Be focused and have a good understanding of the market you are entering: An interview with Menachem Katz, Head of Operations at WeWork Food Labs

Menachem Katz is the Head of Operations at WeWork Food Labs, the food innovation program of WeWork.

WeWork Food Labs in New York City is a dedicated co-working space for food startups and hospitality tech startups as well as an Accelerator program for food entrepreneurs.

We talked to Menachem Katz about WeWork Food Labs and asked him to share advice with food & beverage startups that are launching new products and looking for an investor.

WeWork Food Labs is the first Accelerator program of WeWork. Are there any other programs in the planning in the upcoming future?

No, the focus of our program will only be around food and sustainability because we see the challenges that companies have in raising investments. We believe that by supporting startups and encouraging entrepreneurs to innovate in the food industry we will motivate others to do the same.

You are a well-known veteran in the FoodTech industry with over 20 years of experience who has been mentoring startups for years. I’m sure, you have seen a lot of startups succeed and fail. What is the best advice that you give a food startup founder to launch their business successfully?

My first advice is to be focused. My second is to learn about the market that you are entering.

Sometimes a startup founder that is about to enter the food space comes up with a dream without knowing the challenges they are going to face. I advise every founder to talk to people with relevant market experience and get a good understanding of the market.

The challenges may also vary depending on the type of business. CPG companies tend to be the most challenging businesses. There are many tasks and hurdles to consider from starting a brand, building awareness and growing a customer base to operational difficulties in manufacturing and distributing. You need an expert in all those areas, so my advice is to have someone with solid industry experience on your side.

A tech company faces different issues. They often end up with a question: Does the solution respond to a real problem? Do people in the food industry see it as a challenge at all? Another task here is to understand how to integrate new technologies in rather conservative industries. A startup should consider all these aspects when entering the food space.

What would you say is the best way for food startups to convince an investor?

To give a proper advice, I would categorize startups into four different sectors: CPG companies, FoodTech companies, urban farming, and hospitality.

For a CPG company, the main challenge is to enter a market. The cost of commercializing an idea and financing the first batch is usually quite high. Most companies raising money from an investor try to sell equity, even though the company is not worth much before the market entry.

My advice is to rather try to finance and sell the first batch than to sell equity. The moment the company has some brand recognition, investors will look at it completely differently. To sum it up, planning and setting a company up for at least one year and then raising money to improve the product or boost sales through different channels could be a better strategy to approach an investor.

For a FoodTech company, it could be helpful to partner up with a strategic investor that comes from the industry. For example, a platform that is providing a hospitality solution should look for an investor which will give them access to their client base to test and adapt the product first, as the costs of customer acquisition are very high.

Most restaurants are small operators that will find it very hard to adapt to different technologies. My advice is to find an investor that is part of a restaurant or hospitality group to utilize his network.

Urban farming is a completely new space and we see a few companies that have already received large investments. But none of them validated their business model yet. I think, in the upcoming years the investors' view at urban farming will change.

Raising money for a hospitality operation is usually the most tricky task. This is not an area that typically gets investment. Only people with a lot of industry expertise and experience in franchising will be able to attract an investor.

About the author