth needed to see some level of success with the pilot program. She needed to see beyond the “idea” phase.
She wanted data on what it took to run one vending machine – inclusive of all food products, delivery, machine leasing costs, and logistics.
Elizabeth knew the economics of 100 machines would be better than the economics of 1 machine. She just needed proof that the team could execute the first iteration of the product.
And that’s what she got.
Daily Blends had 2 vending machines by the time we invested – one at a university and one at a hospital.
And since they were able to prove that the unit economics worked at this small scale, Elizabeth had conviction that the unit economics would work even better as the team rolled out hundreds or even thousands of machines.
Pillar #5: The Market
You know, it’s funny. Distribution is difficult for almost every startup.
But while Daily Blends has a lot of logistics and complications to consider, distribution isn’t one of them.
Finding customers for their vending machines would probably be straightforward… as long as Daily Blends was able to develop strong partnerships with venues like the ones listed above.
Look, this isn’t an ad for Daily Blends. We weren’t paid to write about them or anything like that… we wanted to show you a real-life example of how we use the 5-pillar evaluation system in action.
Hope you found this useful… or at least mildly entertaining.
⛰️ And if you like this type of content, you’ll love our pitch event at Hustlers’ Retreat on August 20-24, 2023. We’re going to hear pitches from a few founders, followed by real-time feedback from a panel of seasoned investors.
Plus, one of the founders of Daily Blends is coming to Hustler’s Retreat. Want to learn more about her experience raising from investors and scaling her product? Join us at Hustler’s Retreat.