The 120 snack foods made by NatureBox are available only online, and through a monthly delivery service. And it's not a gimmicky Jelly-of-the-Month Club concept — investors will announce Monday that they'd pumped $18 million in venture capital into the business.
NatureBox founders Gautam Gupta and Ken Chen are two years into a mission to change the way families shop for food, and the new money brings their funding total to $28 million. In 2014, they expect to deliver 3 million $20-to-$50 boxes full of healthy snacks to families around the nation. That's up from 1 million in 2013 and 50,000 in 2012, their first year in business.
The secret to NatureBox's fast growth is that the San Carlos, Calif.-based company is as much about technology as it is food.
When Gupta, then a Silicon Valley venture capitalist, came up with the idea, he was inspired by his own struggles to overcome childhood obesity. Though he wanted to create a nutritious snack brand, he knew it would be difficult and expensive to compete with companies such as Frito-Lay, Snyder's and Nabisco in retail stores. A direct-to-consumer model would allow NatureBox to command higher margins and to collect data and insights about its customers.
"We believe that if we knew more about you as a customer — what types of foods you like and don't like — we could give you a very unique customer experience and really tailor the products to your particular dietary needs," Gupta says.
Subscriptions have become a popular business model for consumer product start-ups in recent years — AngelList cites 313. There's Birchbox for beauty products, Dollar Shave Club for razors, Wittlebee for children's clothes, MeUndies for underwear and socks, Pijon for college care packages, and BarkBox, with its monthly mix of dog treats an! d toys.
Warren Lee of Canaan Partners, the lead investor in NatureBox's recent funding round, says subscription services' takeoff has produced some silly or trivial concepts and product fatigue over time. But, he says, "If you can offer a value proposition that is strong enough, you have a lot of loyalty from your consumers."
NatureBox works, investorssuch as Lee say, because its contents are consumable and customizable. The company isn't sending out samples of products, but full-size options that are selected by the buyer. The price is affordable, yet the volume of boxes shipped each month is enough to generate a predictable revenue stream.
But most compelling is the data, and what NatureBox can do with it.
"It's a change in the way consumer product companies touch their consumers," says Neil Sequeira of General Catalyst Partners, an early NatureBox investor.
Algorithms developed by software engineers help NatureBox collect information about the types of snacks customers search for or select month-after-month and make appropriate recommendations while a customer is on the site. Also compelling are the insights customers share on social media. Gupta says 50% of all customers share their NatureBox experiences on Facebook.
"We have just an endless amount of data we're getting from this direct relationship with the consumer," Gupta says. "We believe over time, the data allows us to expand into new categories."
Data is helping the team introduce five to 10 new products each month — a pace exponentially faster than a typical food brand. NatureBox can quickly sample new products with customers, rotate out underperforming ones and keep customers' anticipation high with new options every month.
NatureBox snack foods.(Photo: N! atureBox)!
Gupta and his investors think they've got the makings of a major consumer snack brand with products in tens of thousands of retail stores, cafes, vending machines and other more traditional channels, but one that started its life mining valuable insights from consumers buying online.
Laura Baverman is a Raleigh, N.C.-based business journalist covering start-ups and entrepreneurship for regional and national publications. She previously covered entrepreneurship for the Cincinnati Enquirer, a Gannett newspaper. Baverman can be reached via e-mail at lbaverman@gmail.com or Twitter @laurabaverman.
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