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Founded and Funded – from ‘Cow Tipping’ to CrowdCow with Founder Joe Heitzeberg and Scott Jacobson
AUTHOR: Erika Shaffer

L-R: Joe Heitzeberg, Wagyu Rancher, Msakii Ishii, a Cow in Gorgeous Setting

We’ve seen some brilliant ideas take off by way of crowdfunding, but crowdfunding the protein you eat is was a new take on the idea – and it worked!  In this episode of Founded and Funded, Madrona managing director Scott Jacobson sits down with serial founder and CEO of Crowd Cow, Joe Heitzeberg to discuss how Crowd Cow has made quality meat and seafood more accessible at scale while simultaneously cultivating a conscious and responsible consumer culture around protein consumption and working with small ranchers to help them deliver meat directly to consumers.

With the goal of creating a more meaningful connection between the farmer and the consumer, Crowd Cow posed an alternative to the current meat commodity system.  Joe intertwines his learnings from his time leading Madrona Venture Labs with early stage anecdotes of how he and his co-founder, Ethan Lowry, came up with the idea and ‘tested’ it with random Starbucks customers. Stemming from a co-worker who prized his relationship with a local rancher who supplied him with high quality beef, Joe and Ethan, took both a creative and innovative approach to mapping their solution Buy shares of a cow and when all the shares are claimed, the cow tips.  And then you are a ‘steak holder’! Ideas that were jokingly suggested by the founders gained traction, eventually equipping the company with data to keep their customers connected to quality beef, pork, poultry and seafood for every type of consumer and every kind of occasion. Local, quality product delivered from the farm to your door with just the tap of a button– a fresh solution, underpinned by consumer trends around sustainable and transparent purchases.

As the Covid-19 pandemic quickly became an imminent threat to the commercial meat industry, consumers began to see a rise in nationwide meat shortages due to production methodology of big agriculture. Flaws in this system became more apparent and Crowd Cow was not only able to build resilience as a company, but make a case for informed and conscious consumer behavior. In creating a culture of dependability, Joe emphasizes just how important it is for a company to be there for their customers through trying times. Scott and Joe also discuss the future of Crowd Cow and the online grocery industry. For the founder or entrepreneurial listener looking for creative problem solving inspiration or guidance on picking the right investors, this episode is absolutely for you. Listen in and be sure to check out Crowd Cow on social media at @crowdcowusa and www.crowdcow.com.

Full Transcript

Erika

Welcome to Founded and Funded. My name is Erika Shaffer. I work at Madrona Venture Group and I’m very pleased to be here with Scott Jacobson, Managing Director of Madrona Venture Group and Joe Heitzeberg, the Co-founder and CEO of Crowd Cow. Crowd Cow is a marketplace for high quality craft meats from farms and ranches around the world. They deliver directly to you through subscription and direct ordering. This is Joe’s third successful startup. Each of those startups were in somewhat different industries, but they were all looking to help people connect in meaningful and authentic ways. Crowd Cow is taking up that mantle to connect consumers to farmers and ranchers through the dinner table. And the company has some very clever ways of doing that. But I’m getting a little bit ahead of myself. I thought we would start with hearing from Joe about how Crowd Cow got started, where did the idea come from, how did you test it out?

 

Joe

Thank you. Thanks for having me. So, the origin story of Crowd Cow, if you will, was my Co- founder, Ethan Lowry, and I were talking to each other and committed to like working together. We worked together way back in the .com era days, way back when which is now 20 years ago. We have remained friends since, but since that early time we’d never actually collaborated again. We’d both gone off and done different startups on our own, and, I think, always wanted to work with each other again, since we got along so well. And I’d been a solo founder and really wanted to return to having a Co- founder. So, we started a list of ideas. You know, the spreadsheet of different ideas, the thesis, how we might test it, how interested we are, how uniquely we are suited doing that idea, how big the market is… just sort of ranking, ranking what we’d go learn about and test, and to figure out what we’re going to do.

 

Crowd Cow was not on that list at all. It was a guy named Brendan, who had worked for Ethan at Urbanspoon, Ethan’s previous company, as an engineer and then he had worked for me at Madrona Venture Labs. He had come to the office one day saying something like, oh man, I’m so excited, I’m getting a cow on Friday! We’re in this high-rise in downtown Seattle and we’re like, what? You’re getting a cow? He was so excited, and he explained how the farmer takes care of every animal. And by the way, when you when you sail in on the boat that settles the island, as this family did generations ago, you get the best land. And let me tell you, it’s about growing grass, as much as it is about raising animals because it’s about what they eat. The nutrient dense native grasses of this place, they got their pick of the best part of the island, you know, it’s in the family. And he’s explaining, in every different way, how much better this connection he had with his food was, for one, but he also emphasized how the beef tastes incredible. I looked at Brendan. He was so excited and oozing joy, and describing it in a joyful way, and I love beef. It was like when I was five, I would get that excited when my mom said we’re having steak on Friday. So, I can’t have it because he wouldn’t share. And I’m going to go hungry now, so I’m going to schlep it back to the grocery store where they don’t have anything like what he described. The best they seem to have been able to do is a little orange sticker that says “special”. So, whenever you have identified something you really want, that is clearly better for the planet, for the animal, tastes better, and you know the person you will support a small community, well, that is the thing that I want to serve my kid and make my kid excited about. But I don’t have that, the markets not giving me that, so no matter how much money I have, to want to buy that item, it’s inaccessible. Brendan, as he explained it, would drive a truck out there and bring home 500 pounds of meat. You had a huge meat freezer and it just sounded like a pain. I, for example, said, will you introduce me to the farm? And he said, oh, you’re too late, they only slaughter once a year. So, when you had a set of desires and a lot of pain to get there, in early adopters, you know going to that level of trouble, there is an opportunity in that. I didn’t realize that right away it was more just, hey, Ethan, you know, Brendan, you know this thing where he buys a cow? Ethan was like, yeah, he’s been doing that for years and would you ever do that? It sounds cool. Nicole’s a vegetarian, Ethan’s wife, so he’s not going to get a meat freezer. And we just got to talking about like why can’t I just buy five pounds of that somehow and just tap my phone and it shows up? And as we framed it that way, Ethan kind of had the light bulb of, well gee, there really should be a website where you can literally kind of quote “meet the farmer” sitting on your couch on your iPhone, watch a video, see some photos, get that intimacy. And maybe you are buying a cow. Why don’t we crowdfund an actual cow and 50 random strangers on the internet? Can each get their five to 10 pounds? And then we were riffing on this just as kind of a joking around conversation, like, oh, yeah, yeah, you claimed the shares. And when they’ve all sold the cow tips, and you become a stakeholder. It was too fun, we were laughing and smiling and so it was a very real problem. A cool solution that made you laugh and smile underpinned with fundamental consumer trends around sustainable transparent purchases within the beef or protein world. Its environmental concerns, animal welfare, it’s taste, I want the best steak if I’m going to eat steak, eat less meat, eat better meat, there are these mega trends happening. And we knew there was something potent about that idea. I think when we thought through the incumbent industry being so slow and big and vertically integrated, that we thought they’re not going to go do this, you know, and sold offline. They’re not even online yet. It felt like, wow, have we just sort of like identified a very big market. Well, how big is it? You know, beef 100 billion dollars if you add pork, or if you add chicken, it’s like another 40 odd billion dollars. And it just felt potent. The next step was, how do we validate this? And, one of the things that I learned at Madrona Venture Labs was you don’t go and build code or build a prototype, you just start talking to people. So, Ethan called 10 friends and I called 10 friends, literally right then and there, just to get reactions on the elevator pitch and the reactions were so black and white. It was just like, I’m totally doing this, or I’m never doing this I’m a vegetarian. And, so you really have that kind of black and white feedback to an elevator pitch. You usually have a lot of questions and nuances. So, this was great, but those people are our friends. So, we went down to the Starbucks, the nearest Starbucks, literally right then, on the spot, and just randomly went up to strangers. Excuse me, sir, may I ask you, do eat beef? Can I ask you some questions? We’re product designers and we have an idea. We got the same reaction. In fact, people were like, what is the URL, I have got to write this down. You know, we didn’t have a URL or a name or anything, it was just a concept. It was all very encouraging so that we thought, let’s go, let’s get a cow, let’s try to sell it using this crowdfunding thing. If we can sell it, great, that’s validation and we can keep exploring. If we can’t sell it, then you and I will get meat freezers, and we’ll shut it down, and in the worst case we’ll have a lot of great meat to eat. Our wives will be a little mad as us, maybe, but you know, in the name of entrepreneurship, you’ve got to try things you’ve got to be willing to fail. That was the origin story. We sold that first cow within 24 hours and we sent emails to our friends, but we had orders from random strangers. It just, right off the bat, felt right.

 

Scott

I’ll take it from here. It’s a great kind of founding story and you know. Ultimately Crowd Cow has expanded from selling product kind of one cow at a time to a broad assortment, lots of different proteins you can buy at any time, but Crowd Cow isn’t the first company to sell meat online. So, give us a little bit more about what makes Crowd Cow special and different for both your customers and the farmers you work with.

 

Joe

Yeah, and I will say, just in terms of assortment, you’re right, it’s at this point, beef, pork chicken, bison, seafood. In fact, and given the, the quality and assortment even within each of those categories, I think that today Crowd Cow has the best assortment, of any online retailer or offline frankly. Only the pure play seafood things might be some that beat us because we’re just building out our seafood now, but even that assortment is very strong. What really makes us unique is – this idea of a connection to where your food came from! We started with knocking on doors of farms and we built our own supply chain, where we’re talking about farms from 22 different states all across the United States and wild-cut fish from Alaska, etc., where it was literally down to the name of the boat and the fisherman, etc., right there on the pack of meat that shows up at your door with you in charge of which one you’re going to buy and why, and then favoriting your favorites. And, we did not work with the incumbent supply chain at all, we built something completely stand alone, so that gives us and gives you as a consumer access to things you just literally can’t find anywhere else, unless you live within 20 miles of that particular farm and they’re also at a farmer’s market, kind of, you know, quality and assortment. So that’s really that connection back to the producer, that transparency, to know that you’re in control of where your dollars go, who you’re supporting, what you’re eating, why, how it was produced and raised – full transparency on that. We’re really the only ones doing that all in.

 

Scott

Yeah, and that’s powerful. One of the great things about e-commerce, and we’re here in Seattle, in the backyard of Amazon, is just the simplicity for the customer you – you find some things you want to buy, you click and then in a day or two it shows up on your on your front doorstep but there’s obviously a lot of complexity and special things that go into making such a seamless experience. Can you give us a little bit of a look under the hood? What are the some of the things you built out that supply chain that enable that sort of magical customer experience?

 

Joe

A lot of it is forecasting and process and then tools to support all that. So, you didn’t, just back to the very earliest days, we did crowdfund the first cow then go and buy it, get it butchered and wrapped and then we packed and shipped it and that first cow actually shipped exactly five years ago today. It took from the time credit cards were charged, and the cow tipped, probably three weeks before it shipped. And we knew, beyond a niche, people aren’t going to wait that long. It’s got to be, really, the vision of tap your phone and it shows up, right? Instantaneous. We worked hard too and knowing that that was going to be the case, and knowing that we’d have this incredible assortment, we’re not going to have one New York steak product’s queue. That’s the commodity world. The best they can give you is price per pound, and a sticker that says “special”. We’re going to give you variety, different breeds, qualities, dry-aged, grass, grain, your choice, all the farms local, you want something local or want something from Japan. So, we’re going to have a lot of New York steak skews. As we did the math, we’re like we’re going to have hundreds of skews. One of the things we saw right away, when you’re shipping a perishable and you’re getting it to the door frozen and safe is there aren’t, still, and there was certainly not five years ago, third-party logistics companies that could do that for you. It’s possible to sell shampoo, get a Shopify website, and hire a three PL and your shipping orders now – not going to be cheap, they’re not going to be accurate. They’re not going to be cost effective, but they can do it for you. Perishables? They’re going to say, I can’t do that. And especially when you say, well, we’ve got 1000 plus product skews. They’ll just literally look at you and say, I, go away, I can’t even price that I don’t even know. So, we very early on knew that we’d have to build that piece. So just in terms of our supply chain, we don’t raise animals that’s farms. We don’t slaughter them. We don’t do the butcher piece. That’s a network we’ve assembled and coordinate with software. But we do, do the order packing and shipping because there was no one else who could do that. And that’s become a real asset. So, between that whole end to end, from the farm to your door, all the pieces in between, we control that picking piece and we control the curation the relationships, we obviously control the website. But all that software coordination using data will inform us how to keep this the virtual shelves stocked and how we can optimize things so that you know, when you when you place your order today, your order will ship out tomorrow. And if you live in most major cities, you’re going to get it the next day or two days. So, it’s, there’s tons of technology in the whole system.

 

Scott

So, as an entrepreneur you know that product market fit and building delightful customer experiences is tough. Sometimes even when you do that, it’s tough to build a good business. And, you know, I’d love to hear a bit about the journey. How do you go from building the delightful customer experience which you clearly have to navigating to building a great business?

 

Joe

Yeah, that’s a great one. I think first, just to note is Ethan and are not the ying and the yang co-founders that complement each other. We’re probably more similar than we are different. And one of the things we’re most similar on is delightful customer experiences. And I don’t mean just user interface, I really mean customer experience all the way through every point of contact and communication – the physical opening of the box, every aspect of that, measuring it, testing into it, and creating experiences that people want to share with others and make them smile and make them come back. So, we’ve biased for that, we also biased early for scale, because we did want to build a big business. So, we really spent a lot of time as technical co-founders, right, by background, on pre planning and building all the systems for scale and making choices in the business to support scale. We would joke the first maybe one or two years in we were, as you take a step back from all you’ve accomplished, in whatever period of time, we would joke a lot about well we have built the, the most overbuilt meat selling system ever for sure. Because we were doing a small volume of orders with an extremely high attention to detail in terms of the logistics and especially the customer experience, that was preparing for scale. I think the part where it’s always the hardest part in any business in ours, there’s a supply side and the demand side. In our business, the supply side is hard. Shipping orders is hard. The software is hard to supply chain is hard. These are farms don’t have websites, and they don’t answer their phone. So, in the early days, we were knocking on doors and getting the car and driving to meet farms, just to get our base built. And then once we had a reputation, they started coming to us, but it took a while to get over those kinds of humps. They’re not software pumps at all. It took a lot of time. But we always kind of knew, if we were hiring where would we hire complement ourselves. So, for us it’s the growth marketing and the merchandising side of the business. More so than the technical aspects. And certainly, logistics is also an area where the domain industry expertise and experience are very relevant.

 

Scott

COVID-19 has had a major impact on the world and on all our lives and it’s had an outsized impact on the meat industry in which in which you participate. Tell us about the impact COVID-19 has had on Crowd Cow and on the broader industry.

 

Joe

We’ve been at home for a while and our kids aren’t going back to school, right, necessarily, or if they do, we doubt they’ll stay back. And this is already been many months into it. We’re also not going back to work, right? So, so much fundamental demand and behavior has changed. Fundamentally for now going on three or four months and looks to stay changed for a quite long time. For us that meant you know, a lot fewer meals are being eaten in restaurants, initially starting with restaurant demand going to zero, and now creeping up very slowly. All that has gone home, all the school meals and, and lunchtime meals at work have gone home. So, all the at home meal cooked and eaten stuff has gone up dramatically. And that’s accelerated the, the shift to online grocery. Furthermore, I think in our industry, the meat plants had disproportionately been negatively affected by COVID virus infections. These big super scale meat plants, where people are standing shoulder to shoulder it’s all about efficiency and commodity to get you that steak that I described in the grocery store, can’t work with social distancing at the scale and efficiency that it that it used to. And so that created shortages. You know, it’s just viral infections rips through but then they have to re-engineer their processes, space people out and ad automation, that stuff takes a lot of time. So, meat shortages even further shifted the demand towards, towards online. And so, for us the massive uptick in demand immediately overnight. And that’s here to stay for quite some time, fundamentally. I think it exposed some weaknesses in that existing supply chain and hopefully,  also it’s given people a chance to not just panic by… here’s what we hear from our customers –  thank you for doing what you do. And I’ve introduced so many people to it, my parents, other neighbors and friends, people love to be the hero and everyone’s looking for the solution. And we’ve got such a great solution and people are happy to share great things with others. So, we’ve benefited tremendously from all of that.

 

I think the weakness and the incumbents, what I’m trying to say there is there are kind of three big things in the last 10 or 15 years. A series of Netflix documentaries that expose big AG, as having negative environmental and animal welfare consequences that made meat lovers feel guilty and question their habit. Then there was a wave of alt meat, for example, Bill Gates is funding a vegetable-based protein because we’ve got to save the planet. These kinds of messages in the mainstream, again, caused meat lovers to question or feel guilty. It didn’t cause them to stop eating meat, by the way, but it caused them to think about it more. And then the third wave is the fact that you can’t buy meat in any grocery store for a week or more. And the reason why is because these extreme viral infections that just the implications to labor exposes again, once again to the mass populace that, maybe we should be thinking about a better way to do the meat thing. And they’re finding us the ones that are finding us. It is a better way. That’s why we built it. So that’s exciting that we’re getting long term habits formed, but also just the shift of awareness that, hey, there can be another way to do this. It happened in beer and wine, it happened in chocolate and lots of other food categories went from one or two brands that were commodity orientation to local and international and varieties and artisanal, and that’s where meat should be,, too and on the dimension of connected back to the source. So.

 

Scott

You know, I know safety is paramount for you as it relates to your team. Give me a little bit more on why you why Crowd Cow hasn’t been impacted in the ways that that some of the larger players in its market have.

 

Joe

Yeah, so you know, when COVID first hit, it hit in Seattle, which I feel grateful or lucky for, because it made us all here in Seattle, think about COVID. I remember, you remember Scott, Covid-19 was in the local news and it wasn’t in the national news, and we all felt kind of weird about that because we had community spread, and we were all talking about oh no, this is unescapable now, it’s going to change things. And it was weird to not see the national news talking about it yet, there was a period of a few weeks there, at the very, very beginning. So, we took that as we’ve got to act now. I remember Redfin, I think had an infection, right. So, they had also been very exposed to it early, and they’d sent their whole headquarters home. Someone in our office said, oh, wow, my friend works there. And you know, they were just told to work from home. Are we considering that should we send everybody home? And I was like, well, I think the first thing we need to do is I’m going to, I’m driving to our fulfillment center tomorrow, see you, bye. The first thing we need to do is figure out safety for our guys packing the orders out. The vision here is, what we do is we provide a service that allows you to tap your phone and it just shows up. That’s our fulfillment staff. They can’t work from home. It triggered a sort of wartime mentality, we rallied everyone around like, okay, this is real. What are we going to do for safety? What is it going to mean for the business? How do we plan? We sort of got into this like, very wartime mode. And then when we realized what it meant for the business, it was very positive, in terms of demand. What it meant for a lot of our friends’ businesses was very negative, in other industries. We all felt a gratefulness and a responsibility, and like, this is our moment. This is our game day. Our customers need us more than ever. And then, if you think through our farms need is more than ever, because a lot of them depend on restaurant sales, which goes to zero. And our very diverse supply chain to kind of answer your question, little regional processors, little farms, co-ops all across the country were diversified, so even if they’re impacted by the virus in terms of infection, we’ve got so many of them, there’s no single point of failure. So, wow, we’re resilient. In terms of if they’re affected by COVID in terms of restaurant demand going by going down, we can really help them because we’ve got online and we’re already their partner. We sort of realized right away, wow, we’re in a really, we’re ready for this. Very grateful for that.

 

Scott

Broad assortment, as you talked about, ala cart and subscription model easy button for customers, click a couple things on your phone, and it just shows up. You’re in a great spot. What’s the future look like for Crowd Cow? What are what are we seeing five years from now?

 

Joe

Five years is a very long horizon. You know, we’re certainly bullish on online and there are theoretically things in the five-year time frame that would go beyond just online. I don’t know how much I can really talk to that on the podcast. And we’ve dabbled in this, we were suppliers to Shake Shack and the Seattle Mariners, and we’ve done some direct sales to restaurants. We’ve got the number one online Japanese wagyu seller, by far, we are. And that’s a restaurant meat. And so, there are things beyond just online that I think in the five-year timeframe we will consider. In the near term, we’re selling just proteins and people don’t eat just proteins. There are lots of ways to cook proteins and gifting is not a super big part of our business and we have a great product that’s eminently giftable, so I think in the one to two year timeframe, there’s clear growth opportunities for us just in the online business and immediate adjacencies. In the five-year time frame, ambitions can include things that aren’t as adjacent to what’s on your plate and meat, but look like things that could, that our platform could easily accommodate. And of course, the platform in terms of fulfillment is very special. And it’s currently amortized on one brand – Crowd Cow. And I think that there’s opportunity there to amortize that more broadly.

 

Scott

I can appreciate not wanting to share the full playbook with the entire world, so I appreciate the broad approach. To close let’s just talk about, this is not, by far, your first rodeo, you’ve been an entrepreneur many times over, a founder/CEO several times – what are things that you bring from, for the entrepreneurs who are listening here, company to company that you know and have learned over the years, that you’d encourage people to think about?

 

Joe

That’s a great question. Why do I do it is a question I talk to myself in my internal dialogue about a lot over the years – because I think each time I jump into a startup, I guess one thing is to realize you’re jumping into a multi-year thing. Don’t be paralyzed by that, and indecisive, but just because you’ve got to put one foot in front of the other and not give up, ever, just keep going. You also know that you’re on a journey that’s going to take you far down. I’m far deeper in the beef world than I ever thought. And I’ve met with the big major players in the industry at this point. And I’m so much deeper in that industry than I ever would have imagined, if you’d asked me 10 years ago. So, just choose carefully, and keep going.

 

In the early stage, demand is the most important thing. A lot of tech founders and I made this mistake for years. A lot of tech founders use the hammer they’ve got which is tech building, coding, prototyping. There was a whole dialogue for a long time, maybe still is I don’t pay attention, but, on Twitter about MVP, and rapid testing and now they’ve got the no code thing. You can test ideas quick. I don’t even think that’s the right first step. Why would you take your idea and build a website for even three weeks, when you could call the right people, call representative customers, or call people who’ve sold similar things to those same target customers? That was my number one learning at Madrona Venture Labs where we realized we’ve got to be fast at validating. So, as we thought through the problem of how to get fast at validating, it always started with phone calls. And I remember, you remember Scott, we worked in a security camera AI enabled security camera platform, right? There are a lot of different target markets, but we killed the idea. We’d worked on it for quite a long time, like a month or two, and we killed it. Really the day it died, was when we finally talked to this guy, who was a sales guy for 20 plus years selling security camera systems into every possible target market, like airport and apartment buildings, real estate, private home everything, and, he knew all the vendors, he knew all the customer types, he knew all the objections, he knew all the technologies, he knew the patent landscape. He knew all things we didn’t know that you can’t just Google for and talking to him, we realized between the fragmentation and the cost in the market and the patent portfolios that people were litigious about and everything. We realized this is not a good place, right now, at this point in time, for a startup from our lab, at least. And so, I was talking to people, it’s good advice for a technical founder – don’t go build stuff. Go talk to people.

 

Scott

That’s great. No, that resonates, and I think it’s it that’s a good place to wrap. Well, Joe, it’s been an absolute pleasure and honor to be able to ride along with you on this journey. And it’s really a fun story to tell and a very relatable story for customers, for suppliers for everybody. So, thanks for spending some time with us today. And we look forward to all the great things that are ahead of us to come.

 

Joe

Yeah, thank you. If I could put in one more plug, too, this is advice I always give entrepreneurs – when it comes to finding investors to work with, you don’t often have a choice, right? Or as much as you want. But to the extent you’ve got choices, or you want to prioritize your time, go for people who’ve got founder empathy. One of the reasons I really appreciate you, Scott, and working with you, what the pleasure is, is you’ve been an operator, and you can be direct. And the more you can have people around the table, who have got experience and have founder empathy, the happier you’re going to be as a founder, the more successful you’re going to be as a team. So, thank you.

 

Scott

I appreciate that!

 

Transcribed by https://otter.ai