After years as an executive at food tech companies, Kishan Vasani decided to start his own food tech business in 2015.
Spoonshot pivots from B2C to B2B
Spoonshot began as a project called “disq,” a B2C mobile app that promised to help consumers discover delicious new food choices based on their personal preferences. Vasani recruited co-founder Sai Sreenivas Kodur, a programmer with food tech experience, and began building the app.
But the pair quickly discovered a fundamental flaw with their business model.
Users could discover food on the app but not order it, so how would the company make money?
“The only way to allow users to place an order within the app was to integrate with major aggregators like Just Eat and Zomato,” Vasani explained on Medium. “That’s a tall order for a young startup, and even if they were to agree to integration, we would be totally dependent upon them, both for our UX and potentially any revenue. And the potential revenue wasn’t exactly lucrative.”
The co-founders decided to pivot to a B2B model in early 2017, aggregating thousands of data sources and using AI to provide food companies with recommendations to drive their R&D efforts. That created a clear path to financial viability, and investors started to take notice. The co-founders got $120,000 in funding from Zeroth, an AI-focused accelerator based in Hong Kong.
In 2018 they attended the Techstars Farm To Fork Accelerator, where they built their first prototype for U.S. food startup Milkful. The product launched in 2019. Through the co-founders’ strong industry ties, various events, and a focus on attracting inbound leads through thought leadership content, Spoonshot managed to garner solid interest from food industry professionals.
On the back of this growth, the company raised a $1 million seed round in 2020 to continue its expansion, bringing its total raised to $1.8 million.
“The food industry is under tremendous pressure to innovate smarter than ever before as consumer demands become more sophisticated, especially amid the current economic and health crisis,” commented Doc Parghi, managing partner at SRI Capital, which led the round. “Spoonshot solves this problem by providing deep intelligence at speed.”
Spoonshot finds that VC money comes with VC expectations
While accepting VC funding helped the company keep growing, it also raised expectations for the business. Vasani soon came to doubt whether Spoonshot could meet them.
“Our software platform requires a continuous stream of robust and comprehensive data to deliver value to our customers,” Vasani explained to They Got Acquired. “The cost of acquiring and processing that data against our pricing wasn’t scaling well.
“At the enterprise level, there are not a large number of companies that can afford to pay the sums we would need to charge,” he said. “This was all against a backdrop of increasing competition, not to mention the adoption of large language AI models that could suddenly give CPG companies a huge acceleration boost with their internal AI development.”
A tightening market for further VC funding didn’t increase Vasani’s optimism that the company could find a path to the kind of growth demanded by its investors. In the second quarter of 2022, the co-founders decided to sell the business and began the painful process of trimming its staff of 42 to ensure the company had enough runway to make it to a sale.
Target Research Group goes from partner to buyer
On the bright side, Vasani didn’t have to look far to find a buyer. In 2022, Spoonshot had partnered with consumer research company Target Research Group to develop an AI-driven food innovation system called #foodbrain.
“I remember when developing new product ideas meant a team of people throwing out ideas, tacking them on a board, and voting on which to pursue,” commented Target Research Group CEO Greg Spagna. “Now the future of innovation is a new AI platform.”
In August 2023, Target Research Group bought Spoonshot for an undisclosed sum in an all-cash deal, acquiring its active list of 11,000 food industry professionals in the process.
The Spoonspot journey taught Vasani that not all tech businesses are meant to be VC-backed.
“VCs want to invest in companies that can scale to $100 million as a minimum. With hindsight, I think that’s an extremely difficult target for the market we were operating in,” Vasani told us.
“But I fully believe that great $10 million to $20 million million businesses can be built in the space over a 10-year period without that high-growth pressure, with a lean operation, where profits can be reinvested into growth.”