S7E89: Zale Tabakman / Local Grown Salads - The Importance of Unit Metrics & Scaling to Support the Goal of Providing McDonald's With Indoor Grown Salads

[0:00:00] Harry Duran: So Zale Tabakman, CEO of local Grown Salad. Thank you for joining me on the Vertical Farming podcast.

[0:00:05] Zale Tabakman: Thank you. It's exciting.

[0:00:07] Harry Duran: Have you been on podcast interviews before?

[0:00:09] Zale Tabakman: Yep. A lot, actually, and generally recording one or two a week. So I love it.

[0:00:15] Harry Duran: Yeah. How long you've been listening to or enjoying podcasts?

[0:00:19] Zale Tabakman: Seven, eight years, I think, at least. I'm a walker. Every night I like to walk for, you know, and so I'm listening for for an hour. So I just listen to podcasts.

[0:00:28] Harry Duran: Have you heard any recent ones recently that have been pretty interesting?

[0:00:31] Zale Tabakman: Yeah. I'm a history guy, a business guy, so I'm continuously listening to podcasts on business and history and business history and stuff like that. I was listening to Masters of Scale, which is by Reed you love it. Reid Hoffman, and I'm really behind. But this was an interview with Mark Andreessen, the guy who created Mosaic. So the reason I bring this one up because I think it's really relevant to what we're talking about, he taught Americans is a venture capitalist, and Reid Hoffman is venture capitalist. And for people who don't know Masters of Scale, reid Hoffman was the guy who started LinkedIn, and he was part of PayPal, and so he's that kind of guy. And they were talking about timing. And every podcast in the Masters of Scales has a theme, and the theme was timing, timing of businesses. And what he talked about was businesses. They invest in businesses, and one of the things that they find interesting is that the same idea shows up. Five years fails, ten years fails, five years later, 15 years fails, and then 20 years later, all of a sudden, it's massively successful. So I think it speaks to our industry. Yeah, right. It speaks to our industry.

[0:01:42] Zale Tabakman: Yeah.

[0:01:42] Harry Duran: That's going to resonate with a lot of folks who are listening, I'm sure.

[0:01:45] Zale Tabakman: 100%. I mean, when I start I've been at this since 2013, and I remember when I first started getting into it, I was listening to a video. It was a YouTube video about three or four guys who had founded indoor Vertical Farming companies, and they failed. And they got these three or four guys on this video podcast. And I read commend, anybody in our industry should read this, watch it if they can find it. Wish I could tell you the names.

[0:02:09] Harry Duran: Yeah, we could circle back after the show. If you get a hold of it, send it to me, and by the time this episode goes live, we'll put it in the show notes.

[0:02:16] Zale Tabakman: Terrific. If I can. Anyways. And they had these three or four guys getting up, and they talked about all the things that they did wrong and all the things that went south and why their projects failed. And I was sitting there scribbling notes, like, one after another, after okay, okay, I got this. Like, so everything I've done is not everything, but a lot of it was built around their set of problems and the set of failures that they had. Right? And all our technology has been built. A lot of it is like, okay, that failed, that failed, that failed. And then, you know, of course, I have my own set of things I've done wrong over, you know, the last seven, eight years and ten years. But the but it's true. And what happens is I see, you know, lately in the last couple of months, there's been quite a few more failures, right. And a lot of the are the same set of problems over and over again.

[0:03:07] Harry Duran: So it was a list of what not to do when you were watching that video.

[0:03:11] Zale Tabakman: It was a what not to do and what is going to cause your failure. And it's pretty interesting anyway, so if you asked for an interesting podcast, I thought that would be irrelevant to what we're talking about.

[0:03:23] Harry Duran: Relevant. I love when the world converge of podcasting, vertical farming, business learning, lessons from people that have forwarded the path, been down the road before, and just kind of figure out what works and what doesn't. So let's just rewind the clock back a little bit. It sounds, and from the look that I took on LinkedIn, is that you've definitely been involved in business for a bit of your career. So as far back as you want.

[0:03:46] Zale Tabakman: I have kids your age, I have kids your age. Don't believe me at that.

[0:03:50] Harry Duran: When did everything start from what's the earliest recollection of having this entrepreneurial or this business bug?

[0:03:56] Zale Tabakman: I was 16 years. I remember I was 1516 years old. I got involved in not a Ponzi scheme, but the marketing where you sign up people and they sign up other people.

[0:04:07] Harry Duran: Marketing.

[0:04:09] Zale Tabakman: Marketing, right. It was called Best Way, and it was kind of like an Amway type thing. And I'm running out buying a whole bunch of it was a disaster. It was a horrible disaster. But I had lots of disasters. Is this pick on sale day? I don't know.

[0:04:27] Harry Duran: I mean, it's interesting because I think I've been an entrepreneur since 2015 when I was in previously in corporate. So I had that security of getting your check deposited in your account every twice a month, you know. And it's interesting what you learn as an entrepreneur is to be comfortable with failure and not you almost see it as a necessary rite of passage, and it shows you just really quickly what doesn't work. And so then I think what I found for me, and maybe this is something you can relate to is in the beginning I'd be like, woe is me, and just licking my wounds and where those thousands of dollars just flushed down the toilet over the years, I just realized I just get up faster. I dust myself off and I'm like, okay, that didn't work. Let's try the next thing. Let's try the next thing. And I think you just develop that armor or that entrepreneurial armor to just continue moving forward, because I think it's this idea of continuous progress forward that really helps to toughen you up as an entrepreneur.

[0:05:23] Zale Tabakman: I agree. I call it falling forward.

[0:05:25] Harry Duran: Yeah.

[0:05:26] Zale Tabakman: I'm always failing, but I'm always failing forward. I mentioned I read when I talk about history, my time of history that I love is both, like, the 1860s American I'm a Canadian, by the way, but it's almost American history, 1860s to the early 1920s, and the number of guys who have been very successful in massive failures are just unbelievable. Right. I think of Edison. Everybody thinks of Edison. Great inventor. Light bulb created. General Electric. Oh, my God, this guy failed so many times, and he had so many things go wrong. Right. So, yeah, 100%. You think you've learned every lesson, and then another day, another lesson. Okay, well, let's talk about pause.

[0:06:11] Harry Duran: Yeah, no, I think it's helpful, but especially in this climate, and as you just referred to, like, this idea of, like, a couple of, like, recent closures of vertical farms. And I think people talk about the cycle of new technologies, and I think we're going through the trough of disillusionment. I always refer to it. I always forget what the entire cycle is called. But it's a common cycle in new technologies, and I think people who can.

[0:06:33] Zale Tabakman: Make it through this, the technology adoption curve. Right. You have the innovators, and you have the first people to try it out, and then you have the early majority late doctors area.

[0:06:46] Harry Duran: So talk to me about the story of let's go just before local grown salads, you were coming up with the idea. What was happening in your world? What were you listening to? Like, how did this get on your radar, and how did this become your next project?

[0:07:02] Zale Tabakman: Yeah, so my COO, which also happens to be my son, tells the story much better. I'm not a great storyteller, but he tells my story better, and I tell my story, but I will share it with you. Okay, so around that time, I had just got divorced, and I have five kids, and I live very close to the mother of my kids, like, ten minute walk. So the kids were half the time there, half the time with me. Right. So I'm just dad, and I'm like, I want to keep my kid healthy stuff, and healthy stuff is salads every day. And so I'm very much into food and salads. And I also at the time, was a big bicycle rider and was doing marathon running. I'm like the guy that shows up at the end when they're packing up and these guys finishing. That was me. Marathon running. I just want to give the right context, but I have these kids, and they're all teenagers, and we're feeding the and so I'm really focusing on food. So that's kind of my mindset and my head. How would I feed my kids to make sure I get them a salad? How do I get them good food?

[0:07:58] Zale Tabakman: Not organic, just like a normal food guy. At the same time, professionally, one of the things I was doing was consulting in Canada and Canadian I was doing this particular type of Canadian tax consulting called Srned scientific Research and Experimental Development. I told you this could get kind of boring. Of course, what happens in Canada is if you overcome a technical challenge, the government will give you back 50% of what you make. So if you do engineering design or something and you write some software, AI software, it's always the simplest one to explain, right? And you pay an engineer $100,000, the Canadian government will give you back $50,000. A great program. That is why companies like Microsoft and all these other people, Google, have software development houses in Canada, and why you find so much engineering design there. Because England has a similar program in Germany has a similar program. Merifit does not. America does things differently. So I'm doing this. Snr deep consulting. One of my clients was a company that manufactures sandwiches. And every day they would manufacture 3000 sandwiches a day.

[0:09:06] Zale Tabakman: So they would service hotels, right? You walk into hotel, you go to a fancy a Regency hotel or Hyatt Regency or something like that, and you have a deal and you have 500 sandwiches there. This company would actually manufacture the sandwiches for the Hyatt Regency. It wouldn't be done in their own places. But if you think about all the things I'm talking about, right, the Hyatt Regency say we would want our DLT sandwich to taste like this or have this flavored component. So they would work with the shelfs there and then they would customize to it. So now you're into a food manufacturing operation, but you're always dealing with fresh foods. This is one and the chef I was working with was all, you know, we'd have these formulas or recipes for their sandwiches. And it's a big operation, 3000 sandwiches a day, right? You're probably doing your three kids and you have to make your peanut butter jam, right? Anyway, so there's a whole bunch of issues. I don't want to get into the shred issues. But what was happening was he couldn't get available certain vegetables that he'd do, or he couldn't get the quality. So he'd always have to have the swapping. This lead is like going to use that lead.

[0:10:11] Zale Tabakman: So he's talking to me all the time about all the problems of getting consistent products. At the same time, I had another client who was doing air into water, which is called you and I in the industry called dissolved oxygen, right? And he had a technology that created put, what they called nanobuffles. So it's dissolved oxygen, but a very low level. And he had this technology for it. And he was selling these technologies to people who grow fish, write shrimp and fish and stuff like that, but they were also selling them to people that would put them into the greenhouses and put the waters in. And they were doing all these experiments about how much more when you dissolved oxygen, you put it there, how quickly your plants will grow. I'm an own hydroponic grower. I grow myself in soil. But you can imagine hydroponic, guys. This is like critical success factor for the anyway, so, by the way, I'm a very technically nerdy guy. Anyhow, so this guy was telling me all about how much money there was in the vegetable market, and he was servicing conquest in Mexico and all sorts of other places that were growing vegetable. But he was saying and then he started showing me all the numbers. I'm going. Holy crap.

[0:11:17] Zale Tabakman: Right? So now back to my kids. I'm starting to say, okay, money and vegetables. Who knew? Who'd have thought there was so much money? I started riding my bicycles. I'm in Toronto. Toronto. Looks like New York City, right? There are lots of roofs. So I started going in, and I started looking at the numbers in, like, a bag package of salad. And I was looking at the prices. I'm saying, Wait, this member I'm crying a kid. So I have to go and buy this bag salad, or I have to buy salad, and I don't want to chop it up, so I want to buy a bag salad. So I buy the salad for my kids, and I'm saying, Wait, I'm paying, like, I can't remember, two, nine, 9399 for 5oz.

[0:11:51] Zale Tabakman: And meanwhile, the components, I can buy all the components for £5 for the same 399 or wherever the numbers were at the time. Many years ago, I was thinking, whoa, there's good money in these bag salads. There's gold in these bag salads, right?

[0:12:05] Harry Duran: Especially since you had someone who had a need for that. Because a lot of times the challenge with some of the conversations I've had over the years, it's creating a great product. But then you have to figure out, the marketing part afterwards and you went to someone who's telling you, expressing to you directly his need and the fact that there was a hole to fill here. And so I think that's your business or your entrepreneurial hat is on, and you're like, opportunity.

[0:12:29] Zale Tabakman: Yeah, bingo. And then I say okay. So I put the studio, I'm riding my bicycle, we're running around, I'm seeing all these roofs. And then I, you know, did a little bit of market research. You know, Canada imports 85% of its food product, right? Because we're cold, by the way, as a side issue for your things. People in Pennsylvania don't understand it. When they bring stuff in from California, they're actually importing their food, too. They're just importing from one state to the other state. Anyhow, so I said, well, why don't we just grow the stuff on the roofs of buildings, right? And at the same time I'm investigating this, I ended up going to one of the hospitals, and they were telling me how much money they get for food, and I'm just building all this in. And then I said, well, let's put it on the roof. And then I started doing the math of roofs, right? And I'm saying, okay, well, if I grow this mount and I sell this mountain, I do the dollars and cents. I'm a numbers guy.

[0:13:21] Zale Tabakman: So first thing is I start from the Excel spreadsheet, right? And then I built a business thing out, and I realized there's no way I can make any money because I can't get enough yield in a square foot to make money. So why don't I go vertical? And we all have a friend in Google, right? Don't forget, we all and I discover indoor the Vertical farming podcast. Look at all the different technologies. And then we started buying a few of them and playing with them and saying, holy crap, this stuff is garbage. I could do so much better. How hard can it be?

[0:13:53] Harry Duran: Yeah, same missed last words some timestamp. This what year is this?

[0:13:57] Zale Tabakman: 2014. And we start figuring out that this stuff is crap, and we start experimenting and weed and develop our own technology and, you know, go through different variations and different versions of it, eventually getting to a point where we have a patent pending Canada United States on our version of indoor vertical farming. And, you know, we did a whole bunch of other member. I started watching those videos about those guys who were failing and all the things, and I'm saying, okay, well, I got to make sure my technology doesn't do this. But what is critical that I want it sounds like you're trying to teach all entrepreneurs on how to go into business and ruin their lives, right? Yeah.

[0:14:35] Harry Duran: I think it's also what's helpful is it's nice when we can learn from folks that have gone down the path, that have the scars to prove it, that have tried things, that have worked and are still around. Because I think it's helpful, especially when the industry is new, is relatively new as vertical farming. There's a lot of excitement, a lot of hype. A lot of people want to get in and may not realize and may not have done the homework that you have done or just have the discipline to do that pull out that spreadsheet before they figure out if this is going to make sense. And a lot of times when we talk about these companies that are getting a ton of funding as well, you're playing with other people's money now. So now it's harder for you to kind of have that lens of really watching every single expense, of really watching the cost of things, of really figuring out profitability. And these are really important. I think you realizing that this is something you're bootstrapping yourself, I think that makes sense why you would just have a closer eye on making sure this is viable for you.

[0:15:31] Zale Tabakman: Right. So one of the things I mentioned earlier and I want to keep coming back to is I focused in on the gold. Remember I said there's gold in those plastic bags, right? Local grown salads. We're all about creating ready to eat salads. So our goal is to get to that ready to eat salad. So when you eat a salad, you know, when you go buy a company, hussein shall remain unmentioned salad, right? But there's a whole bunch of them. I'm just being funny. There's four, three or four items in them. There's a lettuce, there's a cabbage, there's a shredded carrot, and there's something else there. But when you go into the store or you make a salad for your kids or your family, you're going to have seven or eight different products in it, and it's going to have cucumbers, and it's going to have cherry tomatoes, and it's going to have a herb, and it's going to have whatever else. So part of my requirement was that I need to be able to grow all of that stuff.

[0:16:25] Harry Duran: That's a tall order.

[0:16:27] Zale Tabakman: That's a tall order. Well, in the end, we can now grow 60 different vegetables. We can grow so context, we grow microgreens, we grow herbs, so basils and dale, wherever else you want, we grow greens, so all the types of lettuces, right, all the Chinese lettuces, all the different lettuces, and then we also grow all the small vegetables. So we grow peas, beans, cucumbers, cherry tomatoes, all that stuff with our technology. But I had to do it. And the lesson that I want to share with all those budding entrepreneurs that want to ruin their lives, right, and not go get a job and not have to worry and work nine to five is you need to start with the end in mind. I'm old enough to remember the 1980s and seven habits of highly effective people. And one of the seven habits that Kobe talked about was start with the end in mind. And in my case, the end in mind was a Ray Tea salad and be able to sell that salad at the same price that everybody else does, that company that will go on named and be able to sell at a higher, better quality product. And so all our technology was built around and for the target of being able to do that ready to eat salad.

[0:17:38] Harry Duran: So talk to me a little bit about I'm curious. What you saw in that video that was like a red flag for you or something that you were conscious of as you were heading down this path of what to look out for and what not to do and what stood out for you that you incorporated into your business now.

[0:17:54] Zale Tabakman: Yeah. So the one that always struck me as these guys were. The guy came along, I think it was in Chicago, and somebody said to him, here's a $25 million order. And he failed. When he got the $25 million order for the production, he couldn't scale it. And the scaling was his challenge. He did not have a scaling plan. He kept talking about, I can't scale it. I can't scale it, right? And I couldn't scale it. I had this customer who was willing to pay me all the money, and he didn't have a scaling plan. So that one of the first things that we built, is all our technology is scalable. Meaning that if hey, Mr. Customer that comes down, mr. Giant or McDonald.

[0:18:35] Zale Tabakman: My goal is actually to service McDonald's. I want to keep it the end in mind. I want to be the guy that sells McDonald's 35,000 locations around the world, salads every day. And when you eat salad in Tokyo, it'll taste exactly as the same salad as in Toronto or in La. Or in Paris. That, to me, is scale, right? McDonald's comes calling and says, I want you to deliver salads to all my locations. I know McDonald's is not going to show up tomorrow. I know the whole story.

[0:19:04] Harry Duran: But you're happy if and when they do.

[0:19:07] Zale Tabakman: Well, I'm preparing myself to be that guy that McDonald's will turn to and say, okay, you're the only guy that can do it right, or your technology is the only technology can do it. So the thing that reminded me biggest was the scaling problem. And then everybody else had a variation of the scaling problem they couldn't duplicate. And we see this people failing left, right, and center. They couldn't duplicate it. The other thing I think is I can't remember if it was a part of it, but probably was is unit metrics. Focusing in on unit metrics. I do not understand these people who have raised hundreds of millions of dollars. Why? They're not freaking profitable left, right, and center. This is a brainless business. I grow something. I build my factory, my farm, right? 30 days later, I'm harvesting. Or 45 days or however many days later, I'm harvesting product.

[0:20:01] Zale Tabakman: Why the hell on unit? Why the hell am I not making money every single day after that? Now, I get capital costs, right? I get difference between capital costs and operating costs. But every one of my operations should be profitable. There is one of our competitors, one of the big players in the industry that's gotten a lot of money from a lot of very big name people. They just shut down the plant. Why the hell are you shutting down something that's profitable? Because it's not. Which means the unit economics are not making money. I don't care how much they're making. If they're making $10 a month, it's still better than there are scenarios where if you're not making enough, you'll shut it down. But if they're making money, why aren't the just they're not making money. And if they're not making money, they haven't been paying attention to the unit economics.

[0:20:48] Harry Duran: Yeah. And so for folks that are not familiar with local grown salads, can you talk a little bit about what your current offerings are and if that's maybe shifted from when you started? Because I'd be interested to know and if that's what it's been from day one, because that's always helpful to know and how you've been able to maintain that steady offering to that same market. So talk a little bit about that.

[0:21:09] Zale Tabakman: Okay. We haven't pivoted in a big way. We pivoted in a couple of small ways. So I'll tell you where we are right now and I'll tell you kind of where we pivoted and what we do where as a company, we sell technology. And we sell technology in two ways. So I can sell to Susie a farm and I'll sell them our technology and whatever size technology the want. Because our technology is modular. So it's scalable. Right. You can start with 5000 sqft or you can say I want 50,000, don't care. We sell the the technology. Now Susie can then buy our technology and they can operate it as a local grown salad licensee, which means that they're going to use our branding. They have to 100% follow every one of our procedures exactly the way we spec. It never keep the end in mind. I want to sell it to McDonald's.

[0:22:03] Harry Duran: You've got the Ray crocking.

[0:22:04] Zale Tabakman: You yeah, I got the Ray Crocket, but it's got to be exactly the same. Or I could sell to Barbara, who, barbara is a really nice lady, but Barbara says, you know what, I don't like Zale's thing. I have a whole bunch of my own clients. I don't want to share my profits with Zale. So I'm just going to buy this technology. I'm going to use it and I'm going to sell it at Barbara's Vegetables. And she can operate. She uses our equipment, she uses our thing. The does everything. And Barbara. At some point, Barbara and I may compete. Barbara will be the cheaper product in the marketplace because when they're selling it under our brand, I got to make mine two cent or it's a little bit more, $0.02. But I have to make mine and they have to make theirs. But McDonald's will pay for the consistency and that's what they're paying for. So both Barbara and I can exist in the same marketplace.

[0:22:50] Zale Tabakman: I want to point out to your visitors, I'm going to keep throwing in ideas so people understand how I think. Between Washington and Boston, there are 55 million people. The market for fresh vegetables of the kinds that I sell, which I'm going to get into the microgreens, the herbs, small vegetables and stuff like that is $10 billion a year. Right. I don't make my money from selling equipment. I mean, I'm going to make some money selling equipment, but ultimately $10 billion a year, and that's 55. That's from Washington to Boston. It's a very tiny space. It does not include places like La. Chicago, Detroit, Florida, Texas. It does not include the market. If you have anybody from Saudi Arabia that wants to partner with me, I want to go after Saudi Arabia. 160,000,000 people who are wealthy. Right. Because I have that vision of rich air of cheeks.

[0:23:45] Zale Tabakman: Right. Which is really the reality is a little different, but it's 160 wealthy, 60. And they import 95% of the food that they right. Yeah.

[0:23:54] Harry Duran: I was in Dubai in October, so shout out to my current sponsor, Cultivated. They were sponsoring the aggregate conference there, and they flew me out there to interview some CEOs on site. It was really eye opening. And to your point, the 90, 95% of food imported, how they have to irrigate every single thing that's green in that city, and obviously anything else in that area is going through the same challenges. So definitely a lot of opportunity, a lot of money available for investment. So you're knocking on the right doors, and I think it's just a matter of getting connected with the right folks.

[0:24:23] Zale Tabakman: So back to your question of how I've changed. So I always started with the technology piece. I always started with the salads in mind. What has happened is we went from this model, we added the licensing versus the private label, and very formalized our approach to that. I knew I would be I have a degree in computer science, but my degree in computer science, people didn't even know the were computers back then. Anyway, when I graduated in computer science, I had 25 people in my class. Now 250 people in the class anyhow. So we didn't realize the importance of the software. The software was like, yeah, of course I need the software to run this stuff. I didn't realize that my company's competitive advantage would be ultimately the software. Besides, the hardware, integrated tightly with our hardware. We're building a system, our software system, that tracks all the way from seed to the person's plate. It's got AI, so that panera breads, Panera's arugula, they're going to say it's too spicy, but McDonald's Arugula, they wanted a little less spicy. So we can then do a feedback loop, and we can modify the grow parameters that we use. Blah, blah, blah.

[0:25:29] Zale Tabakman: I mean, everybody in our industry is doing what I'm doing. But I gave it a name, and I have little boxes. I got a beautiful picture that shows up all the components.

[0:25:36] Harry Duran: It's a secret arugula recipe, but we.

[0:25:40] Zale Tabakman: Have the software that allows us to actually that well, the idea is that when a Starbucks wants to buy salads, are ready to eat salads and they're buying it on the shelf, they'll be able to tap into our system and understand what the shelf life is, where it was. Built, they'll give us feedback. Oh, the shelf life of this particular one wasn't good. And we'll say, well, was it because of something we did? Was it through our distributors? We only go through distributors. I think owning your own trucks is like the dumbest thing that a company could do. Like, why would you go into logistics business?

[0:26:09] Harry Duran: That's a whole the business.

[0:26:11] Zale Tabakman: Yeah. There's Cisco, there's aromark, and people are just greedy when they own their own trucks. Anyhow, so the big pivot that we've done now is that we're doing microgreens. I did not want to be in the microgreens business. I'm in the microgreens business because part of our technology is going to be sitting idle for bits and parts. So we realize we can doubled up and use it. But microgreens is a very cool business for your small company, but for a big company or very large volume.

[0:26:37] Harry Duran: When you said you didn't want to go into Microgreens, what was some of the fears that you had and then what changed your opinion?

[0:26:44] Zale Tabakman: I have equipment that allows us to grow microgreens really easily. It's part of our standard equipment that we do. And my equipment would be sitting idle, so I'm going to sell it to Barbara or Susie and they're going to pay for this equipment. They need this equipment, but it sits idle for part of the growing cycle. And if they're only growing herbs, it will sit idle a lot of times. So they're paying me good money for this equipment. I need to make sure that they can make money off that equipment. So I do Michael Greens. Michael Greens isn't a big market, right? I mean, yes, it's a very profitable piece of well, I don't know how profitable it is, but it's very high zale product.

[0:27:19] Harry Duran: Sure.

[0:27:20] Zale Tabakman: Right.

[0:27:21] Harry Duran: In restaurants.

[0:27:22] Zale Tabakman: We have a guy in Philadelphia that wants £10,000 of basil and herbs a month. I'm not going to sell £10,000 of microgreens a month. Right. I'd rather sell that. Right. We talked to a pickle manufacturer that wants cucumbers. They want £20,000 of cucumbers a week. Right. I'd rather yes, my margins on my cucumbers are going to be extremely low. But £20,000 a week generates a lot of income. Right. Pays a lot of rent, pays a lot of salaries. Right. And I can grow those and I can grow them exactly the size they want. And by the way, I'm 2 hours away from you and I can guarantee that you're going to get exactly what you want 365 days a year, instead of buying the one month in Texas and another month in Arizona.

[0:28:08] Zale Tabakman: Right. You can do contract with me, be a fixed price contract for a year and you know your prices.

[0:28:14] Harry Duran: So it's really interesting to see the success you've had. Obviously, I get the feeling from this conversation it's a result of all the work you've done, all the research you've done, trying to see what works, what doesn't. And so just for some more clarification, can you talk a little bit about what the physical setup looks like? Because we've had conversations with people that have the indoor farms you can have in your kitchen to a container farm, to the 100,000 square foot spaces. So just to give people a visual of what the unit looks like and where are how it's being used, like what are the applications for it, maybe talk a little bit about the partnerships you've created.

[0:28:50] Zale Tabakman: Okay? So first of all, we're in Philadelphia and I invite all your listeners to find me on LinkedIn. Find our company. We're easy to find local cone salads. There aren't a lot of zale in the indoor vertical farming market. So zale or zale, if you're in Canada and England, right, I recommend you come out and see our stuff. So our stuff we're tower growers. So our technology is tall, vertical, looks like a wall. You know, plenty, you know, zip grow, right? So it looks like that. Obviously we don't, but our technology is our own technology. So when you walk in that's what you're going to see and that's what it looks like. Typical. We have these things called grow areas. Sorry, I'm jumping around a little bit.

[0:29:32] Zale Tabakman: Let me kind of do it very simply. So we do these tower things. So you walk in, you see a tower and that's why we can grow all those different kinds of vegetables, right? Soon as you want to do it on the bunk bed style, you can't. How are you going to grow a pea, right? Your lights are so high, unit almonds fall apart. We can grow peas and they just climb up the wall and it looks great. Bees, beans, all that kind of stuff. Cherry tomatoes. We just move the lights in. Move lights up. Those the things that we grow the seeds in a thing called the seed cartridge. So we predo our seed cartridges and we grow them inside the sea cartridge. The seed cartridge sits in what we call a vertical acre. It's about 8ft long, about 8ft high and about 3ft wide.

[0:30:13] Zale Tabakman: And the seat cartridges are on either side of that thing and it sits in a thing called a vertical acre. Why is it called a vertical acre? Because the harvest over a period of a year is about an acre. So in 32 sqft. We're growing about an acre's worth of plant. And then the lights and the water and the electronics and the sensors are all built into this thing. Okay? And the we put two of these together and they called the grow unit. We put either three grow units or twelve grow units or 24 grow units into a room and it's called the grow area. Remember back to the scaling and the modularity, you see now all of a sudden that's the maximum size of a grow room. And then depending on how many square feet we have we then build up multiple grow rooms. And the grow rooms are custom built. We actually manufacture the walls and the ceilings and we deliver the whole system. And then we have sensors and software that are built. If you think about your Apple phone, you open up your phone.

[0:31:11] Zale Tabakman: All the components are designed for the phone, right? This is one of the rules of scaling. And then all our components are all standardized components. These stainless steel that we use, vertical acre, are nonstandard. We have to get them manufactured. But any guy or any lady or any I guess what was the other any person can manufacture. I tried very hard to be socially appropriate, even for being an old white guy. Yeah, I'm an old white guy, but it's hard work. But I'm working really hard on it because I think it's important. Anyway, so we have the stainless steel and that's the only thing that gets custom manufactured for us. Everything is off the shelf components. And then we build our own lighting systems. Remember that unit economics we talked about earlier? Like most people, when they do out indoor vertical farm, most of their costs are buying lighting systems from Phillips or from we said, why don't we just build our own and manufacture our own so it can be exactly what we need for what we need. We're not taking something and making it and that's kind of what it physically looks like.

[0:32:10] Zale Tabakman: And the it's a sealed room you walk in and then we have these things called germinators, which are seat cartridges go into before they go in and those seat cartridges double up as a piece of equipment that's used for growing the microgreens. And that's all controlled with software and everything else.

[0:32:24] Harry Duran: What was the biggest challenge for you as you were putting these systems together to get everything working together efficiently?

[0:32:30] Zale Tabakman: Money. Always money, always not having enough money, not having enough capitalization. But I'm also remember I did that whole history thing and one of the things I've learned is if you have too much money, it doesn't work very well for you. So there is a company who shall rename nameless that in our space, a couple of them, who got tremendous amounts of funding and they just spent the money on really cool gadgets for harvesting and everything else. And I'm thinking I didn't have that kind of money. So I had to figure out the cheapest, best way of doing it. The lighting is a good example, right? Originally, to go out and buy a lighting system of any kind of we need a lot of light, right? People don't understand the need for light. And I don't want to give away every one of my secrets, but let's just say the lighting is really important. And what happens is if you go by a lighting system, they're very expensive. But if you go by all the components for the lighting system, all of a sudden, the same amount of light, same amount of system becomes very inexpensive relative to what people are paying $1,000 for. I can build for $50. And it's a better life.

[0:33:40] Harry Duran: And yes, with your experience and with the team you've put together, you're able to get everything now working together efficiently.

[0:33:47] Zale Tabakman: Yeah. And we're tracking all the data and how many days for how many ounces. Right. I will tell you one of my secrets that you promise not to tell anybody else. Yeah.

[0:33:57] Harry Duran: Just between you and I, just you and I here.

[0:34:00] Zale Tabakman: Okay. Most people focus in on reducing the cost of electricity. That's dumb. It's really, really dumb. They really do should do is do like Zale and focus in on how to increase the yield for every kilowatt of electricity you're using. They're looking at the wrong formula, looking at the spreadsheet. They're looking at the spreadsheet. They're not looking at the analysis of it. When I was in computer science, when I was in university, I took a business course and two business courses. And one of them, the one I remember most was all the analysis that you had to do with your income statement and your income statement and your balance sheet and all the ratios you did all those ratios. I spend hours on our ratios looking at what happens if I could shrink this by one day my growth that's yield per dollar of electricity. Right. So the analysis of how you look at the problem is totally different than looking how I want to reduce my electricity bill. I don't care what my electricity bill is. The other thing that people do is they're always looking at the wrong numbers.

[0:35:13] Zale Tabakman: I'm looking at how can I increase my dollar of revenue for the same capital cost? Right. It's a different way of viewing it. It seems obvious when public course that's what he's doing and it's all different, but it really is. When you say, hey, what happened? I'll tell you a story. Nelson Rockefeller, he was the guy who created Standard Oil, okay? This is the Zale mindset. Now, Rockefeller was probably one of the best businesses that ever existed. And what happened was back in his day, right? I hate the expression back in the day, but back in his day, the used to sell oil in jars, right? They would sell oil in petroleum or kerosene that would use to lighten your lamps. And he was walking through and this is a story that people tell over and over again, so it's not special for me. And what happened was they would put the tops on the jars and they would twist it four times. And he said, why are you twisting it four times?

[0:36:09] Zale Tabakman: Why don't you only twist it three times or two times? And essentially what he was doing was he shrinking the little cost of the top. And the time that it took the guy to do it, that's unit costs. People think about the big dollars, but you got to really look at the pennies that get repeated over and over and over again. And then you put all this into your Excel spreadsheet. I mean, I sit in Excel all day long, right, and I'm looking at each part of it and how, you know, I have the stainless steel units. So we put, like I said, 24 in a room, right. I don't care if I save $50 on the, on the Excel spreadsheet, on the $50, $100 on the stainless steel. It's not going to make a difference in my life. But if I can shrink the amount of time that the lights are on for five minutes every single day, which is only a couple of pennies, but I have the lights on every or I shrink the wire by an inch or two where I use you know, that's where all the money and then it comes to the yield. If I can get another quarter ounce yield or a 5% yield on every turn of my vegetables, what's the effect going to be on my bottom line? And it becomes huge, right. And it's pennies. Each one of those are pennies. But indoor vertical farming is a penny industry.

[0:37:28] Zale Tabakman: You're selling stuff. Well at $5 a pound. You sell something at $5 a pound, you got to send a lot of pounds to pay for an $80,000 farm manager.

[0:37:39] Harry Duran: Yes, I applaud you doing that meticulous analysis and that hard work of, like, looking at those what might seem to be pennies saves. But I think it's interesting because you have a perspective of people who naturally, when you get a lot of funding, you feel like a sigh of relief, and you feel like you have some cushion and you have some space to kind of try different things. And when you're looking at every single cost and every single expense really matters when you're doing it all yourself and you're bootstrapped. And I think you having that discipline to look at it on a line by line basis and figuring out the specifics of is this something that can move the needle slightly incrementally. But when you add those up over time, it's kind of like when they talk about compounding interest. Right. It's that same effect. And so I really applaud you doing that.

[0:38:23] Zale Tabakman: So to the people that are in our business, think about that. If you do a cycle in the hydroponic guys, they're doing maybe 14 or 16 cycles per year. If they get one more cycle out of it, they've increased their top line by 5%. But their operating costs probably don't change because they're going to run their lights. Let's just take a simple model. They're running lights 12 hours a day, 365 days a year, okay? That's their electricity cost. Now, if they can get one more cycle out of it, they've just increased their capital costs haven't increased. Their operating costs haven't increased. But their revenue has gone up. Now, let's say that 13 is probably around 28 days for a cycle, okay? If they get it down to 27 cycles, 27 days or 26 days, which is like, who cares? It's only two days. Huge bottom line effect.

[0:39:14] Harry Duran: And so as we get close to wrapping up this conversation, this has been really helpful and really exciting to hear your perspective on it, because I think it's something that's almost like a breath of fresh air in terms of thinking about this at the really granular level, and especially for folks that are just getting started. I've been consciously thinking of new farmers getting into this space and understanding what some of the challenges might be. And I think this is a great reminder that you really have to understand all the costs, all these expenses, and how each one of those move the lever and how they affect your ability to price things and your cycles. And it's so important, and I think people just are focused on the big upstarts, and I think there's a lot of room for discussion in terms of what's happening in this space, and I'm really happy to have your perspective. So, Zoe, when you think about what you've gone through, I always like to ask this question just to have you think about what's top of mind for you, but what's a tough question you've had to ask yourself recently.

[0:40:06] Zale Tabakman: What am I doing wrong? I try to ask that question every single day. What am I doing wrong? What could I be doing better? Where can I get that incremental improvement of myself? In the end, I'm the leader, and everybody's looking to me for leadership, right? And they're looking for me to have all the answers. And so you need to always be asking yourself that. And, you know, why haven't I raised, you know, $800 million like everybody else? You know, I'm such a smart guy, right? Or I'm whenever such I actually rely on my looks more than I rely on my brains. But, you know, but why haven't I raised the $800 million? Right? Why have they done that? Right?

[0:40:44] Zale Tabakman: Like, why aren't I there's so much money been thrown at this industry. Why hasn't coming at me?

[0:40:50] Harry Duran: Yeah, I imagine you'd be running a different business. I mean, it'd be interesting to see what you could do with an investment like that with the discipline that you have in place already. So I think, obviously, this leads me to my next question, which, given the audience of this podcast, it's your peers in the industry, your colleagues, people who are interested in the space, who've been here for a while, who are just getting started. So I've been leaving room at the end of these conversations for anything that you have that would be an ask or a message to folks in the industry. What comes to mind for you?

[0:41:20] Zale Tabakman: Okay, I'm going to give you what I really think is really important. Remember, I talked about that. I do the history and I read the business history. So two big stories. Nelson Rockefeller and Henry Ford both come to mind in Nelson Rockefeller in the Oil industry in the 1850s, 1860s, 1870s, and then Henry Ford in the early 19 hundreds. Those two guys did two things. They both worked very hard with everybody in their industry because they were working. Nelson Rockefeller did it in a really nasty way. He said, you have two choices. You can either go broker, you can be business partners with me. Henry Ford didn't do it that way. Henry Ford said, let's work together as the market is so big, I do not need to compete against anybody. I can sell my technology happily for the next ten years and sell as much as I possibly want and I will never saturate the market. So people in the industry need to work together as a team, right? We need to help each other.

[0:42:22] Zale Tabakman: Like my ideas, somebody should steal my ideas and say, hey, where are unique economics? Let's get Dale here, get him in and to talk to us about unit economics, the other side of it. So that's an unselfish thing, but I think it's kind of selfish because all votes will rise, right? The other part is we're looking for partners. We're looking for people to say, well, I want to be we already have one in South Carolina. It's a private level guy. His name Roll. He said, I want to be in this industry. I don't want to reinvent the technology. I want to buy your technology. I want to work with you. But I want to own indoor vertical farming because I want to make money selling vegetables. So I'm looking for people who just want to be those kinds of guys. The want to own their technology. They want to own a brand, they want to invest in a brand.

[0:43:06] Zale Tabakman: They want to be an operator. That's what we're looking for. We're not really looking for investors, so to speak. We're looking for guys who want to own an indoor vertical farm, either own and operate or will operate for them and they just want to own it. Or they want to be in this business but don't want to suffer and say, oh, this looks really easy, and then spend a million dollars of R and D later.

[0:43:28] Harry Duran: They want the Zale spreadsheet, they want the sales spread.

[0:43:31] Zale Tabakman: Yeah, we just give it to them and just make it. And all they are worrying about is finding customers and selling product and building their own community and getting jobs.

[0:43:39] Harry Duran: What's been helpful for you when you think about that next leg of having quality product? You've got the economics are working for you now. And now there's the challenge of marketing and getting it out and having people realize what it is that you're offering and it's something that they want. Where have you seen success to the extent you can talk about anything, any of that what's been a good learning for you there?

[0:43:59] Zale Tabakman: So we're now working with community we have like a little bit of success that's now starting to rock with community colleges. So community colleges saying, hey, we want to run indoor vertical forming programs. Can we buy your technology can be part of that. In Philadelphia, we're working with high schools and we're working with the Drexel Autism Institute. So we're working with folks, young kids, teaching them about food and growing and stuff like that and then looking, creating jobs. I'm a big believer in I'm an Duran. I want to put our system in urban places. So we're working in opportunity zones. So we have all these old buildings. Our technology fits in ten foot in ten foot to the rafters or to the joints, right? So we want to be in those old buildings that are sitting empty, and we want people to put our farms in there and create jobs and opportunities on. And we want to pay living wage jobs. It's kind of where I'm hoping. Like, I want Chicago, Detroit, New York, Philadelphia, Boston, St. Louis, any place that needs jobs and wants good paying jobs.

[0:44:58] Harry Duran: The food deserts.

[0:45:00] Zale Tabakman: Food deserts. I firmly believe indoor vertical farming will contribute to solving the climate crisis because most of the food is moved in North America, right. You move everything from California to across the country. Half the cost and half the thing is just moving the stuff, right, and fail. So it's a way of just running out of truckers anyway. They can just go on and on and on. That's like a whole other podcast. Fail pontificating on that crap. Sorry. Yeah, but this is a future, right? The industry is struggling and it fits and starts, but if you look at the history of any the car industry, the oil train industry, every big industry goes through this. The guys who are big now, you won't even hear about them in five years.

[0:45:49] Harry Duran: Yeah, like they say, history leaves clues. And I think what's been clear for me throughout this conversation is how much you've paid attention to those clues, how much you've followed the lead of those who have gone before us, who have had success in business and also with an eye towards watching everything very closely in terms of economics and profits and how to scale properly. And how to grow properly. And you kept referencing McDonald's, and obviously there's a standardization comes to mind when you talk about them. So I applaud you for everything you've done so far, and you've had a lot of success. And I think it's attributable to just having that short pencil and having the experience of having those we talked about earlier, those barriers that you had, they set you up for what to do and also what not to do. So I think everything has come together nicely for you. So I'm glad we're able to share your story.

[0:46:37] Zale Tabakman: Well, thank you. Thank you. This is great. You ask great questions. It's very good.

[0:46:42] Harry Duran: So, any farming words, thoughts about where we're headed? We're going through some challenging times with some of the news that's come out, but what has you excited, Zale, when you think about the next twelve months?

[0:46:51] Zale Tabakman: We have people lining up to talk to us. I'll tell you one thing that's kind of saying we're talking to some 25 different cities. I have a great sales lady, and she's reaching out and talking to city planners and cities, and they're now talking about integrating indoor vertical farms into new housing projects. Right. So it's built into the design of that. The future is incredibly rosy. Okay, so people are screwed up and big deal. They had too much money, they wasted the money. They got themselves nice cars and whatever, but the industry is going there. It's going there are people who are growing. There are people who are selling. I can't remember the name of the guy. Kimball Musk's company did a great deal with Gfs. Right. That was really exciting when I saw that one.

[0:47:33] Zale Tabakman: I don't think the technology is such a great technology, however, but I think what he did was absolutely amazing. Right. And Cisco will do the same thing. And Aromarkle and all the big boys will start girls, I guess big girls will start doing the same kind of things.

[0:47:48] Harry Duran: Yeah. Well, I appreciate you connecting with me. I'm glad we were able to share the story because I just love telling the stories of founders of companies large and small who've been doing it for a while. We're just getting started, and I think yours is going to be really inspirational, especially for folks understanding the building blocks of what makes a farm successful. And so I encourage folks to learn more to visit your site local Grown Salads. Is the website anywhere else you want to send folks to learn more?

[0:48:13] Zale Tabakman: Oh, LinkedIn.

[0:48:14] Harry Duran: LinkedIn. Okay.

[0:48:15] Zale Tabakman: Monday through Thursday, I post something all on why indoor vertical farming is just like the greatest things with slice bread.

[0:48:21] Harry Duran: Yeah, we're active on LinkedIn as well, so make sure you have all your websites and your LinkedIn profile, anything you've provided for us, we'll have that in the show notes as well. So if anyone's listening and want to connect with Zale on this team, they'll be able to do that. I really appreciate you taking the time to come on. I really enjoyed sharing this story.

[0:48:36] Zale Tabakman: Thank you. Thank you. Look forward.