Lyofresh Technologies is developing efficient and affordable freeze dryers to reduce the economic and technical barriers to using freeze drying as a food preservation method. This enabling technology can be implemented at different scales across the food system to avoid food waste before it occurs while creating value added products.
We've identified several existing and new customer segments, each having a specific value proposition. Please see attached business model canvas.
We are focusing B2B sales with food processors as our first market segment, as it is an existing and growing global market; there is a demonstrated need for more efficient freeze dryers in this market segment; and it will allow us to generate revenues quickly. We have two letters of intent from one camping food company (in St-Hyacinthe, Quebec) and one chain of coffee shops (Toronto, Ontario) to purchase the first units that we build. These companies are willing to beta test the first MVPs that we produce, and we are working closely with them as we develop the technology.
The primary decision maker is the owner or buyer at the processing facility who will be motivated by economic and performance benefits. The largest barriers for existing freeze drying technology are the high capital and operating costs, and most importantly the limited output (1 batch every 25-72 hours).
For Food Processors not currently using freeze dryers, the investment cost for adopting a Lyofresh Freeze Dryer will be quickly offset by the new revenue streams it will enable, while reducing economic losses from overproduction.
For Food Processors who currently use freeze dryers, the investment cost for adopting a Lyofresh Freeze Dryer will be quickly offset by the capital and operating costs, increased capacity and efficiency.
A variety of business models are considered to reduce the barriers of adopting our technology: one example is co-ventures with food processors, where we partner with existing processors and farms, creating a supply chain network to source, process and market freeze dried foods, while reducing the capital costs for
processors and allowing Lyofresh to using existing facilities and infrastructures.
We will be experimenting with a few business models, which will have an impact on the customer relationships. When developing cooperative relationships where we provide technology and our partners provide processing facilities or inputs and distribution networks, it will be a very close partnership as profits will be shared.
In a transaction B2B model, we are offering the technology, as well as preventative maintenance and repair services, as well as access to our database of optimized freeze drying profiles.
For B2B transaction sales, our business model is Design, Marketing and Sales of Freeze dryers, and partner with third party manufacturers for fabrication. The main activities we perform or manage are:
Third Party Manufacturing
Marketing and Branding
York University: incubated in the Bergeron Entrepreneurs in Science and Technology (BEST) Lab, partner with the Osgood Law IP clinic, partner with Innovation York's LaunchYU accelerator and resources, partner with Lassonde School of Engineering with faculty and for capstone projects.
Ampleon: semiconductor manufacturer for semiconductor microwave generator
RFMW: distributor of microwave equipment
Danfoss: manufacturer of refrigeration compressors
We've been working on this venture for over 2 years, developing a parallel innovation model where we develop a technology for an existing business or market need, while also meaning to create an enabling technology to reduce hunger and avoidable food waste. World Vision can be a powerful partner in helping us implement and measure our vision and impacts, as we plan on scaling our tech in developing countries.
B2B sales to food processors; we expect revenues of $12 million a year within three years. This may seem high, however this type of industrial equipment typically sells for between $200,000 - $1-2 million depending on the size of the machine. Our market research (from MaRS) indicates that the market is estimated at $4.5 billion USD in 2018.
We will also generate recurring revenue from a preventative maintenance program, as well as access to our optimized database of freeze drying profiles.
The largest cost will be payments to third party manufacturers partners for the fabrication of the freeze dryers. The second largest cost will be operating costs linked to R&D, sales, marketing and distribution. Approximately half of the capital needs will be towards salaries of the team.
We have $320,000 in letters of intent with our first two customers. Depending on the speed at which we can deliver units to the customers, we expect profitability within the first year of operation as margins on sales are quite high.
The company's mission is only slightly different than the UN SDG #2: innovating to end hunger, achieve food security and create a global sustainable food system. Impact in is our DNA, since from day 1 the end goal is to develop increasingly more efficient and affordable freeze dryers that can be implemented at each point in the food system to reduce avoidable food waste, create new revenue streams for farmers and processors, increase the supply of shelf stable foods at the local level to increase food security. The parallel innovation model allows us to use the profits we generate from industrial users in the developed world to perform R&D to deliver a unit that can be efficient and affordable enough to be used in developing countries at the farm level.
Maybe not a direct comparison, but we look up to Biolite, which has been successful in developing a consumer product (a camping stove) while translating the same technology in developing countries (a clean burning home stove), solving the problems of dirty burning home stoves causing premature deaths; and enabling household level electricity generation for lighting to replace dirty kerosene gas lanterns. We plan on implementing many of their lessons, such as creating strong partnerships with microfinance lending institutions, hiring local salespeople, in person demonstrations, and more. I'm not aware of any other example where food waste avoidance is being tackled using preservation / value added processing as a model.
There are a few ways we can think of at the farm level, and hope that World Vision will be our partner in some way. We can measure:
quantity of food processed at the farm (determines waste avoided, GHG reduction, economic loss avoidance)
quantification of revenues from revenues generated selling freeze dried food as a new revenue stream
food security/sovereignty measurements (Sphere guidelines or other methods)
whether a food reserve is established in the event of emergencies or disasters, which may lead to community emergency food reserves
Strengths & Weaknesses
Our strength is our passion for making a difference using a sustainable path as a company. We have a range of recent graduates as well as experienced professionals within the team. This has led us to progress very rapidly in the last 8 months on both the technology and business side. We've also build a network of advisors, including those with experience in the food system and food processing to guide us.
Our weakness is in our inexperience working in the food processing equipment space. While Some in the team have worked in the food processing space, it was not for equipment specifically.
The largest assumption or risk was from the technology itself and proving it at the prototype level. We have proven that the technology works at this level as of March 2018. The second largest is that it can scale, which is where we have begun the next phase of our prototyping process to build out a larger prototype/MVP.
Most Significant Challenge
Capital. It is the single most important constraint for us currently. Industrial hardware require large amounts of capital, and we will be raising with Angels hopefully in the next few months.