Shelf Engine has made some major changes since it was founded about two years ago.
The Seattle startup began by providing technology to grocery stores to create more accurate orders for perishable items like bread and produce, but the company has since evolved to take over the ordering process from stores.
Shelf Engine has raised $4.3 million to grow the network of grocery stores on its platform and handle ordering for more departments for existing store customers. Today, Shelf Engine has more than 250 organizations on its platform, including national names like WeWork, Seattle chains such as Bartell Drugs, PCC Natural Markets and the Swedish Hospital network.
Shelf Engine uses artificial intelligence to predict what stores will need, and any items that don’t sell Shelf will take back, essentially guaranteeing the sale. The company starts by taking over a single type of order, such as bread or produce, and then embeds itself deeper within the store’s ordering process, with a goal of eliminating waste.
“Grocery stores don’t want to manage a bunch more SaaS platforms, they just want to make sure their waste problem goes away,” said Stefan Kalb, Shelf Engine co-founder. “It’s a ton of pressure for them … and so we are here to basically say, ‘hey, let’s eliminate that burden from you all together instead of having another system to manage.'”
Shelf Engine makes money by marking up items it orders for stores, betting that grocers will save money by trading the extra cost on orders for the losses that come from unsold food. The same way many grocery chains have out-sourced delivery to Instacart, Shelf Engine wants to take control of the ordering process.
Shelf Engine, which recently went through the famed Y-Combinator accelerator, now has 11 employees and has raised more than $5 million in its lifetime. To embed itself deeper in stores’ ordering operations and add more stores to its platforms, Shelf Engine is beefing up its sales and product groups as part of the new investment.
Shelf Engine drew the attention of some big investors in this funding round, including new participants Bain Capital Ventures and Foundation Capital. Also joining in are existing investors such as Alexis Ohanian’s Initialized Capital and Liquid 2 Ventures.
Kalb got the idea for the company through another startup he co-founded: Molly’s, which provides healthy food to hospitals, grocery stores, coffee shops, gyms and offices. Kalb noticed the difficulty of building efficient fresh food orders and decided to build software that helped Molly’s purchase the right amount of bulk food to fulfill customer requests.
The financial impact was so substantial that Kalb turned that idea into its own company.
Kalb, who was born in France and graduated from Western Washington University with degrees in mathematics and economics, co-founded Shelf Engine with Bede Jordan, a Microsoft veteran who was most recently the principal software engineering lead for the company’s HoloLens team.
The grocery industry is at a crossroads, Kalb told GeekWire, looking at increased involvement from Amazon, both through its acquisition of Whole Foods Market and the expansion of Amazon Go. Molly’s was among the first local providers to supply food for the original Amazon Go store at launch, so Kalb is very familiar with the technology.
Kalb thinks the technology that powers Amazon Go and removes cashiers from store puts a lot of pressure on other grocers. He said the most grocers will someday have to develop cashier-less technology, but that remains a long way out. Until then, grocers will look to other areas to save money, and that’s where Shelf Engine wants to take advantage.
“I think we are going to become a very fast decision for any grocery store, because they will need to compete with the Amazons of the world, and so anywhere they see a massive savings they’ll be working with people like us,” Kalb said.