McDonald’s is acquiring Dynamic Yield to create a more personalized drive-thru

McDonald’s is announcing an agreement to acquire personalization company Dynamic Yield.

The announcement does not include a price, but a source with knowledge of the deal said that it’s more than $300 million.

Dynamic Yield works with brands across e-commerce, travel, finance and media to create what’s been described as an Amazon-style personalized experience.

McDonald’s said it will use this technology to create a drive-thru menu that can be tailored to things like the weather, current restaurant traffic and trending menu items. Once you’ve started ordering, the display can also recommend additional items based on what you’ve already chosen.

In fact, the fast food giant said it has been testing this out in several U.S. locations in 2018. The plan is to start rolling this out across the United States in 2019, and then to move into international markets. The company also plans to integrate this technology into other digital products, like self-serve kiosks and the McDonald’s mobile app.

“Technology is a critical element of our Velocity Growth Plan, enhancing the experience for our customers by providing greater convenience on their terms,” said McDonald’s President and CEO Steve Easterbrook in a statement. “With this acquisition, we’re expanding both our ability to increase the role technology and data will play in our future and the speed with which we’ll be able to implement our vision of creating more personalised experiences for our customers.”

At the same time, McDonald’s said Dynamic Yield will continue to operate as a standalone company serving existing and future clients, that it will continue to invest in the core personalization technology.

According to Crunchbase, Dynamic Yield has raised a total of $83.3 million from investors including Innovation Endeavors, Bessemer Venture Partners, Marker Capital, as well as strategic investors like Naver (which owns the messaging apps Line and Snow), Baidu, The New York Times and Deutsche Telekom.

Updating

Extra Crunch: What’s the cost of buying users from Facebook and the other ad networks?

This post reveals the cost of acquiring a customer on every ad channel my agency has tested.

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Which ad channels should I use?

Starbucks will anchor the new $400 million food-focused Valor Siren Ventures fund

Starbucks is serving up a steaming hot $100 million cash commitment to anchor a new food-focused fund in partnership with the consumer and tech-focused focused private equity firm Valor Equity Partners.

The behemoth of burnt-coffee said that its commitment to the Valor Siren Ventures fund is an attempt to focus on “new ideas and technologies that are relevant to customers, inspiring to partners (employees), and meaningful to Starbucks business.”

The Starbucks announcement was short on details, except for a general statement that it would focus on investments in companies developing technologies, products and solutions related to food or retail.

As a company, Starbucks has been incredibly innovative — rolling out new tech-enabled services to customers. The company has one of the most popular mobile payment services, is dabbling with cryptocurrency payments, and has a robust on-demand delivery service through UberEats.

Meanwhile, Valor has a long history of investing in both technology and consumer food businesses. Thee firm as investments in companies that run the gamut from SpaceX, Tesla, and Addepar to food services companies and restaurant chains like WowBao, Fooda, and Eatsa.

With its commitment Starbucks joins a growing number of food and beverage companies that are embracing venture capital. Kelloggs, Tyson Foods, General Mills all have affiliated venture funds and even Chipotle is starting an accelerator program.

“We believe that innovative ideas are fuel for the future, and we continue to build on this heritage inside our company across beverage, experiential retail, and our digital flywheel,” said Kevin Johnson, president and chief executive officer of Starbucks, in a statement. “At the same time, and with an eye toward accelerating our innovation agenda, we are inspired by, and want to support the creative, entrepreneurial businesses of tomorrow with whom we may explore commercial relationships down the road. This new partnership with Valor presents exciting opportunities, not only for these startups, but also for Starbucks, as we build an enduring company for decades to come.”

Postmates’ newest feature is like Uber POOL for food delivery

Postmates is launching a new feature called Postmates Party that lets customers within the same neighborhood pool their orders. In return, these customers get the food delivered for free, eliminating a major pinch point for potential Postmates users.

The feature illustrates how Postmates, one of the earlier entrants to the billion-dollar food delivery wars, is trying to remain competitive by appealing to price-sensitive customers.

Customers using the app can tap on the Postmates Party tab, which will show trending merchants from which people in their neighborhood are ordering at that exact moment. By joining the “party,” customers can share the delivery from popular restaurants and get free delivery.

For now, the company’s party feature will only be offered in a handful of the nearly 3,000 U.S. cities in which it currently operates. The feature is now available in Chicago, Las Vegas, Long Beach, Calif., Los Angeles, Miami, New York City, Phoenix, San Francisco, San Diego, Seattle, Orange County, Calif. and Philadelphia.

And there is an important caveat. The party feature has a five-minute time limit in which the customer must place their order to get the deal.

“We are driven by the vision of creating a logistics infrastructure that allows goods to move throughout a city at nearly zero cost to the consumer. Postmates Party is the latest innovation in on-demand delivery that will help us deliver on this vision,” Postmates CEO and co-founder Bastian Lehmann said in a statement. “Postmates Party is a fun way to give customers the option to save money by ordering from popular restaurants that people all around them are ordering from in real time.”

Earlier this year, Postmates raised an additional $100 million in equity funding at a $1.85 billion valuation. The round comes four months after the eight-year-old startup drove home a $300 million investment that knocked it into “unicorn” territory.

Launching from YC, Eclipse Foods casts a long shadow over the $336 billion dairy industry

Eclipse Foods may be the company that finally takes milk out of the dairy business.

Ever since the acquisition of WhiteWave Foods by the French dairy giant Danone for over $10 billion investors have been thirsting for a technology that would give consumers a better tasting, more milky (for lack of a better word), milk substitute than the highly valuable (but not very tasty) almond, soy, and other plant based dairy alternatives.

There are at least $37.5 billion worth of other reasons for investors’ interest in the milk alternative category. That’s how much money will be spent on dairy alternatives by 2025, according to a newly released study by the market research firm Global Market Insights.

Enter Eclipse Foods. Founded by two veterans of the alternative sugars and proteins business, the company is going after the whole dairy industry, starting with a line of spreads and select additives for restaurants around San Francisco.

“We had an oh shit moment when we got our plant based milk to act just like the real thing,” says Thomas Beaumon, Eclipse Foods co-founder and the former director of product development at Hampton Creek (now known as Just Foods). “We’re not pureeing nuts or seeds or legumes. We asked, ‘What are the properties of milk?’ and built this dairy base of the exact amino acids and fat profile.”

Thomas Beaumon in the kitchen (Courtesy Eclipse Foods)

Joining Beaumon on the journey to create the perfect milk substitute is Aylon Steinhart, a former specialist working with the Y Combinator aligned food technology incubator and think tank, the Good Food Institute.

The two men met at the launch event for Just Egg, the fourth product to debut from Just after the release of the company’s mayonnaise alternative, cookie dough, and porridge.

“We started talking about ideas and landed on this dairy platform,” recalls Steinhart. “It’s a place where we can make a big change very fast given the technological breakthroughs that we solved for early on.”

The demand is certainly coming on strong. According to Steinhart about 80% of millennials are consuming dairy replacements at least once a week.

Aylon Steinhart (Courtesy Eclipse Foods)

Humans didn’t start out drinking milk. Over the 300,000 odd years that some form of homo sapien has been stalking the planet, it has only been in the past 10,000 odd years that people decided to squirt the liquid out of a cow’s udders to consume it.

At first, humans couldn’t even consume the stuff without getting at least a little nauseous. They needed to develop a genetic mutation to even process the lactose sugars properly.

“The first time that we see the lactase persistence allele in Europe arising is around 5,000 years BP [before present] in southern Europe, and then it starts to kick in in central Europe around 3,000 years ago,” assistant professor Laure Ségurel of the Museum of Humankind in Paris, told the BBC earlier this year.

Segurel speculates that the health benefits of consuming milk might have been related to the exposure (and potential inoculation) to various diseases that may have otherwise spread from the animals to the humans that were raising them.

If that was the rationale, it’s increasingly unnecessary for modern living, and may indeed be more of a hazard to human health.

Global meat and dairy producers could count among the largest contributors to climate change if their growth remains unchecked, according to a report from the non-profit Grain.

They estimate that meat and dairy consumption should be reduced by 81 percent in order to meet global emissions reduction targets.

 

With the production of Eclipse’s dairy alternative, there’s no animal required.

“We have an off-the-shelf platform right now. The only additive will be water,” says Beaumon.

And unlike other alternative dairy products, Beaumon and Steinhart claim that theirs actually tastes good. And, as a Michelin starred chef, Beaumon should know.

The company’s first line of products will be a line of cream cheeses, including one for the bagel-and-schmear loving crowd. However, the majority will be more millennial focused, according to Steinhart.

“There will be various unique flavors that are culinarily focused,” he said.

Expect the first products to debut in an exclusive pilot with Wise Sons and through the ice cream maker Humphry Slochombe, a leader in high end ice cream in SF.

However companies decide to label their Eclipse-based products, they certainly shouldn’t call them vegan, according to Beaumon.

“Vegan cheese is gross,” he says.

Former Dropbox exec Dennis Woodside joins Impossible Foods as its first President

Former Google and Dropbox executive Dennis Woodside has joined the meat replacement developer Impossible Foods as the company’s first President.

Woodside, who previously shepherded Dropbox through its initial public offering, is a longtime technology executive who is making his first foray into the food business.

The 25-year tech industry veteran most recently served as the chief operating officer of Dropbox, and previously was the chief executive of Motorola Mobility after that company’s acquisition by Google.

“I love what Impossible Foods is doing: using science and technology to deliver delicious and nutritious foods that people love, in an environmentally sustainable way,” Woodside said. “I’m equally thrilled to focus on providing the award-winning Impossible Burger and future products to millions of consumers, restaurants and retailers.”

According to a statement, Woodside will be responsible for the company’s operations, manufacturing, supply chain, sales, marketing, human resources and other functions.

The company currently has a staff of 350 divided between its Redwood City, Calif. and Oakland manufacturing plant.

Impossible Foods now slings its burger in restaurants across the United States, Hong Kong, Macau and Singapore and is expecting to launch a grocery store product later this year.

Bottomless has a solution for lazy coffee addicts

If you’re like me, you let out a heavy sigh every month or so when you reach out and unexpectedly find an empty bag of coffee. Bottomless, one of the 200-plus startups in Y Combinator’s latest batch, has a solution for us caffeine addicts.

For a $36 annual membership fee, a cost which co-founder Michael Mayer says isn’t set in stone, plus $11.29 per order depending on the blend, Bottomless will automatically restock your coffee supply before you run out. How? The startup sends its members an internet-connected scale free of charge, which members place under their bag of coffee grounds. Tracking the weight of the bag, Bottomless’ scales determine when customers are low on grounds and ensure a new bag of previously selected freshly roasted coffee is on their doorstep before they run out.

Voilà, no more coffee-less mornings.

Founded by Seattle-based husband and wife duo Mayer and Liana Herrera in 2016, Bottomless began as a passion project for Mayer, a former developer at Nike.com. Herrera kept working as a systems implementations specialist until Bottomless secured enough customers to justify the pair working on the project full-time. That was in 2018; months later, after their second attempt at applying, they were admitted into the Y Combinator accelerator program.

Bottomless’ smart scale

Bottomless today counts around 400 customers and has inked distribution deals with Four Barrel and Philz Coffee, among other roasters. Including the $150,000 investment YC provides each of its startups, Bottomless previously raised a pre-seed round from San Francisco and Seattle-area angel investors.

Before relocating to San Francisco for YC, the Bottomless founders were working feverishly out of their Seattle home.

“This whole time we’ve been 3D-printing prototypes out of our apartment and soldering them together out of our apartment,” Mayer told TechCrunch. “We kind of turned our place into this new manufacturing facility. There’s dust everywhere and it’s crazy. But we made 150 units ourselves by hand-soldering and lots of burned fingers.”

The long-term goal is to automate the restocking process of several household items, like pet food, soap and shampoo. Their challenge will be getting customers to keep multiple smart scales in their homes as opposed to just asking their digital assistant to order them some coffee or soap on Amazon .

Amazon recently announced it was doing away with its stick-on Dash buttons, IoT devices capable of self-ordering on Amazon. The devices launched in 2015 before Google Homes and Amazon Alexas hit the mainstream.

So why keep a smart scale in your kitchen as opposed to just asking a digital assistant to replenish your supply? Mayer says it’s coffee quality that keeps it competitive.

“Some of our most enthusiastic customers live out in like deep suburbs far away from city centers, but they really love fresh coffee,” Mayer said.And there’s no way to get fresh coffee if you live 20 or 30 minutes from a city center, right?”

“Or you might think in a city like San Francisco or Seattle, you can get freshly roasted coffee pretty easily because there are restaurants all over the place, right?” He added. “That’s certainly true, but it does take a little bit of extra thought to remember to grab it on the right day when you’re running low.”

Mayer and Herrera don’t consider themselves coffee experts, despite now running what is essentially a direct-to-consumer coffee marketplace out of Seattle, the coffee capital.

“I’m originally from Portland and Portlanders know a lot about coffee,” Mayer said. “I never really considered myself to be a coffee aficionado or a coffee snob in my head, but I guess compared to like the average American from anywhere in the country, I would be just a regular coffee drinker in Portland. All I really knew about coffee going into this was that it’s better fresh. That’s it.”

Bottomless is currently accepting customers in beta. The team will pitch to investors at YC Demo Days next week.

VCs have growing appetite for “AgriFood”

Venture investors are pouring billions of dollars into feeding their hunger for food and agriculture startups. Whether that trend line is due to enthusiasm for the sector or just broader heavy investing in the VC space is much less clear.

According to a recent report published by AgFunder – a VC and investing marketplace focused on the agriculture and food sectors – the “AgriFood” space is booming. Using data from Crunchbase and several other data partners, the organization published its “2018 AgriFood Tech Investing Report” this morning, finding that investment in AgriFood companies increased 43% year-over-year, reaching $16.9 billion in 2018.

AgFunder classifies AgriFood tech as “the small but growing segment of the startup and venture capital universe that’s aiming to improve or disrupt the global food and agriculture industry.” Their definition is intentionally broad, encompassing everything from crop and livestock biotech, property management systems, and payments, to biomaterials and meat alternatives, all the way up to tech platforms for restaurants, grocers, deliveries and at-home cooks.

While some of the AgriFood tech categories – such as delivery or restaurant software – have long been popular destinations for venture capital, we’re now seeing a more diverse array of startups innovating across the entire food supply chain. According to the report, expansion in AgriFood is fairly consistent across upstream (agricultural and farming) subsectors to downstream (more consumer-facing) subsectors, with each group growing roughly 44% and 42% year-over-year respectively.

The data also shows growth occurring across almost all deal stages. AgriFood saw huge increases in the average deal size and total investment for late-stage companies in particular, as venture-backed startups have grown to global scale. And penetrating and attracting capital from international markets seems more feasible than ever. AgriFood investing, which traditionally has been largely US-centric, is rapidly becoming a global phenomenon, with more than half of total funding – and some of the largest rounds – now coming from companies and investors outside the US.

Square Roots will expand across North America through new partnership

Farming incubator Square Roots is announcing a new partnership today with food distribution giant Gordon Food Service.

Square Roots has built urban farming facilities in refurbished, climate-controlled shipping containers, which it uses to grow food and train farmers in a year-long program.

Until now, it has operated out of a single location in Brooklyn, which meant you could only purchase Square Roots from select locations in New York City, and it was only working with 10 farmers in each cohort. CEO Tobias Peggs (who founded Square Roots with Kimbal Musk) said this partnership changes all that.

The idea is to open Square Roots locations in or near Gordon Food Service’s distribution centers and retail stores across North America, and then to sell the resulting produce through the food distributor’s channels.

The companies aren’t revealing how many locations they’re planning to launch, or when they’ll open, but Peggs described it as “a long-term partnership,” adding, “There is a lot of potential with this partnership. They’re coast-to-coast in Canada, with big swaths in the United States.”

Peggs suggested that by working together, Square Roots and Gordon are answering a growing demand for locally grown food “at scale, across big swaths of the country.”

Gordon Food Services CEO Rich Wolowski made a similar point in the announcement, saying, “Customers want an assortment of fresh, locally grown food all year round. We are on a path to do that at scale with Square Roots and are excited to be the first in the industry to offer this unique solution to our customers.”

Why work with Square Roots? Peggs said the company’s approach requires less water and space than outdoor farms, while also requiring less investment than other indoor farming technologies, thanks to its “modular approach.”

“Certainly, it’s less of a dollar number to add a farm in a shipping container than it is to build a big plant factory,” he said. “What we’re able to do is very cost effectively, just-in-time deploy that capital expense.”

While this deal will allow Square Roots to expand, Peggs said the company will continue to operate its own facilities and handle its own sales in Brooklyn, and the company could still take a similar approach “in other markets where it just makes sense to go direct.”

Food delivered to the doorstep is not so cheap in China anymore

A big selling point of ordering food to the doorstep in China is price, which, in the early years, could be much cheaper than eating in-house. That’s arguably indulged a demographic of lazy, indoorsy eaters, but that may not last for much longer.

Over the past few months, users in China have noticed incremental price increases on their meals ordered via Ele.me and Meituan, the country’s largest food delivery apps. The trigger? China’s food heavyweights have gone about taking a bigger cut of each order — over 20 percent in some cases — as their priorities shifted following a major upheaval.

Three-way war

Ele.me and Meituan work just like their American counterparts Uber Eats, GrubHub, DoorDash and the likes. The apps list menu items from an assortment of local restaurants. When a user places an order, they pass it along to the restaurant and dispatch a driver — in China’s case, a scooter driver — to pick up the food. The customer can then see when their meal will arrive through a live map tracking the driver’s movement.

This new habit of ordering food via a marketplace app rather than calling a restaurant caught on rapidly in China, in part thanks to vast sums of subsidies from companies like Ele.me and Meituan to bring costs down for restaurants and users. The market was on course to reach 240 billion yuan ($35.8 billion) in transactions in 2018 with an 18 percent year-over-year growth rate, estimates research firm iiMedia. Total users would reach 355 million, which means a quarter of Chinese are now ordering food from their phones.

ELEME ALIBABA meituan

Meituan’s delivery driver pictured in an ad / Image: Meituan via Weibo

Food delivery startups willingly undertook the cash-intensive fight because they had deep-pocketed backers. For a few years, the sector was a three-way proxy war between China’s tech mammoths Baidu, Alibaba and Tencent, which are collectively known as the “BAT”. Baidu effectively quit the scene after selling its food delivery business to rival Ele.me in 2017. Last year saw more shakeup as Alibaba took over Ele.me, which subsequently merged with the parent’s local services unit Koubei, while Meituan went public with Tencent being a major shareholder.

Meituan led the game in 2018 with a 61.3 percent market share according to research firm TrustData, giving it a meaningful edge over Ele.me, which alongside its newly acquired Baidu Waimai commanded a total of 36.5 percent share.

Subsidies were helpful in enlisting restaurants and consumers early on, but as the market consolidates, investors will likely become more attuned to monetization. It’s thus unsurprising to see both major players scaling back from subsidy-powered growth. It’s too soon to know how the faceoff between Ele.me and Meituan will play out in the next few years, as the duo is now dealing with a fresh set of challenges and goals.

New adventures

It’s hard to nail down how much Ele.me and Meituan are charging restaurants from each transaction since fees vary on the location, type and size of a restaurant. What’s widely acknowledged is that both have been raising commission rates once every few months, forcing restaurants to rethink their strategy for ferrying food around.

“We’ve raised all our items by at least two yuan [$0.30]. We aren’t worried because we’ve built a loyal customer base over the years. For those who just started and focus on delivery, they may have a harder time,” a restaurant owner who operates a take-out kitchen in Hefei, the capital of China’s Anhui Province, told TechCrunch.

ELEME ALIBABA meituan

Ele.me’s delivery driver pictured in an ad / Image: Ele.me via Weibo

The subsidy-fuelled period cultivated a clan of “virtual restaurants” that operate only out of a kitchen. As subsidies shrink, those reliant on delivery as a lifeline are left with three options: close down, absorb the new costs to keep customers happy, or in some cases where the kitchen is well-functioning, shift the costs to customers.

TechCrunch spoke to more than a dozen restaurants and take-out kitchens in China’s major cities and found most are paying at least 20 percent of each order — a considerable bite to the low-margin business — to Meituan and slightly less to Ele.me. The discrepancy may speak to Meituan’s mounting operating losses — which tripled year-over-year to 3.45 billion yuan ($510 million) in the third quarter of 2018 — a soft spot that its rival poignantly pointed out.

“Ele.me promises it won’t further raise fees [on restaurants] and its rate will always be lower than that of Meituan,” Ele.me vice president Wang Jingfeng told news portal Sina in an interview in January. “Meituan is under financial pressure. But Ele.me understands the food delivery market is still in the phase of being educated. Reaping rewards from merchants too early can do great harm to the market.”

Meituan said it had no comment on its increased fees for restaurants. But the Hong Kong-listed company, driven with the vision to become the “Amazon for services,” already showed signs of stress when it ceased expansions on its costly new ventures — car-hailing and bike-rental. Food delivery accounts for the majority of Meituan’s revenues, while hotel booking is its second-most significant revenue source. The company, however, assured investors that it’s in no rush to turn a profit.

“We are not focused on the short-term profitability, even though we have been proven that we are able to do so, to make it — continue improvement in our unit economics. We would rather focus on growth and improve the overall user and merchant experience and to continue to strengthen our leadership in this market,” said Chen Shaohui Chen, Meituan’s vice president of corporate development, during the company’s Q3 earnings call. 

Despite enjoying support from consistently profitable Alibaba, Ele.me will also face pressure soon as parent company Alibaba copes with slowing revenue growth. For Ele.me, opportunities lie outside China’s megacities where eating via an app is not yet a norm. All told, Alibaba plans to hire 5,000 new employees in 2019 for Ele.me and Koubei to infiltrate the largely untapped Tier 3 and 4 cities, a source close to the matter told TechCrunch, and the team will focus not just on delivery but also work to digitally power up conventional restaurants.

Food delivery is just one way to generate income. Both Ele.me and Meituan are aiming to upgrade restaurants the way Alibaba and JD.com have transformed brick-and-mortar stores: from how data analytics can beef up sourcing efficiency to implementing scan-to-order for in-house diners. The hope is a data-centric practice will convert to cost-saving for restaurants, which will eventually boost their loyalty and willingness to pay for the tech giants’ tools.