Small-Time Start-Up Goes Big Time with Gourmet Mushrooms

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Alejandro Velez and Nikhil Arora were college buddies who fell in love with an idea they heard in a class—that you could take a major waste stream, coffee grounds, and use it to grow gourmet mushrooms. Despite not knowing a thing about mushrooms, the two decided to embark on a business adventure that would change their lives.

In 2009, they formed their LLC, BTTR (pronounced better) Ventures through LegalZoom. Standing for “Back to the Roots,” the company is a 100% sustainable urban mushroom farm. Now, their pearl oyster mushrooms and innovative grow-your-own indoor mushroom kits are available in nearly 200 Whole Foods stores across the country. They have a partnership with Peet’s Coffee & Tea, diverting and transforming about 8,000 pounds of used coffee grounds per week into a rich soil for gourmet mushrooms. In March, they moved into their new location, a 5,000-square-foot warehouse in East Oakland.

The recipients of numerous awards, the duo shares their story about how they got started, some of the obstacles they faced, and the strategies and philosophies that have helped shape their business success.

How did you come up with the idea for your business?

Alejandro: We were both going to Cal [UC Berkeley] and I was a business and econ major with a minor in education. Completely had my path set going into investment banking. And on my last semester at Cal, I was sitting in a business ethics class and the professor brought up this fact that you could grow gourmet mushrooms on coffee grounds, but nobody had ever done it on a commercial scale.

When we found this out, we didn’t know anything about growing mushrooms, we didn’t know anything about farming, but something about that idea was pretty fascinating—take a waste stream and basically turn it upside down and grow some food on it.

How did you get it off the ground?

Alejandro: We talked about it for a little bit and decided to walk over to one of our local cafés and pick up some grounds. It was around April of 2009, just before I was going off to spring break. We planted ten buckets. When we got back, nine of them had gotten contaminated with no growth whatsoever, but one of those buckets ended up growing this beautiful crop of pearl oyster mushrooms.

We ended up taking that same bucket over to Chez Panisse, this organic local restaurant in Berkeley. The founder and head chef is Alice Waters who is very into local food. She had her chef at the restaurant try the mushrooms and he turned around and said, “These are good mushrooms.”

What was pathetic is that we didn’t know anything about mushrooms. We didn’t know the difference between a white button mushroom or a gourmet mushroom. We didn’t have the pallet for it, I guess.

Then we took that same bucket and walked over to the Berkeley Whole Foods. Eventually, we ended up getting a phone call from the Regional Coordinator of Produce.

At the time, Nikhil had a job lined up going into consulting in San Francisco. He gave that up as well and we became full-time farmers. Eventually we grew our first crop on October 9th and had our first sale. Fast-forward to today—we’re in 192 Whole Foods. We just got national distribution from them. We’re looking to continue growing this year.

That’s great! So, would you consider yourselves successful at this point?

Alejandro: That’s interesting. I love that word because it’s so subjective. It was when just a mere idea of taking a waste stream and turning it into food actually translated into a team. We hired somebody that had been unemployed—we worked through a program where they had been unemployed for six months and had at least one child under 18—and when they started sharing our vision, somebody who had never done farming before and didn’t know anything about growing mushrooms, and became passionate about this, that was when we said, we’re doing something pretty cool and something big. We don’t know where it’s going to go, but we feel we’re definitely onto something and we love it. It’s a lot of fun.

How does your business philosophy factor into your decisions?

Alejandro: We’re in front of the warehouse space we’re looking at because we’re going from 1200 square feet to about 5,000 next month. We’re in the middle of East Oakland right now and going into underdeveloped areas. That’s where we want to have our farm.

Every decision that we make, we want to be very conscious of. For example, we just brought on our customer service girl. We found her through the Disabled Student Learning Center student internship program. At first, we didn’t know exactly how it would work. We just liked her. She has such awesome passion. Now she runs all customer service for the company and is probably going to start full-time.

How did you decide on LegalZoom?

Nikhil: It’s funny, probably the first business thing we did was go to LegalZoom and make this official. Looking back, we just knew about it. I logged on, created the LLC and got all the tax forms and stuff. I still remember that when we got everything in the mail, I thought, “This is real now. It’s not a little side project anymore.”

What are the essential elements that have made you guys successful?

Nikhil: For us, a big part of it was being okay with the fact that we didn’t know everything. We walked into this thing—I was a business poly sci student and Alejandro was a business education student—we had no background in mushrooms or retail business or grocery.

I guess the sense that we didn’t know anything helped us expand and pursue every single resource we could imagine. A lot of the success of BTTR Ventures has been mentors and the community, and a lot of people that helped us along the way, even LegalZoom. I think it’s understanding where your strengths and weaknesses lie and being confident in that and then going out there and just finding resources to help you out to take you where your passion or skill sets don’t lie.

What have been your strategies—was starting a “green” business part of your strategy?

Nikhil: It was part of our strategy with this company. We weren't out there trying to create a company whose 'side-mission' was sustainability. We were excited about Back to the Roots because at its core—everything about it was sustainable. Sustainability was our business. At the end of the day, we're collecting trash and adding value to it!

You guys have won a bunch of awards, was that part of your strategy too?

Nikhil: No. The very first award we got was this $5,000 grant from our Chancellor that was literally a couple of weeks before graduation. That’s what really kick-started us. We had a little bit of money to get through some initial tests and stuff, but that first one was just for getting us started. You have to be able to survive through the first few months. After that, we just kept looking for different things and applying for them.

Definitely the grant money was a huge help. Along with the $5,000 grant from the Chancellor, we won a $10,000 grant from the BBC and Newsweek. And those two really allowed us to boot strap this business and not have to go to outside investors as of yet, and keep ownership of it and our vision of things.

In the beginning you had some rough times. How did you make it through?

Nikhil: I would say our first 6–8 months were the hardest. We were trying to learn the business from scratch and we knew nothing about it. We had a 90 percent failure and 10 percent success rate. There was literally just Alejandro and I, our partnership and team.

We both share that same sense of optimism—it worked once before, we can do it again. Even then, there were days when I would say, "Oh man, it’s just terrible." And he’d keep the energy up. And then there were other days that he’d say, “Oh man.” And I’d come up with the energy. The early months and early days when we were really trying to figure things out and there wasn’t much work, it was definitely that partnership that carried us through. He’s like a brother to me now.

What have been your biggest successes?

Nikhil: For us, what makes me the most happy, something Alejandro as well, is when we started to actually create jobs and support livelihoods out of what was just a mere idea. Now we have seven people full-time. That to me is the biggest success.

One of our employees, who was actually unemployed for two years, was finally able to get engaged because he had a steady job. That sense of being able to create something that can actually affect people is a cool feeling.

What advice would you have for someone just beginning a business?

Nikhil: Do not try to do it alone and even if you don’t have a partner, use your community and use any resources. There are a lot of resources out there—you can look at LegalZoom, community partners or just people giving you advice. There’s no sense in trying to think that you have to do something alone. There’s a ton of supportive people in every industry and every field. So just reach out.

What’s next for you guys to grow your business?

Nikhil: Just this last holiday season, we launched into the Boston, D.C., South and SoCal regions of Whole Foods. We’re now in six of eleven regions of Whole Foods. We see being able to go nationally through that retail chain, expanding our online presence and working with other natural grocers. That’s all with the mushroom kits.

Then about late spring, early summer, we’re looking to launch a few new products and start to extend the product lines. Alejandro and I are extremely excited about the new year.