Incubation nation: Questioning what it takes to be a successful startup
- Sunrise Strategic Partners, LLC is the latest addition to the growing number of food startup incubators, founded in partnership by natural foods entrepreneur Steve Hughes and private equity firm Trilantic North America.
- Like other food incubators, Sunrise will provide capital and expertise to growing food companies, such as direction regarding business planning, policy and regulations, marketing language, and how to shift from a home kitchen to commercial operations.
- Sunrise will focus primarily on emerging brands that make products associated with healthy, active, and sustainable living and keep millennials as target consumers, Hughes said in a statement.
Andrew Ives, managing director of food incubator Food-X, told Eater 80% to 90% of businesses fail within the first three years. Successful startups start with a solid product idea, and capital and business expertise can facilitate growth. But to make it into something more, it's also about timing, positioning in a market segment that's ripe for disruption, and crafting a marketing message that resonates.
Startup Krave Jerky found success by elevating the beef jerky concept. Krave brought in all-natural ingredients and exotic flavors and positioned the product as something that served consumers' demands for functional, protein-rich foods and convenient snacks for on-the-go living.
The company attracted the attention of Hershey, which saw potential beyond its chocolate-based portfolio and acquired Krave last year. Krave founder Jon Sebastiani has since launched his own startup incubator, Sonoma Brands, armed with his experiences making Krave the example of a successful startup.
However, the food incubator concept itself may be in need of fine-tuning. A 2013 industry report found that only 39% of for-profit incubators were profitable, and 57% were breaking even. In the nonprofit sector, profitability drops to 15% of incubators, with nearly one-third operating at a loss. Incubators tend to either rely on investors, grants from banks or local governments, or income from renting out their commercial kitchen space.
But investing in a food company that might not ever become profitable isn't always feasible for for-profit incubators, much less nonprofit ones. This may be why more major food companies, like General Mills and Campbell, are getting in the game of funding food startups. These manufacturers have much to gain if the startup succeeds but less to lose if it does not.