Midway through their final semester at UC Berkeley, Nikhil Arora and Alejandro Velez were getting ready for life in the corporate world. Despite the sluggish economy–this was the spring of 2009–they had attractive jobs lined up, Nikhil as a consultant at PriceWaterhouseCoopers, Alex as a banker at Credit Suisse.
So what did they do? They chucked the job offers and began to grow mushrooms out of coffee grounds.
Two years later, they have no regrets. Their startup, called Back to the Roots, is literally a growth company: It sells mushroom kits that enable people to grow and harvest up to 1 1/2 lbs of gourmet oyster mushrooms in as little as 10 days, out of a cardboard box filled with used coffee grounds. Out of the box thinking, you could call it.
Despite a stumble or two, the company’s doing well. Back to the Roots sells the kits online and at Whole Foods Markets. It employs about a dozen people, most at a 10,000 square-foot warehouse in west Oakland, CA. Every day, they turn trash–about 20,000 pounds a week of coffee grounds, collected from Peet’s Coffee & Tea outlets in northern California–into cash.
I spoke with Nikhil this week via Skype because I like businesses that find a way to extract value out of stuff that would otherwise be thrown away. That idea was what intrigued Nikhil and Alex, too; they were taking a class in business ethics when the professor, Alan Ross, mentioned that mushrooms could be grown from coffee grounds. After class, Nikhil and Alex–who, until then, didn’t know one another–approached him to learn more.
“There was something exciting about the idea of creating so much value out of waste,” Nikhil said. “It’s a model of how business can be done.”
Both, it turned out, had a desire to use their work to do good. Nikhil had spent a semester studying abroad in Ghana, where he’d worked on a recycling project. Alex had started a mentorship program at Cal.
Alas, our would-be entrepreneurs didn’t know a chanterelle from a crimini. But they did some online research, watched YouTube videos and planted 10 test buckets of mushrooms. One produced a crop, which they took over to Chez Panisse, the Berkeley-based temple of local, organic cuisine, for a taste test. It passed. Their next stop was a local Whole Foods, and they eventually found their way to a regional manager who expressed interest. They wangled a $5,000 grant from the UC Berkeley chancellor, and they were on their way.
It hasn’t all gone according to plan. “We’ve gone through a lot of iterations,” Nikhil said. Originally, they tried growing mushrooms in bulk for stores and restaurants, while also producing the kits. But given their limited money and time, they have opted to focus on the grow-at-home business. They have been helped along by a $50,000 grant from the Hitachi Foundation, another $50,000 grant from Miller Coors and a $25,000 low-interest loan from Whole Foods’ Local Producer Loan Program.
Clearly, this isn’t a sustainable model, and Nikhil knows it. “Along the way, we’ve made every error, business-wise,” he says. “Whole Foods has been awesome in that regard. They’ve given us a lot of support, working through the kinks.”
But the kits, which retail for $19.95 each, are now winning rave reviews on Facebook. Whole Foods has expanded distribution across the country, although I couldn’t find a kit in my local Whole Foods Market. (The produce manager said they’d stopped carrying them because they hadn’t sold well.) Back to the Roots now stresses its educational mission; customers who post a picture of their mushrooms on the Facebook page can either get a free replacement bag or donate a kit to an elementary classroom.
Can the mushroom business scale? At $20 a box, it doesn’t seem likely to be a mass-appeal product. But Nikhil and Alex have shown they have a passion to make a difference and an ability to learn. They’ve also got plenty of ideas. Why not grow herbs in a box? Says Nikhil: “We’ve just scratched the surface.”