Perhaps best known for cofounding America Online (AOL) and later serving as its CEO, Steve Case has now turned his attention to foodservice. Like many tech innovators, he sees great potential to “disrupt” the system through technology and a tech mindset.
Case serves as chairman and CEO of the investment firm, Revolution LLC, which he also cofounded. Washington, D.C.-based fast casual Sweetgreen, nonprofit Revolution Health, and mobile ordering platform OrderUp are among the food-related brands in Revolution’s portfolio. A tireless entrepreneur, Case also started the philanthropic Case Foundation with his wife Jean and serves as chair of UP Global, which fosters entrepreneurship.
Case spoke with QSR’s Nicole Duncan about what the intersection of food and technology might look like for both sides.
In recent years, food concepts seem reminiscent of tech startups. As someone with experience in both spaces, how do you see the gap between the tech and food worlds being bridged?
I think it's a natural evolution because I think technology is starting to—and the Internet specifically—impact more aspects of our lives. And the way I think of it is, we've been through two waves of the Internet and a third wave's about to break. The first wave, which companies like AOL were a part of—call it 1985 to 2000—was just building the Internet, building the awareness of the Internet, getting people connected to the Internet. It seems crazy now because we take it for granted, but when we started AOL 30 years ago, only 3 percent of people were online, so it really was a challenge to get everybody connected. But that was sort of the first 15 years.
The last 15 years—the second wave—has been building on top of the Internet. It's really been apps and services and things like Twitter or Snapchat; because the Internet existed, they were basically products, apps, and services that were building on top of the Internet. That's really dominated the last wave. I think the third wave is going to be about integrating technology, and particularly the Internet, into every aspect of our lives and, in the process, challenging and disrupting big sectors of the economy. That includes things like energy and transportation and healthcare and education, but also includes food, which is globally a $5 trillion market. Our sense is technology will reshape how every aspect of food, with the production of it, the distribution of it, the consumption of it evolving with technology being a driver, as well as some demographic trends and some lifestyle trends that are favoring different options.
Are you seeing people who have been traditionally in the food space meet technologists halfway more than ever before?
Yeah, I think that's fair. I think in some respects now, because of the ubiquity of the Internet, every company needs to be a tech company. With these first two waves, tech was its own sector. Now tech is starting to impact other sectors, including food.
With Sweetgreen, there are really two, maybe three, big trends that were driving them. One was the whole fast-casual segment starting to disrupt the fast-food segment, which we thought would continue over the next 10–20 years. The second was a push for healthier options that some have called "real food." And the third is the convenience that's made possible by technology, including smartphones. My bet is within three years, the majority of Sweetgreen orders will be done on smartphones and people will order as they're walking to the restaurant. When they walk in, they'll be recognized, and billing information is stored so they'll be able to be out of there quickly if that's their purpose. If they want to go have the experience of standing in line and getting their food and eating there, obviously that will still be there and be appealing to a lot of people, but technology does enable convenience for the consumer.
Technology also enables them to manage—in terms of the healthier food side of things—the supply chain, so they can work with local farms and create this farm-to-table, seasonal kitchen experience that would have been difficult, if not impossible, to do 10 years ago. It's not just the technology people see, like their smartphones and the convenience that's possible there, but it’s also how technology is really the underlying platform to allow some of these concepts to really take off.
A lot of people like you who come from the tech sector have a different mindset when approaching business. What kind of mindset or skills do you think are meeting a need in food that wasn't even realized before?
I think it requires a balance, a meeting of the minds, and a partnership mentality. I think technology is again an enabler for innovation, but there are other aspects that are important as well. In the case of the [quick-service] space, obviously the food is the main event. Technology is increasingly important, but people aren't eating the technology; they're eating the food. You've got to have the quality of food, you've got to have the right kind of operational focus, and you've got to have the right real estate.
There are a lot of aspects to it that are important and will continue to be important. If people bring too much of a tech-centric focus to this, they'll miss out. Technology is a new enabler that will drive and accelerate some of these trends around real food, some of these trends around convenience—particularly for this growing, younger demographic, what some call Millennials, who are tending to be a little more foodie oriented, a little more adventurous in terms of their eating, a little more experiential in terms of what they're looking for, and driven by convenience and having grown up as sort of digital natives. They're very comfortable with technology and expect things to work in a certain kind of way. You've got to use technology as an enabler for broader innovation, whether it be on the food side or the convenience/delivery side, as opposed to thinking that suddenly you just sprinkle some magical technology pixie dust and you can independently do it.
Related to that, I think it's going to require more partnerships between people who understand the restaurant industry and people who understand technology. If you don't have both, I think you're going to have an iffy challenge in the future, and in many cases it's going to require partnerships between technology companies and major companies in the restaurant space as opposed to everybody going it alone. I think strategic partnerships will be more important in this space.
We've also invested in companies like Revolution Foods, which started eight, nine years ago by two moms to create healthier school lunches, and that's already scaled over $100 million of businesses on the school side. They then launched to the consumer product side. How they use technology to then manage that whole process of getting the right ingredients from the right places and then delivering them to the right schools in the right kind of way, and now also delivering consumer products to Safeway and others—technology enables that.
We also invested in a company called OrderUp; it's in the delivery business, particularly in the second-, third-tier cities. The major cities like New York, Boston, etc., have GrubHub and providers like that, but they generally are not available in the medium-sized, smaller cities. So OrderUp is focused on that, using technology. But again, they had to partner with restaurants in different regions to be able to create the complete consumer experience.
Sweetgreen recently introduced a limited-time, sustainably farmed salmon from Patagonia. Are there other examples within the Sweetgreen brand where tech has shaped those kinds of decisions?
From my perspective, the tech is … kind of a three-ring circus, if you will. Some relates to how you are sourcing and the supply chain, the farm-to-table side; some relates to how you are managing it. The data associated with operations give you the ability to track things and, based on real-time big data, being able to make some adjustments is increasingly important. And the third is how technology is used to improve the consumer experience, particularly around convenience, but there are other aspects.
One thing for example, Revolution Foods has done using technology to improve the consumer experience is engaging with kids in schools to get their thoughts on menu items and create little competitions and voting around different options. They have real-time feedback in terms of how the kids are actually liking things and eventually rating things and suggesting things, so they're engaged in the culinary creation process as opposed to simply being told here are the options and eat it and go back to class.
Do you see food startups supplanting tech startups?
I think in some ways the line between those two is starting to blur and that will accelerate. I think food startups will be using technology and tech startups will increasingly be targeting a $5 trillion food industry, but the lines will blur a little bit.
As I said with these three waves of the Internet, there will continue to be second-wave companies created that are more pure-play technology-focused, app-focused. But I think a lot of the momentum in this third wave is going to be attacking things like food and education, health, transportation, you name it, that really is the Internet of things—another one that's ripe for disruption and requires a partnership between the technologist and the entrepreneurs with some of the existing players in some of those industries. I think it will be difficult to disrupt the healthcare industry, for example, without partnering with hospitals and health plans. I think it will be difficult to disrupt the education system without partnering with universities and professors. That partnership aspect is going to be important.
OrderUp is an example of somebody that's essentially in the business of partnering with [quick-service] providers particularly, and that's how they scale. They're not in the business of operating, nor in the business of actually creating food; they're really in the business of bringing technology that provides more convenience for consumers and drives volume for restaurants.
Do you see this fascination around food waning or do you see it being something that's going to continue to grow?
I think it will continue to grow. First of all, it's something that everybody can relate to. Investors look at what they call Total Addressable Market, or TAM. In this case, the total addressable market is 100 percent. Everybody eats three times plus a day—in this country, I think I saw it was 4.9 times a day on average. So it's a big business, and it’s transforming assets on the production side and a lot of things in the agricultural tech space that are interesting, some on the distribution side.
We talked about some of the supply chain issues and some on the convention side where there would be different options in homes or different options in restaurants or different options in schools or different options in offices or different options when you're on the move. I think there's going to be a lot of different innovation happening in all those different sectors, and I do think entrepreneurs and investors are beginning to realize this third wave is breaking, beginning to look at some of the opportunities in that space, and, just from an economic standpoint, beginning to recognize that the food industry is a huge industry. Just look at the fast-casual space; a company like Chipotle is worth $20 billion, Starbucks is worth $70 billion. These are big numbers that are starting to attract the attention of entrepreneurs and investors recognizing that it feels like some new brands are going to be emerging.
Obviously our bet was Sweetgreen; it has the opportunity to be the next Chipotle, and the interest [has grown] since we invested in that, which is probably now almost two years ago, eighteen months ago. The inbound calls we get from other investors include pretty sophisticated investors who want to invest in Sweetgreen. We probably get more calls about Sweetgreen than any other couple dozen investments that we've made because there's a sense that something is happening there with some of the trend in the market, what they've done in terms of building the brand and the authenticity, the actual execution, the results, and the places they've opened like in New York City and others. The inbound interest in that is significant, and I don't think that would've been there three or fours years ago.
What can emerging brands learn through either reaching out to potential tech partners or trying to integrate that disruptive mentality into their business model?
I think it is recognizing that they are particularly skilled at certain things, and those skills are important. Some of the things I mentioned around menu, menu design, supply chain management, real estate selection, hiring and training people, or a whole host of skills that are complicated and hard—they're quite good at that. That's not necessarily something that people who bring a tech perspective or an engineering perspective necessarily would understand or be good at. At the same time, there are some things that other people do understand better in terms of some of what's happening with new technology, how they can be leveraged in new kinds of ways to provide better operational efficiency, and, more importantly, greater consumer convenience and satisfaction.
Everybody trying to do everything themselves is likely going to be difficult. For example, we've gotten calls from people because Sweetgreen has developed a pretty compelling tech solution around ordering on smartphones, and people want to learn that. So we're now looking at that as a potential avenue for expansion rather than everybody trying to make their own.
How do you surround yourself with people who understand this? Some of it is hiring some younger people generally who are more in touch with what's happening here, but also partnering with some of the entrepreneurs to figure out ways to engage with some of the startups there and not just focus on the business as it is today, but focus on where it's going. The hockey player Wayne Gretzky, it was often said the reason he was so great as a hockey player is he focused on where the puck was going and just positioned himself to be where the puck was going. I think that's the opportunity for people in the food space as well.