Nikhil Arora, 25 and
Alejandro Velez, 24, didn’t plan on being mushroom farmers. In 2009, during their
last semester at the University of California, Berkeley. Arora lined up a corporate consulting job and
Velez nabbed one in Investment banking. But a lecture on sustainability in a
business ethics class changed all that. Their professor mentioned that he had
heard it was possible to grow edible mushrooms in recycled coffee grounds. “No
one had ever taken that idea and done anything with it commercially,’’ Arora
says. Intrigued by the idea, the students took to Velez’s fraternity kitchen,
where they set up 10 paint buckets of used coffee grounds fertilized with
oyster mushroom spawn. Ten days later, they had sprouted their first crop.
They conceived a business,
fueled by a $5000 prize from a campus innovation competition that allowed them
to buy a van and rent a 200-square-foot ware-house. “At that point, that was
like giving a million dollars to us,” Arora recalls. Two weeks shy of
graduation, Arora and Velez nixed their plans to join corporate America. They
spent the summer couch surfing and giving them-selves a crash course in urban
farming, tweaking variables like humidity, air flow and temperature. The
investment paid off. That October, they sold their first mushrooms to Whole
Foods Market in Berkeley. “We still have that invoice on our wall,” Arora says.
Soon they branched out
into manufacturing and distributing indoor grow-at-home gourmet mushrooms kits
using recycled coffee grounds as “soil”; this became the basis for their
company. Back to the Roots. “We started off doing fresh mushrooms, then both
the mushrooms and kits, and now just the kits”, Arora says. “We were almost out
of business doing both, realizing they are very different
operations-consumer-branded product vs. fresh produce-and we had to pick one to
Today, Back to the
Roots operates out of a 10,000-square-foot warehouse in Oakland, Calif, selling
its DIY mushroom kits to 2,500 retailers internationally, including Whole
Foods, Safeway, Home Depot, Loblaws in Canada and Three-Sixty in Hong Kong, as
well as directly to consumers online. Revenue reached $1.3 million in 2011 and
was projected at $5 million in 2012. Consumer purchases of the $19.95 mushroom
kits through the company’s website account for 20 percent of all revenue.
To produce the at-home kits, Back to the Roots
collects at least 40,000 pounds of used coffee grounds each week from 30 Peet’s
Coffee; Tea locations. This spared landfills growing up: A Back to the
Roots Kit, 1 million pounds of coffee grounds in 2011: In 2012, Back to the
Roots recycled 3.6 million pounds.
Arora and Velez take
pride in having grown their sustainable food business organically, without VC
or equity funding. To date, their most substantial cash infusion has been
$125,000 in prizes from business-plan competition, including two worth $50,000.
To help ensure their employees share their enthusiasm, the owners divide half
the company’s profits among the 31-person team at year’s end. ”It’s a fun way
to align everyone to the same goal,” Arora says. “We’re all growing together.
We really want to build a lifetime, generational brand.”