Most of us stop thinking about our food scraps once we take the trash to the curb. Not so for Amanda Weeks, who started a food waste company designed to reduce harmful greenhouse gases. Now she just needs investors to get behind her plan to save the planet.
From Gimlet, I’m Josh Muccio. You’re listening to The Pitch. A show where real entrepreneurs pitch to real investors — for real money.
Amanda Weeks: I wanted to do like Uber for waste management.
Sheel Mohnot: Ooh smelly?
Amanda: Yeah, it was very smelly.
Amanda: So we’re going to be paying well above union rates essentially for this…
Phil Nadel: Okay. When you’re investing your money, do the right thing. When you’re investing my money, pay the minimum you can pay.
Today we meet a founder who’s on a mission to clean-up the planet by changing how we dispose of organic waste — we’re talking about our restaurant leftovers, moldy breads, and banana peels.
But what happens when someone tries to reinvent an industry that’s almost as old as trash itself?
We’ll find out in a moment, but first let’s meet our panel of investors.
Phil: I’m Phil Nadel with Barbara Corcoran Ventures.
Phil’s investment firm is one of the largest syndicates on AngelList.
Phil: If for some reason the numbers don’t bite, then the thing falls apart.
Phil is a straight shooter looking for companies without a lot of question marks.
Jillian Manus: This is Jillian Manus. My fund is Structure Capital.
Jillian is something of a legend in the world of Venture Capital. In her early twenties, she survived domestic abuse that left her living in shelters in NYC. She was able to pick herself up, start several companies and is now a multi-millionaire.
Jillian: You can have the most incredible product, but if you don’t know how to talk about it, you’re gonna have a problem accelerating it.
Jillian tends to take center stage and really drive the conversation.
Jake Chapman: My name’s Jake Chapman with Gelt Venture Capital.
Jake’s investment firm has over a billion dollars in assets under management.
Jake: They’re going to shut you down on that name. It’s definitely trademark infringement.
As a former attorney, Jake brings a lawyerly mindset into a pitch — if a founder can hold up under cross examination, he might just invest.
Howie Diamond: Hey I’m Howie Diamond.
That’s Howie who founded the VC firm, Ranch Ventures.
Howie: There needs to be a moral and ethical code that’s aligned.
Howie is looking for altruistic companies: he’ll only go in on a startup that’s making the world a better place.
Sheel: I’m Sheel, a partner at 500 Startups.
Joining us this week is Sheel Mohnot – he broke into the big leagues of venture capital when he sold his company, FeeFighters, to Groupon.
Sheel: This isn’t going to work. You should think of something else.
You can always count on Sheel to say exactly what he’s thinking — and he appreciates the same candor in an entrepreneur.
Ok, here we go!
Our investors are waiting on today’s entrepreneur Amanda Weeks — and they’ve been waiting, for a while. 30 minutes, to be exact.
When you’re asking people for money, it’s probably best to be on time.
Howie: There are repercussions.
Phil: You got to pay the price.
Finally, the door swings open.
Founders and investors say their hellos.
Amanda: Thanks for waiting for me. I’m from New York and I’m accustomed to everything happening in like a third of the time. Of getting around here. So thank you.
In a manner familiar to anyone who’s ever been late to something they shouldn’t have been, myself included, Amanda tries her best to pull herself together — and then she dives into her pitch.
Amanda: So my name’s Amanda. I’m the co-founder of Industrial/Organic. What do you think is the single largest component of landfills? Do you think it’s plastic? Do you think it’s paper? Because it’s actually food. Food is the single largest component of landfills. It’s about 21%. Uh cities, don’t have the infrastructure, don’t have the ability to handle an increase in organic waste diversion…
So, Amanda explains, the problem with food waste is that after it finds its way to the landfill, it just sits there, slowly rotting away. And as it decomposes, it puts off a steady flow of methane – methane is a greenhouse gas and a major contributor to global warming.
Amanda: So Industrial/Organic has adapted commercial food processing technology to handle food waste in an indoor industrial setting without mesh – methane emissions and much lower odor than other methods. We’re raising a million seed round right now. We have about half of that in the bank.
Amanda says that she just started raising money for Industrial/Organic a few months ago and she’s already secured about 600K of her target million dollars, including a large check from a pretty well known investor…
Amanda: Who was Brooklyn Bridge Ventures, if you know him?
Sheel: How much did he put in?
Amanda: He put in 350.
The mention of Charlie O’Donnell gets everyone’s attention. Though few investors will admit it, they definitely take a closer look at a startup if a well respected investor has already gone in. I can feel Amanda starting to crawl her way out of the hole she dug when she showed up late.
Sheel: What’s your background?
Jillian: So Amanda has a great background. I know, I’ve heard about Industrial/Organic before. She’s a very interesting… Go ahead.
Amanda: Well, I don’t know if it’s that interesting.
Phil: We’ll be the judge of that!
Sheel: We’ll tell you if it’s interesting.
Jillian: Yeah, we’ll tell you if you’re interesting or not.
Amanda: So I grew up in Staten Island near the biggest landfill in the world, that could be seen from space.
Sheel: Ooh smelly?
Amanda: Yeah, it was very smelly. It was a huge part of my childhood, like going to ballet class or going to friends’ birthday parties, and like, hold your nose everybody we’re going past the landfill. But I thought it was totally normal and like everyone did that.
Eventually Amanda moved on from life near the landfill. She started her career at Marvel Comics in the business operations side. After that, she spent some time in advertising and pharmaceuticals.
Amanda: And so around the same time people started becoming more interested in where their food was coming from. And I was thinking, you know, what’s something that everyone’s always going to need: food. Then was attracted to the waste aspect of that.
And that’s when inspiration struck: she could apply her background in business to the smelly problem she first encountered in her backyard as a child. Trash.
Amanda: And initially wanted to start a collection service. I wanted to do like Uber for waste management. And then just started networking in the space, and researching, and talking to people. And realized that the bottleneck is really in the processing capacity.
Processing capacity: in other words, what happens to our trash after we throw it away.
A lot of it goes right to the landfill. And it’s been this way for nearly a century. But Amanda thought: great, an industry that hasn’t changed in generations, I’ll disrupt that.
Amanda: So I just started experimenting and researching and reading about different methods that were out there. And stumbled upon an obscure method of fermentation that’s popular with homesteaders. You just put food waste in a bucket, sprinkle some stuff on it, and let it sit for two weeks and then you bury it in the ground. And I thought, what if you could scale that up and mechanize it and run it kind of like a brewery. So then I went around New York City and visited every brewery and winery and distillery and —
Jillian: Must have been fun.
Phil: If you could turn this stuff into beer, then you got a business.
Jake: I was thinking that too.
Before investors turn Industrial/Organic into a moonshine operation, Jake gets us back on track.
Jake: What is your process?
Amanda: So food waste comes in, it gets sorted. So any sort of plastic bottles or anything else that got in gets pulled out. It’s shredded to about a particle size of about an inch. Sterilized with a UV light. And then it gets inoculated and put in a holding tank for 24 hours. In that time, the food waste starts to release a lot of water. And then we grind that down into a slurry.
Amanda is getting into the weeds on a pretty dull topic: trash processing. But the wonkier she gets, the more investors are leaning in. Because when there’s money on the line, the devil’s in the details.
Amanda: The material is mechanically pressed using technology similar to what you’d see in a cold juice operation. Then pelletized, and then finally heat dried. In the end we make a fertilizer in a pelletized form.
And this is when Amanda pulls out a clear ziplocked bag filled with tiny brown pellets.
Phil: She brought us fertilizer.
Amanda: That’s six months old.
Amanda: We sell the fertilizer…
Jillian: Sit on the shelf and be like, don’t eat the fertilizer, Jillian. But that’s actually — I eat really, really that whole… It’s bad, bran, yeah…
Sheel: It’s like this.
Jillian: Yeah. It looks like that. It looks like bran cereal.
Amanda: Yeah, that’s the end product.
It’s a clear sign that Amanda is hitting her stride — when Phil — the one investor who rarely talks unless he’s interested — chimes in.
Phil: What’s the closest competitor of the technology?
Amanda: Anaerobic digestion. Some of you may know, it’s basically large silos of food waste in an anaerobic environment where they are harvesting the methane and using it for energy. It’s really expensive. And hard to scale. The yields aren’t great. You need 30 days to collect the methane, and then that — there’s a sludge left over that also needs to be composted. Two months. Our process takes five days, I don’t know if I mentioned that.
Phil: Who’s your first customer?
Amanda: Sure. So we’ll be working with the restaurants and food processors in New York City. One of the customers that we have signed up is a company called Dig Inn. They are a pretty popular chain in New York. It’s like farm to table fast food. We’re going to start our collecting from their commissary, and then collecting from their locations. We’ve also lined up Momofuku. They’re another restaurant group in New York. Don’t know if you’ve familiar with them.
Sheel: What – What’s in it for them?
Amanda: So, first of all, they already pay for waste collection. And so we give them a better service. We offer bin swaps, meaning we take their whole bin and we bring them a clean bin every time we collect.
Amanda: Which is a huge pain point for them.
Jillian: What’s your revenue model?
Amanda: So our revenue model is we earn money from waste processing fees. They leave the waste behind and they pay by weight.
Jillian: What’s the average load? How many tons?
Amanda: So our first facility will do one ton per day when we launch in February.
Amanda: And then by September we will have scaled to 18 tons per day.
So Amanda’s plan is to start small — right now she’s raising money so Industrial/Organic can process up to one ton of food waste a day. Which is not a lot. But eventually she wants to handle up to 18 tons a day.
Amanda: Our price will be $75. The price in the New York area right now is $115.
Jillian: So you have a better price? You have a better price?
Amanda: We have a better price further down the chain.
When Amanda says “further down the chain” — she means eventually, as they scale the business, prices could come down. But, for right now, Industrial/Organic’s price will be the same as everyone else’s.
Jillian: So the incentive here is a do-good incentive. Maybe I’m not getting the total value prop for a customer other than, you know, do well, right?
Phil: They’re not saving money.
Amanda: They’re not saving money. They’re getting a better service, they’re getting marketing and PR opportunities from knowing that their waste is going to a farm that they’ve sourced
Phil: I just want to go back to the revenue model because I didn’t finish that off. Because you have this fertilizer as the output. I want to find out…
Sheel: You making money from that?
Amanda: Yes, we are. It’s pretty small percent at this point of the total revenue.
All right: so Amanda’s plan has a lot of moving parts: they’ll pick up food waste from restaurants, they’ll process it at their facility, and then they’ll sell the fertilizer.
Sheel: I’m actually a little worried about the operations because you have to go around, especially when you’re at not at scale by any means.
This is Sheel. He started a food delivery service called Thistle. And he knows all too well the challenges of running a logistics heavy business.
Sheel: You’re running around. How much is it costing you just to pick up this stuff?
Amanda: So we’re not going to use garbage trucks. We’re going to get cargo vans. Because we’re doing bin swaps, so we’re just going to take the whole bin. So that cuts down significantly on the cost of vehicles, the cost of gas, the cost of getting around.
Sheel: So my biggest concern is you have an operations nightmare collecting all this stuff. Is there a way that you can partner with an existing provider and just process this stuff, and Momofuku could pay the existing provider something?
Amanda: So that’s our long-term model. Um we’ll switch over to working with other haulers.
Sheel: It’s like a proof of concept, basically?
Amanda: Yeah. It’s like a beta.
Amanda’s trying to say, we’re not up and running yet. Industrial/Organic is getting ready to launch, but they’re not yet open for business. Which could be fine — investors take chances on companies at this stage all the time. She just needs to have a rock solid plan.
Jillian: What do you think your burn is going to be?
Burn meaning how much the business will be spending.
Amanda: Um, in the next year I think it’s about $60,000 a month. I mean, we’re going to be growing all through this year, and hiring people and adding capacity. So it’s hard to pinpoint down one number.
Jillian: So 60 represents what? It represents drivers? A logistics person, it represents sales, it represents — what does it represent? Because 60 is very, very low. I mean, is this like slave labor? Are you shipping them in from — I’m trying to figure this out.
Amanda: No, no. That $60,000 is a number from like the average of the next year of scaling up.
Sheel: How many people are at the plant?
Amanda: So over the next year, we’ll be hiring about ten to fifteen people.
Jillian: So it can’t be 60. I mean, unless you’re paying them in fertilizer pellets.
Amanda: Yeah. No we’re not. So a lot of that is… [scoring end]
Jake: That’s a great business. We make fertilizer pellets and you take fertilizer pellets home.
Jillian: They look like bran cereal.
So the investors are laughing, but these figures – about 60K, 10…to 15 employees… these aren’t the kind of hard and fast numbers they’re are hoping to hear.
There is, however, one figure Amanda is sure about.
Amanda: We’re going to be paying people well above, we’re going to be paying — The lowest wage is $20 an hour. So we’re going to be paying well above union rates essentially for this —
Amanda: Because we want to be responsible. We want to treat people well.
Jillian: So how many people are we treating well?
Amanda: It’s ten to fifteen.
Jillian: You’ve got ten to fifteen people at $20 an hour.
You can’t hear it, but the investors are actually jotting down notes and crunching the numbers.
Jillian: And that’s just the plant. That’s just the facility. We’re not even talking about the office. We’re not talking about the drivers, the sales.
Howie: And the sales, and customer acquisition.
Sheel: If there were just ten people and they were all making $20 an hour that in and of itself is close to $40,000 a month.
Amanda: So there are some roles that we won’t be hiring until the next raise. So like my co-founder and I are going to handle sales. Basically everyone, myself included, we’re all going to get commercial driver’s licenses.
Phil: I don’t see how it’s $60,000 a month average.
Jillian: Right. Right.
Jillian: So I’m a little bit concerned that your operations cost is not realistic. What am I missing here? I think I’m missing something here.
Amanda: I’m pulling out basically an average of what our costs, our monthly cost is going to be next year. It’s going to go up. So obviously, by the end of next year our operating costs will probably be more in the $150,000 range.
Amanda’s been trying to sell investors on how lean her business is. But the thing is: these are venture capitalists. Big numbers don’t scare them. In fact, they’d rather see her be aggressive.
Jake: Could you skip the middle stage and process a ton very inexpensively? Do that for six months. Parlay that into a contract with the haulers, and then go out and build a $10 million facility that can process — The operational complexity in your business, like what Sheel was talking about, is all the logistics of getting trash into the business. And that is something that you’re planning on scrapping in six months or a year if things go well. So if you can skip that step somehow.
Amanda: It’s probably what we’ll do if I don’t raise the whole million.
Jillian: So I guess the question is why not get it to the point, or why not… Because it’s proof of concept? That’s what you’re doing? Okay.
Amanda: Yeah. Because we’re scaling it up over time.
Jillian: You’re just trying to figure this out. Okay.
It’s decision time. Has Amanda managed to talk investors into her plan for the future of waste processing?
Sheel’s up first.
Sheel: For me, I like the overall idea, I think that there’s promise. I’ve run a food business, so I would love to be a user. I just think the operational stuff, it’s always more complex than you think. And I’m saying that because I’ve been through it personally. And people that are going to work for you for $20 an hour, driving or whatever, there’s going to be days where they don’t show up. There’s all these nightmares that you’ll have to deal with. So I really encourage you to offload that as much as possible.
Sheel Passed. Next is Phil.
Phil: I’m concerned about the operational complexities. I’m concerned about the fact that you’re underestimating the amount of capital that you’ll need. So for me, for those reasons, I’ll pass.
Here’s Howie- he’s committed to investing in social-good companies, and Industrial/Organic is exactly the kind of business he would be into.
Howie: Yeah, I think if I was a restaurant I would use your service over the incumbents because, you know, the environmental impact. You’re clearly passionate about, you know, you’ve studied this, you have an emotional connection to trying to solve this problem. I think it’s a little too early for me and for that reason I’m going to pass.
Howie’s out. Here’s Jake.
Jake: I think it’s a great idea. I love the social good angle. But I think honestly, the stage your company is really idea stage. It’s not just pre-revenue, it’s really idea stage. Because you haven’t built out any of the logistics part of the business yet. It’s a whole realm you haven’t even touched on, right? It’s just chalk on a chalkboard right now. We’d want to see some progress on making these things work operationally. And for that reason I’m going to pass.
Four of the five investors have passed on Industrial/Organic.
Phil: So now you have Jillian left. One to go.
Jillian: I think what you’re doing is so important. I also believe that you are going to make this work. The first person I would like you to hire would be a logistics person, alright. I do think that you are not realistic about your burn, at all. Okay? But I think you’re going to get there really fast and you’re gonna say, okay. There is no doubt in my mind that you’re going to do this. I really feel that. I am not going to invest right now. But you have my contact information already, Amanda. I want to stay with you and I want to keep the conversation open. Because I do want to see you hit some of these milestones.
Amanda: Thank you.
Jillian: And for future reference, I know that this is a difficult city to get around, believe me. And I am late more times than I’d like. But when something’s really important to me, and I’m asking for money from people, I make sure I’m ten minutes early. And if I have to make sure I’m half an hour early and sit and wait, I do. Because it creates a little like, it’s disrespectful. I know you didn’t mean to be. I’m positive. Okay? And we really, really appreciate what you’re doing.
Phil: I think it’s a noble cause. And I encourage you to continue.
Sheel: I’m excited. And for the sake of the world, I think it should exist.
Phil: Can we keep the fertilizer pellets?
Phil: All right.
Sheel: All yours, Phil. All yours, Phil.
Jake: It’s Jillian’s lunch.
Jillian: Thanks a lot, Amanda.
Amanda didn’t get the money she was seeking and she walks out of the room. When we come back, the investors share what was going through their minds during her pitch.
Welcome back. Amanda finished her pitch and she’s heading home. Back in the studio, investors are able to speak freely about what they’ve just heard.
Jillian: She really has to dig in. When she said at the very beginning, well, we said, what’s — she said, “Well, it costs the same for them.” It’s going to cost them, and you thought to yourself, well, okay, what’s the incentive? Where are you — you know?
Phil: That was a huge red flag.
Jillian: That was a red flag.
Phil: How about this red flag. I’m going to pay my employees a lot more than union minimums.
Jillian: Well, she’s trying to do the right thing. She is trying to do the right thing.
Phil: Okay. When you’re investing your own money, do the right thing. When you’re investing my money, pay the minimum you can pay.
Jillian: And also, when someone comes to pitch, they should know their burn solid.
Sheel: Their numbers.
Sheel: For me, that’s a big one.
Jillian: When she had to look up and think, huh, my burn?
Howie: Yeah, the numbers need to be back of that, like —
Jillian: I was like, uh-oh, this is a problem. That’s it.
Sheel: And then like, what’s the breakdown of that $60,000? Yeah.
So a few months later I called Amanda to catch up on how things were going with Industrial/Organic, and hear how she felt about her experience pitching to investors.
Amanda: Well the interesting thing is that we were very early. So, we had just a raised a pre-seed. That morning before I came, I was coordinating wires.
Josh: No way.
Amanda: The whole experience was kind of weird, because I was being asked all these questions that I think are more suitable for, uh, a company at a later stage. And, like, they were asking me what our burn rate was, and, and truthfully, at that point, it was zero because we were just sort of in cockroach mode of raising our first round after going through an accelerator. So…
Josh: Cockroach mode being like, uh, like stealth mode, like just getting started, like kind of bootstrapping? What do you mean by –
Amanda: Yeah. Like bootstrapping.
Amanda explained that after the pitch, she took the investors’ advice to heart. She simplified her logistics by partnering with outside haulers and focusing on processing only. And she has exciting news — Soon, Industrial/Organic will be opening its very first facility.
Amanda: You know, I think that the next six to 12 months are going to be really fun and interesting and exciting – I feel like right now, we’re crawling, and we’re gonna be walking, and, you know, then we’re gonna be running. And I think that it’ll be — it’ll be great for us to execute on something that we’ve been talking about and planning for a long time.
Josh: So, right now, you’re the crawling cockroach. The cockroach is gonna stand up and turn into . . . a praying mantis? Praying mantises, they stand up on their legs.
Josh: And where do you go from there?
Amanda: A butterfly.
A cockroach to a butterfly? Sounds like a painful metamorphosis.
Speaking of painful, I had to ask Amanda about a serious point of contention from her pitch.
Josh: So one of the things that came up in the pitch, and I don’t how you feel about — I’m gonna tell you something that Phil said after you left the room.
Josh: Remember when you were talking about how you wanted to pay your employees well?
Josh: And I think $20 an hour was mentioned, something like that. And then Phil, after the fact, he’s like, “Okay, when you’re investing your money, do the right thing. But when you’re investing my money, pay the minimum you can pay.”
Amanda: I’m sorry, in what world is $20 an hour really, really well? I mean, we’re — that’s a competitive rate, you know, for someone working in that industry. I don’t intend to run an ethical business at the expense of profits, but I don’t intend to make a profit at the expense of ethics either.
Josh: Mm-hmm. And people. Yeah.
Amanda: You know, it was just a — yeah, it was just a — anyone who’s ever looked at my, um, financial projections and our hiring plan hasn’t said that I’m paying anyone too much.
Amanda: ‘Cause we’re not.
Josh: Take that, Phil.
My guess is that saying “well above union rates” is what initially threw Phil off. Because that made it sound like Amanda wasn’t in touch with the realities of running a business. Which makes a broader point…
Companies like Industrial/Organic need to thread two needles — you need to have a clear social impact but you also need to have a very clear business plan. Something Amanda lacked at the time of her pitch, but she may have figured out by now. In fact, she just told me the next person she plans to hire is someone in operations.
To hear scenes from next week’s episode, stay tuned til after the credits.
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Public service announcement:
We are on the hunt for early-stage startups, for our next season, to be recorded this August. So, if you or someone you know is building something unique, go to thepitch.show/apply – and fill out the form.
Thanks so much for listening to the show this week, if you want to find out more, our website is thepitch.show, you can find us on Twitter and Facebook @thepitchshow. We’ve got a brand spankin’ new newsletter where we put behind the scenes content from the entrepreneurs and investors on our show. You can subscribe to that at gimletmedia.com/newsletter.
Our show was produced by me, Josh Muccio, Asthaa Chaturvedi and Rob Szypko. We were edited by Devon Taylor, Annie-Rose Strasser and Alex Blumberg.
Our Theme Music is by Breakmaster Cylinder, with original music composed by The Muse Maker, Bobby Lord, and Tyler Strickland. We were mixed by Enoch Kim with help from Matthew Boll.
Thanks to Lisa Muccio for planning the season 2 recording event last fall.
Quick disclaimer, no offer to invest is being made to or solicited from the listening audience on today’s show.
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All right — you’ve been listening to The Pitch from Gimlet Media. I’m Josh Muccio. See you next week.
Next week on The Pitch, we hear from an entrepreneur who’s trying to change what we see and experience at 40,000 feet.
David Dicko: I am in the business of making sure that passengers love the virtual reality experience.
Jillian: Do you have patents on this?
David: We don’t have patents. We have — we’re —
Jillian: That’s a problem. You know that, right?
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