Fast food chain Chipotle has made two investments from its $50 million Cultivate Next food tech venture fund this week. The investments — one in restaurant automation and another in meat alternatives — offer a glimpse into where the company thinks the restaurant industry’s future lies.
Chipotle announced the fund back in April. The plan was to invest in “seed to Series B stage companies that can accelerate the Company’s strategic priorities such as running great restaurants, amplifying technology and innovation, further advancing its Food With Integrity mission, and expanding access and convenience for consumers.”
The first investment Chipotle made with its food tech fund was in a company called Hyphen, a San Jose company that “automates meal production and augments labor, which increases profitability and efficiency in food service.”
That sounds a lot like making burritos with robots. Which probably sounds pretty good to Chipotle. After all, most QSR companies (and small independent taco stands for that matter), struggle with an acute labor shortage. And that shortage is most acute at the lower end of the wage scale.
So for Chipotle to pour millions into an automation platform makes perfect sense.
Here is what Chipotle CTO Curt Garner said when we covered the fund’s creation in April.
“We are exploring investments in emerging innovation that will enhance our employee and guest experience, and quite possibly revolutionize the restaurant industry,” Garner said. “Investing in forward-thinking ventures that are looking to drive meaningful change at scale will help accelerate Chipotle’s aggressive growth plans.”
Delicious Mushroom Root Burgers
Another long-term issue for a company like Chipotle is food sourcing and sustainability. This probably explains the second investment announced this week, in a company called Meati Foods. This Boulder, Colorado, company was founded in 2016 to create a sustainable meat substitute made from mushroom roots. Sounds…yummy. But for those looking ahead, which seems to be the whole point of Chipotle’s food tech fund, investing in a meat substitute makes sense. This probably also addresses the “food with integrity” component to the fund’s investment thesis laid out back in April.
After all, the popularity of Impossible Burger and some of its rivals have made it possible for vegans to have something close to the experience of a delicious burger without the guilt associated with, well, killing a cow. Or for some, with clearing millions of acres of rainforest to create grazing land for cattle.
It’s unclear how much Chipotle invested in each of the two companies. We assume it’s quite a bit less than the $50 million available in the fund. Chipotle is a participating (not a leading) investor in new funding rounds for both companies.
Both companies have already raised substantial amounts of money. In February, Hyphen raised a $24 million Series C round led by Tiger Global. The leading VC firm has invested in some of the biggest names in tech, including Meta, Stripe, Airbnb, Block, Checkout.com, and many more.
Chipotle joined Hypen’s new $50 million round, also led by Tiger. That brings Hyphen’s total raised since launch to $84 million.
Meanwhile, Meati has raised more than $275 million since its founding six years ago. Chipotle is one of many investors in Meati’s $150 million Series C round announced last week.
Why This Matters
Here’s why Chipotle’s fund is interesting to local. Local independent restaurants compete with multi-location brands for customers and labor. Funds like Cultivate Next are an early warning system for what may eventually become the standard in restaurant operations. This involves everything from how the food is prepped to what ingredients go into the food that is served. And the degree to which restaurants will need to rely on cheap hourly labor to keep their doors open.
Will technologies like those Chipotle is investing in widen national chains’ competitive advantage over mom-and-pop greasy spoons over time? Things seem to be moving in that direction.
