Incubating Success - The Growth of Food Incubators for Emerging Entrepreneurs

Table scraps masthead 3.png

by Clark Driftmier

We often hear the saying: “It takes a village to raise a child.” In the world of food start-ups, we might also say: “It takes a village of supporters and resources to raise a new food company.” Fortunately, food entrepreneurs of today have the unique and valuable resource of Food Incubators to provide a range of essential infrastructure and support services to help facilitate growth and success. During the 2010’s, the presence of these incubator resources and facilities has grown dramatically, from fewer than five to more than twenty. Incubators can now be found in major metro regions and urban food hubs across the country.

 "The Hatchery" Food Incubator, Chicago (rendering)

"The Hatchery" Food Incubator, Chicago (rendering)

Why Use an Incubator?

For emerging food companies, their founders and teams, food incubators can provide a wide range of resources and services, at costs that are affordable and/or underwritten. These resources fall into six primary “buckets” of activity:

1.       Infrastructure:

  • Kitchen working space, tasting rooms, food production areas which meet state and federal food safety requirements, co-working space, meeting areas

2.       Outsourced services:

  • Package design, graphics, marketing, sales, legal, accounting, insurance, banking

3.       Mentorship:

  • Food thought leaders, chefs, investors, food executives, consultants, leadership coaches

4.       Education opportunities, events and workshops:

  • Seminars, programs, tours of food facilities

5.       Community:

  • Informal discussions, get-togethers, networking, sharing of ideas and goals

6.       Investment:

  • “Accelerator” funds, state and local development funds & grants, support from food companies, angel investors, private equity

Emerging companies typically reside within food incubators for much of their early life, eventually growing sufficiently to open their own dedicated offices and facilities. The food incubator does just as it’s named - - it “incubates” and nurtures the business during the early vulnerable stages of development. Bonds and friendships forged during the heady but difficult first stage in the food incubator often last for years as the entrepreneurs grow together and chart parallel but unique pathways to the realization of their plans and ideas.

Here is a brief overview of several of the current food incubators which collectively are helping to foment entrepreneurship with hundreds of start-up businesses:

Pilotworks (www.pilotworks.com) The original facility for Pilotworks is in Brooklyn, NY, with additional kitchens now operating in Chicago, Dallas, Newark NJ, Portland ME and Providence RI. Pilotworks provides kitchen workspaces, equipment, mentoring, outside services

 Kitchen facilities at Pilotworks, Brooklyn NY

Kitchen facilities at Pilotworks, Brooklyn NY

Union Kitchen DC (www.unionkitchendc.com)  Union Kitchen operates two kitchens in Washington DC, a distribution center, two retail grocery locations and a food accelerator program. Beyond its current base of start-up clients, more than 200 additional aspiring start-ups are on its waiting list for a spot in the program.

 "Meet the Makers" night at Union Kitchen DC

"Meet the Makers" night at Union Kitchen DC

The Hatchery (www.thehatcherychicago.org) Located in an economic development zone near Chicago’s Loop, The Hatchery has received funding from state and city agencies as well as from food giants including Kellogg’s and Con Agra. One of the largest incubators at 67,000 sq. ft., The Hatchery has 56 food grade spaces and can serve 75-100 companies.

 Networking space at The Hatchery, Chicago (rendering)

Networking space at The Hatchery, Chicago (rendering)

NOFFN (www.noffn.org) NOFFN, the “New Orleans Food & Farming Network,” has a number of programs, both kitchen-based and farm-based, designed to support sustainable agriculture and the unique food culture of the great New Orleans region. NOFFN’s “Edible Enterprises” program is the kitchen-based food incubator. The organization also runs the “Growing Back to the Roots” farming program and the “Grow Mo Betta” education workshops, among other initiatives.

 NOFFN "Edible Enterprises" kitchen facilities, outside New Orleans, LA

NOFFN "Edible Enterprises" kitchen facilities, outside New Orleans, LA

Kitchentown (www.kitchentowncentral.com) This initiative in the Bay area of California has a kitchen facility in San Mateo and a Learning Lab in the Mission District of San Francisco. The kitchen facility has 10,000 sq. ft. of space, numerous food prep areas, co-working spaces, a food storage warehouse and a café for members and visitors.

 Member foodmakers at Kitchentown, San Mateo CA

Member foodmakers at Kitchentown, San Mateo CA

Kitchencru (www.kitchencru.biz) Kitchencru has helped nurture Portland OR food startups since 2011, making it one of the most established food incubators with hundreds of alumni firms. Its primary 4,800 sq. ft. facility has a wide range of food production systems and equipment.

 Making artisan cookies at Kitchencru, Portland OR

Making artisan cookies at Kitchencru, Portland OR

Benefits

The benefits of food incubator participation are numerous. Promising-but-struggling food enterprises gain access to many different areas of infrastructure and service which would otherwise be unavailable or unaffordable. Mentorship and coaching opportunities help to stimulate professional growth as emerging entrepreneurs hone their leadership and management skills. The friendship and affiliation with other entrepreneurs helps build community, the sharing of ideas and the bonds of mutual support and encouragement among peers. Additionally, many of the incubators link emerging food brands to investors and accelerator funds which can greatly enhance the financial viability of the venture during its early vulnerable stages.

Challenges

The biggest challenge for a new firm in an incubator is really the underlying risk for any startup food business - - the pure risk of failure and the possibility that the venture will not gain a sustainable share or position in the market. However, this risk is present for all startups, and the incubator can help to mitigate the risk in a number of ways.

Another challenge is the potential risk to proprietary Intellectual Property (“IP”) due to the communal, open environment of the incubator. Unique and breakthrough ideas can be co-opted or copied by others. One wonders if an incubator-bred brand can fully protect any truly significant, proprietary IP. There is one level of risk to have others see a new flavor of cupcakes; the risk is entirely different with, say, a breakthrough formula for plant-based proteins that can be widely viewable and discoverable by 75-100 other ambitious entrepreneurs. We recommend that emerging food company leaders take all possible precautions to guard and protect their unique, proprietary IP, which can be challenging in an open, communal incubator environment.

A third challenge is to find the right financial partner among the accelerator funds, private investors and angel funds which are available in some incubator programs. It’s important for the founders and stakeholders to evaluate different financial partners to select the best partner with similar goals, expectations and investment timelines for the business.  Investors can be inspired and sincerely helpful, but they also are in the program for the financial gain they hope to realize. The key is to find investors who are aligned with the founders and can serve as a beneficial resource in terms of both financial support and strategic guidance. We also recommend that emerging food company leaders do everything possible to retain the highest level of ownership, so that they can reap the highest portion of its future value if or when a financial transaction occurs down the road.

Summary

The current environment of the food industry is very favorable for creative, emerging new brands and ideas. Consumers continue to embrace all kinds of new flavors and forms of food. Retailers need new brands to build excitement for their shoppers. Investors and large food companies need new and emerging brands to provide platforms for future growth and products that future consumers will embrace. To address this opportunity, there are more emerging food entrepreneurs than ever, creating new brands and foods which speak to the needs and interests of a new generation of consumers.

The combination of these factors means that the demand for food incubator resources is likely to increase significantly in metro areas and food hubs across the country. We predict that the Food Incubator movement will become a robust industry in its own right, with dozens of facilities across most major U.S. metro areas. Some of these incubators will follow the path of Pilotworks to roll out their model to multiple markets using equity investment. Others will stay independent but will increase in the size of facilities and range of services to serve a burgeoning list of clients and member companies. This growth will parallel the growth of the co-working office industry, which in ten years has blossomed into a major part of the office working infrastructure of most major cities.

Starting a food enterprise is a daunting proposition, but with the infrastructure and support of Food Incubators, exciting new businesses are hatching.

# # # #

Additional Food Incubator Resources:

Food-X (www.food-x.com) New York, NY

HBK Incubates (www.hotbreadkitchen.org/incubates/) East Harlem, NY

La Cocina (www.lacocinasf.org) San Francisco, CA

Commonwealth Kitchen (www.commonwealthkitchen.org) Boston, MA

Fund the Food (www.fundthefood.com) Birmingham, AL (the Kirchner Food Fellowship, created and managed by Kirchner Group, Merchant Bankers)

Forge: Food (www.forgeportland.org) Portland, OR

Chobani Food (www.chobanifoodincubator.com) New York, NY

Shoals Entrepreneurial Center (www.shoalsec.com/specialty-food-production/) Florence, AL

The Good Food Business Accelerator (www.goodfoodaccelerator.org) Chicago, IL

The Yield Lab (www.theyieldlab.com) St Louis, MO

# # # #

CLARK DRIFTMIER is Managing Director of Strobus Consulting (www.strobusconsulting.com) which provides clients with new product development and go-to-market business development strategies. He has been a food entrepreneur and start-up specialist for nearly 3 decades. Clark’s new product and management initiatives include hundreds of new products in several dozen food categories, with combined annual sales of nearly $2 billion. A published author of articles on natural and organic foods, Clark has also spoken at numerous conferences and has served on several national and regional not-for-profit boards. He and his family live in Northern California.