Funding helps startups expand, protect intellectual property

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Melt Organic will be releasing two plant-based cheese spreads in the fall. Photo courtesy of Melt Organic

Two Boise startups have received more funding.

Melt Organic, which produces plant-based dairy products, received $350,000 from Sage Growth Capital, while Retrolux, a cloud-based software company for the lighting industry, received an unspecified amount from Ideaship to fund intellectual property development.

Sage Growth Capital, which launched July 1, 2019, is considered a revenue-based fund, which means investors are paid back out of the revenue the companies generate. The advantage of such a system is that repayments are flexible because they go up or down based on sales performance as opposed to a venture capital fund, where investors typically take a share of equity and participate in the company.

Thus far, Sage Growth has made one investment, $200,000 in Killer Creamery.

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Kevin Learned

“It’s a small town, and we’ve all known each other for a long time,” said managing partner Kevin Learned, one of the founders of the Boise Angel Alliance, which funded the original company behind Melt in 2014. “We had discussions with Scott Fischer (Melt CEO) before we started Sage, about whether this type of financing might make sense.”

Foundation cheese

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Scott Fischer

Melt, which already makes a line of plant-based butter products, will use the funding to help it develop its line of plant-based cheese products, Fischer said.

“Sage had the right funding vehicle for us at a time when we needed cash to grow,” Fischer said.

The company had intended to launch the cheese line at the Natural Products Expo West conference in Anaheim, California, in March, which was canceled due to the COVID-19 coronavirus. But the products are still on track: Two cheese spreads due in the fall, made of Idaho garbanzo beans and red lentils, with two hard cheeses to follow in the spring. Two of the products are a mozzarella style, while the other two are a cheddar style, Fischer said.

The company has been working on the “foundation cheeses” from which the other products will be made for almost a year in its laboratory, Fischer said.

“It took the longest amount of time to not have off flavors,” Fischer said. “Now we’ve got flavors that we can make into an infinite number of products.”

The fall products, which he described as a pub cheese spread, will be garlic herb from the mozzarella-style base and spicy jalapeno from the red lentil cheddar base, he said.

Melt has signed a contract with Chef’s Warehouse, a specialty food distributor, Fischer said.

“It’s a distributor to high-end restaurants,” he said. “When restaurants begin to open up, our butter will be sold in all of those.”

Melt also has private-label deals with six of the top 10 grocers in the country, he added.

Meanwhile, Learned noted that Sage isn’t limiting itself to dairy, or even food products.

“We’re delighted to help our food businesses scale, but it’s not our only investment,” he said.

The company has raised $2.1 million and has committed $650,000 of that, leaving it $1.45 million more to invest, he said. The firm has a term sheet out to another company that he hopes will result in another investment, he said.

Intellectual property

Retrolux announced it has received an investment from Ideaship, a patent leveraged venture capital firm that provides patent development support for early-stage startups. Ideaship is a collaboration between Global Technology Transfer Group (GTT Group) and Panasonic Intellectual Property Corporation of America. The amount of the investment was not revealed.

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Leif Elgethun

“Retrolux is thrilled to receive an investment and strategic IP services from Ideaship. We’re confident this partnership will accelerate our innovation strategy while increasing the quality and value of the growing intellectual property we’ve developed and are committed to expand over time,” said Leif Elgethun, co-founder and CEO of Retrolux, in a statement. “We’ve excited to work with Global Technology Transfer Group, Panasonic and Stoel Rives LLP to strengthen our strategy and prosecute patents for high value innovations.”





Catching up with Melt, as it spreads to new markets

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The wall o’butter in the Melt team room. Photo by Sharon Fisher

A booming Idaho plant-based food company is looking to expand, not just in products but in markets.

Melt saw $1 million in sales for the first time in the third quarter. The company’s plant-based butter is now sold in 12,000 locations in the U.S. and Canada.

In the first half of 2020, CEO Scott Fischer hopes to bring eight new plant-based products to market, including cheeses, cheese dip and other snacks. He wants to raise $8 million to $12 million to launch those products through a private equity firm connected to a strategic acquirer, rather than directly through another food products company.

“We’re taking advantage of the plant-based revolution,” Fischer said. “We’re up 100%.”

Melt’s main competitor, Earth Balance, is up 2%, while Smart Balance is down 3%.

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Bill Benjamin

The changes in the company are getting attention in Idaho’s funding community.

“It is great to see innovation like this in a sector Idaho has been known for, and in a way that leverages Idaho’s resources and advantages in a sustainable, helpful and proud way,” said Bill Benjamin, managing partner of Galena Capital Partners, a Boise-based investment bank that is engaged with the company to raise money.

When Fischer first looked at Prosperity Organic Foods, which makes Melt plant-based butter, he was being brought in for his expertise, as founder of CFO Idaho, to perform due diligence on the company for Steve Hodges of Bluestem Investments, who was considering investing.

“I highlighted a number of opportunities to reignite the company in what we all agreed was an industry ready to take off,” Fischer said. “’It’s a great product at its core and there are things we could do to jump-start it.’ They came back six weeks later and said, ‘We agree with your assessment. Would you be willing to come in and do all these things?’”

When Bluestem promised to make a $3.5 million investment, Fischer joined the company as CEO in May 2018.

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Scott Fischer. Photo by Sharon Fisher

The first issue Fischer had to deal with was a big one: taste.

“We started out by talking to our consumers,” Fischer said. “Consumers always know why you’re growing or not growing.”

Those consumers said was the butter tasted “coconutty.”

“A very small percentage loved it,” Fischer said. “Another percentage hated it. So I said, let’s get rid of the coconut taste.”

Some consumers also said the packaging was confusing and not relevant, so Fischer hired a microagency out of Santa Monica to do a redesign.

The company also looked at ways to save money on distribution and its supply chain, such as saving 60% on supply costs by switching to Uber Freight and consolidating all its purchasing through one broker and sending it to a single location, Fischer said.

“It used to cost $6,000 to ship,” he said. “Today it costs $350.”

Most important, Melt had to decide what its brand was – and Fischer got a commitment from the remaining six employees (now there’s 11) that they would live the brand as well.

“If we say ‘organic,’ we have to be organic,” he said. “If we say ‘save the planet,’ we have to save the planet. We have a set of values we adhere to and we do that every day.”

Fischer also altered the way the company was run, such as changing the CEO’s office to the “team room” and putting his office in the bullpen with everyone else so he’s more accessible.

“I trust these people. I hired them because they’re phenomenal experts at what they do,” Fischer said. “Nobody gets penalized for making a mistake. It’s different if you make the same mistake over and over again. We celebrate mistakes because we just discovered another thing we’ll never do wrong again.”