Niklhil Arora in alleywayPsst! Wanna buy some mushrooms?: Nikhil Arora in the alley outside Back to the Roots’ warehouse. Photo: Bart NagelWhen two good-looking 23-year-olds give up careers in investment banking to grow mushrooms, oysters and shiitakes aren’t the first fungi one imagines.

But Nikhil Arora and Alex Velez are on a different trip. Their business, Back to the Roots, turns coffee grounds into food, first as mushrooms they sold wholesale and now as grow-your-own gourmet mushroom kits.

It all started with a “random fact” tossed out by their business ethics professor in February 2009, in the last semester of their senior year as UC Berkeley business majors — that gourmet mushrooms could be grown in coffee grounds. That seed of an idea landed in the brains independently of both Arora and Velez, who didn’t even know each other at the time.

Alex VelezFun guy: Alex Velez Photo: Back to the Roots“We both understood the potential scope for it,” Arora says. “This country is addicted to drinking coffee day in and day out. We knew if we could turn this waste into something of value, it could make a huge impact.”

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Take mycelium and add chutzpah

Separately, they contacted their professor, Alan Ross, to learn more; he put them in touch with each other and when they decided to team up, referred them to the famous mycologist Paul Stamets. With his advice, they ordered spores, scrounged used grounds, and inoculated them with mycelium, turning Velez’s room in his fraternity house into a mini-science lab.

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Soon, after some trial and error, they had their first crop. But were they tasty? they wondered. They decided to drop by Chez Panisse, the epicenter of the locavore/Slow Food movements and perhaps the most famous restaurant on the West Coast, and just ask the chef. He sautéed some right then and there — because really, why wouldn’t you want to eat mushrooms in a plastic bucket brought in by some strange kids in Cal T-shirts? — and pronounced them not bad. Pretty good, even.

Encouraged by the chef’s reaction, they headed over to Whole Foods with the same bucket, “walking in the front door, that’s how clueless we were,” recalls Arora. Clueless they may have been, but they impressed the store’s representatives. Randy Ducommon, the supermarket chain’s Northern California regional produce coordinator, became a mentor and backer. He told them, “if you figure this out, we’ll take you on.”

After they won a social entrepreneurship grant from the university’s chancellor for $5,000, “we decided we just had to run with this,” says Arora. “Before we knew it, we were full-time mushroom farmers. Our friends were like, ‘Whaaaat’? They thought we were crazy.”

Ross, the business professor whose chance comment started the whole thing, didn’t think so. “Nikhil and Alex are amazing guys. Very few of the thousands of students I’ve taught have followed their passion and taken a chance on a new endeavor such as Back to the Roots,” he writes by email. “And what makes their story more fantastic is that both of them had excellent, well-paid job offers [in investment banking and business consulting] that they turned down to start this venture. The future is unlimited for Back to the Roots. We will be reading about Nikhil and Alex for many years to come,” he predicts.

Grounds hog days

Maybe, but right now, a little over a year into the business, life at Back to the Roots is far from glamorous.

The two work from 6:30 a.m. to 9 p.m., every day, for which they just started paying themselves $300 per week. They have five other employees, working in a nondescript old brick warehouse building right next to a busy overpass in Emeryville, Calif. (just over the bridge from San Francisco). It’s their fourth location: it took a few tries to figure out the mushrooms needed fresh air, and that carpeting was a bad idea. The rusty used van they bought to haul their “soil” is parked around the corner.

Since starting the business, they estimate they’ve diverted more than 10,000 pounds of coffee grounds per week from the waste stream. Peet’s Coffee & Tea not only saves the grounds for them, it pays them a little to take them away. Peet’s has also helped mentor the fledgling entrepreneurs, and will begin selling the kits in their stores starting on Earth Day in April this year.

On the loading dock outside are piled plastic shelves and other detritus, representing a shift in focus for the mushroom guys. In March 2010, Back to the Roots Ventures launched its grow-at-home mushroom kits, and has since dialed back on growing fresh mushrooms for wholesale. “The bulk mushrooms were incredibly labor-intensive, which made it not so scalable,” explains Arora. “We thought we could make a larger impact faster with the kits.”

The Easy-to-Grow Mushroom Gardens are available online and in more than 200 Whole Foods in Northern and Southern California; Washington, D.C.; Boston; and elsewhere. For the kits, they collect the grounds; press and dry them; pack them in bags; then inoculate the bags with oyster mycelia, storing them on well-ventilated racks in the warehouse. The mushrooms essentially stay dormant until someone buys the kit and exposes them to some moisture and light. In under two weeks, you can grow about a pound of fresh mushrooms just sitting on the kitchen counter, harvest and eat them, and get one to three more crops.

Arora and Velez are pitching the Easy-to-Grow Mushroom Garden not so much as a local, sustainable source for healthy food, but more as an educational tool and fun family project. Otherwise, the kit’s $20 price tag might seem pretty high for a pound of oyster mushrooms.

“We want to show people in households across the country that it’s not hard to live sustainably, to think about waste and grow your own food at home,” says Arora. “You get great food out of it, yes, but it’s more about understanding tangibly what this whole sustainability buzzword means.” They especially love the photos that customers send in of their kids with their mini-mushroom farms.

Mushroom kitThe newly redesigned mushroom-growing kitPhoto: BTTR VenturesThe kit would be a cool project for kids. I confess I started misting the one they gave me before the holidays, stowed it out of sight temporarily, then promptly forgot all about it. Rummaging around for something else in my pantry, I was surprised to find several-inch-long mushrooms! They were hard as cork from my neglect, but those are some feisty fungi.

The business is growing by leaps and bounds, as are the two guys’ profiles. Thanks to a friend with connections, they made it onto Last Call with Carson Daly (video below) and have since made a Tedx talk for the Young Social Entrepreneurs conference in Washington, D.C.

No longer are they surviving on two maxed-out credit cards. Whole Foods gave them a $25,000 low-interest loan from the Local Producer Loan Program, and they won a $50,000 grant from the Hitachi Foundation, along with a few smaller ones.

Still, it’s been a slog, with many more tons of grounds to shlep and spores to sprinkle lying ahead of them. I asked Arora if he had to make the same choice over again, would he?

“A hundred percent more so,” he says. “We didn’t know what we were getting into, what it would take, which is more work than I could have ever imagined. When you have an idea, people usually say, ‘Wait and get some experience.’ But when you’re passionate, everything just comes, we’ve found. People start helping you out, because they see you want to learn.

“At some point you have to take the chance, take the risk. Everything about this business has been brand new to us — we’d never grown anything before, there were all these reasons not to go forward. You have to have faith that it’s all going to work if you believe in what you’re doing.”

Now that’s a good trip.

Watch the guys in action on the Carson Daly show: