Why slow food is attracting high-tech money

Why is a venture capital firm led by online pioneers backing a farm-to-table salad chain?

That is the question some tech industry watchers asked themselves two weeks ago, after Sweetgreen, a fast-casual salad restaurant with outlets on the East Coast, announced that it had raised $18.5 million in financing.

Individual investors in the company during this round included the restaurant magnates Danny Meyer, Daniel Boulud and David Chang, as well as Gary Hirshberg, chairman of Stonyfield Farm yogurt. But most of the financing came from Revolution Growth, an investment firm started by Steve Case, a founder of AOL, and other former AOL executives.

Revolution Growth typically finances consumer-focused, technology-enabled companies that aim to disrupt established industries. In that context, the salad start-up seemed a non sequitur.

"It has surprised people because it was not a typical technology or venture investment," Case said recently.

But he said he believes Sweetgreen is tapping into a large, underserved market: wellness-minded consumers who want to eat healthier food in casual settings with quick service.

"There's clearly a revolution in food underway," he said.

Many traditional brick-and-mortar companies have spent the past decade or two trying to translate their in-store customer services into online experiences. But one reason that tech investors are interested in Sweetgreen is that it is trying to do the reverse. The company's executives are applying the online ideal of a seamless user interface to in-store experiences for their customers.

A new Sweetgreen store on Kenmare Street in New York, scheduled to open this month, feels as if it were designed for people immersed in the lush visual experience of Instagram. The company is installing an open kitchen where customers can watch employees peel and slice raw vegetables as they wait for their salads.

"We really wanted to show, not tell, what we do," Nathaniel Ru, a Sweetgreen founder, said on a tour of the Kenmare restaurant. "It almost makes the kitchen part of the customer ­experience."

It's hard to resist the Sweetgreen narrative. The short version goes like this: In 2007, three students at Georgetown University in Washington — Nicolas Jammet, Jonathan Neman and Ru — were frustrated by a lack of affordable, healthy dining options near campus. So they decided to open a place of their own.

"We were the customer," Jammet said. "We were building it for ourselves."

To develop a menu, they held salad parties in their dorm rooms, using their classmates as focus groups. Then they scrounged small loans from relatives, friends and acquaintances — and used the money to renovate an empty, 560-square-foot building in Georgetown.

"The beauty of that small store — not only did it help us create the brand, but it forced us to be so simple," Neman said. "The food had to speak for itself."

From that single structure, the company has become a chain with 27 restaurants across Washington, D.C., and five East Coast states. Neman estimated revenue of about $50 million for 2014, up more than 50 percent from last year. Early next year, Sweetgreen plans to open in California.

Sweetgreen is but one of a number of fast-casual restaurant chains — including Dig Inn in New York and Tender Greens in California — promoting slow food, made locally from local ingredients, to wellness-minded diners. It buys its produce largely from local farmers, and each restaurant prepares the ingredients daily, in-house. Although customers can create their own dishes, most people order from a menu of a dozen or so company-designed salads.

But Sweetgreen has its own secret sauce that entices its target audience to come back. Early on, its founders identified a desire among certain social, health-conscious consumers, whose lives are largely mediated by devices, to make local, physical connections.

In each city, the company hires local architects to design one-off restaurants; some display the work of local artists.

"As the world becomes more flat, you want to feel like you belong somewhere," said Scott Belsky, a Sweetgreen investor who is a co-founder of Behance, an online showcase for creative work, now owned by Adobe. "Eating local food and supporting local artists is part of that."

Although Sweetgreen's local-touch approach is costlier to replicate than cookie-cutter restaurants, Case, the investor, said the company had the chance to become a national brand "that really is the Chipotle of healthier options."

He pointed out that Revolution Growth was doubling down on Sweetgreen. Last year, the firm invested $22 million.

"Of all the investments we have made, this has generated the most inbound interest from institutional investors and individual investors," Case said. "So there's something going on here that is a big idea."