While undergraduate business students at the University of California Berkeley, Alejandro Velez and Nikhil Arora were struck by an idea they heard during a class lecture: You can grow mushrooms on entirely recycled coffee grounds.
"I was going into investment banking and Nikhil was going into consulting,” said Velez. “We thought, ‘What the hell, mushroom farming sounds way … crazier. Not cooler, but crazier.’”
In 2009, two months before graduating, they founded Back to the Roots. Initially a bulk mushroom farm, the company now develops products focused on sustainability and education. The first product was a Grow-at-Home Mushroom Kit. Their second, released last month, is The Aquaponics Garden, a self-cleaning fish tank that grows fresh herbs. To date they have sold almost 350,000 mushroom kits and 15,000 AquaFarms.
Both Velez and Arora describe their socially conscious corporate predecessors as existing in a small niche market. They hope to subvert that phenomenon and make sustainable business the norm. Naively idealistic? Their numbers suggest the opposite. As the purchasing power of the millennial generation grows, sustainability just might be a profitable business model.
Traditionally, it has been thought that business and sustainability do not go hand in hand. Could you talk about the intersection between socially conscious food ventures and conventional business mentality?
Nikhil Arora: We weren’t foodies. I’d spent six months during my junior year in college studying in Ghana working on a recycling project. Alex created one of the largest one-on-one mentorship programs on the Cal campus [University of California, Berkeley]. So we had passions around the environment and education, yet we were both businessmen.
It’s cool to see how much credibility sustainable business movements have now. When we first graduated we were in the heart of the financial crisis. Lehman Brothers had just gone under. There was a sense of, “There’s got to be a better way to do this.”
There’s this idea that if you have a socially conscious agenda than you should be a not-for-profit organization. Now that seems to be shifting. Do you think more change can be effected with for-profit models?
Nikhil Arora: 110%. Both Alex and I believe -- into our cores -- that you can make money and do good at the same time. We look at making money as one part of sustainability.
I don’t know if you’ve heard of the B Corp movement. It stands for Benefit Corporations. It’s like an LLC [limited liability company], and in states that have passed the legislation, you can now officially be a B Corp. That means that in the constitution of your company you embed the fact that your goal is not just to go after profits, but to focus on sustainability of the environment and your community. Delaware and California just passed the law, among others.
There are a handful of successful companies that started off in the 1980s: Ben & Jerry’s, Patagonia, Annie’s. These companies are worth hundreds of millions and still have a huge social mission. They created this awareness and now I think our generation can take that, run with it, and make it the norm. Back to the Roots is like version 2.0.
It is clear to see what is sustainable about your products’ mini ecosystems. In the larger sense, how do you think about sustainability?
Alejandro Velez: Our number one challenge was to make our products domestically. That takes a lot of work. The cheapest and easiest solution would be to go overseas. We were really lucky we found a manufacturer for acrylic paint 20 minutes away, for example. Even things like the rocks in the AquaFarm –- we partnered with a company called Growstone. The stones are made from entirely recycled glass.
On the seeds side of thing we partnered with Seeds of Change, which is a leading organic non-GMO seed provider here in California.
Even the aquatic side was a challenge. We partnered with a company called Kordon, a leader in the aquatics business. We were able to help launch their all-natural brand of aquatic additives that you need to set up your aquarium. That’s a cool journey, to work with them on developing the new line so every AquaFarm comes with all-natural de-chlorinators.
If we transformed the way we think about sustainable business, would collaboration become the norm?
Nikhil Arora: Collaboration is an absolute part of it. When we started out we partnered with Pete’s Coffee. We would collect their coffee grounds and in turn they paid us, carried our mushroom kits in their cafes, gave us coupons for discounted coffee, and we put those in our kits.
Even if it feels like there’s a huge movement around socially conscious business in San Francisco and the Bay Area -- it’s such a small niche. You think about the huge ecosystem of business –- Exxon, Miracle-Gro -- they are running these industries. We are too early on in this movement of bringing sustainable business to the forefront to be competing with each other.
Alejandro Velez: There’s been a huge shift. Big corporations are struggling with their customer demographics getting older and older. We’ve heard it from our buyers -- Home Depot and places like that. Their challenge is to tap into that millennial generation that cares about the ‘why’ and the ‘who’ of products –- why it’s created and who is behind it, rather than just what it is.
We’ve heard again and again this anxiety from the big players about their demographics who used to not care about this. In the next five or 10 years, as the millennial generation starts having more purchasing power, it will be interesting to see how these older brands will either re-brand themselves or acquire other companies to stay relevant and fresh.
Any unique advice about how to stay relevant and fresh? How can you make money, while often not having a lot of money, and stay true to the mission?
Nikhil Arora: We started in 2009 and we’ve been profitable since 2010. We’ve always had a community focus. We have a program where if anyone posts a photo of a fully-grown mushroom kit on our Facebook page, we donate a kit to the elementary school of their choice. We’ve reached thousands of kids nationwide. You can have a big focus on the community and still be profitable and grow.
What the Facebook campaign taught us is if done the right way, engaging and giving back can actually help your bottom line. We didn’t realize it at first, but the program drove so much traffic to Facebook, which is now the number one driver of traffic to our website. We now have high-margin sales directly from our website which fund the program itself. That was a big eye opener for us. The more we gave, the more we got and the more we were able to give, like a really cool upward spiral.
There’s this stereotype that giving back has to be a once a year tax write off -- do it once and call it a day. But if it’s integrated into your business your costumers will support you moreover and pay it back.
You mentioned neither of you were foodies. How do you guys eat now?
Alejandro Velez: Before we graduated, our fanciest gourmet meal was a $5 footlong. Our first year and a half growing fresh mushrooms, we learned so much about the food industry. I mean, just learning more about it made us both eat differently. There’s this idea, “Oh good quality food is so much more expensive,” but it’s cheaper. That was a big learning. If you invest 10 percent more in food you will probably save that tenfold in health care later on. If you’re going to pay 79 cents for bananas and you can pay 20 cents more, get organic.