This app, which helps people find food at huge discounts, is considered 'the most genius' by many.

Sometimes, David Niles, a 63-year-old man living in Brooklyn, New York, goes to great lengths, or depths, to save food from going to waste by dumpster diving near his home.

Niles suggests a cleaner digital version of the practice, which is an app called Too Good To Go. This app allows retailers such as restaurants and bakeries to sell "surprise bags" of leftover food at discounted prices, typically between $3.99 to $9.99 in the US. Niles has spent nearly $10,000 to pick up almost 2,000 surprise bags on his bicycle over the past four years.

In 2020, Too Good To Go, a Danish startup founded in 2015, generated approximately $162 million in revenue in the US, mainly through taking a percentage of each surprise bag purchase and charging annual membership fees to retailers.

An annual membership fee of $89 and a charge of $1.79 per bag in the U.S., a company spokesperson states.

DON'T MISS: The ultimate guide to negotiating a higher salary

Mette Lykke, CEO of Too Good To Go, publicly states the company's mission to combat global food waste, which costs the world $1 trillion annually, according to the World Bank. Despite not yet achieving profitability, the company continues to reinvest its cash flow by expanding geographically, adding new retailers to its app, building new support offices, and acquiring other startups.

Lykke states that her company earned $8 million last year before subtracting one-time costs, but notes that they don't prioritize profitability as their main goal.

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

The founders of Too Good To Go were five Danish entrepreneurs: Thomas Bjørn, Stian Olesen, Klaus Bagge Pedersen, Brian Christensen, and Adam Sigbrand.

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

She says that she thought [Too Good To Go] was the most brilliant app and was deeply in love with its concept.

In 2017, the founders of Too Good To Go believed they required a CEO to better expand the business, so they appointed Lykke as their new CEO, according to a company spokesperson.

She examined the startup's finances and found them in such poor shape that she went home and asked her husband if she should back out of the job, she says.

Lykke recalls his response as: "Since it's already been published, you'll have to figure out a way to make it work. So, take a deep breath and get to work."

Lykke's initial move for 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.

Lykke has expanded its business to include a grocery service, a software system for food retailers, and 100 million users across 19 countries in Europe, North America, and Australia. The app was launched in the United States in 2020 and currently hosts retailers in 33 U.S. metro areas.

It is crucial to address the issue of food waste, which is enormous, according to Lykke.

Conviction to stay the course

Besides Too Good To Go, which has received $158 million in investment funding, there are other for-profit companies working to reduce food waste. In fact, venture capitalists have invested over $1 billion in the niche industry, supporting businesses such as online grocery delivery service Misfits Market and at-home composting system Mill, according to PitchBook data.

Retailers aim to attract customers who are low on funds or environmentally conscious through Too Good To Go sales. Although profits may not be substantial, it is better than the $0 they would earn by discarding their excess food. At Delish Bakery in Medford, Oregon, owner Susan Prunty reports that several of her Too Good To Go customers have eventually become full-priced regulars.

Niles, a dumpster diver in Brooklyn, worries that Too Good To Go "greenwashes" the issue of food waste by giving users false impressions of environmental responsibility. However, 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.

Dana Gunders, ReFED's president, states that the environmental impact of the proposed policy is equivalent to approximately 900,000 cars being removed from the road.

Although a profitable and eco-friendly approach may not guarantee Too Good To Go's future success, retailers could potentially launch similar programs themselves, food safety regulations vary by country, and the company may eventually run out of stores to add to its app, according to PitchBook food tech analyst Alex Frederick.

The success of Too Good To Go depends on the belief in the sustainability of its business model and the determination to remain committed to it in the future, according to Lykke.

"She believes we have a brilliant model, but she emphasizes that having a great idea is only 10% of achieving success. The rest is all about execution."

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

Earn more money at work by taking CNBC's online course on negotiating a higher salary. Expert instructors will teach you the necessary skills to increase your paycheck, including how to prepare, build confidence, communicate effectively, and craft a counteroffer. Start now and use the coupon code EARLYBIRD for a 50% discount through November 26, 2024.