Nutriomix: Have they done the maths without the (end) customers? #DHDL

The two founders of Nutri­omix must have had a slightly different idea, as they brought together two areas of exper­tise to turn an entire industry upside down. 25 years of research into which nutri­ents and combi­na­tions make cells live longer meet a specially devel­oped algo­rithm that can use this knowl­edge to make any recipe much healthier.

They offer this to food manu­fac­turers, who are supposed to use it to signif­i­cantly improve their prod­ucts for the benefit of their customers.

However, they also wanted to be paid accord­ingly by the lions: 500,000 euros for 5% was their deal proposal, which corre­sponds to a valu­a­tion of a whop­ping 10 million euros. And without any concrete turnover.

What seems incred­ibly high at first glance is not so unimag­in­able, even in times of declining startup valu­a­tions, if it is a very scal­able model that can really shake up an industry and could very quickly lead to very high early sales.

The first point seems to be fulfilled by the fact that it is prac­ti­cally soft­ware that can improve any dish at the touch of a button. However, we later learn that the „new“ recipe deter­mined in this way is usually first sent to the food manu­fac­turer’s experts, who test it for flavour and compo­si­tion. There may then be corre­sponding change requests, and ingre­di­ents added by the algo­rithm have to be removed and replaced by others. So there may well be several iter­a­tions and it is actu­ally logical that such a manu­fac­turer would not easily change a dish that has been tried and tested on the market for a long time. Even if it then becomes many times healthier. So it doesn’t seem to happen quite so auto­mat­i­cally after all, and such major customers normally require appro­priate support.

However, if you look at point two – the poten­tial for disrup­tion and revenue – it could actu­ally be worth­while.

Nutri­omix states that it is already in talks with three manu­fac­turers and wants to agree revenue shares with them. All three have offered stakes of between 10 and 20%, which imme­di­ately trig­gers strong reac­tions among the lions.

Food expert Till­mann Schulz imme­di­ately inter­jects that the price of a cheap frozen pizza, for example, would not allow for this. Trade lion Ralf Dümmel adds that the founders‘ argu­ment is that this pizza could be sold for €2.49 instead of just €1.99 in future, for example. Founder Christoph had previ­ously made the compar­ison with gluten-​free foods, which are consid­er­ably more expen­sive than normal foods.

But it is precisely this thesis that all the lions doubt. This is because it presup­poses that a large number of end consumers are prepared to spend more money on healthier food. Of course it works in certain areas, but Nutri­omix is not a food manu­fac­turer in a certain segment, but wants to work with the big food compa­nies. And then the ques­tion arises as to what makes their customers tick.

Till­mann Schulz doubts that the masses seri­ously want healthier food and has recog­nised from the sales figures of the prod­ucts he sells that the current trend is towards cheaper vari­ants. According to his find­ings, only a few people are prepared to pay premium prices for premium food.

And if you look at the market and the mass of cheap, but completely over-​sugared and chem­i­cally flavour-​manipulated foods, his doubts cannot be dismissed out of hand.

The Nutri­omix founders have prob­ably expe­ri­enced what often happens with start-​ups: They have accepted their thesis as truth too quickly. The good initial feed­back from the food manu­fac­turers they speak to may well have contributed to this. Unfor­tu­nately, the viewers don’t learn anything more about them, for example how big they are or how far the discus­sions have progressed.

Perhaps the lions have an infor­ma­tion advan­tage here, because they don’t seem to believe in the 10-20% revenue share promised to the start-​up. They hold on to their market knowl­edge, and this clearly speaks to a highly compet­i­tive market in which end consumers shop primarily on price and taste, which means small margins for manu­fac­turers and strongly favours the use of cheap raw mate­rials that are, however, strong flavour carriers (sugar, fat, salt, flavour enhancers). Even if this is, of course, the oppo­site of life-​prolonging.

This struc­ture or key drivers of a market – together with the usual margins – are what founders inside and outside the cave need to realise. Because only if you really under­stand the current market can you really shake it up.

At the end, Ralf Dümmel will point out that manu­fac­turers often don’t even have a 20% margin when they supply the big players in the market. So even if they were to increase their prices, they would run the risk of having hardly any more or even less margin than before if they agreed to work with such a startup – not to mention the threat of losing customers with any kind of change to an existing product.

In the end, all the lions drop out because they don’t believe in the founders‘ vision, even if some of them affirm that they would like the concept to succeed anyway.

In fact, the conclu­sion of this pitch is a rather depressing one: Customers don’t always do what’s good for them. No matter how useful, healthy or life-​enhancing – perhaps even life-​prolonging – a product is, whether the customer actu­ally buys it depends on a number of other factors. Only when you have fully under­stood these – and ideally their inter­ac­tions – can you really shake up a market. This is not always possible.