David Niles will go to great lengths, or depths, to save food from going to waste: Sometimes, the 63-year-old goes dumpster diving near his home in Brooklyn, New York.

The far more sanitary digital version, Niles says, is an app called Too Good To Go, where retailers like restaurants and bakeries sell "surprise bags" of leftover food at discounted prices, usually between $3.99 to $9.99 apiece in the U.S. He's spent nearly $10,000 to pick up almost 2,000 surprise bags on his bicycle over the past four years, he says.

Too Good To Go, a Copenhagen-based company founded in 2015, brought in just under $162 million in revenue in U.S. dollars last year, according to documents reviewed by CNBC Make It — primarily by taking a cut of each surprise bag purchase and collecting annual membership fees from retailers.

In the U.S., the company typically takes $1.79 per bag and charges an annual membership fee of $89, a company spokesperson says.

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Publicly, Too Good To Go's mission is to help reduce global food waste, a problem that costs the world $1 trillion per year, the World Bank estimates. The company has yet to enjoy a profitable year, instead reinvesting its cash flow into expanding geographically, adding new retailers to its app, building new support offices and acquiring other startups, says CEO Mette Lykke.

"We do want to run a profitable company," says Lykke, who notes that her business earned $8 million last year before subtracting one-time costs. "If we really wanted to, we could go more hardcore for profitability. But again, it's not really why we're here," she adds.

'You're probably just going to have to make it work'

Too Good To Go was originally founded by a group of five Danish entrepreneurs: Thomas Bjørn, Stian Olesen, Klaus Bagge Pedersen, Brian Christensen and Adam Sigbrand. 

Lykke learned about the company while chatting with another woman on a bus near Copenhagen, and joined its first funding round in 2016 as an angel investor. An entrepreneur herself, Lykke co-founded a social fitness startup called Endomondo that was acquired by Under Armour for $85 million in 2015.

"I just thought [Too Good To Go] was the most genius app, and I loved the concept," she says.

In 2017, Too Good To Go's founders decided they needed a CEO who could more effectively grow the company — and they asked Lykke to take over, says a company spokesperson.

One of her first acts was to more deeply examine the startup's finances, which were in such poor shape that she went home and asked her husband if she should back out of the job, she says.

His response, Lykke recalls: "It's already been in the newspaper, and you're probably just going to have to make it work. So suck it up and get to work."

Lykke's first step toward company growth was actually a contraction, shuttering Too Good To Go in four of the 10 countries it operated in. The business had expanded "way too fast, way too soon" without fully figuring out its business model, she says.

Since then, Lykke has re-expanded the company to include a grocery service, a software system for food retailers and 100 million users across in 19 countries in Europe, North America and Australia. The app arrived in the United States in 2020, and already hosts retailers in 33 U.S. metro areas and counting, says a company spokesperson.

"[Food waste] a massive, massive issue, and it's important that we solve it fast," Lykke says.

Conviction to stay the course

Too Good To Go, which has nearly $158 million in investment funding, isn't the only for-profit company trying reduce food waste. Venture capitalists have poured more than $1 billion into the niche industry, funding businesses from online grocery delivery service Misfits Market to at-home composting system Mill, according to PitchBook data.

They're all attempting to reach users who are strapped for cash, care about the environment or both. Retailers don't often profit hugely from Too Good To Go sales, but some income is better than the $0 they'd get from throwing their extra food away. And at Delish Bakery in Medford, Oregon, for example, owner Susan Prunty says that multiple of her Too Good To Go customers have become full-priced regulars.

Some app users like Niles, the dumpster diver in Brooklyn, worry that Too Good To Go "greenwashes" the issue of food waste, giving users false impressions of environmental responsibility. But if every food retailer in the U.S. used a similar markdown mechanism, they'd save one million tons of food annually, according to calculations by Chicago-based nonprofit ReFED.

"That's the [environmental] equivalent of about 900,000 cars coming off the road," says Dana Gunders, ReFED's president.

A profitable, eco-friendly approach can't guarantee Too Good To Go's future success. Retailers could cut out the middleman by launching similar programs themselves, food safety regulatory hurdles vary by country and the company will eventually run out of stores to add to its app, says PitchBook food tech analyst Alex Frederick.

Too Good To Go's future depends on faith in the long-term potential of its business model and a conviction to stay the course over time, says Lykke.

"I'm very convinced that we have a brilliant model here," she says. "Having a great idea or concept is fantastic, but it's really only 10% of getting there. The rest is all about the execution." 

Conversions from EUR to USD were done using the OANDA conversion rate of 1 EUR to 1.103897 USD on December 31, 2023. 

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