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    In Silicon Valley, investors turn to food start-ups

    Nick Taranto, a cofounder of Plated, a company that sells ready-to-make dinner kits, at the company’s warehouse in New York.
    Michael Nagle/The New York Times
    Nick Taranto, a cofounder of Plated, a company that sells ready-to-make dinner kits, at the company’s warehouse in New York.

    NEW YORK — What if the next big thing in tech does not arrive on your smartphone or in the cloud? What if it lands on your plate?

    That idea is enticing a wide group of venture capitalists in Silicon Valley into making big bets on food.

    Some investors say that food-related start-ups fit into their sustainability portfolios, alongside solar energy or electric cars, because they aim to reduce the toll on the environment of producing animal products. For others, they fit alongside health investments like fitness devices and heart rate monitoring apps. Still others are eager to tackle a real-world problem, instead of building virtual farming games or figuring out ways to get people to click on ads.


    ‘‘There are pretty significant environmental consequences and health issues associated with sodium or high-fructose corn syrup or eating too much red meat,’’ said Samir Kaul, a partner at Khosla Ventures, which has invested in a half-dozen food start-ups. ‘‘I wouldn’t bet my money that Cargill or ConAgra are going to innovate here. I think it’s going to take start-ups to do that.’’

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    In the last year, venture capital firms in the valley have funneled about $350 million into food projects, and investment deals in the sector were 37 percent higher than in the previous year, according to a recent report by CB Insights, a venture capital database. In 2008, that figure was less than $50 million.

    That money is just a slice of the $30 billion that venture capitalists invest annually, but it is enough to help finance an array of food start-ups.

    The venture capital firms helping to finance these businesses are some of the valley’s most prominent names, in addition to Khosla: SV Angel, Kleiner Perkins Caufield & Byers, True Ventures, and the Obvious Collection.

    Celebrities from Hollywood (Matt Damon), pro football (Tom Brady), and the tech world more broadly (Bill Gates) have also joined in.


    ‘‘Consumers are interested in sophisticated experiences that are beautifully delivered, which we’ve seen happen on the Web and with products like the iPhone,’’ said Tony Conrad, a partner at True Ventures, which was an early investor in the coffee company Blue Bottle. ‘‘Now, we’re seeing that happen with food and beverage.’’

    Venture capitalists have strayed from pure technology to food before. Restaurant chains like Starbucks, P.F. Chang’s, Jamba Juice, and, more recently, the Melt, were backed by venture capital. And recipe apps and restaurant review sites like Yelp have long been popular.

    But this newest wave of start-ups is seeking to use technology to change the way people buy food, and in some cases to invent entirely new foods. Investors are also eager to profit from the movement toward eating fewer animal products and more organic food. They face a contradiction, though, because that movement also shuns processed food and is ­decidedly low-tech.

    ‘‘It’s not Franken-food,’’ Kaul of Khosla Ventures said. ‘‘We’re careful not to make it sound like some science experiment, but there is technology there.’’

    Hampton Creek Foods, based in San Francisco, uses about a dozen plants, including peas, sorghum, and a type of bean, with properties similar to eggs, to make an egg substitute.


    Tetrick, its founder, started the company after working on alleviating poverty in sub-Saharan Africa. He hired a protein chemist, a food scientist, a sales executive from Heinz, and a contestant from the television show ‘‘Top Chef.’’ Two large food companies are using the egg substitutes in cookies and mayonnaise, and he said he planned to sell them to consumers next month.

    Unreal, based in Boston, makes candy that the founders say has no artificial colors or flavors, preservatives, hydrogenated fats or genetically modified ingredients, with at least 25 percent less sugar than similar candy on the market and added protein and fiber. The candy is sold in stores including CVS and Target.

    Still, food start-ups have their own challenges that are unfamiliar to tech entrepreneurs and investors, like a broken-down delivery truck or a bad oyster. These setbacks can be more difficult to recover from than a software malfunction.

    In the early days of Plated, for instance, which sells ready-to-make dinner kits for recipes like Greek lamb burgers with cucumber salad, the founders sank $15,000 into building a customized refrigerated warehouse in Queens. Then they discovered that it would not cool lower than 70 degrees, unsuitable for food handling and preparation.

    “We just had to walk away from that investment,’’ said Nick Taranto, one of the founders.