One Chicago Startup Is Finally Bringing Big Data To The $400 Billion Restaurant Business
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Cue one enterprising duo that saw an opportunity in that gap. With massive amounts of menu data becoming available online, Justin Massa and his co-founder Eric Cooper started Chicago-based software service FoodGenius three years ago to bring big data to the food industry.
Massa, 34, isn't a serial entrepreneur. This company is actually his first experience in the startup universe.
"I came from the non-profit world," Massa says. "My co-founder was laying carpet before we started full time."
FoodGenius sells a dashboard that runs analytics on a massive set of data, mostly from newly merged online food-ordering giant GrubHub Seamless and menu aggregator Allmenus, on what 330,000 restaurants around the U.S. are serving. The service allows customers to see data on nationwide trends and details as narrow as a particular protein served in mid-priced Italian restaurants by state.
In a few short years, it's secured big customers such as mac-and-cheese seller Kraft Foods and supermarket chain Safeway. The company was a graduate of Excelerate Labs (now TechStars Chicago) and design consultancy IDEO's first "startup in residence" before securing its own offices last year, when it raised $1.2 million from investors including Hyde Park Ventures and Hyde Park Angels.
We talked to Massa about his experience going from a non-profit to the startup world, whether accelerators are a good idea, and why he loves building a company in Chicago.
Our conversation has been condensed and edited for clarity.
Business Insider: Where did the idea for the company come from?
Justin Massa: It started in a somewhat different place than what we do today. The original idea was for a consumer-facing application, something you'd put on your phone that would help you find dishes at different restaurants. We first came up with this idea in summer of 2010, and we looked at services like Amazon, Netflix, and iTunes. All of them suggested the most granular thing. You went to something like Yelp, and it recommended a place, not an item; same for OpenTable or Metromix or Urbanspoon.
For me, it was like Amazon recommending an author but not a book, or iTunes an artist but not a song. It just totally didn't make sense to me.
I started working on that problem fairly quickly, but realized that there wasn't much of a business solving that problem. Delivering insight to a consumer about what they should eat in the next 20 minutes — there's not a lot of ways to monetize that. The data we were going to process in order to make that suggestion was really interesting for the food industry. Talking to people in the food industry and realizing they were fascinated by data was what led us to what we do today.
BI: You don't come from a startup background, so what led you to start your own business?
JM: At first I started my own non-profit, then I worked at a place called the Metro Chicago Information Center. A theme of my work from about 2006 onwards was taking really messy, unstructured public data and deriving value. I didn't call it this at the time, but I was really 'productizing' unstructured data.
Right before I started FoodGenius, when I was at the MCIC, we would work with people like the MacArthur Foundation, the United Way, Chicago Community Trust, to take really messy government, public, and social data and help them understand what was happening in a neighborhood when they funded interventions. With MacArthur we delivered this crazy data product that tracked 99 block-by-block indicators of community change — everything from how many potholes were reported to how many arts activities there were to how many times they closed the block for a block party.
BI: FoodGenius went through a startup accelerator. Would you recommend that path to others?
JM: I would make a qualified ringing endorsement of accelerators. The one that we went through, which was then called Excelerate, is now called TechStars. It was a really great experience. Without the money and the support it gave us, we never would have been able to start the business.
That said, my qualification of going into an accelerator program is that you really have to vet it. Y Combinator is awesome; 500 Startups is awesome; TechStars is awesome. There's this glut of accelerators out there. Some are great and hopefully will help your business. Some are really great ways to waste three months of your time.
BI: What are some warning signs you should stay away?
If it's brand new, I would be cautious. If the companies that have come out of it aren't still in business, I would be really scared. If the network of mentors and advisors the accelerator puts together aren't the kind of people you need, I wouldn't apply at all.
BI: Why doesn't the food industry have good data and analytics already?
JM: The food world has really been split down the middle. You've got grocery [on the one side], and restaurants or food service on the other. On the grocery side of the world, they've had data for a long time. Companies like Nielsen and IRI, although they don't describe themselves this way, were some of the first 'big data' companies. They were taking large sets of data that were really messy across lots of different areas and stores, normalizing them, and providing insights about the industry.
On the restaurant side of the world, I think there's never been a robust data industry largely because the data just didn't exist. The fact is, there are still large chunks of restaurants that don't have electronic points of sale, loyalty cards, or bar codes. There's no uniformity of product.
The raw materials which with you could build a data industry were just not there. If we tried to do this 10 years ago, the tech costs would have made it unfeasible. If we tried to do this five years ago, the tech costs would have come down, but the actual data wasn't there at a reasonable scale. Ours is a business that only really makes sense in the last three years. It's largely because Amazon Web Services has just depressed the amount of cash you need to have the technology to start a business like this.
Now you have things like GrubHub Seamless and Allmenus — tons of menu data on the web that's accessible. You don't have to spend a ton of money or time having to get the restaurant to send you a fax and then typing it in.
BI: How do you convince giant chains to trust a tiny company?
JM: That's a constant concern. There's one thing we learned at Accelerate that I really took to heart, we really apply it to everything. When you're starting your company, especially when you're venture-backed — I think it was Brad Feld who started Techstars who first said this — people invest in lines not points.
What he's saying is you can't come in once and expect someone to write you a check. You need to meet a series of times, tell them what you're going to do, and go out and do it. Then you come back and say, 'Hey, everything I told you I was going to do, I did it. And here's what I'm about to do next.'
The product we're selling is really new. And much in the same way that we raised investment capital, we take that approach of lines not points with prospective customers.
With the large customers, we meet them four to five times over a series of months. We update them on the specifics of the product and more broadly about the trajectory of the business. Eventually they hit that threshold where they say, "I've encountered these people three or four times. I'm starting to see them in magazines. The product gets more exciting every time I see it, so this is something I want to buy."
BI: How is it running a company in Chicago? Is finding talent a problem?
JM: I love Chicago, and I love running a business here. It's a very livable city; it's easy to get around, and the cost of living is nothing compared to San Francisco or New York. The startup community is growing, but it's not so large that you can't really meet lots of people quickly. Once you're in, it's kind of two steps to almost anyone. There are a lot of Fortune 500 companies in the area who are potential large customers, and they've been very active in the startup world.
You highlighted the downside, which is talent; there's less of it. But when I talk to friends in the Valley, there are a lot more people, but there's a lot more competition to get those people's attention. And you're going to pay a 20% premium over what we pay in Chicago. Same thing in New York, though at a 15% premium instead. Yes the talent's a little harder to find, but it's hard everywhere.
BI: What's different about Chicago startups?
JM: There's a shared identity of startups in Chicago. There are jokes about it, but Chicago has a very practical approach to building a business, and venture investors are very practical when investing here.
I really like the fact, and this is our own personalities too, that Chicago's idea isn't just to build this giant monster of a thing and then commercialize it, but to build and commercialize as you go. That seems like the way you should build a business. Not everybody likes that, but it's part of Chicago's identity.
BI: What's been your biggest challenge so far?
JM: One of our big challenges is that the food industry is very insular. It's not uncommon for us to go out and meet with a potential investor or partner, and things that are obvious dynamics of the food industry to us are complete unknowns to them.
I distinctly remember in the early days of the business we were meeting with an investor; the meeting ended and they were smiling, excited and engaged. They said, "We think this is a really exciting business, but to be perfectly honest, I don't know what to do because I don't know anything about the food industry."
Especially on the restaurant side of the world, there are very few B2B enterprise software companies that just focus on serving the food industry, and as a result you have a lot more education to do.
BI: What's your long-term goal for the company?
JM: There are a lot of services that look at the grocery world, a lot that look at the restaurant world. There's nothing that looks holistically at how America eats. We hear from our customers that the channels are blurry. Who competes with whom is increasingly nebulous. You now have grocery products and restaurant products that are directly competing against one another. We think that the industry should not look at its vertical, its corner of the world, but at how people really eat.
Some of it we can do today, some of it we have to figure out. But I think when I look to the future, the biggest idea I see is to be able to really understand what Americans are eating. And on top of that, being able to be predictive about what kinds of flavors, products, tastes, proteins and ingredients are going to be popular in the future.