Rachel Drori, the Healthy Food Innovator

Building Daily Harvest Into a Category-Defining DTC Food Company

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Rachel Drori

Rachel Drori, like many other founders, took a problem she personally experienced and turned it into a thriving business.

As the Founder and CEO of Daily Harvest, a company that delivers chef-crafted, ready-when-you-are food built on fruits + veggies, she’s defined a new industry, becoming an innovator in the food space, and building a company worth hundreds of millions of dollars in the process.

She did it by believing in and executing a vision not shared by many early on.

Despite the doubters, she’s persevered, and her story is one I’m very excited to share with you today.

Let’s get to it.

Early Days

Rachel was born and raised in New York City and both of her parents were entrepreneurs, with her dad running a wallpaper business and her mom leading a chemical distribution company.

They undoubtedly had an influence on Rachel, much like the entrepreneurial parents of Ryan Petersen, the Founder of Flexport, who I wrote about a few months back.

Rachel went to college at the University of Pennsylvania, graduating in 2004.

After graduating, she worked at the Four Seasons Hotels and Resorts for 3 years as a Marketing Coordinator before joining the MBA program at Columbia Business School in 2007.

In joining the Four Seasons, she wanted to work for one of the best brands in the world, and her experience taught her about customer centricity and not only building things people want but things they will want in the future. She’d take this lesson to heart later on in building Daily Harvest.

At Columbia Business School, her first day was already indicative of how she’d run her business in the future:

Drori says she has always been focused on capital efficiency. On her first day at Columbia University Business School, the dean asked her incoming class to articulate the purpose of business. As classmates gave politically correct answers like “doing good” or “solving needs,” Drori responded honestly: “To make money.” A business can’t do any good, Drori says, if it doesn’t make money.

She’s not wrong and many entrepreneurs seem to miss that important part.

After getting her MBA in 2009, Rachel spent a year as a Manager of Global Marketing and Strategy at American Express, then she became a marketing executive at Gilt Groupe, where the idea for Daily Harvest started.

We’ll get to that shortly, but, like many other entrepreneurs I’ve covered, Rachel’s best idea, wasn’t her first idea.

Prior to starting Daily Harvest, Rachel created another company called The Sunday Fare.

This company, which she would work on with a colleague from business school, is described by Rachel on her LinkedIn profile as “Where Luxury and Value Meet at Home. Tech-enabled brand delivering fast fashion for the home.“

But when big brands like Zara and H&M launched competing products, and given the capital-intensive nature of the business model, Rachel and her co-founder ultimately decided this wasn’t the business they wanted to run.

And that’s an important piece of the story. Finding founder-market fit is just as important as finding product-market fit.

For Rachel’s next company, she’d find the business she was meant to run, with a business model she could get behind.

Starting Daily Harvest

While Rachel was working at Gilt Groupe, she often found herself hungry, having no time, and solving this by grabbing whatever was the quickest food nearby. Eventually, she’d make smoothies at home and freeze them, so she could have them when she needed them. This was the inception of Daily Harvest.

She went from making smoothies for herself to making them for friends and family and beyond:

I always wanted to be an entrepreneur, and this felt like the right opportunity. There was a real need I figured out that I had, but I wanted to figure out how many other people had this need before we dive in headfirst.

So I got myself a commercial kitchen in Long Island City, I started buying Trader Joe’s Produce, and I decided that if I was going to do this I needed to be disciplined.

I didn’t want to fool myself, so what I did was set a metric, which was 5x more who I didn’t know were purchasing than those who I did, and once I hit that it was time. That would mean that this wasn’t my friends or my mom’s friends feeling sad for me, and would show that I had gotten degrees removed from friends and family, and prove that it was a real business.

Rachel Drori

Rachel even got a food handlers license as well.

And remember, she’s shipping frozen food, all part of her value proposition and business model, so she’d get dry ice down the street and find packaging she could ship through a third-party carrier, using FedEx to deliver to the entire NorthEast early on.

When shipping to Manhattan, she’d mix the frozen produce together, seal it in plastic, and enlist the help of her nephews, who were in high school at the time, to make deliveries for $20 a night, at a time when she was pregnant with her first child.

She initially funded the business with $25,000 of her own savings, which reminds me of the prolific Billionaire Tyler Perry using $12,000 of his savings to get his theater plays going and how the relentlessly resourceful Sara Blakely used $5,000 of her own money to launch Spanx.

It’d only be a couple of months after setting herself the goal to have 5x as many strangers order her product as friends of hers and she’d go all-in on the business.

And, to be clear, the product was less than stellar looking, Rachel would actually describe it as “disgusting,” but that was intentional - it wasn’t the focus early on.

Rachel knew if she could solve the problem her product was trying to solve first, she could always improve the marketing and branding. After all, that was her specialty and she had years of experience.

And why go with frozen fruits and veggies to make smoothies?

Frozen food is not only higher in nutrient content than other foods, but it also solves food waste problems and helps increase accessibility for those in food deserts.

Later Rachel would say:

I created Daily Harvest to reimagine how food can nourish both humanity and the planet. We make it easy to eat more sustainably sourced fruits and vegetables and the bigger we grow, the more good we can do. We are laying the foundation for a better future.

Rachel Drori

A key part of the strategy for Daily Harvest is working with farmers directly and freezing produce within 24 hours of it being picked. Those ingredients are then packaged into pre-made recipes.

Of course, she built out that network of farmers over time, but having a product is one thing, getting the word out to consumers is quite another.

Capital-Efficient Growth

In the early days, Daily Harvest started spreading through word of mouth and on social media.

When it was time to spend money to grow Daily Harvest, Rachel allocated her initial marketing dollars to Daily Harvest’s own social media platform, building the team in-house and investing in their own photography and storytelling capabilities instead of working with an agency.

Adding to their own in-house abilities, they built a robust program for micro-influencers, getting hundreds of them to help promote Daily Harvest’s products.

Rachel also encouraged her entire team, not just the marketing team, to engage with customers on social media to create buzz around their product.

This type of capital-efficient growth has always been something Rachel has believed strongly in and it was something she was also forced to do in the early days as she struggled to convince investors of her idea.

But investors eventually bought in, and a Forbes article from 2020 tells of how her capital efficiency paid off:

Daily Harvest says it’s been nearly profitable since day one and should be solidly in the black later this year. That’s one of the shortest payback periods ever seen by Carter Reum, co-founder of Los Angeles-based venture firm M13, who has invested in a slew of millennial-focused brands in addition to Daily Harvest, including Rothy’s, Bonobos, and Birchbox. That financial discipline could pay off if the economy does go into steep decline.


And Carter Reum echoed her capital efficiency sentiment:

Rachel was one of the first people to recognize that the world was shifting from growth-at-all-costs to growth-with-profitability. She’s built a tremendously successful, capital efficient business.

Carter Reum

Having a great product and a number of early customers, Rachel would raise a small seed round and expand to all of the East Coast first, then the West Coast, and finally middle America, launching nationally by 2017 when she raised a big round of funding.

But we’ll get to that in a minute.

Let’s talk about her early fundraising journey.

Early Fundraising for Daily Harvest

Rachel bootstrapped Daily Harvest for the first 8 months of the business.

Investors simply didn’t get the idea, so Rachel did what any great entrepreneur would do - she focused on building the business, improving the product, and getting customers.

She used that traction to raise a small seed round of about $1 million in May 2016 and a year into the business she was leading a team of 12.

In hindsight, with early customers who loved the product, I wonder if she could’ve raised a community round on a platform like Wefunder. I bet she would’ve been able to get a huge buy-in from those early supporters.

By the time Rachel went out to raise a Series A in 2017, the business was growing rapidly, so rapidly in fact that in the 6+ weeks of fundraising for her Series A, her run rate actually doubled, and the term sheets she had gotten from venture capitalists no longer seemed appealing.

So what did Rachel do?

She blew up the entire round.

Instead of going with one of the term sheets she had been issued by investors, she wrote her own term sheet, capping the amount each firm could invest in Daily Harvest.

When she presented it to investors, some balked, taken aback by the unconventional nature of what Rachel had done.

Some of the venture capitalists with strict ownership targets refused, dropping out of the round, but Rachel ended up getting what she wanted - a number of high-quality, committed investors.

She announced Daily Harvest’s Series A in June 2017 with a round that included celebrity investors like Serena Williams and Gwyneth Paltrow in addition to WME Ventures, Collaborative Fund, Rubicon Venture Capital, Imaginary Ventures, and others.

And remember, this is just two years after she started the business and a year after many investors simply didn’t think her business was viable.

This is a great example of when it pays to stand your ground, go after what you want, and stay true to your vision.

Rachel was just getting started though and, after the Series A, Daily Harvest would take off.

Reaching Product-Market Fit

As Rachel would later describe, her first two rounds of funding for Daily Harvest were a slog.

The Series B would be a different story.

Prior to raising a Series B, Rachel, with no intention of fundraising yet, did a lot of “VC dating” to just try and get to know a number of investors that she might one day want on her cap table.

That work paid off.

When Rachel went out to raise her Series B, she only reached out to 6 VCs for the round and was able to close it in a couple of weeks.

The $43 million round, which was led by VMG Partners and Lightspeed Venture Partners and also included M13 and BAM Ventures as well as celebrities like Shaun White, Bobby Flay, and Haylie Duff, valued Daily Harvest at a reported $500 million.

And it was a turning point for Rachel and Daily Harvest:

2017 was the point when we felt like we had reached true product-market fit. So pre-fundraising — previous to that point — I would say it was incredibly difficult. People didn't understand how the collections that we had laddered up to this bigger picture to this platform. There was a lot of friction in the fundraising process, especially because the people from who I was trying to raise money just didn't see that there was a problem. They were like, “Well, why, why wouldn't I just buy a Jamba Juice?” I'm like, “I don't even know where to begin.””

Rachel Drori

She made a great deal of traction, finding a target market in need of what she had to offer:

Her strategy is to make it super easy for a generation too busy, too tired or too quarantined to prepare their own meals. Even before the coronavirus hit, Millennials hated to cook. According to a 2017 USDA report, Americans aged 25 to 40 spend 55 minutes less per week, on average, cooking and washing-up than Gen X adults.


And she’s had this success and defined a new category because the food system is fundamentally broken:

The way that Big Food is set up is very systemically broken. Investors in big food companies, the big CPGs of the world, are really focused on things like margin, accretion, and slow, steady returns dividends. When you think about how that translates to food it's pretty ugly. And the way that they're structurally set up is not to innovate.

A case in point is Kraft in recent years, right? Their big innovation last year was launching pink macaroni and cheese. They’ve just completely lost touch with the customer and they don't have the structural agility to be able to move with modern times.

Rachel Drori

At the time of their Series B, Daily Harvest has more than 100,000 subscribers nationwide.

By the end of 2019, when Rachel raised an undisclosed about for Daily Harvest’s Series C, they’d do more than $125 million in sales.

In the years to come, they’d continue their meteoric rise, but also face a number of challenges, with their biggest one yet in 2022.

Taking Off

By January 2020, Rachel is leading a team of 160 people.

When the pandemic hit, Rachel reacted quickly, doubling up on inventory, and Daily Harvest was able to make the most of it, experiencing exponential growth.

This was made possible by the 400+ farming suppliers, who kept up the flow of fresh produce Daily Harvest needed.

And by this time, they had honed in on their personalization of the customer experience:

Because we have this direct link with our customers, what we're able to do is we actually phenotype taste beds and we understand what every single customer wants and needs down to an incredible level of detail that allows us to create food for each individual.

We don't look at customers as averages. We really look at each individual and we create food to meet the needs of those customers. We have smoothies for different tastes, preferences, and different tea, eating values, and different profiles.

As we expand into this collection depth, we see different groups consuming over different days. So it's really systematic the way that we think about it and it's really served as well to increase share of stomach over time, as we've been able to take this data and turn it into meeting the needs of our customers.

Rachel Drori

Learning from the needs of its customers, in early 2021 Daily Harvest launched a new product, plant-based milk, continuing its expansion into new categories.

And it makes total sense.

Non-dairy beverages are a huge market and yet most of the products are filled with, as Rachel says, “A bunch of bullshit.”

They’re also heavily packaged, presenting an opportunity to offer something better.

So what was the product that Rachel and her team created?

They called it Mylk, and it comes in 4oz increments of frozen, plant-based “milk,” with recyclable packaging and a small carbon footprint.

As Rachel would mention:

To build trust you have to be timely and you have to get customers what they want when they want it.

Rachel Drori

This was what customers wanted, and Rachel and her team delivered.

And they’d do this repeatedly - listening to customers and iterating quickly.

By June 2021 Daily Harvest was doing $250 million in annual sales, with a team of about 260 people.

In November 2021 Rachel raised a Series D round of funding that valued Daily Harvest at $1.1 billion, with Rachel reportedly owning a 35% stake in her company as a solo founder.

This new funding allowed Rachel to invest more in data and technology, all while she continued to evolve her marketing mix, which has grown up since the early days of bootstrapping:

It was easy to scale on Facebook. Now it's a whole different ball of wax. The landscape has changed significantly. The landscape is always changing, it's a complete moving target and something that works today will not work tomorrow. It’s just how you have to live in this world.

We went out really aggressively into every channel you can imagine to give us that optionality and that agility where we can change our spend in different channels based on what happens to be working at the time. Influencer marketing is part of our mix, TV is a part of our mix, but I think the most important thing is — even if one thing is working really well — that you keep your spend and you keep the other channels engaged enough where if something changes you can always pivot and change that mix.

Rachel Drori

Rachel always keeps a portion of the marketing budget siloed for experimentation, trying one new channel at a time, and looking for a 3x minimum ratio of lifetime value to customer acquisition cost (LTV:CAC), with a target ideally at 4.5x - 5x.

At this point, Rachel and Daily Harvest were on top of the world.

The next year, however, Rachel would face her biggest challenge to date.

Struggles and What’s Next

It’s hard enough to build a company without the press tearing you apart for any error you make, so I don’t want to belabor this point but have to mention it as part of Rachel’s story.

In 2022, 450+ people reported illness from eating Daily Harvest’s French Lentil & Leek Crumbles meal.

It’s probably the worst thing to happen to a food company.

By July, Rachel announced that the culprit was tara flour, an ingredient included in the meal. Of course, they stopped sourcing the ingredient from their producer, and it was the only meal they had any issues with.

Still, the incident resulted in lawsuits, a steep decrease in sales, and a number of layoffs.

Every founder, even one like Rachel who built her company to $250+ million in sales, faces setbacks.

This was a massive one.

Still, my guess is Rachel overcomes it in time, with Daily Harvest’s ability to iterate quickly, be capital efficient, and stick to her vision, which has evolved over time as it has needed to.

As part of that, she announced that Daily Harvest would be launching into retail in the summer of 2023 for the first time.

It’s a big step for the company and something Rachel had no intention of doing years before.

I’m curious to see how it plays out and optimistic Rachel will find a way to make it a success.

Rachel’s Wisdom

In each edition of the Just Go Grind newsletter, I like to include a few more quotes at the end from my research into the founder who is featured, sharing their wisdom.

On the secret to Daily Harvest’s fast growth:

People always say like, “What's the secret to your really fast growth?” And I actually talk about our supply chain, which is not the answer that people want to hear, but the reason why is, if you've ever seen a Rogers bell curve, it’s a normal bell curve, but if you think about the way normal product development works, you have an insight and then it can take up to a year to bring something to market, climbing up that curve. By the time you get to the top, that's usually when big companies are going to market. Right?

Our supply chain agility and our data allows us to go to market when an early adopter is interested in something and our early adopters, because we listened to them, became these evangelists, and what's really powerful is that it spurs this virtuous marketing cycle that rides itself up that curve, as opposed to facing headwinds on the way down, where you have to like hire Justin Timberlake to shake his tushy on television. Of course, we pay for some influencers, but really, what you're seeing is us co-creating with our customers and our customers being so glad that we listened to them and gave them what they wanted.

Rachel Drori

On sticking with her direct-to-consumer business model until 2023:

I have no interest in the freezer aisle. It's broken. We have totally turned that on its head. We're reimagining what a packaged food company can look like.

Rachel Drori

On pitching to investors:

One of the tricks, when you're pitching, is that you're also always selling. So one of the things that I did was I showed that there was great customer demand for these things — like sustainability is now table stakes. It wasn't five years ago.

Just showing where the customer demand was going and showing that there was also a business revenue opportunity tied to everything that we were hoping to do on the sustainability side was a really important part of the story. Some of the questions that we asked just to make sure that people were aligned actually weren’t to the investors directly, it was always to other companies that they invested in and not the ones that they introduced us to.

Rachel Drori

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