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Technology

How 2 young guys went from the brink of bankruptcy to selling their business for $300 million

In the summer of 2011, after graduating from Harvard Business School and finishing active duty with the Marine Corps, Nick Taranto got a job at Goldman Sachs.

“I was miserable working working on Wall Street and I was gone within seven months,” Taranto tells CNBC Make It. He left in January 2012 to start his own business. “I knew I wanted to do something entrepreneurial where I could roll up my sleeves and harness data and technology and apply them to a very large industry,” says Taranto, now 33.

He and a friend from business school, Josh Hicks, now 35, teamed up. They brainstormed for five months and decided to tackle the broken customer experience of dinner: a microwaved burrito isn’t satisfying, ordering from a restaurant is expensive and grocery lines are often too long to deal with after a tiring day at work.

That summer, pair landed on the e-commerce concept behind Plated: ship customers boxes of ingredients with easy-to-follow recipes to make it convenient to cook healthy meals at home. (Its more famous competitor and IPO cautionary tale, Blue Apron, was just getting started at the same time.)

“We incorporated from my couch on West 14th Street on June 7th. We bought a $9.99 domain from GoDaddy, and it’s been it’s been testing and learning since then,” says Taranto.

Plated has come a long way. Wednesday, the company announced it was acquired by Boise, Idaho-based national grocery store chain, Albertsons Companies, for $300 million. Taranto will stay on as chief strategy officer and Hix will stay on as CEO. Their third co-founder, Elana Karp, who came on in January 2013 to lead the business’s culinary efforts, will continue in that role. Albertsons gets the technology and innovation of a meal-kit delivery service and Plated gets the size, scale and resources of a company with 2,300 store locations across the U.S. and 35 million customers per week — this at a time when Amazon’s purchase of Whole Foods threatens to make it harder for smaller grocery businesses to compete.

“We are playing for billions here. We are going to kill Blue Apron, we are going to take on Amazon Fresh. This partnership enables us to become a $10 billion brand in a matter of years,” says Taranto to CNBC.

The early days getting Plated off the ground required pushing through a lot of uncertainty on a shoestring budget.

“The first five months we were incredibly scrappy. Neither of us had paychecks. We had exhausted our savings, we had liquidated our 401ks, we started putting our business experiments on credit cards. It was a very high risk time in our lives,” says Taranto of himself and Hix. “At our trough … cumulatively my co-founder’s and my negative net worth was in excess of several hundred thousand dollars, including student loans.

“We were incredibly anxious,” he continues. “We were incredibly nervous. Not only did we not have a business that works or even a business model to go test, but we were facing the prospect of personal bankruptcy.”

The co-founders would divide and conquer responsibilities and in the very beginning, with Taranto packing the meal delivery kits by hand.

“While Josh developed the website and built out the payment gateways so we could take credit cards, I would go to the local grocery store,” says Taranto of the pre-Karp era. “I would buy salmon and basil and package it up and put it in Fed Ex boxes and hand deliver it to the FedEx store and we had exactly zero repeat customers in our in our early days,” he says.

“We launched in mid July in Manhattan in sweltering 90-degree heat and these boxes of salmon and basil would arrive on people’s doorsteps just soggy and gross. It was a real humbling, difficult, challenging start.”

In addition to delivering wilted produce, Taranto remembers struggling to keep the business afloat through Hurricane Sandy, which hit New York City at the end of October in 2012, and an ill-advised (and failed) attempt at building their own refrigeration unit from scratch.

“Nothing about those early days seemed seemed sustainable,” says Taranto. “But we knew we had an idea that had legs — in our gut we knew that — and it was just perseverance and determination to figure out how to make this thing work,” says Taranto.

In May of 2014, Plated appeared on ABC’s hit show “Shark Tank.” The founders got a deal with billionaire tech investor Mark Cuban on the episode, but it later fell apart. When the show re-visited the company in a follow-up segment called, “Beyond the Tank,” Kevin O’Leary was impressed with the start-up’s development and made an investment.

Being on the show gave the company a shot in the arm. The month that followed the airing of Plated’s episode of “Shark Tank,” the start-up did more revenue that it had cumulatively since launching two years earlier.

“We saw a no kidding ‘Shark Tank’ bump,” says Taranto.

In addition to O’Leary’s investment, the co-founders raised other money. Though Taranto says they got literally hundreds of “no’s” along the way, in March, Plated (which by then had more than 1,000 employees) raised close to $100 million dollars in venture capital, Taranto told CNBC Make It at the time. The food delivery start-up also got funding from venture firms ff Venture Capital, Greycroft Partners and Formation 8, according to public fundraising database Crunchbase.

With the sale of Plated to Albertsons Companies, O’Leary made a 1,346 percent return on his investment, he tells CNBC Make It. The $300 million sale is the largest exit for a featured business in the history of “Shark Tank,” according to O’Leary and a representative for the show, which is about to premier its ninth season.

“These guys are a classic ‘Shark Tank’ story — excellent in executional skills and marketing logistics,” says O’Leary to CNBC.

“This is huge and it just gives you an idea of how the American dream can play out on ‘Shark Tank.’ I love these guys.”

The day after the sale was announced, and five years after starting from his couch on 14th street with a $9.99 domain, Taranto says he is indeed living the American Dream. “My dad is an immigrant from Turkey and my mom’s family still runs a farm in South Dakota, and it has been a hell of a ride the last five years,” he says to CNBC.

Plated’s hyper growth story is a function of, in part, Taranto’s willingness to set out-sized — what some might even call unrealistic — goals for himself.

When he was a 19, he “came up with this newfangled scheme that I wanted to be the youngest person ever to ski to the North Pole,” he says. One spring break from school, Taranto went to northern Canada to train with an arctic explorer. (He lied to his mom about where he was going.) He almost died when he fell in the cold water in the course of the training and ended up calling off the mission. But that Taranto would chase the dream as far as he did is illustrative of his ability to step outside the boundaries of what others expect.

Whether for some personal goal or when starting a a business, Taranto says there are just some itches you have to scratch.

“If you don’t scratch that itch, you will always regret it and there will be one of those ‘woulda, coulda, shouldas’ for the rest of your life,” he says. “So my advice to aspiring entrepreneurs is if you really feel that itch and you feel compelled by an idea so strongly that you just have to go out and do it, then you should go do it.”

See also:

How a college dropout grew Whole Foods into the company Amazon just bought for $13.7 billion

How 3 guys went from call center cubicles to ‘Shark Tank’ and millions of dollars in sales in 3 years

How ‘Shark Tank’ helped this bagel company hit $2 million and get a deal with Starbucks

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Disclaimer: CNBC owns the exclusive off-network cable rights to “Shark Tank.”

Source: Tech CNBC
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