How Freshly grew from a meal-delivery startup to a business Nestlé valued at up to $1.5 billion

Yard Ventures backed Freshly in 2017 when the meal-delivery company was expanding its operations and preparing to reach more customers across the United States. Then three years later, Nestlé acquired Freshly in a deal valued at $950 million, with potential earnout payments of up to $550 million tied to future business growth.

Yard Ventures led Alumni Ventures’ participation in Freshly’s $77 million Series C funding round. Nestlé had also invested in the company in 2017. It had bought about a 16% stake before acquiring the entire business on October 30, 2020.

Founded in 2015, Freshly had grown to ship more than 1 million meals a week across 48 states by the time of the acquisition, as per Alumni Ventures report.

How Yard Ventures Backed Freshly’s Expansion

Freshly began with an idea from founder and CEO Michael Wystrach, who was looking for a way to fit healthy eating into his busy schedule.

Wystrach began preparing portioned meals with help from chefs at his family’s steakhouse in Arizona in 2012. He extended the service to friends through word of mouth and the idea developed into a subscription meal-delivery business.

With support from incubator and investor BrandProject, Wystrach expanded the service, established a headquarters in New York City and officially launched Freshly on January 1, 2015.

The company’s workforce grew from 400 employees in July 2017 to nearly 2,000 by October 2020, according to Alumni Ventures. Freshly raised capital from investors including BrandProject, Highland Capital and Insight Partners to support its growth.

Then in 2017, Yard Ventures led Alumni Ventures’ participation in Freshly’s $77 million Series C funding round, alongside Blue Ivy Ventures, Chestnut Street Ventures, Purple Arch Ventures and the Total Access Fund.

At that time, Freshly was adding a second facility on the East Coast that was expected to more than triple its production capacity and also help the company reach 45 states.

Why Investors Backed Freshly

Freshly offered a weekly subscription service delivering fresh, chef-cooked meals directly to customers’ homes. Customers could choose meals from a rotating menu and heat and serve them at home.

Alumni Ventures identified several factors that made Freshly attractive as an investment, including its growth, its leadership team and the investors involved in the funding round.

Nestlé’s participation was notable because the food company was exploring the prepared-meal delivery market. In 2017, Nestlé purchased an approximately 16% stake in Freshly as a strategic move to evaluate and test the market.

Freshly was also expanding its production capacity at the time, with plans to increase output through its second East Coast facility.

Nestlé Acquired Freshly in a Deal Worth Up to $1.5 Billion

Nestlé acquired Freshly. The transaction valued the company at $950 million, with potential earnouts of up to $550 million contingent on successful business growth.

The $1.5 billion figure is the maximum potential value of the deal, including the earnouts, not the amount paid upfront.

Nestlé said the acquisition would combine its understanding of at-home food consumption and research and development capabilities with Freshly’s consumer analytics platform and distribution network. The company said the combination offered opportunities to grow Freshly’s business and across its wider portfolio.

What Nestlé and Freshly Said About the Acquisition

Nestlé USA Chairman and CEO Steve Presley said consumers were embracing e-commerce and eating at home, trends that the company expected to continue beyond the pandemic. He said, "Freshly is an innovative, fast-growing, food-tech startup, and adding them to the portfolio accelerates our ability to capitalize on the new realities in the U.S. food market and further positions Nestlé to win in the future," as per Nestle's release.

Freshly CEO Michael Wystrach said that, "With Nestlé, we will have access to resources, research and development, and years of experience that we can tap into to catapult our growth plans and move closer to our goal of being in every household in America."