The ‘VC of food’ Allison Rose on investing in restaurants: 'It's more about supporting the chef.’View transcript
As the sole investor at Rose Culinary Ventures, Allison Rose has provided seed round funding to some of the West Coast’s top restaurants, including a handful that boast Michelin stars, making a name for herself as the “VC of food” in the process.
According to Rose, funding restaurants is like collecting art — you might make some money selling it someday, but the real motivation is enjoying the art. That approach may not be surprising considering only 40% of restaurants in the US make it beyond their first year. The pandemic was especially hard on the restaurant industry, prompting Rose Culinary to pivot to consumer packaged goods. Now, Rose invests in everything from Kombucha to high-tech grills.
Rose is married to Coatue Ventures chairman Dan Rose, whose firm invests mainly in software. Although Dan has given valuable advice on the gadgets and CPG products Allison invests in, he leaves the food to her.
When we spoke with Rose, she explained what it takes to open a world-renowned restaurant and discussed her move to CPG investing.
From restaurants to CPG brands00:00:00
The Business of Business: Tell me about Rose Culinary Ventures, your role there, and how it got started?
Allison Rose: We were living in Silicon Valley. And at the time that we moved to Palo Alto, there weren't a whole lot of restaurant options. And so we were driving to the city a lot, just for date night or something with my husband, and a friend of ours from business school was a restaurant investor. I kept calling him, bugging him for restaurant reservations, where should we go? And so we fell in love with one of the restaurants and kept going over and over again.
Then our friend said, “You know, why don't you invest? It could be your spot.” So we did, and that was kind of fun. Then he had a sous chef that was opening up his own spot, and we're like, “Well, wait, we really want to support him.” And then he had a friend that was opening up another restaurant. It ended up just being more about supporting the chef and wanting to have an experience that was unique. It's kind of like collecting art, you find an artist that you really appreciate and admire, and you maybe want to invest into more than one piece, or most people are not really investing in the piece of art, because you're going to get your money back from it. But because you actually like the art and like the artists.
That's my number one rule with restaurants, I view chefs as the artist and the food as the art. So I only do stuff that I absolutely love. I don't have any formal culinary background training or anything like that. I just do it based on a gut feeling and just appreciating the craft. So it started with that. Then it snowballed and all of a sudden I had 10 restaurants in the city.
I had a sous chef and a sommelier from French Laundry reach out to me. I couldn't believe it. They sent me a deck and they wanted to do a restaurant in downtown Palo Alto. It was like all the stars had aligned. I was so excited. It was like this team was for sure a success. I worked with them closely on helping them figure out location and who should be their investors. I actually ended up throwing a dinner party and had them fully funded by the end of the night because everybody in Palo Alto was so wanting a Michelin-starred restaurant. So it was an easy sell. And they're doing great.
“That's my number one rule with restaurants, I view chefs as the artist and the food as the art.”
COVID has been hard on all the restaurants. But that was really exciting. And then things just started happening. All of a sudden, I'm like, “Maybe I should make this official.” So I created Rose Culinary. The thing with restaurants is there's not a ton as an investor, like with being an art collector, there's not a ton of money to be made with it. It's really more about supporting the chef.
Fast forward four years later, my kids are feeling a little burnt out on Silicon Valley. They threatened to go to boarding school in Hawaii. I tell them they can go but I'm going with them. My husband stays in Silicon Valley and commutes to Hawaii every weekend. And it was going to be just a one year experiment, a gap year sort of thing. It ended up being a clear fit for our family. This is where we really want it to be. Then all of a sudden, I'm like, “Well, wait, this is so frustrating. The best part about being a restaurant investor is dining in the restaurant. And now I'm living in Hawaii.” So I quickly jumped on a few projects in Hawaii, I did three restaurants over here.
Then COVID happened and so all of a sudden these poor chefs are just — it was rough. It's still rough. I have several that will not make it back. They'll be closed forever, which sucks. But just organically, when we moved to Hawaii, people found out I was in the food world, and the Big Island is so rich with innovation and produce. We live up in Waimea which is farm country. I started being approached by little — not startups, but small innovations of culinary things, hot sauces and little garden stuff.
Shaka Tea reached out to me, she's this dynamite CEO, and she's basically created a tea made from a plant called mamaki, which grows wild here in Hawaii. She's trying to change the whole beverage industry and get sugar off the shelves. She's using monkfruit and mamaki and creating this really great tea. I wanted to support her because I liked her, had nothing to do with wanting to get into the CPG category or investing beyond restaurants. But I just liked her. I felt like it was something that was good for Hawaii.
At the same time, I was also doing a restaurant here on the Big Island that was also a rum company. The story was really great because they're bringing back heirloom sugarcane to grow the rum and restoring the Kohala coast in a really holistic way. So that seemed like a no brainer. Then it just started to happen. Somebody else reached out to me that wasn't in Hawaii that wanted me to invest in their CPG product. It was in the middle of COVID. And I was thinking, you know, why not? This is a great brand. This is something I feel like I want to do, so it just happened organically.
Now there's quite a few companies that we've invested in. For me, when I invest in anything I do, it's about the person, because I really truly believe that you can have a good product, but not have a CEO that's going to put their heart and soul into it. It's not going to work. And it's the same thing with a chef. When I meet a chef, I know right away if they have grit, and it takes serious grit. It's really hard being in the restaurant industry.
“When I meet a chef, I know right away if they have grit, and it takes serious grit. It's really hard being in the restaurant industry.”
Starting a CPG company is even harder because you're dealing with a bunch of other different layers. I'm using a little bit of my restaurant knowledge as far as maybe an elevated list of chefs. So my palate has been a little more elevated and trying to be choosy about the categories that I'm now moving to invest in. The best thing with CPG is that I can get it here in Hawaii. I can enjoy it every day. We just did a company called MUD\WTR. I'm really excited about it. It was mostly because I was drinking it every morning and loved the taste, loved how it made me feel. And it turns out, great CEO, great company.
Another one we just did is Better Booch. I've been wanting to do a kombucha company for a long time. I've struggled because I really haven't found a kombucha that I like. Sometimes they're just a little too sour or too bubbly. They've got a really hard mouthfeel. I discovered this one when I was in California, absolutely loved it, and met the CEO. I'm like, this guy is great. He's got what it takes. He's super smart. And it's a husband and wife team. For me, it's about the story. It's about the CEO, it's about the passion that they have behind the brand. Then of course I have to like it, it wouldn't be any fun to invest in something that I didn't enjoy myself.
The challenges of being a food VC00:08:20
When the pandemic hit, it was very hard on the restaurant industry. Was CPG your way of keeping things going or pivoting to something that you knew could withstand a pandemic?
It really happened organically because living here on the Big Island, we're up at a farm and we live 20 minutes from a grocery store. Early COVID days, nobody was leaving their house. COVID actually changed the way the consumer feels comfortable online. I know for myself, all of a sudden, instead of defaulting to Amazon, I was reaching out to my favorite companies. My favorite tortilla place, my favorite chip place, my favorite hot sauce place, because I couldn't find it on Amazon or I just thought, “Well, why not buy it in bulk? Okay, I'll get 12 hot sauces and stuff my pantry because who knows how long this is gonna [last]. It seemed like a natural thing that I was doing. And it triggered something like, well, this could be a really fun way to stay in the culinary world. Harness the information and the knowledge that I've learned for the last few years and apply it to a food product that I think will do well and one that I can enjoy.
You mentioned that the restaurant industry is not an easy one. I'm sure you knew that going into this. Did that worry you? Did people warn you beforehand about becoming a food VC?
Our good friend, Marc Weiser, who we met in Michigan, my husband was going to business school at the time. His first restaurant was Gary Danko. He's just one of those guys that everything that he was investing in was succeeding. I piggybacked with him at the very beginning. He was really sweet, because I remember he told me, he's like, “It's a terrible thing to do, you'll never make any money, you'll probably lose all your money. But if you want to support the chef.”
Then it clicked for me, because my husband and I love collecting art. That is the perfect comparison. I don't buy a piece of art because I think it's going to triple in X value in 10 years, I buy it because I want to live with it every day, and I want to enjoy it. That's how I see the food industry.
“No chef wants your investor to start giving opinions on the wallpaper and the light fixtures and what's on the menu.”
Not only am I doing CPGs, but then there's a bunch of other consumer tech companies, like good eggs is one of my absolute favorites. And I invested in them before COVID. And COVID just really cemented that that is a model that's going to stick around for a long time. And again, a dynamic CEO, Bentley is one of the best CEOs I've come across. He's stupendous at his job and well respected by his employees. All of those things add up and matter.
What else makes a worthy investment for you? What else makes a restaurant that you can see will succeed or at least make it past its first year?
There's certain things that I look for, obviously, it's the chef, but chefs are artists, so most of them are not really great at the business side. So if I find a team, Che Fico in San Francisco is like the perfect example. David Nayfeld is this dynamic chef, he's got a big personality, he's always thinking outside the box. His partner, Matt, is much more linear. He holds David together. When David gets a little to do, David or Matt definitely can ground the company. He's a savvy businessman. That's the perfect team.
It was the same with Protégé in Palo Alto. It was an incredible chef. The two of them together actually have great business sense. I find a super eccentric chef, and they don't have a team backing them, those are usually the ones that fall apart, you have to have both.
My favorite duo, it's a husband and wife in San Francisco, from Birdsong. They actually met at a restaurant, she was running back to the house for the venue, and he was chef de cuisine there. They met there, and they're just adorable together, because they are like the perfect synergy. And I love that they’re husband and wife. He's got the creativity on the plate, and then she's really great at keeping everything organized and thinking outside of the box. During COVID a lot of restaurants either just stayed home and disappeared, or some were a little scrappy and tried to figure out how to keep things going.
One of the things Birdsong did was come up with this new concept. The day they were told they had to close down he had 40 chickens in his freezer or refrigerator, and he's trying to figure out what to do with them. He quickly started making chicken sandwiches and all of a sudden, everyday through COVID people were signing up to buy one of his chicken sandwiches.
How to invest in a restaurant00:14:23
Could you walk me through the process of meeting one of these teams for the first time and getting a business off the ground? And whether you take more of a hands off approach or go with them every step of the way.
I'll just start with the restaurant side. I'll use Che Fico as a good example. So I get invited to lunch with David and Matt. It's not at their restaurant because they don't have a restaurant. It's at a busy restaurant, downtown San Francisco. I feel like I am one of those people that maybe I'm discerning, and I'm kind of picky. Maybe I'm too quick to judge. I don't know, maybe it's a flaw. Maybe it's an asset. I usually have a gut [feeling] when I meet somebody.
I sit down in the booth and David and Matt are sitting across from me, and that was it, it was chemistry right away. I remember leaving the meeting feeling like “Wow, that guy is going to be the next Food Network chef. Thank God he has Matt to ground him because he can go really far.” But it's nice that he's got a team to support that. I needed to taste his food at that point. It was like an intuitive feeling that I'm like, “This guy has the passion and the grit, of course, he pitched me what the restaurant was going to be and what he was hoping for.”
The next step was I had him come and cook for me at my house. Because that's the proof, it's on the plate. Blown away, it was exceptional, really well done. He then found a location, I introduced him to some other friends that might be interested in investing, he had to do a big fundraising, ask and get the rest of the money himself. And that's a huge part. I mean, it's really hard to raise X millions of dollars, open up a restaurant. If a chef can do that, that definitely shows that they've got the ability to at least take it to the next step.
“The hardest part about opening up a restaurant is actually the funding. It's actually quite hard to raise enough capital to get you where you need to be.”
But here's the thing, no chef wants your investor to start giving opinions on the wallpaper and the light fixtures and what's on the menu. So usually chefs love me because I totally intrinsically trust them. I wouldn't invest in them if I didn't trust them, when I know that that's not my place. I should change my own light fixtures and wallpaper in my house. But it's not my [place] if there's something significantly wrong.
At one point, Birdsong had a different name and it was really hard to pronounce. And I did make a suggestion that they might want to change it. I didn't say I wouldn't invest if they didn't change. It was just a suggestion. But that's as far as I've ever gone. I've never made a comment on the food or the wine list or anything because this is their creation. Comparing it to an artist, you wouldn't want the artists behind you saying “Why did you use yellow instead of green? I really don't like yellow.” Well then, you shouldn't have bought the art. So that's how I go about my chef thing.
I like to go in early stage. I like coming in early stage because it's where I'm comfortable. So angel and seed rounds, sometimes I'll do a Series A but once it gets to Series B or C it's usually out of my price point. There's been one or two, but mostly I like being the first one, and this was very similar with the chefs. Typically I was the first person to invest in them and take a risk. I think I'm comfortable with taking risks. I apply that to both CPG, the tech stuff that I've done and the restaurant stuff.
What are your greatest challenges in this position? Whether that's taking on a business that doesn't turn out so well or watching places close during the pandemic?
There are two restaurants that are not going to make it. It's brutal to watch because these people have poured their heart and souls into it. I have one restaurant in San Francisco. This was going to be a big one for her. I really believed it was going to get her a third Michelin star. There aren't many female chefs that have Michelin stars at all, let alone three.
The formula was perfect. The location was perfect. She's perfect. The food was amazing. She opened up a month before COVID. And it was a very expensive location, the real estate was expensive, and the location itself, that whole part of LA is still shut down. There's no way she can make it back. And so it's just brutal to watch, and for her having to go and call all of her investors and basically say, “Your money's gone.” It's really, really tough, so much empathy for that.
With the product stuff, the hardest thing is saying no. I mean, it's easy to say no, if I don't like the product, and I don't even take the phone call. But if I like the product, and I like the CEO, there's just something not quite clicking and the numbers just don't quite feel right. And it's awful. I hate saying no. It's like telling an artist, “Yeah, it's good, but I don't really like it.” So that's the hardest part, it is staying true to my discernment, which I think I've got a good navigation on. Even if you get further down the line in a relationship, and they're really excited to have Rose Culinary part of their brand, it's awful to turn them down. I just hate it. So I try not to take the phone call until I know for sure that I've done my due diligence.
So how often do the no’s come?
We're probably seeing maybe four to six companies a month. And we're looking at that. I'm usually investing in about one a month. That's where we're at. But restaurants, I have been pitched a few this month. I am doing one because it's an extension of Birdsong. I already believe in them, and I'm already part of their family. The restaurant thing I'm not as excited about anymore just simply because I live in Hawaii, and it's very selfish. I don't get to enjoy it. I am doing a project in Carmel because there were just some chefs. I can't say no to just because I know they're going to be amazing. This one chef that I'm backing in Carmel, like it's going to be a home run. I just know it.
Advice for breaking into the food industry00:21:29
What advice would you give to somebody who wants to open a restaurant or wants to have their own CPG brand?
For the restaurant side, I just had this conversation with this guy from Carmel that's opening up a really great spot down there. I tell him from my experience, and even every chef knows us, it's gonna be hard, and he's got little kids, and it's gonna be a tough road. There's nothing easy about opening up a restaurant, and then you throw pandemics in the mix now, and all of a sudden, it's even harder. The hardest part about opening up a restaurant is actually the funding. It's actually quite hard to raise enough capital to get you where you need to be. I like to help with that part as much as I can.
I've got a bunch of foodie friends that are interested in restaurant investing. So that's the trickiest part. Once you get through that, and then you've got to get you got to make sure you've got a staff and right now, I think it's a global thing. Mostly in cities, San Francisco, New York knows the most struggling just trying to find work trying to find staff. It's just almost impossible. I've had two chefs call me this week saying, we want to fully open up. California is letting us fully open up, but we literally cannot hire staff, we cannot find them. We cannot find dishwashers, we cannot find waitstaff, it's a problem. So that's a whole new layer.
“The thing with restaurants is...there's not a ton of money to be made with it. It's really more about supporting the chef.”
But even before COVID, you need to have a team that fully believes in you. Because those first few years, days, months are really hard. You're trying to find yourself, the chef is trying to find him or herself on the plate and express that to the customer while running a business. Most chefs are artists, they're there, they didn't go to business school. It's super tricky. So having a partner or having somebody that works for you that can manage the business aspect of the restaurant would probably free the chef up to be a little more on the creative side. For consumer products that's a tough one. I'm kind of new at this, it's really just been in the last year. The most important thing is creating a brand. I know that social media has been a huge influence, especially before COVID, but definitely since COVID a lot of my products I'm finding through Instagram. Like, is there a following and all that kind of stuff. And then, of course, everybody wants an influencer. So you get an influencer, you can get an ambassador, which is like a sports person or something like that. You're on your way with those are like the two golden tickets, also hard to do.
We're just getting started. I'm learning as I go, I made a few mistakes. The journey has been really fun. It's a weird thing that COVID has actually been the best thing that happened to Ross Culinary. Because it helped me move towards understanding where I want to go and what my direction is.
Do you have any other arenas you want to get into anything you're thinking about? Or are you sticking in these two lanes right now?
I've done a few. I just did a barbecue company called Spark Grill. I did it because I was really excited about it. Another really wonderful CEO doing something I actually think is going to be good for our world. But it's tricky, because I don't really know anything about product. I know about food product, but I don't know about electronics. So I'm researching a blender right now. It's kind of fun. But again, I need to do a little more due diligence, but the Spark barbecue has been great. I actually think he's gonna do really well. But it's all new. It's the first kitchen gadget, I guess you'd call it. That's really fun. I've looked at a bunch of delivery sites. Startups like food delivery, grocery delivery sites. I try to be careful not to invest in anything that's going to compete with something I've already invested in.
Now that you're looking at products and electronics, do you ever collaborate with Dan Rose? Do you ever ask for his input on something that you're looking into?
Yeah, for sure. He's my biggest cheerleader. He's great. I keep bringing products into the house, and I make him do blind tastes. He's like, “I don't know.” I don't think his palate is as refined as mine. But he's getting there. We did a whole granola bar case study the other day, I made him taste everything. And it was great. He chose the one I invested in. So that was smart. I don't know if my daughter tipped him off or not.
As far as tech stuff goes, I'll certainly run stuff by him. He's an expert at what he does. I tried to keep the food stuff to me and let him do the rest.
Well, it sounds like at least he knows his granola bars.
He does. It’s funny, he’s alone in California. He called me and he's like, “There's nothing to buy in the grocery store. I need you to help me.” So yeah, we make a good team. It's fun to eat out with him. When we first met, I think he tried to impress me. You invited me to make pizza night and he bought one of those Boboli pizza crusts. And he took a jar of canned garlic, like the gross kind, and he put the whole jar on it. And then I think he put like, they'll be two slices, and tried to convince me that he knew how to cook. So I quickly never let him cook for me again.