A few weeks ago, I shared a bit about how Hustle Fund decides when to invest and when to pass.

You can read more about that here.

The thing is, that article is full of theoretical examples. How do you use a 5-pillar evaluation process in real life?

We're gonna answer this question right now.

Below is a 5-part analysis of a company that Hustle Fund invested in. We break down each of our 5 pillars and explain our thinking behind each one.

If you make it to the end and think we should have passed – PLEASE for the love of cookies write in and tell me why. I do love a friendly debate 😉

But first, what’s the company?

The company we're evaluating is called Daily Blends. And yes, we got their sign-off before sharing all this information with 7,000(ish) people.

Daily Blends is on a mission to make healthy, affordable food available 24/7.

Their solution: a network of smart fridges (think vending machines) that offer a variety of fresh, healthy food products.

Some fun facts:

• The founders – Shriya Gupta and Purva Gupta – are sisters who immigrated to Canada from Asia in 2020
• Daily Blends partners with food brands to fill the fridges
• Fridges are installed in public areas like train and bus stations, hospitals, and universities

I have to admit, I was surprised to hear that we invested in Daily Blends.

Why? Because at first glance this sounded like a complicated, high-overhead, high-risk company with a long sales cycle.

But then I talked to Elizabeth Yin, who led the charge on this deal. Here’s what I learned:

Pillar #1: The Team

When it comes to the team, Hustle Fund wants to see founders with domain expertise.

This means the founders:

1. Have deep insight into the problem they’re solving AND know how to attack the problem because of their experience
2. OR have researched the problem a ton (like, for months and months)

This was especially important in the case of Daily Blends. Why? Because their business model is heavily dependent on nailing the unit economics.

Think about it: food is tricky. There are ingredients to source, food to store, fridges to lease, delivery costs, and spoilage concerns (to name a few).

And for Daily Blends, there is also the data to consider. How many fridges in each neighborhood? Where to put each fridge? How much of each item to stock?

Frankly if the team consisted of anyone other than Purva and Shriya, we may not have invested.

This is because Purva and Shriya are uniquely well-positioned to run this company.

Purva’s background is in the food and tech industry – as a founder/chef of her own company, and also in the hotel restaurant industry. She has a deep understanding of the unit economics and logistics of food. She's also a computer engineer and graduated from one of the top tech institutes, IIT Mumbai, in India.

Her sister, Shriya, is a techie too. She has extensive experience in AI, data analytics, growth marketing, and product development.

Given that Daily Blends is a company with high overhead costs and a bajilion logistics to consider, the founders had to have a deep knowledge of the unit economics of the food industry AND be detail oriented in order to make this work.

This is not a business with room for error.

But Elizabeth believed that if the founders got it right, they could eventually have millions of these vending machines all over North America.

She also believed that if anyone was going to get it right, it would be Purva and Shriya.

Pillar #2: The Problem

The nut of the problem is that healthy food at a low price is not readily available for consumers in North America.

Sure, restaurants exist. But their costs have gone up, which means their prices have gone up.

There’s always food delivery services… but those prices are on the rise, too. I've personally paid a $10 delivery fee for a $12 meal.

There are plenty of fast food restaurants with low prices and late hours, but those options are largely unhealthy.

So if you’re squeezing a meal into a busy day, or unable to eat dinner until late at night, your options are limited.

This is the problem.

There is no convenient way to get pre-made, healthy meals at “fast food prices” in North America whenever you want.

I asked Elizabeth: Is this really a MASSIVE problem?

She says yes. Here’s why:

1. People will need to eat food for the foreseeable future.

2. People have lots of options, but most options don’t optimize for all three of these elements:

a) Cost (restaurants + food delivery are expensive)

b) Health (what’s available late isn’t healthy)

c) Availability (most options aren't available 24/7)

Pillar #3: The Solution

Daily Blends came up with a unique solution: use existing vending machines and stock them with healthy, appealing food.

We’re not talking about a bag of stale baby carrots. Daily Blends offers meals like yogurt parfaits, chocolate chia granola, caprese pasta salads… things people will actually eat.

And they were able to offer these meals at around $6. Roughly the same as a happy meal.

The other compelling part of their solution is their distribution. They partner with venues like malls, hospitals, universities, transit centers to get their vending machines in high-density areas where people are often in a rush.

Now, there are a LOT of complicated pieces to the biz:

• How to keep costs down for consumers AND make a profit?
• How to make sure the food stays fresh?
• How to anticipate demand for each item?
• Where to put each machine?

But because of the founders’ background in food and data analysis, Elizabeth had conviction that they could make it work.

Pillar #4: Traction

Now, Hustle Fund invests at the pre-seed and seed-stage level. So we’re used to seeing companies with very little (if any) traction.

But because this business relies heavily on unit economics, Elizabeth needed to see some level of success with the pilot program. She needed to see beyond the “idea” phase.

She wanted data on what it took to run one vending machine – inclusive of all food products, delivery, machine leasing costs, and logistics.

Elizabeth knew the economics on 100 machines would be better than the economics of 1 machine. She just needed proof that the team could execute on the first iteration of the product.

And that’s what she got.

Daily Blends had 2 vending machines by the time we invested – one at a university and one at a hospital.

And since they were able to prove that the unit economics worked at this small scale, Elizabeth had conviction that the unit economics would work even better as the team rolled out hundreds or even thousands of machines.

Pillar #5: The Market

You know, it’s funny. Distribution is difficult for almost every startup.

But while Daily Blends has a lot of logistics and complications to consider, distribution isn’t one of them.

Finding customers for their vending machines would probably be straightforward… as long as Daily Blends was able to develop strong partnerships with venues like the ones listed above.

Bonus Section: Why might someone still say no?

I’ve been in the investing world long enough to know that investors can ALWAYS find a reason to say no to a startup.

Here are some reasons someone might push back (and why Elizabeth still decided to invest):

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The complexity

Given all the moving parts of the biz, it could be easy for things to go wrong for Daily Blends.  

Success for them requires a strong attention to detail, ensuring that there are no missteps on logistics or an excess in costs.

Elizabeth believed that Purva and Shriya were uniquely positioned to handle these demands.

The Capital Required

The founder of a SaaS company can basically build the business with nothing more than a laptop.

Daily Blends’ upfront costs were dramatically different.

They had to pay for things like the vending machines (which they lease), food, transportation, etc. before receiving any money from their customers.

This didn’t concern Elizabeth too much because the founders had proved they could become profitable on one vending machine within a month.

The Partnership Side

Elizabeth knew that the founders had to find the right location for Daily Blends fridges in order to get enough foot traffic.

At the time of investment, this is one area she didn’t have conviction in – after all, neither founder had a background in business development.

But when you’re a pre-seed investor, sometimes you gotta make the bet without having all the answers.

And luckily this was not a problem. In fact, Daily Blends signed a multi-year partnership deal with the largest public transportation network in Ontario, which means they’ll roll out over 60 fridges at high-density train and bus stations within the year.

They also formed partnerships with the largest university in Canada, and at hospitals and factories… venues with high foot traffic and very few healthy, fast food options.

Disclaimer

Look, this isn’t an ad for Daily Blends. We weren’t paid to write about them or anything like that… we wanted to show you a real-life example of how we use the 5-pillar evaluation system in action.

Hope you found this useful… or at least mildly entertaining.

⛺️ And if you like this type of content, you’ll love the Shark Tank-style pitch event at Camp Hustle on May 17, 2023. We’re going to hear pitches from a few founders, followed by real-time feedback from a panel of seasoned investors.

See you there?

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