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[E4C2] Turning Home Grown Mushrooms Into A Multi-Million Dollar Business – Back to the Roots

In this interview, Co-Founder Nikhil Arora shares how their green business idea became a reality, from the early days of collecting used coffee grounds from local Berkeley coffee shops, to their partnerships with Peet’s Coffee and Whole Foods, to the $5 million business it is today.

He also talks about the evolution of their product design, and how their urgent ad in Craigslist turned their mountain sized heaps of coffee ground waste into a valuable sideline business in soil amendments.

As of 2011, the company has:

  • Diverted and reused 1 million lbs of coffee grounds from the landfill
  • Helped customers grow over 250,000 lbs of their own fresh mushrooms
  • Sustained 10 school gardens through our nutritious soil amendment donations
  • Created 21 urban, green-collar jobs in the West Oakland community

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Now what exactly is an AquaFarm, you may ask?

It’s basically a fish tank that grows herb. From a company that grows shrooms.

Here’s how it works. You get a 3 gallon fish tank. The nutrient-rich water from the tank gets pumped up to the plants in the growing tray. Basically fish fertilize the plants, and the plants filter the water for the fish. It’s an awesome symbiotic relationship. You can grow organic herbs like basil and wheatgrass with this closed-loop ecosystem in any kitchen or classroom! Guaranteed to fascinate children, and adults.

Get an Aquafarm from Back to the Roots

Mentioned in this Podcast

The Tropical MBA Podcast
Dynamite Circle

 Where to find Nikhil and Alejandro

FULL EPISODE TRANSCRIPT

Lorna: Ok, Nikhil, I’m so glad that you’re here to join us today to share with our audience the story of your guy’s phenomenal success. So if you could tell us more about your company, how Back to the Roots came to be, that would be fantastic, and please also let us know what products you guys sell. I know you’ve got the really cool gourmet mushroom kits but it seems like you’ve branched out to other products and we’d love to understand too, the inception of your business idea. So where and how did you come up with this awesome, creative, sustainable business idea, and what it took to get your start-up idea off the ground?

Nikhil: Absolutely, well first of all thank you very much for having us on here. This is really exciting. I can give a quick background, at first, just in terms of how we got started, and how we kind of ended up being full-time urban mushroom farmers.

Actually, it’s kind of a funny story because our last semester, in college in 2009, where Alex and I were actually both at UC Berkeley, I was an undergraduate business Poly-Sci student, he was an undergraduate business education student, and Alex had offered to go in investment banking in New York and offered to go into consulting in San Francisco. Kind of think you know what you’re doing and about to graduate, and two months before graduation we were sitting in a business ethics class and we hear our professor bring up, which looking back now, a pretty random fact. We could potentially grow gourmet mushrooms on entirely recycled coffee grounds. And I think something about that idea kind of turning waste into food and jobs got us both excited and we didn’t know each other at the time. We both reached out separately to our professor and said “hey, that’s kind of cool. I need more information.”

He wrote us both back separately.

I have no idea but this other kid asked me about it too. You guys should link up.

Alex and I both met up and just started kicking around the idea. And eventually it was right before spring break, we decided, you know, what the heck? Lets give it a shot. And ended up planting these ten test buckets. Literally these Ace Hardware paint buckets of mushrooms filled with coffee grounds and some mushroom seeds, and we come back from spring break and out of these ten buckets, nine of them are just completely contaminated. But one of them just had these gorgeous bunch of mushrooms growing out of it.

That was really the first time we saw that this idea actually had something to it. It could actually work. We ended up taking that one bucket around to a local restaurant called Chez Panisse and got a chef to try it out there. One of those people in the local food scene. She became really supportive and got her head chef over and tried them out and they kind of agreed “oh, it’s delicious!”

And that same day, took that same paint bucket over their local grocery Whole Foods and walked in the produce department with a paint bucket of mushrooms and those guys became really supportive as well. Ended up getting a small $5k grant from our chances a couple weeks before graduation. I said, you know what, we’ve got mushrooms that taste good, we’ve got some possibility of demand from Whole Foods and $5k in our pockets. Forget best in banking, forget consulting, full-time mushroom farming it is. That was about how we ran into it.

Lorna: Wow, so you guys were actually on route to embark on a traditional business management career and now you guys are growing ‘shrooms in East Bay.

Nikhil: Exactly. The fraternity kitchen, right? Quite the change of direction, but we wouldn’t have it any way looking back. It’s been awesome.

Lorna: Dude, I have to say that ‘shroom growing just sounds way more interesting than being a top five management consultant.

Nikhil: It’s been a blast. It’s definitely been a roller coaster but a ton of fun. It still doesn’t feel like work, it just stills feels like something you’re excited every morning and wake up and get to it.

Lorna: So what kind of mushrooms do you guys grow?

Nikhil: We started off with the fresh mushrooms and loose wholesale ones for the produce departments and we’re doing oyster mushrooms right now, which by far are the best on coffee grounds and as we started off with the fresh mushrooms, especially along the way, we’ve had a lot of people from our community and our customers. They’re asking us, “yeah, that’s kind of cool. But can we take this one step more local. Can we do this ourselves? Can we do it at home?”

That’s really where the idea of the Grown at Home Mushroom Kit came about which is now our primary product and it’s an oyster mushroom kit and it’s all grown on entirely recycled coffee grounds, in this case from Peet’s Coffee, our primary partner and supply side.

It lets you grow a pound and a half of fresh oyster mushrooms in as little as ten days. It’s super quick, super easy, and our vision with this is really to serve as an inspirational, educational tool that can get everyone excited and get them empowered to grow their own
food and something where you don’t need a green thumb or big backyard, but anyone no
matter where you are, no matter your expertise can grow their own food. We’ve been really excited about kind of building a movement around to connect people that’s doing it.

Lorna: That’s really cool. So you guys have oyster mushroom growing kits. Are you going to branch out into other kinds of mushrooms like maybe chanterelles or is that the one that kind of lends itself to be most easily cultivated at home?

Nikhil: It’s definitely caters itself to be most easily cultivated. Right now, I think more than other types of mushrooms, we might look at other types of products in this grow it at home space. We really called the company Back to the Roots, there’s never X-Y and Z mushroom farm. That didn’t really suit us as far greater than the mushrooms, far greater than coffee grounds. This is where we got our start. But this is a whole movement to be created, by really connecting people to their food in a lot of different ways. In the short term we’re really excited about going a lot deeper with this kit particularly because we feel that given the ease of use, given how fasts it grows, it really opens it up to so many more people. You don’t have to become a niche foodie or expert gardener. Right now it kind of fits the [free] demographic, the gardening demographic. The families, kids, science projects. They’re kind of a fun gift to get someone else excited about fresh foods that otherwise wouldn’t be. It’s been cool to see that trail into retail now too. We’re selling in Home Depot now, we’re selling in Whole Foods. In science classrooms, and school fundraisers, and garden centers. It’s so cool to see how just one kit, this one product, can connect so many different people around this concept of growing your own food locally and fresh.

Lorna: So, going back to the different product lines, you guys have this vision to actually expand into other kinds of home grown products too, right? Is that in your product development plan?

Nikhil: Absolutely. In the short term, we see that there’s 100million households in this country. We feel that every household should have this kit and have this experience in growing their own food, and that’s really where our vision is driving us right now in the short term.

Lorna: Cool. So, do you guys also wholesale as well, is that part of your business?

Nikhil: With the fresh mushrooms?

Lorna: Yes.

Nikhil: Yes, we started off with the fresh mushrooms. It was actually I think it was the end of 2010 slash early last year, early 2011 where we still had the fresh mushrooms and it probably took us about 500 pounds a week of the fresh oyster mushrooms really servicing most of the Whole Foods in North Cal, a lot of the farmer’s markets, different grocery stores and to be honest with you, we were about two weeks away from going out of business at that time of year, end of ’10, early ’11. We had about 1,000 square feet of warehouse space, 500 square feet for the fresh mushrooms, 500 square feet for the kits. We still were really bootstrapping this whole operation, hadn’t taken any outside funding yet.

Looking back at that point we were really not putting our entire heart and soul and all of our energy to one of them, and they’re both very, very different operations; the fresh growing versus the kits which was much more of a consumer product. At that point we had to make a decision. We’ve really got to pick one of these and focus and do it right. We decided at that point that we were probably more excited about these kits now because they kind of let us build a movement across the country to connect thousands and thousands of people versus just even ten years could be like a five mile radius mushroom farm, you know, if we would have gone on the fresh route. So we actually largely discontinued the fresh mushrooms. We still go for just a handful of local restaurants and things like that but really primarily focus on the mushroom kits now.

Lorna: Cool. This bootstrapping business cost you guys $5k grand to get off the ground, and that was something that you received as a business plan competition prize or how did you get that initial funding?

Nikhil: Yup, that was $5k through this social entrepreneurship competition. We had just grown these first mushrooms, our first bucket and got a little bit of support from Whole Foods and Chez Panisse in Berkeley and decided you know what, lets put a couple page plan together and see if we can get some support from the school and ended up winning the social entrepreneurship competition called Big Ideas at Cal and got a $5k grant for our chances. So that was really the final point where we said “you know, we have $5k in our pockets, we should go out there and try this” and that’s kind of what it took to get things really started.

Lorna: Were you required to raise more funds? Did you guys self finance the growth of your business or take out loans or accept angel or VC funding at all?

Nikhil: Sure, so so far we have not taken any angel or VC funding. We have been really lucky and fortunate to win a couple more business plans since. We’ve got a $50,000 grant from the Miller Coor’s group. They had an urban business plan competition and another $50,000 grant slash prize money from Hitachi Foundation who had the social entrepreneurship competition. And then since then we actually got a loan for $25,000 from

Whole Foods itself which is really, really cool and awesome for them, they help to support local farmers. That kind of got us through our initial stages of growth and just very recently finally became quote on quote “bankable” and have a credit line from a local bank. One Pacific Coast bank here in Oakland.

Lorna: So, those social enterprise business plan competitions, I mean, $50k was that cash? I mean that’s quite a nice chunk of change.

Nikhil: Yeah it is. Personally we are really, really thankful for both of those organizations and these really cool programs they both put together and I really recommend that any other social entrepreneurs out there take a look at them. It’s an annual thing and it gives you great resources, great networking, mentors and of course the cash prize as well which is always invaluable.

Lorna: So when you decide you were going to go after social enterprise business plan competition prize money, do you have a list of those competitions that you guys targeted or did you just fall into the ones that you got into? I mean was it a very strategic decision like, ok we need more money, lets do some research, lets come up with ten business plan competitions and give it our all and apply to those competitions?

Nikhil: I mean honestly we’re very new to this space and a lot of business people, you know, friends, community members, forwarding things along to us or we heard about it somehow. We’re still at a point right now where we feel we’re trying to get the word out and trying to get support and we applied to everything. Anything you hear about we’re applying to, you know, it can’t hurt. At the very least there’s nothing wrong to come from it, we can’t lose anything, so we applied to as many and as much as we can. You win some, you lose some but those two have been awesome, awesome organizations and some may think as you people started to know your opportunity community they kind of forward along opportunities to us and we just fill them out and that’s the way we applied.

Lorna: So can you tell us all the different ways that makes your company, Back to the Roots, a sustainable business?

Nikhil: I think we look at sustainability here in a couple of different ways. One, it’s not just the environmental way, in terms of lightbulbs changed or gas mileage made more efficient, and things like that, where it’s like a side operation or side department of our company. I think for us sustainability is at our very, very core because every single morning we’re collecting and reusing waste. This whole company, our product, our mushroom farm, our team, it’s all built on literally what was trash. We’re collecting, diverting 40,000 pounds a week now of coffee ground waste from local cafes and otherwise we throw it away, using it as soil for our kits and as a foundation for this whole company. So it’s something where we really get excited about it. Every morning it’s so cool to see this van of truck fulls of waste
coming into our farm and serving as the foundation for this whole company. It’s kind of invigorating, every morning you see it. So that’s the big thing that we always want to continue to strive on, is making sure sustainability is something at our core, of every product we do, all our processes; it’s not just a side department as you go into the future.

The second big thing is that we look at sustainability not just environmentally but also financially, in terms of our team and employees, and just making sure we’re creating a livelihood for people that’s sustainable as well. For us that may be financial literacy
courses for our team, English classes for our team. Looking up local banks and making sure that we’re offering up all the best services as possible to our team as well.

The third thing is sustainability in our community. We’re always trying to work on getting involved as much as possible in the community, be it donating your mushroom composts, doing workshops for schools, inviting schools out to our farms and really learn about what we’re doing and hopefully inspire other kids as well. To us all of that is sustainability and it’s something that we try to live by and always strive for.

Lorna: So would you imagine or would you describe your whole process to be a cradle to cradle process? The impact of your business as being pretty close to zero impact or are you still working on it?

Nikhil: Yeah, I think at our core I think it is. I think the bulk of what we’re doing is either most of our products is top to ground. Get that at home, you grow your mushrooms and then once you’re all done with that your leftover waste from the kit, your leftover coffee grounds mixed with mushroom roots turn into a really rich soil amendment for any of the parents at home, so you can add more value to that in some sense. It’s like the waste of waste still has value to it. So I definitely think that’s a big part of who we are but at the same time we’re always looking to improve ourselves. We know that there are countless other ways we can become more sustainable, more efficient with energy and resource-wise and we’re constantly looking to improve our packaging, improve our products, improve our warehouse operations. But I think we do, we are excited about the fact that at our core, it’s taking waste, adding value to it, and then our own waste is still something that people can reuse.

Lorna: So I have this image of you guys in my mind in the early stages you were a start-up as going from one local Peet’s Coffee shop to another with a wheelbarrow collecting big garbage bags of coffee grounds. I’m really curious about what the logistics are of collecting all this waste from coffee shops. What was it like for you guys in the beginning? How did you scale that?

Nikhil: Yeah, your image isn’t too far off. That’s the cool thing about it. Literally we’re going there every morning with a dolly and picking up their waste every morning. We started off at one cafe and it’s funny because we first started off, we didn’t really know how they were going to react. We’re kind of running in there kind of nervous and anxious and ask the coffee guys, you know, what are they going to say? I still remember the first time we asked one of the cafes, the one right next to our campus in Berkeley, and the barista was like, “absolutely! You can take this from us.”

We kind of quickly realized that this is clearly an issue that they don’t want to deal with. Waste is a big, big problem and they were excited to get rid of it. I think one of the hardest things at first was really training and working with all these stores to separate their waste. Separate the coffee grounds out into a separate bin because we don’t want to collect everything else so that takes some work and training with a lot of different local cafes. But once we have that set up now in the back of every cafe we work with, can have one bin for their trash and another bin for the coffee grounds that says “mushroom guys, don’t touch” and we put all the coffee grounds in there. And every morning now we start at about 5:00am and have a morning collection route. We drive by about thirty cafes or so, and in some instances we’re valet trash collectors. We go into the back of their cafes, take this bin, put it on our trolley, we go back to our van, empty out the grounds, put the bin back into their store and go on to the next store and eventually bring it all back to our mushroom farm every single morning. We are at our core valet trash [collectors?] for our partnering cafes.

Lorna: How many pounds or maybe its tons now of coffee grounds do you guys reuse per year?

Nikhil: So last year we collected and diverted, it’s actually a big milestone for us, we hit 1million pounds of coffee grounds diverted, reused last year in 2011. And since then we’ve actually scaled it up quite a bit. Right now at least, we’re doing about 40,000 pounds a week at coffee grounds primarily from Peet’s Coffee.

Lorna: Wow, that’s shocking how much coffee we actually consume.

Nikhil: Yeah, it’s pretty remarkable. Every cafe just has these, I wish you could see, these big old bags with tons of coffee grounds every single morning when it’s light again. It blows my mind, every morning there’s massive amounts of coffee grounds in their warehouse. It’s cool to see. It’s such a tangible way to see how much waste there is out there and how much more value there is to it.

Lorna: So it sounds like this whole process of collecting the waste that’s a really huge input for your company, that whole process actually lead to some pretty significant partnerships with your company.

Can you talk a little bit more about your relationship with Peet’s?

Nikhil: Absolutely. So Peet’s has been one of the most exciting things for our company. First just starting off with them and since fostering a really, really deep partnership. It started off with just us taking coffee grounds from them with a couple cafes and as we started to grow and scale up, they actually came back to us and said “you guys are huge. Every single morning at the same time that waste management is here, we’re already paying waste management so why don’t we pay you guys to make it official?” And that was such an awesome, exciting period for us. We’re actually now being paid to make a slight profit off of our biggest raw material, with coffee grounds. It’s a really cool win-win. We’re taking the grounds off of their hands, doing something more sustainable with it and in turn we get to cover our costs in some sense for our biggest raw material.
So that was one of the first major steps up for the partnership and since then now, we’ve actually started really partnering much more closely where every kit we sell, has a $2 off coupon for a bag of Peet’s coffee in our kits. We’re actually cross-merchandizing now in retail and grocery stores where we’re putting our kits on their Peet’s Coffee racks in the grocery aisle and they’re putting their Peet’s Coffee bags on our mushroom kit displays in the produce department. We both gain head doubling our corporate in stores and increase distribution and just working together. I can really tell this story now, too much broader community and it’s just been awesome working with them and continuously always try to find new ways to choose what they have to reuse. A lot of their team has been such close mentors to us as well so it’s been a fun partnership.

Lorna: You know it’s actually really interesting how this partnership just seemed to have evolved between your companies really organically. Some entrepreneurs really go after partnerships in a very strategic way but this one almost kind of seems like it was almost too good to be true. I’m kind of curious, you know, a lot of entrepreneurs, especially successful entrepreneurs, they might come up with really great ideas and they might be really hardworking. It seems like a successful business is often a combination of the brains, the money, the hard work, but there’s also an element of luck. And it sounds like from what I’ve heard about you guys so far there’s quite a bit of luck. You guys had quite a bit of lucky breaks in your entrepreneurial journey. I’m kind of curious about what some of those lucky breaks might have been for you?

Nikhil: Yeah, absolutely. I definitely think we’ve been very fortunate and both Alex and I, at our core, believe in energy, believe in things coming together; when you see things combining just kind of running with it. Things happen for a reason. We really, really believe that.

At the same time it’s advice for other entrepreneurs and I would love to say this because it’s something that we don’t want, I think a lot of people look at this company and think “oh, it’s a matter of a couple lucky breaks that happened.” It’s funny too because a lot of times we don’t talk about the countless other people that parts that did develop or that didn’t work out, and I think the ones that do are really highlighted and it’s really cool to see how they did work out and flourish but I really believe that luck is something where you work a ton, you put yourself in a ton of opportunities and by the law of just chance and probability, some of them are going to work out, some of them won’t be, and to an outside perspective the ones that do work out, it can only be lucky but they don’t see any other ninety-nine failures that you had to get that one chance that could be considered lucky enough.

I don’t want to have other entrepreneurs lose spirit and look at us like “oh, this is just like a fairy tale, you guy’s are really lucky”. I think it’s just a matter of you put in the hard work, you open up a lot of doors for yourself. Some doors will stay open, some will be closed and you keep on moving forward. The ones that stay open for you can be considered luck but you didn’t know that it was because of the hard work you put into it. We really believe that too. Luck is a matter of the amount of energy you put into something. But for us we definitely, the luckiest something is that one of those buckets even grew. We had no idea what we were doing when we started off. We planted those ten buckets and we were fortunate that one of them actually grew because that really inspired us to continue running with this. We saw that one pile of mushrooms and how beautiful they looked,
number one, and two we were able to get tested out by some chefs so that was a big, big moment for us. I think as in so many other ways, I think it’s people you meet and just relations that have been cultivated. We really do feel fortunate, I think looking back, the Bay area is such a great place to start this. It’s a really cool combination in the Bay area of entrepreneurship. We’ve got passion for entrepreneurship, a passion for food, and the passion for social enterprises and I think that cross section of those communities has really given us a great foundation here, a lot of great mentors and advisors to reach out to as we look to grow Back to the Roots.

Lorna: So you mentioned energy a couple times in your description of what luck looked like for you. I hear a lot about the importance of the entrepreneurial mindset in terms of attracting or generating success and more opportunities and favorable circumstances. Do you guys actively practice maintaining positive attitude, gratitude and all the different energetic shifts that some entrepreneurs would say actually play into the law of attraction and is actually the fundamental catalyst in terms of whether or not a business venture is successful or isn’t?

Nikhil: Absolutely. I think, at least for us, Alex and I both really believe in that to our cores. Obviously the now isn’t everything, but at the end of the day, we’ve made this decisions, created relationships, ongoing relationships, business relationships, based on the energy that we feel from people and we try to surround ourselves constantly with that kind of
positive mindset and people who share that mindset as well because I think it’s going to be so powerful. We really believe in it. Positive energy attracts other energy similar. I think its allowed us to form some of these really cool partnerships and we’ve found people who really share that same vision and passion for the work we’re doing. I think it’s an understanding that we have that if people come together with that same kind of energy and that same really optimistic look towards what they’re working on then really cool things can happen. We look at that as important, if not more important than anything else, just kind of creating new relationships for our business.

Lorna: So you have some really great partnerships. You have this one going on with Peet’s Coffee. You also had one that kind of started off from the inception of your business with Whole Foods? Yeah, so are there any other partnerships you’d care to talk about and any advice to entrepreneurs on how to secure powerful partnerships like that?

Nikhil: Yeah, I think the biggest advice that we could play off but I think it’s the most lesson we’ve learned, is that, number one, partnerships are by far the #1 most important thing to grow a business. People are out there, been there, done that, and not replicating, spinning the wheel. Exploring partnerships with people who’ve already done this work you’re passionate about too and you can leverage each other’s strengths.
Two, is that always look at relationships as a two-way street. Even with your suppliers,
your customers. There’s always value added both ways. So I think that’s allowed us to really help grow and go deeper with our partnerships. One of the main, primary examples is Peet’s Coffee. We grew from just a supplier relationship to now one where we go back and forth offering value to each other. It’s just so much more deep and we have so much more confidence and trust in each other.

Number one, never undervalue the power of partnerships and two, even when something looks one-sided how can both parties offer value back to you? What kind of creative ways are there to work together beyond just that first impression that comes to mind. I think with Whole Food’s and Peets Coffee, both of those have happened and its allowed us to have two awesome partners for the long road.

Lorna: Some of my readers ask where do I find partners? Do you have any recommendations on where aspiring entrepreneurs can find awesome partners? I know there’s some cofounder online dating sites and you know.

Nikhil: For us, everywhere we look, we’ve got some of the coolest partnerships develop just from our community. The customers reaching out asking quick questions. We kind of question them and making sure why you guys are interested in this? We ask them deeper questions. Everyone interacts with you.

Our soil amendment which was the byproduct of our own wastes, a lot of those partnerships with local gardening centers and non-profit farmers arose from people writing one line emails, “hey what are you guys doing with your waste?” Pushing that deeper and building a partnership, well of course a relationship, and then a partnership out of it. I think most of our partnerships haven’t come from actively searching for it but just kind of understanding that anyone can develop into a really cool partner, and just kind of going in there with that mindset. Most of them just comes from our community, and supporters and friends and things like that. We’ve kind of been fortunate to interact with and just made it a point to continually push them and try to build that relationship with them.

Lorna: So how did you end up tapping into the power of your community? I mean a lot of businesses often operate almost in isolation from the community around them and you guys seem to have really grown and evolved very quickly through the power of the community support and feedback you’ve received. How did that happen or begin for you guys?

Nikhil: I think a big part of it is making an active effort to and I think we’ve always tried to be very open door policy with our operations with what we’re doing. Being very transparent with our community and operating tours all the time. We host a lot of community events at our warehouse now. Anyone who calls we kind of trained our whole team to always ask
them more questions. How did you hear about us? How can we do what we’re doing
better? Do you have any other ideas for us? I think making that a part of our culture to really take that extra moment is always worth it. To take an extra moment, to ask an extra question for someone; supporter, or customer or team member. You never know where its going to lead you to. I think its something that we had to make a very active effort to connect with the community but it’s been so awesome. I think one of the most rewarding things about this whole thing, is building that relationship with our community.

Lorna: So the byproduct of your business, you actually have turned into a soil amendment product, which you now then make available to non-profits and local farmers? Is that how that works?

Nikhil: That’s correct.

Right now we have a lot of the waste leftover from the fresh mushroom production. A little bit from the mushroom kit production and that waste that left coffee grounds mixed with the mushroom root actually turns into a really supreme soil amendment. We have a lot of leftover waste from the bulk mushroom farming that we offer back to the soil amendment or compost, and then with the kits and individual scale, you can’t do that at home with the kits but it’s really cool to see that. That all developed actually through our community asking us “what do you guys do with your waste?” Getting a lot of inquiries from them and having local farmers and gardeners teach us that hey, you guy’s should know your own
waste is something really, really powerful and beneficial for other plants. So now we have it packaged up and we’re actually selling the soil amendment this spring in Whole Food floral sections across northern California.

Lorna: Did you even know that your waste actually had value? How do you know this? I would kind of maybe, this is terrible, but I would be inclined to landfill it if I didn’t know that it had value to someone. Was there something that, did you sense that your byproduct had value to another group of stakeholders or did you just discover it, kind of fortuitously that “oh! Someone actually wants to buy this stuff?”

Nikhil: There’s actually a funny story. At our last warehouse, we were growing the fresh mushrooms and thousands of thousands of pounds of fresh coffee grounds coming in every single morning. We’d grow the mushrooms, harvest them, and then once we’re done, we’re left over with all this organic waste, this coffee and mushroom roots. And we knew we couldn’t just throw them away, it’d be the same thing that cafes are doing. So we couldn’t handle this stuff, didn’t want to throw it away, so we started building this massive mound behind our warehouse kind of thinking we’d figure something else to do with it.

It was a funny story. We got this email from our old landlord and by this time this mound had grown a couple van car sizes. He was like, this is disgusting, the whole place, you look like trash, you have two weeks to get rid of everything or else I’m canceling your lease and you guys get kicked out of here.

We have nowhere else to go, we were freaking out, so we’re like what do we do? And then we just put it on Craigslist, lets just see what happens. And no joke within like two or three weeks had a couple month’s backorder on our own waste because so many people inbound reaching out to us about it. And we were just blown away that people actually want our waste. Through that process, started reaching out to him and learning more about it, and quickly realized that mushroom substrate is actually one of the most premium soil amendments out there on the market.

Lorna: Oh my God, never underestimate the power of Craigslist for community marketing.

Nikhil: (Laughing) Yeah, I know.

Lorna: So you guys grew pretty fast. How many stores are you in now?

Nikhil: Currently we’re in, I want to say over 1,000 retailers nationwide. We’ll grow to probably 4-5,000 by the end of this year.

Lorna: So are they all primarily Whole Foods and Peet’s chains?

Nikhil: No, that’s actually the cool thing. Whole Foods has about 300 stores nationwide. We are national in Whole Foods now. We just launched in Home Depot as well, it’s been a big partner of ours. A lot more natural food stores across the country. So it’s just really exciting to see distribution grow and diversify as well. A big focus this year now is to go from the natural food space to the lawn and garden space with nurseries and things like that.

Lorna: Do you have any advice for inspiring entrepreneurs on how to get their product into these big chains?

Nikhil: Yeah, I think for us, it’s honestly we went into this with absolutely no knowledge and no background in distribution or retail and we walked into one store and pitched the heck out of this product and convinced the store and individual team members at that store that this is something they should carry. That kind of went up the ranks that way. I think it’s so much more legitimacy and for big buyers a lot more traction if they can see their own stores, their own team members, wanting this product.

We really suggest to try to get into a chain, stop by one store and talk to those team members, talk to that store manager, convince them. If you can convince them, they can email their head buyers and help you actually get into the system by finding these key people who can vouch for you. Because it’s so easy, if not, to get lost in these massive pitches.

Lorna: So it seems like you guys basically just hit the ground running yourselves. You knocked on doors, you probably did a little bit of research, pulled up some numbers, made some phone calls, is that what it looked like for you guys in the beginning stages?

Nikhil: Absolutely. It still does, to be honest with you. I mean it’s a lot. One of the values in our wall is hustle. Putting in a lot of work. For us it’s outreaching. It’s constant outreach. Knowing that you reach out to 1,000 people and only one might only listen to you but that’s one person, you can do it again. We spend a lot of time, our whole team is on the floor doing demos, and is talking to customers and building that buzz one customer at a time.

Lorna: So do you still do a lot of it yourself? Or do you actually have a dedicated employee whose job it is to get into more retail chains who actually has experience moving food products into stores like that.

Nikhil: Yes, that’s probably one of the coolest things about this. We have a team now, it’s a business development team of eight people across different cities across the country but they’re all pretty much in the same boat. Young, a couple year’s out of school, going down the corporate route, and instead they wanted to do something they’re more passionate about, fell in love with the idea and now they’re out there selling mushrooms. We’re
looking to hire more based on passion than experience. We believe they can kind of learn experience, they can figure that out. But we want people who are really, really passionate about this movement who can grow this movement. It’s been fun building up that team and they’ve been the ones driving sales right now and driving awareness.

Lorna: I have to say your product is awfully attractive. It comes in this cute, beautifully designed box. It seems like the mushrooms just grow right out of it.

That is so cool. How did you guys come up with that product packaging? How many iterations? Did you have several iterations of what your product looked like? Because I can
imagine now going into a store with that adorable product, you know, people would just be all over it. But did you guys start off that way? Or did it evolve from something a lot less attractive like a bag?

Nikhil: It definitely evolved. It’s gone through numerous, numerous iterations. The way we did the fresh mushrooms we started off with these big, clear plastic bags. Almost the size of a basketball or football if you can imagine one. I remember the first time we got really excited about these kits, we invited Randy, our regional buyer from Whole Foods to our mushroom farm to take a tour. We showed him the whole process and at the end of it we were really excited to show this mushroom kit idea we had.

We had these big, clear bags. Imagine this big bag of fungus stuff looking inside. We had slapped a sticker on it from FedEx or Office Max that said “Mushroom Kit” and Alex and I thought it was the most beautiful thing in the world. We were really excited at the end of the tour, “Hey, Randy! We’d love to show you this new idea we have. It’s a grow at home
mushroom kit.” Pulled out this bag and I will never forget this because Randy looks back and double takes and he’s just like “guys that’s disgusting!”

Cool concept but go back to your R & D team and figure something else out. At that time it was only Alex and I, you know.

I think it was a great lesson learned where you knew the idea was there, you were really excited about that idea but we had to go back and figure out packaging, and make this appealing not just for that small niche of people who were into a big bag of fungus or mushrooms on their kitchen window sill, but actually making it accessible for everybody. It was some awesome feedback for us and definitely an eye opener. It’s been really cool since then taking a lesson and trying to build a pie that everyone can relate to.

Lorna: So you find an in-house designer whose sole job was it to evolve the packaging of your mushroom kit? Or was it community feedback?

Nikhil: It was a lot of community feedback. At first it was just Alex and I on Powerpoint, to be honest with you, behind this thing. That’s where we thought that was beautiful design, looking back now, a good thing eventually we got connected with an awesome, awesome–now kind of friends and mentors–a company that’s called InHouse Creative Studios that does branding and packaging and basically a lot of branding for Whole Foods and Nordstroms and Allegro and they took us on almost pro-bono and really helped us out redoing our packaging. It definitely needed an expert touch to it. It’s something if you go on our website we have some pictures, some of our videos of our old packaging. You’ll see a transition. We started off with a lot of text and weird UV glossy, green box that we eventually wanted to go away from, and something more natural looking and simpler, which is what the boxes are now, kind of a natural brown box. It’s simpler design and less
text. It’s definitely something we’ve learned to be a big, big part of our vision is really bringing good packaging and clean design to everything we’re doing. I think that’s going to be a big part of driving this movement away from that Berkeley hippie stereotype and into a really mainstream part of this and eventually create a movement around this.

Lorna: So are you guys profitable?

Nikhil: We are, we are. It’s exciting. I think it’s a big part of our vision, is showing people you can run a successful company that can focus on the community as its primary goal and still do well and create jobs. It’s not something where non-profits are good and for-profits are bad, it’s this really cool middle-ground and if you do it well you’ll have this huge impact and still do good for the community.

Lorna: How long did it take for you guys to actually reach profitability?

Nikhil: End of ’10. So about a year. It wasn’t very much but about a year or so into it.

Lorna: And what are your annual sales figures like now?

Nikhil: We’ve been excited about the growth. We did about $1.3million last year in ’11 and we’re looking at about $5million this year in 2012.

Lorna: $5million?

Nikhil: Correct.

Lorna: Wow, and this is primarily through the sale of homegrown mushroom kits?

Nikhil: Correct.

Lorna: Wow, who would’ve known? That is very, very cool.

So in your entrepreneurial journey, which sounds totally amazing and exciting, are there any things that you would have done differently if you were going to do it all over again? Were there any mistakes that you made that you would advise other aspiring entrepreneurs to definitely not do if they were following your footsteps?

Nikhil: Sure, I think the number one thing that I’ve learned is that everyone is in a different boat. We’ve got so much feedback. Some of which was valuable to us, some of which was not. I think it’s understanding where your passions lie and where you want to take your own business. It’s taking every piece of advice with a grain of salt. But with that being said, the biggest thing we’ve learned is focus. It’s really focus, focus, focus because a small
start-up has a million avenues and paths it can go down and everything seems so new. Everything seems so exciting. It’s really quick and really easy to get lost in that and end up at a point where you’re not really executing well at anything.

So I would just say pick one thing and pour your life and soul into it and do that better than anyone else and it’s the coolest thing that they can do. That’s one thing that we’ve learned from this whole process so far.

Lorna: Well thank you so much, Nikhil, for your advice. We’re about at the end of our segment. I’d like to ask you is there anything that you would like to highlight or direct our audience to in terms of knowing more about your company?

Nikhil: Absolutely. For more information you can check out backtotheroots.com or visit our website at facebook.com/backtotheroots.

One thing I’d love to offer your community is a 10% off discount code. So if you go to our website, just type in mushrooms4me10. That’s number 4 and number 10.

mushrooms4me10 you’ll get 10% off.

And actually if you post a photo on our Facebook page of a fully grown mushroom kit, we’ll actually donate one to an elementary school classroom of your choice. We really try to encourage people to share their experience, grow this movement and in turn we’ll donate one to a school of your choice and get your kid involved in it too. We really want to highlight that and hope to encourage everyone to share their experience on the Facebook page. We’re always open to more feedback and questions and inquiries and ideas so feel free to reach out to us on our Facebook page or shoot us an e-mail. I’m excited and hope
to hear from people and just work together. I think we’re all working for the same goal and vision. So I’m excited to work together and find out other ways to partner with more people out there.

Lorna: Awesome. Beautiful use of social media engagement to connect with your community. Love it.

Nikhil: Thank you so much for having us on. It’s been awesome. So I’m definitely excited. Keep in touch and good luck with the podcast as well. I’m glad to be a part of it.

Lorna: Thank you.
[END OF RECORDING]

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