Why We Invested: Ono Blends

Seasoned team with a passion for mobile dining

Note from Mike and Ash: We’re introducing a new series, “Why We Invested,” to share insights about how we evaluate and pick the teams we back.

As cool as smoothie-making robots are, they’re hardly leading the data-fueled revolution that we wrote about in “Our Investment Thesis.”

So, you may wonder, why did we invest in Ono Blends?

Reason 1: We liked the founding team

We’ve also written about how we invest in founders first. We look for PEAs: founders with passion, expertise and the ability to execute. And with Ono Blends, we found two PEAs+.

We found Stephen Klein and Daniel Fukuba the same way we find most of the founders we back: through an introduction from another founder. We usually don’t focus on consumer products, but we took an immediate interest in their combination of talents in food automation.

Daniel had impressive technical credentials designing robotics at a solar company and one of the early leaders in automated food delivery. It turned out that Daniel helped design Creator’s hamburger-making machine that Ash remembered from a 2012 demo day. Daniel had also founded his own company and had seen another company through from pre-seed to Series A. That was all tremendously valuable experience.

Stephen had a similarly strong background in business and operations, which is critical in a business that depends so much on logistics. He had served a similar role at other well-respected startups in the space. He led operations and research for Instacart and served as VP of Operations for Cafe X, a robotics coffee shop that’s also one of the leaders in this space.

All of this helped validate that they are the ones innovating in this space.

The next step was meeting them and hearing their plan. 

Reason 2: They were capital efficient

Initially, we were struck by one slide in their pitch deck. It was a simple chart listing the well-known companies that launched in this space—Creator, Zume, CafeX, Spyce—and how much money they raised before producing a viable product. The totals ranged from $30 million down to $6 million.

By contrast, Daniel and Stephen had produced a fully automated robot and outfitted a custom-designed mobile truck with less than $2 million. That validated their ability to execute.

As we have written about in the past, the difference between a highly successful startup and a failed startup could be something as simple as time. The longer your business is viable, the better the chances you’ll be successful. We get excited when we see startup teams that can be incredibly efficient with resources, because we are confident that our money will give them as long of a runway as possible (and then some—depending on their creativity).

Reason 3: They were agile

When we talk with seed-stage founders, we ask a lot of questions to probe their thinking: How do they think about the market? What’s their go-to-market strategy? What assumptions are baked into their plan? How will they adapt to changes in the market? Are they agile?

We get to know their thinking about everything from go-to-market strategy to back-up plans when things go wrong. Early-stage startups move at lightning speed. You need founders who understand the market and can adapt when things change.

Daniel and Stephen convinced us they were thinking three steps ahead. We talked through the schedule they included in their pitch deck for where the truck would be at different times of the day. Not only was the schedule incredibly well thought out and optimized throughout the day, they had also made arrangements with a popular cycling studio, yoga studios and banks for the ideal placement of the truck.

We probed them about market assumptions and how they might pivot if, say, smoothies fell out of favor. They understood that they had a minimally viable product they needed to get to the market—and then they would adapt from there. They were savvy enough to design engineer the truck with different module systems that can drop into a standard-size van. This allowed for future pivots (to, say, protein bowls) and created a potential source of additional revenue, if they sold the modules to other companies.

Another thing we liked: When they hit a potentially serious snag with the local health department, they solved it quickly and moved on. Health code requires a sink in every food truck for employees to wash their hands. Because robots don’t need to wash their hands, they hadn’t put a sink in their truck. Rather than getting lost in a protracted back-and-forth, they installed a sink on the outside back of the truck and moved on.

Reason 4: Smoothies are a good, simple business

From our initial meeting, another thing that stood out to us was the fact that Californians pay upwards of $20 for the same type of quality smoothies that Ono Blends sells for $7. Only with Ono Blends, the truck delivers the smoothie to the customer, and it’s fully customizable. Better yet, for returning customers, the robot remembers their order.

By significantly slashing labor costs and eliminating the need for expensive real estate, Ono Blends is able to deliver a better product using high-quality ingredients, for a fraction of the cost. 

Because the truck is mobile, the business could also stretch out the day and adjust to meet demand anywhere in the city. 

Reason 5: It’s more than smoothies

Another compelling fact in their pitch: This business is about more than just smoothies, or even robots, for that matter. 

Ono Blends is creating robots and delivering smoothies—and it’s also designing a new type of mobile food, cutting significant cost from traditional options. This not only saves them money down the road (when they expand to other markets) but also creates other business opportunities. Because they designed van modules for other types of mobile food delivery, the company also has an excellent opportunity to try different concepts. 

Even though this investment was not overtly a data play for us, we couldn’t help but get excited when we dug into the mobile platform Ono created, which allows them to learn and adapt to consumer behavior.

Reason 6: They were at the right stage

Ono Blends also was at the ideal stage for us to invest: They had a minimum viable product (MVP) and needed to find product-market fit.

Our investment would help them launch their product in L.A. By launching just one truck, they could begin gathering the metrics they need to prove to future investors they had a viable business. From there, they could paint an accurate picture of what a, say, 20-city expansion might look like, to Series A investors. 

So, in a sense, our check gets them to the next one.

Reason 7: They had a plan to get to the next stage

Our investment supported two things: Launching the first truck and designing of the next version of the modular truck.

Together, that would tell a good story for investors in a Series A: “We built and deployed a truck, and we proved our metrics. We designed the next truck, which will save us money. And now we need to raise $15 million to expand.”

What’s next

Since we invested, the company launched its first truck in the L.A. area. Daniel and Stephen remain focused on proving viability by hitting their numbers (an increasingly difficult challenge since the Covid-19 crisis began), so they can get their business to the next stage.

About the authors

Ash Patel and Mike Marquez are co-founders of Morado Venture Partners, a seed venture capital firm dedicated to capturing investment opportunities in emerging technologies and data-fueled businesses.

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