Holey Grail Donuts bites into $9M for Los Angeles retail expansion – TechCrunch

Holey Grail Donuts started selling its hand-fried, made-to-order taro donuts on Sunday mornings out of a little red burger trailer in Kauai in 2018.

Four years and hundreds of long lines later, the truck is still there, but the company is taking on what co-founder Nile Dreiling calls “a stale $40 billion donut industry” by expanding its presence into brick-and-mortar locations in Los Angeles after raising $9 million in financing.

Dreiling, who was previously doing ecological engineering in Oregon, teamed up with his sister, Hana Dreiling, a private chef in Kauai, Hawaii, to start Holey Grail Donuts. They spent a lot of time reverse-engineering the donut to get the end product, which is a taro donut fried in organic, fair trade coconut oil versus palm and other oils “that often leave a waxy taste in your mouth,” Nile Dreiling told TechCrunch. He believes his company is the only one making its donuts in this sustainable way.

“We are taking something that everyone is familiar with, and reinventing it to meet our values, while essentially improving the tastes without the negative health and environmental consequences,” he said. “The process we incorporate yields a donut base that’s hot and crispy and not too sweet, which is the perfect vessel for essentially consistently rotating the garnishes. We currently have over 60 flavors that we’ve developed over the past couple of years.”

The fun part? The company uses a donut robot to make and fry the dough so one person isn’t constantly sitting in front of the fryer. That’s particularly helpful inside the food truck where there is limited space, and enables employees to serve a large capacity of customers quicker, Nile Dreiling said. Holey Grail Donuts also utilizes an app so people can order ahead of time.

Among the ever-rotating jukebox of flavors, popular toppings include L&L (lemon zest infused sugar, lime curd, finger lime caviar and begonia petals), North Shore (locally-grown turmeric, tangelo and freshly cracked black pepper) and Lydgate Farms (vanilla bean, single-origin cacao nibs and cherry).

As mentioned, the global donut industry is a $40 billion market, and Dreiling estimates the market is approaching $50 billion by 2025, with 30% of that growth attributed to North America’s love of the donut.

With that, changes are happening even at the highest levels in the industry with well-known brands like Dunkin’ and Krispy Kreme pivoting to supply and advertise new product ranges that meet the demands of people wanting to make healthier choices, he explained.

“What we’re doing at Holey Grail is approaching demand with a high level of integrity and a mission focused on creating healthier options with incredible taste,” Nile Dreiling added.

The company currently operates a food truck in Waikiki and recently opened a flagship store in Honolulu to complement a shop in Hanalei.

Nile Dreiling said he was not sharing specific details related to revenue or growth metrics at this time, but did say, “we have certainly seen incredible growth in Hawaii and we’re starting to see this traction in Los Angeles as well.” The “Tasting Box” of four donuts retails for $15, and with the integration of its app this year, Dreiling says the average order volume has increased to $20 to $23 per order as people add on beverages.

Now armed with this cash infusion, the company is putting down roots in permanent locations in Santa Monica and Larchmont later this year that complement a roaming food truck in Culver City.

In addition, the company is building out a new supply chain for that expansion, which includes partnering with local farmers stateside to source produce, while also maintaining its relationships with Hawaiian growers of taro, coconut oil and cacao. It is also scouting out new markets for additional retail and food truck locations.

The $9 million combines both a Series A, led by Collaborative Fund and Lee Fixel, and a seed round led by True Ventures. The firm’s Tony Conrad is on Holey Grail Donuts’ board of directors. Additional investors include Tony Hawk, James Freeman, Christopher Kostow, Hass Hassan, Stephan Jenkins, Yves Behar, Matt Mullenweg and Ryan Graves.

Tony Conrad, partner at True Ventures, told TechCrunch that Holey Grail Donuts’ food truck approach to choosing the right location for retail shop caught his eye.

“The first capital we put into the company was to see if that concept could translate into four walls of a donut shop,” he added. “We activated into a neighborhood to see if that neighborhood actually cared or liked it and if we had the right foot traffic. It’s also kind of like pre-marketing before you open up to get community support, and I don’t know why more people don’t do it. It’s quite novel. It works.”

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