Transforming the Future of Food with Ashley Hartman, Managing Partner, Bluestein Ventures

In this compelling episode, I sit down with Ashley Hartman, Managing Partner at Bluestein Ventures, to explore how they're transforming the $4 trillion food industry through strategic investments that prioritize nutrition, sustainability, and digital innovation. We dive into Bluestein's forward-thinking strategy, from partnering with startups to navigating the complexities of the food supply chain and driving meaningful growth. You'll also gain insights into the latest trends in plant-based foods, alternative proteins, and the crucial role of technology in addressing America's health crisis. Whether you're an entrepreneur, investor, or simply passionate about the future of food, this episode is brimming with transformative ideas and actionable insights. Don't miss out on this deep dive into the forces shaping a healthier, more sustainable food system.

Podcast Episode Transcript: Transforming the Future of Food with Ashley Hartman, Managing Partner at Bluestein Ventures

[00:00:00] Erin McCann: Hi everyone, thanks so much for joining. I'm very excited that Ashley Hartman, Managing Director of Bluestein Ventures, is here with us today. Ashley, welcome, thanks so much for joining.

[00:00:10] Ashley Hartman: Thanks for having me, excited for the conversation.

[00:00:13] Erin McCann: Me too. To kick things off, would love to hear your thoughts about the work that you do and Bluestein Ventures, and in particular, what trends or developments in the food industry are you most excited about from an investment perspective?

[00:00:28] Ashley Hartman: Yeah, happy to just kick off and just give an intro to set the context. But Bluestein Ventures is an early-stage venture capital fund based in Chicago. Our mission is to transform the food system to be better, healthier, and more sustainable. And so we do so by investing in early-stage ventures across the supply chain within food.

So anything from goods on the shelf, how goods get to the shelf, and how goods are made And so our focus is pre- seed to series A, so very early in a company's life cycle. And then we partner with our companies closely to help [00:01:00] them really achieve product market fit. And that's our lens on the world is how do we help companies set the infrastructure for scale?

So with that context the, our current fund we're on fund three is really driven by three broad themes. We're investing behind nutrition, sustainability, and digitization of the industry. And that's the focus that we take on the food industry and where we see the food industry going in the next five to 10 years.

[00:01:27] Erin McCann: Perfect. And just for our listeners, can you say a little bit more about what we mean by digitization of the industry?

[00:01:33] Ashley Hartman: Yes, absolutely. So it is pretty broad across the supply chain. So really thinking about how do we use all the tools and technology to our advantage to make the supply chain more efficient and effective.

[00:01:46] Erin McCann: So essentially, if I'm hearing you correctly, by digitizing, we're improving that process itself, but we're also likely aiding our efforts in terms of improving sustainability by updating those processes themselves, as well as [00:02:00] the available information and the choices we can make on nutrition, so they all connect.

[00:02:05] Ashley Hartman: Absolutely. The food industry is highly interconnected, and so pushing on one string helps the other and so that's the hope, is with digitization, we can have a much more efficient and effective supply chain, which should help with sustainability and nutrition. Those are often linked, not always linked, though.

[00:02:21] Erin McCann: Makes sense. And what do you believe sets Bluestein Ventures apart when you think about the broader space, other venture capital firms, and investing in the future of food?

[00:02:31] Ashley Hartman: Yeah, absolutely.

So, what sets us apart is really twofold. First, our expertise within food is very unique, particularly across the supply chain.

And so we have this lens on the world around food and where we see the market going and a very deep and wide network across food that helps us be successful and helps our portfolio companies accelerate their growth quicker. And then second, we're hands on with our portfolio companies, so we don't just invest with our dollars, but our time.

And as I mentioned earlier, [00:03:00] our lens on the world is go-to-market strategy. So that's incredibly important at the seed stage, because we really want to make sure that companies are using their resources, both time and dollars, not just capital, effectively. And so we like to help companies and partner with them early on to think through how do we set the infrastructure to scale?

How do we make sure we're focused on the right things? How do we develop strategically? How do we set the KPIs very early in a company's life cycle to really help you scale and grow? And so between the two we like to say all roads eventually lead to Bluestein when you're raising money in early-stage in the food industry.

And so, it's been really impactful for us over the last 10 years to really build that reputation and expertise around food.

[00:03:44] Erin McCann: Fantastic. And for those new to some of this terminology, KPIs, we're talking about key performance indicators, right? Or essentially how we're defining success.

[00:03:50] Ashley Hartman: Sorry, I hate using terminology.

I'm so sorry.

[00:03:52] Erin McCann: It's all good. It's all good. That's actually how we're defining success, right? Is how you're elaborating to, to define those performance indicators. [00:04:00] Absolutely.

[00:04:00] Ashley Hartman: The key metrics that help you really align yourself and your organization on what is happening both kind of all these indicators that tell you what's happening with the business and all of the data that you can gather, really honing that down into the key drivers of growth.

[00:04:16] Erin McCann: Fantastic. I want to delve a little bit more into some of your areas of focus and your priorities and as quick context, some of our recent podcast conversations here have explored things like the importance of plant-based foods, cultivated meat, cultivated seafood. When you look at your next steps, what are you most focused on?

And particularly in these spaces when it comes to plant-based foods and alternative proteins as part of that?

[00:04:42] Ashley Hartman: Yes, the plant-based food industry, alternative protein industry is going through a bit of a trough of despair. So when we're looking at alternative protein, it's really around true innovation.

And when we think of true innovation, that is the triumvirate of taste and texture. price, [00:05:00] and nutrient density. And we don't think that those three pieces have been solved simultaneously. So we are only investing in companies if we think they can achieve those three criteria. For example, we invested in a company called Meaty, which is an alternative protein using mycelium back in 2018.

And the genesis behind that investment was because they had a game-changing product on both taste and nutrient density. And we thought that with their production method, they could get down to price parity over time. And so that's when we think about plant-based and how is the industry going to move forward?

We need to solve those three things together. And that's what really excites us. But we still think, even with the kind of overhyped nature of the space and the fact that we're going through this trough of despair, we do think that like this market is here to stay and we need to find innovative solutions across the spectrum from plant-based all the way to cultivated.

And we can see that with just the [00:06:00] trends that are happening. Gen Z is more focused on the environment than any previous generations. They're consuming less meat and dairy than any previous generation. I just read an article actually that 8 percent of Gen Z reported purchasing conventional cow's milk compared with 37 percent of the baby boomer consumer.

So I just don't think that these trends are going away. It just might be slower and we might need a lot more unlock in technology to get us there.

[00:06:26] Erin McCann: There's so much to what you just said. I want to make sure we unpack a few things. So first and foremost, as you mentioned, we've got this framework of taste and texture, price, and nutrient density.

I can imagine, myself included, recognizing that while this is a framework, what constitutes good taste, good texture, an appropriate price, and nutrient density can vary by individual, right? So can you talk a little bit about what's your process? How do you essentially think about the thresholds when you say, for instance, that Meaty fit two of these three criteria?

How does this [00:07:00] work when we think about that framework?

[00:07:02] Ashley Hartman: Yeah great question. So I take, I'll take the three of them separately. So we talk about kind of taste, texture. It's really about, are you providing something that's completely differentiated in the space? Are you coming out with a Beyond competitor or are you actually providing something that's different on someone's plate?

So when we invested in Meaty, for example, just sticking with that back in 2018, this was before Beyond had gone public. And Impossible and Beyond were growing, and so we thought that was great to introduce consumers to plant-based, but what really hadn't been solved is that center of the plate protein that can replicate, not exactly, but replicate kind of the chicken and steak on your plate.

And you can't do that with a burger. It's a burger. It's a mashed up piece of plant material. So that was the differentiation and the problem they were solving for the consumer that was looking to eat healthier, but couldn't solve that piece of their plate. And then on taste and texture, I mean, obviously it's subjective, [00:08:00] but you know, we have our army of kind of tasters and consumers that we want to send products to and have them try it and get a consensus and you're not going to appeal to everybody.

That's just the nature of food. And we're not looking to appeal to everybody, but we're looking for that kind of "aha." Like that "aha", that craveability, that "I want more". So oftentimes, even with a product at work, I'll leave it on the counter and I'll see, is it gone at the end of the day, or is it still there?

And that's just a good indication in our office of even someone can say they like it or don't like it, but what do they actually do? So that's taking taste and texture. Taking nutrient density, I think that's a little less subjective. I mean, when we think about nutrient density it's really around clean ingredients and how are we providing nutrients to the consumer.

So that's what we look at. It's not about having, I think it was, the Whole Foods motto, it's not about "holy food", it's like whole foods. And so we're not looking for perfect being the enemy of good, but we need to see that clean [00:09:00] ingredient, really nutrient-dense profile. So that like you are actually eating something that is good for you, just not as bad for you.

And then with price, we dig very deep into unit economics at the earliest stages, and we know things are going to change, but we like to understand where companies are today. And then, extrapolate that out on how they, what are the levers that need to happen to get them to scale? And we think about, okay, what assumptions are we making?

What do we need to believe in order for this to be successful? And is that believable? And so obviously you don't know everything at the earliest stages, but we make educated assumptions and we'd start with the unit economics today. What do we know today?

[00:09:42] Erin McCann: Thank you for that context. There's another term that you mentioned, and I'll provide some quick context here to help clarify the question.

You mentioned the trough of despair. So, I think when we think about some of these terms, we can certainly be thinking about the space, right? We can be thinking about the industry, [00:10:00] we can be thinking about the state of product adoption, right? We can be thinking about broader goals in terms of broader shifts we may like to see in food choices overall.

So can you share a little bit more? What do we mean by "trough of despair"? Why is this a challenging time, as you mentioned, and, what leads you to have optimism? And as context can, you can certainly share this from a personal as well as a professional perspective, if you're comfortable, I'm happy to chime in terms of how I'm thinking about these things personally and professionally.

I want to make sure we're clarifying that term for our listeners.

[00:10:33] Ashley Hartman: Yeah, for sure. I think if you flashback a few years ago you saw there was so much attention paid to plant-based. Every company had plant-based as their number one criteria that they had to figure out. Every food service operation had to have a plant-based option.

So it was really very forefront in everyone's mind. I think we thought that the adoption, especially of plant-based, alternative [00:11:00] protein meat wise, less kind of dairy. We thought that the path of alternative protein and meat was going to match the alternative protein or alternative dairy products, which are now I believe in the like 15 percent market share range.

And really alternative meat, I don't remember the exact percentage right now, has been stuck. It's still at a very minimal percent. And you've seen for example, Beyond Meat, which is a public company, so you can see how they're doing, they have not been able to hit profitability, they have been declining in their sales, and retail stores have been declining in alternative protein sales, and food service companies have pulled back on their interest in plant-based being on the menu.

And so, with all of that, really we've seen just a lack of consumer adoption, to the same extent we would have expected if we had followed that crazy high growth path, which I don't ever think was sustainable, right? Everything grows and it wasn't growing [00:12:00] linearly, it was growing, it looked like it was growing exponentially, and then it flattened.

And for us, the reason we're excited about it is because of some of the data points that I'd mentioned around Gen Z and the younger generation being more focused on environment and health, that we do think that there are some fundamental shifts across generations that we're going to continue to see.

However, that needs to be matched with better products. I don't think that consumers are going to compromise. And I think that's what we were asking consumers to do. A few years ago, we were saying, "Hey, you can have a plant-based, burger on Mondays, but it's not going to taste as good.

It's not going to be great for you. And it's going to be more expensive." I just don't think that's a proposition that consumers are willing to take. I think you have to always assume that they're going to be no trade-offs. I am perfectly happy, most consumers are perfectly happy, to buy a more sustainable product, but it can't be worse quality, and a higher price, and not as good for me.

So you have [00:13:00] to really solve these problems in order to move the industry forward, in my opinion.

[00:13:05] Erin McCann: Thank you. It certainly helps when we think about the context in terms of the shifts we've seen in dairy compared to the not as large shifts in meat and how you're thinking about these moving forward. I want to shift gears a little bit to your process in terms of identifying startups and products. So when you're exploring potential investments, how are you identifying promising startups within the food industry? And what are the criteria, certainly in addition to what you've already shared, that you might also add to that list in terms of what you're looking for before considering an investment?

[00:13:44] Ashley Hartman: Yes, great question. That's, you're getting deep into kind of our process, but really what we are looking for, I'd mentioned that go-to-market strategy is how we help our companies, and that's the lens we take when we're looking at startups in the food industry. And we really want this unique [00:14:00] go-to-market strategy that you're going to come to market with.

And when we say go-to-market strategy, to make it more clear, it's a unique combination of your vision, which is really what is your innovative value proposition and what market are you playing in, combined with what we call is your playbook, which is how are you going to market? What is your product strategy?

What's your sales and marketing strategy? And what is your business model to actually succeed? And then the third leg of that stool is your engine, which is your team and your resources behind you. So that's how we look at innovation in the food industry is like, how do you combine those three elements to make a really unique company that's going to be successful?

So that's at a high level, drilling down further at the earliest stages, the most important to us is really, what problem are you solving in the market and how is your solution innovative? The unit economics, because we have to believe you can build a sustainable business in order to invest that, food is a [00:15:00] combat sport and you have to be very operationally-driven.

And so you have to be able to build a strong unit economic profile. That also helps our investment because you're going to be more capital efficient. And then the third piece of that is the team. So, really who, why are you uniquely suited? Why is there founder-product-fit here? And how do we put our dollars behind you to be successful?

'Cause we're not going to be running the company. So if we, this is a long marriage, we're investing in companies for five, 10 years. And so we really want to partner with entrepreneurs who we can have a relationship with over time.

[00:15:36] Erin McCann: Makes perfect sense. I love the analogy that it's a combat sport.

I could interpret that a few different ways. Can you say more?

[00:15:43] Ashley Hartman: Yeah. No, I think, so, food is day in, day out. It requires a lot of stakeholder engagement from multiple pieces across the supply chain, a lot of collaboration. And it's a low-margin business. Most companies in the food industry are low-margin businesses.

You make [00:16:00] that up on volume, but you have to really be focused and hone in on every dollar you're spending because you have to, in order to be successful in the food industry, you have to be able to survive. And that means you have to be able to make money. And so you have to constantly be operationally-driven.

[00:16:16] Erin McCann: When you're thinking about problems to solve, when you're thinking about what you just mentioned in terms of all of these key factors, we're also thinking about your overall investment criteria, right? So we're coming back to nutrition, sustainability, and digitization of the space. When you're thinking about the sustainability piece, how are you prioritizing sustainability?

Like, how can we unpack that with greater specificity because we know that term is utilized widely and utilized in a variety of different ways, right? People can be using the word sustainability and mean totally different things. And how do you evaluate the sustainability practices of a company that you're [00:17:00] considering investing in?

[00:17:02] Ashley Hartman: Yeah it's a great question, and there's a lot of greenwashing going on, so I appreciate that question, because I think sustainability has become this buzzword that means nothing. It reminds me of the plant based, a few years ago, when, you'd see plant-based water. You're like, well, water was always plant-based.

It's not exactly a term I would use for water, but sure.

[00:17:19] Erin McCann: That's a low bar.

[00:17:20] Ashley Hartman: Yeah, exactly. You could just slap it on anything, and I think that's where we're getting to with sustainability. And so to be clear, not every investment we make has to have a sustainability angle, and we're okay with that. So that's just one criteria we put on, it's one theme, right?

We want the food system to be more sustainable, but it's not exclusive to our investment, any investment we make. So for sustainability, I like to see it built into the business model. It's not just sustainability for sustainability's sake, it's not a feature, I call it a benefit, how do you actually embed it into the business model?

How can it propel your business forward and how can you use it to your advantage? [00:18:00] So, that's what gets me excited, is like really thinking about how sustainability is built into the business model. I can give you an example, one of our portfolio companies is a company called Mori, which is a shelflife extension technology, and it is a silk protein that coats perishables and extends shelflife through the supply chain.

So, clearly, that's beneficial for sustainability. It fits right into sustainability, but it's built into the business model for that to enable companies to be more productive and profitable. It enables companies to reduce food waste, sell into new geographies. So sustainability becomes the byproduct of their solution, not the feature that you add on.

So that's what gets me excited when I look at a sustainable company.

[00:18:46] Erin McCann: And is my interpretation correct that when you're saying "sustainability isn't necessarily a requirement", that allows you to consider sustainability over a longer-term trajectory? So we talked a little bit about alternative proteins.

One might suggest [00:19:00] that the state of industry today takes a lot of investment, takes a lot of upfront technology. We're not necessarily at some definitions of sustainability, but that product in and of itself as the promise of being sustainable as we continue to innovate and evolve, essentially, are you suggesting that we want to see sustainability built in, ideally within the business model itself. And there's also recognition that sustainability may take time, may not be part of the early model. And can you say more? Is another interpretation could be that we're essentially looking for one out of these three criteria or there's more or less important criteria?

So just want to get a sense of how these pieces fit together.

[00:19:45] Ashley Hartman: Yeah. No it's a good clarifier. So when I said that, it's less, we, if you could have all three, that's great. But we don't require all three. So sustainability, yes, we don't have to see full blown [00:20:00] sustainability today when you invest.

But some companies sustainability is going to be, how do we embed it more in what you're doing in the organization rather than it's part of the business model investment case that I'm making. So, for example, one of our portfolio companies is a company called BiomeSense. They're a microbiome solution.

They fit very squarely in nutrition and digitization because they're a vertically integrated device and database that enables us to understand our microbiome. But that's, they're not pushing the food industry to be more sustainable. And so that is okay for an investment, it doesn't have to have only, sustainability doesn't have to, be in every investment we make.

Of course we want them to think about sustainable business practices when they are building the company, but sustainability itself in terms of how it's gonna move the food system forward is not part of the investment thesis for that investment in particular.

[00:20:56] Erin McCann: Makes sense. I guess the flip side question would be, [00:21:00] are there cases where you're simply saying "no" to an investment opportunity because they're not aligned with your ethics, your values, your guiding framework? Can you say more about the lack of these three things on the other side of the equation?

[00:21:19] Ashley Hartman: Yeah, a hundred percent. We say "no" a lot to companies that we don't think are moving the food system forward.

And I think we have the benefit that we firmly believe that the food system is going to move to nutrition, sustainability, digitization over the next five to ten years, so we don't have to compromise a lot. But we do say "no" where we think something is not moving the industry forward in a way that we envision the world should be.

We do live to our values. So, 100%. There are a lot of, we don't invest in really pure play consumer brands, but we see them all the time. And if there's, two things don't get us excited. One is, are you just, [00:22:00] a better mousetrap that's not exactly, exciting to us because you're not actually building nutrition into into your business model.

And then secondly you're not that innovative. So, those two things go hand in hand fortunately for us, but we say no a lot for companies that we don't think are of the future around nutrition.

[00:22:20] Erin McCann: Oh, that's a perfect segue to our next question. When you're thinking about innovation in the space, including alternative proteins and plant-based foods in particular, how do you see companies that have traditionally not focused on these categories adapting and evolving?

[00:22:35] Ashley Hartman: Yeah, I think every large consumer company, large CPG company is working on their strategy right now. It's been exciting to see a lot of the innovation. It's not maybe innovation exactly where we want yet, but I think that the innovation and the fact that there is a lot of testing and learning and new products coming out is exciting.

You saw Nestle launch [00:23:00] a product around GLP-1, a companion to GLP-1 usage. That's, a very quick turnaround for a large company to start to come out with innovation that quickly. You've seen Kraft Heinz partner with NotCo which is a plant-based company, and it's not just, it's not just emerging brands anymore.

And I think that's great. And I think there's a lot of opportunity for partnerships between early-stage and large CPG. It takes time, but it makes me excited. And then it's not just plant-based, but it's functional products are soaring too. There are rumors that Pepsi and Coke are circling around Olipop and Poppi for acquisition.

And they're targeting gut health with their kind of "healthier" soda. So, we're seeing a lot of a lot of innovation all across the supply chain and a lot of partnerships that I don't think would have happened five to 10 years ago.

[00:23:50] Erin McCann: So when I hear you talking about the ways that this innovation can happen or the ways that brands are adapting and [00:24:00] evolving and collaborating, some of this can take the form of partnership.

Some of it can take the form of acquisition. Are there any other models that you would include in terms of what you're excited about that you're seeing right now?

[00:24:12] Ashley Hartman: So I think there's partnership both B2B and B2C. So the NotCo partnership with Kraft was more of a B2C partnership. I do think there's a lot of really exciting partnerships, B2B with kind of more functional ingredients, with more supply chain technologies, AI development for food formulation.

There's a lot of kind of both B2B and B2C partnerships that get me excited on the acquisition-- you mentioned acquisition-- and then there's also just investment and piloting and learning and testing, even if it's not full-blown partnership. So, those are the three areas that we monitor over time.

[00:24:47] Erin McCann: Exciting. Excellent. So when we think about technology-- you mentioned AI in food formulation as one example-- when we think about technology playing into the [00:25:00] future of food and shaping the future of food, how does Bluestein Ventures navigate this intersection when we think about food and tech, and how do you manage risk in your investment strategy, especially when it's coming to food tech?

[00:25:14] Ashley Hartman: Yeah so food tech --so tech is imperative when it comes to food because it's the way that we're going to find innovative solutions. So that's number one. I mean, you can look at like refrigeration, like that was a ginormous tech breakthrough that opened up an entire industry around food, or the barcode that opened up kind of doors for distribution.

These are tech advantages that have driven the industry leaps forward. But at the end of the day, we can't lose sight of the fact that this is food. And I think we were talking about earlier that taste is king and operations are mission critical. So those are the two things that, I look at really deeply at every investment.

So for example, I was at Future Food-Tech back in March. And the lunch was supposed to highlight companies that were exhibiting there in the food tech space and showcasing [00:26:00] what they can do at the conference. And every single person I saw was complaining about how bad the food was. Like, you can't have tech for tech's sake.

You need to solve a problem and you need to come up with a solution that is actually going to get consumer adoption. So for us, you mentioned risk, we don't put categories, you know, food tech, digital tech, commerce, into different buckets, we're first market-backed investors. Start with the market opportunity. What does the consumer want? And then, does it need to be serviced by technology or not?

So, you can't invest in technologies because it's innovative. There has to be a problem that it's solving. And I think that sometimes we lose sight of what is the problem that you are solving. There has to be some unlock and a good reason for that tech to exist. So that's the lens that we, I, personally take on the world and when I talk about, when I think about kind of food tech and how it can propel us forward. And then, oh, go ahead.

[00:26:56] Erin McCann: Oh, I just want to ask a quick follow up question to that before we jump in [00:27:00] terms of your investment strategy, because I think it'll connect. And I say this as someone who, talks openly about making a transition from few dietary restrictions to ultimately becoming and sustaining veganism for seven years now.

So the taste conversation comes up all the time, right? When we think about plant-based foods, when we think about innovation in food. And I think it's particularly important to tie this back to your overarching framework when we think about nutrition, right? Because there are naturally going to be situations in food products that we know may achieve what consumers are looking for from a taste perspective, but are lacking in terms of the nutrition element.

How do you think about these two things? And my, what I'm hearing from you, what I'm taking from your comments is they don't have to be in conflict, but they may be in conflict at times, at least in terms of some of the examples that you've shared. So how do we think about improving on nutrition while also [00:28:00] meeting needs in terms of taste?

[00:28:01] Ashley Hartman: I think that's where technology comes into play-- is how do we enable the no trade-offs to occur? When I think of Meaty or Mycelium, that is a magical ingredient that actually can, be, is it exactly steak or chicken? Absolutely not. But does it replicate that place on your plate and there are fewer trade-offs?

A hundred percent. But it also doesn't have to be for everybody. And I'm not saying every single person has to, transition 100 percent of their diet. I also am vegan, a fellow one over here, and I know my taste buds are very different than the next person's taste buds that aren't, isn't vegan and I don't think that you need to convert everybody, but can we convert some people?

Can we even lessen our reliance on meat? You don't even have to have major tech breakthroughs. Can you make a better tasting product that halves meat and we see blended products now, right? Like you, you reduce half of your footprint and you [00:29:00] become much healthier by blending meat with vegetables or mushroom or whatever you choose to.

So I don't think there's as big of the gas, a gap as we think. I think we just are now in this kind of tech evolution where we are seeing better and better innovations.

[00:29:17] Erin McCann: Thank you. So just to reiterate, you're essentially saying thinking about improvement can include blends, can include improving part of the nutritional profile, while retaining taste, while thinking about fewer trade-offs than exist today, and essentially recognizing that this isn't a conversation of taste or nutrition, that we can have both, and tech is essential to getting there.

[00:29:43] Ashley Hartman: Absolutely. Good summary. I should just let you answer my questions.

[00:29:48] Erin McCann: Just trying to elevate the important things that you're sharing. So when you think about your own investment strategy, how are you managing risk?

[00:29:56] Ashley Hartman: Yeah, so when we think about risk/reward, we think [00:30:00] about-- I mentioned this a little bit earlier, but cash efficiency.

And then we also think about entry point valuation. So what is the valuation and the value we're placing on the business when we invest? So you can make venture-level returns in food regardless of where you play in the supply chain, whether it's food tech, digital tech, commerce, consumer with these two factors in mind, but you have to be focused on them.

And I think we got away from that over the past few years, especially around I mean, both really, but cash efficiency went out the window where companies were just spending cash in a completely inefficient and frankly, obnoxious way. Not to have a return on their every dollar they spend, but really just almost lighting it on fire.

And I think that got us in trouble. And you just have to be very mindful in the food industry of, how much dollars are you spending and where are you expecting your outcome to be? And that's how you manage risk and reward.

[00:30:54] Erin McCann: And if we're to circle back on your previous comments, just to make sure we're [00:31:00] connecting the dots. Essentially, companies got into trouble because their expectations on what adoption would look like, what consumer behavior would look like. would emulate other decisions, other trends you'd seen, particularly in dairy as compared to flatter adoption curves. Is that fair?

[00:31:21] Ashley Hartman: Yeah, I think that's a great way of putting it. I think we got away from, okay, what is the actual realistic growth path and how much and what should our enterprise value be? So, Beyond Meat in the heyday was getting bid up to some ridiculous valuation that had no bearing in reality and expecting that growth to continue for 50 years, and that just doesn't, it's not realistic.

And so I think we just have to have a realistic mindset on, okay, what is a real, what is going to happen with the consumer? How can we grow? How can we build efficient businesses? I think they took their eye off the ball around building a strong unit economic profile. Their margins have [00:32:00] been terrible.

They should have built that from day one and been focused on that. But the incentives over the last few years were not that, so.

[00:32:10] Erin McCann: So, it sounds like when we think about next steps, we're you're seeing a shift in terms of that emphasis on margins now compared to a few years ago.

[00:32:20] Ashley Hartman: Totally. It's a few years ago it was the Uber model-- oh just spend a lot of money and we'll build it and it'll come, and that just doesn't work in the food industry.

[00:32:31] Erin McCann: We're talking about very different margins than compared to other industries that you're mentioning, and certainly when we think about broader tech, right, we're talking about very different adoption processes, monetization, all of these things and certainly in terms of the operational requirements of getting food to consumers.

[00:32:49] Ashley Hartman: Absolutely. And there's also just not an element of winner-take-all. And so you're not, spending money to take the entire market. You're going to be playing in a big market. And so you don't have to [00:33:00] deploy capital in the same way.

[00:33:02] Erin McCann: Makes sense. Thank you. When you think about the challenges we've talked about and more, what do you see as the greatest challenges facing the food industry today, let's say, over the next year horizon at a minimum, and how can startups and investors work together to address them?

[00:33:22] Ashley Hartman: Such a good question. So I always like to phrase that the food industry is magical. It is really a miracle that we can get food on our plate from a farm, who knows where, and it's fresh and we can feed the world, more or less with that conceptually. However, I do think that our current supply chain and food supply can be harmful.

And I think there are two challenges that keep me up at night, just generally, and that I care deeply about. First, we consume too much food that's lacking in nutrient density-- 90 percent of the U. S. population is metabolically unhealthy. That is completely insane. And then [00:34:00] second, I really care deeply about food insecurity.

It's alarmingly high. It's like almost 13 percent of our U. S. population, despite record volumes of food waste. So like these kind of three metrics are definitely ones that I think are great challenges that we have to solve that I really think that we need to think deeper around and how we bring people together to solve them.

[00:34:26] Erin McCann: Thought-provoking and powerful challenges to deal with and to address. When you think about the prioritization that you've mentioned, and the emphasis on your three key areas, I can certainly see the direct connection to nutrition and sustainability. When you think about the food insecurity piece, does this factor in with the decisions you're making in terms of evaluating potential startups?

[00:34:54] Ashley Hartman: Again, it doesn't factor into every decision we make because some of it has to be [00:35:00] dealt with in the public sector and the philanthropic sector and not the investment sector. However, it is something I deeply think about when I, we are making an investment. So, for example, we do have an investment in a company called Attain Health.

It's a Food as Medicine platform that enables food prescriptions for underserved populations that are food insecure and have health issues. And so this is a way for them to have access to healthy food in areas where they would not have access otherwise, both because they're in food deserts and because they can't afford it.

And so they're at the forefront of Food as Medicine and food insecurity. And that is the reason we made that investment. And I think you're seeing a lot more public attention and dollars being put behind this that combine this kind of nutrition and food insecurity angle.

[00:35:48] Erin McCann: It's great to hear. When you think about the areas that you've invested in, you shared some inspiring examples. Can you share a success story from one of the companies that you've invested [00:36:00] in that showcases the potential of innovation, that really showcases the kind of growth and adoption that you're aiming for.

[00:36:10] Ashley Hartman: Yeah, absolutely. We love talking about success stories, but so I'd mentioned that success comes from an innovative go-to-market strategy. And so one of our large successes was a company called Factor75. It's a meal delivery company with healthy meals. We invested back in 2016. So meal delivery was a very nascent thing at that stage.

I mean, we think about it as ubiquitous now, but it really wasn't. Blue Apron and HelloFresh were just coming up and they obviously are meal kits. But they, we didn't think that they actually solved the problem, which is, I want a convenient meal. And they're not super convenient when you actually think about the work that requires to take a meal kit to an actual meal.

It saves you the pain of shopping, but it does not save you the pain of actually getting a meal quickly and conveniently that's healthy. And so, it's very [00:37:00] difficult-- I know, it sounds pretty simple, but it's very difficult to serve a high-quality, healthy food delivered to someone's door with unit economics that makes sense.

And so, one of the unlocks was their MAP packaging, where they were able to keep the food fresh for 14 days, and then they nailed their product and operations. And then the third piece they solved was they actually solved a really large problem for a very engaged audience. And they started with the paleo and ketogenic community that really wanted to stick to their diet, stay healthy, but they could not go to 18 stores, cook all their meals, et cetera.

It was very difficult to achieve that. So they really nailed that audience at the growth, at that right inflection point of the industry. And so now it's crazy. We invested in them back in 2016. I think they were doing a few million dollars in revenue run rate at the time, not even trailing.

And now they're the number one prepared meal delivery company [00:38:00] in the U. S. and sold to HelloFresh at the end of 2020. If you think back in 2016, like HelloFresh wasn't even an acquirer at that point. They weren't even big enough to be an acquirer. So, the whole industry has developed and enabled them to really cement their place as number one.

[00:38:16] Erin McCann: That's a fascinating example that touches on so many of the key criteria that you've mentioned throughout. Can you say a little bit about the founders and the founder fit?

[00:38:25] Ashley Hartman: Yeah, absolutely. So, it was started by Nick who was actually a former MME fighter. And he couldn't find, it was a problem that he was having.

You talk about kind of founder-problem-market fit, their founder-product-market fit. He couldn't find a way to eat healthy while he was, had a really rigorous training. And then Mike, his co-founder, who was a CEO at exit, he was an incredible operator and really talked about unit economics.

He's best in class that I've seen at really thinking about literally every dollar, every percentage point. And so between the two of [00:39:00] them, they really had this great unique combination to take the company forward.

[00:39:04] Erin McCann: Fascinating. Thank you. When we think about the consumer side of things, we've talked a little bit about taste preferences, we've talked about some of these key problems from a consumer lens, and certainly this example I think is a perfect segue. As consumer awareness around health and wellness continue to grow, how do you see this kind of awareness affecting and impacting the types of products that are succeeding, the types of companies that are succeeding, and essentially consumer behavior continuing to evolve as well?

[00:39:41] Ashley Hartman: Yeah, I think that health and wellness right now is table stakes. I don't think you're going to see a product that doesn't have that in mind, whether it's your definition of health and wellness or my definition of health, there's obviously different definitions of the margins, but it's table stakes.

I don't think you're going to see any company coming to market with without that at the forefront of their mind. [00:40:00] Where I think we'll start to see more and more intersection is actually food and healthcare. And that's what we're pretty excited about and what we've been investing behind over the last few years which is I think, the next evolution of, health and wellness within the food industry.

[00:40:15] Erin McCann: Can we unpack that a little bit more? So I'll share a couple examples that just immediately come to mind when you're mentioning, for instance, number one, the definition may be wildly different, right? What we're looking for in terms of what it means to be healthy can vary. We can also see awareness on some factors that perhaps, you know, areas driven, especially by healthcare right now, in terms of increasing awareness on the health impact of other factors, right?

So, one that I vet for with my foods that I have to keep tabs on to the earlier point around how do we, say, get enough protein while training, as one example, especially if we are relying on packaged options is sodium content, right? Some people may be very focused on sodium content with a particular diagnosis and [00:41:00] as part of their plan, and others may not be looking at sodium at all, right?

So when we think about where the table stakes definition is today, right? To your earlier point that we can see greenwashing. We can have wildly different definitions of sustainability. We can have wildly different definitions of what it means to be a healthy food or a wellness-based food, right? So what do you see as, if you were to give just an example or two, like what's table stakes?

If we take out the marketing element, we take out those words specifically, where do you see decisions factoring in health and wellness today? And where do you see opportunity for impact and for pushing things forward in terms of improving the nutrition component and these broader health and wellness factors for food within or beyond the healthcare decisions?

[00:41:50] Ashley Hartman: Yeah, I think, so what you're seeing today is, I'm seeing the trends across three factors. One is reduction in sugar. And I think that's [00:42:00] the trend that everyone looks at the pack for. I think reduction in sodium is a big push from a lot of large CPG companies. And then third is, I'd say, gut health broadly. There's, that's really tied to fiber right now, but there's kind of probiotics and fiber and other kind of key ingredients there.

So I'd say those are the three kind of front-of-pack things that I've seen on the market driving things. Where I look for the future is clean ingredient. And I think that's where that's just never going to go away. I don't know how long keto or paleo are going to last. We don't, I don't, obviously it's not my, the diet I follow.

I don't know how long plant-based is going to last. I don't, what I know is going to last is that when you give someone nutrient-dense food with whole ingredients that impacts their health. It tastes better over time. And that's where we can start to see really big movement. And I don't think we're there yet with large companies [00:43:00] really prioritizing it.

I think they're trying to get their claims in order with sugar, sodium, maybe fiber and gut health, but I don't think that they've really taken the next evolution in clean ingredient.

[00:43:12] Erin McCann: And just to hold each term to the same standard here, when you're referring to clean ingredients, what does that mean to you?

[00:43:20] Ashley Hartman: Whole food, not very many.

[00:43:24] Erin McCann: Not very many non-whole food ingredients?

[00:43:27] Ashley Hartman: Not very many ingredients on a pack, right? Very natural whole food, pronunciate, you can pronunciate ingredients on the back of a bag. That's how I think about clean ingredients. Again, that's a term that also has had a lot of greenwashing, but

[00:43:41] Erin McCann: Helpful, thank you.

So, want to make sure that we are thinking about those that may want to follow a similar path to your career journey and advice that you'd have. So what advice would you give, first to entrepreneurs looking in to break into the food [00:44:00] industry, and attract investment from places like Bluestein Ventures?

And what investment, what, excuse me, what advice would you have for others looking to work in or be engaged with the food industry in other capacities that we've mentioned and more?

[00:44:16] Ashley Hartman: Such fun questions to think about. So for entrepreneurs, I would say my first piece of advice is start first with what problem are you solving for the consumer?

You have to get crystal clear on that. And I know it's very simplistic to say, but I think we lose sight of it a lot. And why is your solution needed? And be very honest with yourself. Like you're not selling an investor. Sit down and actually think about that. So that's the first place I'd start with if you're looking to build something in the food space.

So that's kind of one. And then the second question, remind me.

[00:44:51] Erin McCann: So when we think about who you're giving advice to, there's certainly entrepreneurs that may be looking to create a food product, right, create a [00:45:00] product that solves nutrition, sustainability, digitization and we've also talked about other paths, including as investors, as collaborators, as employees within the broader food space.

I'm just curious to widen that lens of advice that you would give when we think about the roles and the opportunities that we've talked about so far. Entrepreneurs are one, and anyone else you'd like to include?

[00:45:22] Ashley Hartman: Yeah. It's a broad set of stakeholders you just mentioned, but I'd say, I don't know if I can give broad advice across all sectors of that.

But one is just collaboration. I think that has been a huge piece of success for my career is being an ecosystem builder. That's what we like to do at Bluestein is really think about how do we build the ecosystem around what we're doing, because it takes a village, it takes a community, to build, to make change in the food system.

And I think you have to collaborate all across the supply chain from large CPG all the way down to startups, to investors, to government, to philanthropy. These are big [00:46:00] problems we're trying to solve and you can't do them with one person and one-point solution in this space. And so that's probably the advice I'd give to anyone is let's figure out how we do this together.

And that's the beauty of the food industry because everyone, every single, mostly every single person I've met actually enjoys being in this industry and wants to see the space move forward. And so, there's a lot of opportunity to do that.

[00:46:25] Erin McCann: Makes perfect sense. And you mentioned earlier something I just want to reiterate, which is that for any of the product examples we've talked about and for innovation in the food space, across these problems in particular, but arguably more as well, these are not winner-take-all spaces, which we may see as a challenge when we compare investment decisions of the past to how things are evolving, but I also see as an opportunity in the sense that there is room, and we should be encouraging many products, right? That innovation involves a variety of [00:47:00] different go-to-market strategies, and that it's a perfect opportunity for collaboration because these are not winner-take-all spaces.

[00:47:08] Ashley Hartman: A hundred percent. I mean, you're talking about the whole food supply chain is a four trillion dollar market. There's ample opportunity to be playing in this market that does not have to be winner-take-all. So, that's what gets us excited.

[00:47:21] Erin McCann: Thank you so much. This has been an inspiring conversation.

For those that want to learn more about you, about Bluestein Ventures, about any of the topics we've talked about, where can they follow or go to learn more?

[00:47:33] Ashley Hartman: Yeah, go on our website: bluesteinventures.com. Very easy to remember. And you could just email a message. And then we also have our LinkedIn page that has all of our updates and we're pretty active there as well.

[00:47:47] Erin McCann: And we'll include the links for the companies that you've mentioned so far. So listeners, check those out in the corresponding notes. And please send in questions, share your [00:48:00] comments. We'd love to hear your thoughts and reactions to this conversation. And Ashley, thank you so much. It's been phenomenal hearing your perspectives and learning from your experience. And I'm excited to see the reactions to this conversation.

[00:48:12] Ashley Hartman: Thank you so much for having me. This was so fun. So thanks for your, all the work you do in the industry.

[00:48:18] Erin McCann: Oh, thank you. It's been my pleasure. Love this conversation.