Stefan Kalb ran a multi-million dollar business in selling sandwiches and salads to Seattle area cafes and supermarkets. As an actuary by training, he couldn’t help but notice the profits in the business were driven by how closely his team was able to match supply to demand. Every unit unsold was cost that would not be recouped. He paired up with a friend, Microsoft Hololens engineer Bede Jordan, to figure out a better way.
We’re proud to announce our newest seed investment in their startup, Shelf Engine. We led this $800K seed round with participation from our friends at Liquid 2 Ventures and Founder’s Co-op.
This is a great example of a strong business founder with domain expertise working together with a strong engineering co-founder to tackle a big business lying in plain sight. Both sides of the equation here are exposed regularly to supply/demand mismatch: both food producers (manufacturers and distributors) and food retailers (cafes and grocers). The ordering process today remains a manual one, with nearly all orders still done using traditional methods: phone, fax, or often just pen and clipboard.
When using traditional methods, it’s up to regular operations folks to decide when to up an order or reduce it— but that results in whiplash. If you over-order, then you’ve got waste. If you under-order, then you don’t sell as much as you could have. Individual managers end up increasing or decreasing order size based on what just happened (one data point), which means there’s whiplash as order sizes change dramatically over time.
Food wastage costs grocers as much as 12% of overall revenue, and when large grocers like Kroger average 1.4% long term profit margin, that represents a multi-billion dollar problem that needs to be solved. Shelf Engine has created a food ordering and prediction engine that has already increased annual profit by 7% for an early pilot, and is going live now with beta customers in the Seattle area.
This early stage startup is tackling precisely the kind of file cabinet business we know desperately needs smart software, and we’re proud to be backing this team.