THE EGG MAN
Matt o’Hayer knew how to farm a better egg—he’d done it as a kid. the real trick for his company, Vital farms, was getting consumers to pay for them and finding investors to finance him.
Matt O’Hayer knew how to farm a better egg—he’d done it as a kid. The real trick for his company, Vital Farms, was getting consumers to pay for them and finding investors to finance him.
On a sunny afternoon at a 25-acre family farm near Paris, Texas, Matt O’Hayer is crouching in the mud to play with the hens. As he pets one, dozens swarm around him, clucking and cooing. He coos right back. “Hey, girl,” he whispers. “Good girl.” O’Hayer, the 62-year-old founder of Vital Farms, is checking in on one of the independent farms in his network of 120 that produce eggs to Vital’s exacting specifications.
Moving inside the farm’s chicken barn, O’Hayer meets thousands more hens, each of which lays an egg every 28 hours inside her own private nesting box. A conveyor belt runs underneath the boxes to catch the eggs, and as O’Hayer points out proudly, there’s a dark curtain in front of each box: “Girls like their privacy,” he says. At Vital Farms both the chickens and their farmers are treated differently. “People say chickens don’t eat grass,” laughs O’Hayer, clad in red flannel and jeans. “I’ve heard that for years. Whole Foods used to tell me that. They love it.”
Early on, O’Hayer lured farmers by telling them they would earn as much as 35% more than conventional egg farmers while raising about 75% fewer hens. “We’re not going to nickel-and-dime them,” O’Hayer says. “We want to build a relationship.” Today he routinely turns down farmers who want to join his network, many because they live outside a swath of land that stretches from northern Texas to Missouri and east to Georgia where livestock can be raised in grass year-round.
After the farmers collect the eggs, Vital Farms packs them into black cartons with a chalkboard typeface. Each comes with a copy of Vital Times, a tiny newsletter that features a bird of the month and is topped with quirky headlines like “Our Girls Get the Munchies!” The marketing and a creative financing scheme have allowed O’Hayer to carve out a niche in the more than $5 billion egg industry. When O’Hayer started in 2007, he committed to producing “pasture-raised” eggs—the accepted standard being 108 feet of outdoor space per hen (conventional eggs come from hens crammed into tiny cages; “cage-free” just means there are no cages; “free-range” can mean up to 20 square feet per hen). It was one of many decisions he made knowing it would likely limit his company’s growth. Back then, pasture-raised eggs represented less than 0.1% of the market. Now it’s 2.7%, and O’Hayer’s Austin-based Vital Farms has about 73% of that. The company, which employs 110, hit sales of $100 million last year, up nearly a third from 2016. It has grown beyond Whole Foods and figured out how to get mainstream consumers—in chains like Amazon Fresh, Kroger, Walmart and Target—to pay artisanal prices, as much as $8 a dozen (more than four times as much as the cheapest carton at Walmart). “It’s much larger than any of us imagined,” says Whole Foods president A.C. Gallo.
Growing up in Rhode Island, O’Hayer used to hear his uncle talk about paying his way through college by selling eggs door-todoor. Just before his 13th birthday in 1968, O’Hayer started his own egg business. And then, when it came time to go to college, he decided to try entrepreneurship instead, launching a series of ventures that he hoped would take off. He moved to Houston to open a company that cleaned buildings, selling it in 1980 for a few hundred thousand dollars. With the cash, he bought a farm and raised hens for three years before selling the acres to fund a company that helped small business owners save money by bartering services with each other.
Next, in 1995, he started a discount travel company, Grand Adventures Tour & Travel Publishing, for airline employees, who often need to book hotel rooms at the last minute. It went public in 1998 and hit $50 million in revenue. But then, during a Manhattan fundraising trip in 2001, O’Hayer watched the twin towers of the World Trade Center fall—and then saw booking cancellations start rolling in. Within hours he had decided to lay off more than 100 employees. The next month he sold the company in a friendly foreclosure that left him with one takeaway: “Always be overcapitalized.” He spent the next five years living on a catamaran where he and his girlfriend, now wife, sold vacation charters.
In 2007 they moved to Austin—home of John Mackey, O’Hayer’s good friend and the founder of Whole Foods. During a scubadiving trip to Indonesia with Whole Foods executives the following year, O’Hayer says he heard a lot about raising food humanely. Recalling how much better the eggs had
tasted when his hens were fed grass, he decided to take another shot at the business. He purchased 20 Rhode Island Red hens and a 27-acre plot of land in Austin and started selling the eggs to local restaurants and farmers’ markets. He wound up donating most of the eggs to a food bank because few people would pay the price he demanded. “I wasn’t ready to sell them cheap,” says O’Hayer, who delivered the eggs from a 2005 Subaru he still drives. “I wanted to establish what they really would cost longterm.” In 2008, Whole Foods started selling his eggs in the Midwest. “They took a big risk putting us on the shelf,” he says. “They’ve championed it in their stores and created a category.”
O’Hayer had the good fortune to launch Vital Farms as consumer awareness of agricultural practices was turning into a movement. As sales increased, O’Hayer concluded he would do better marketing eggs than farming them, and he started building his network of farmers. “There are only a few grocery chains in the country that don’t sell pasture-raised at this point,” he says. After a 2013 flood destroyed O’Hayer’s Austin farm, he focused on marketing, eventually selling the land. The marketing initiatives included hiring a veteran wildlife videographer as director of brand, staging exclusive dinners with social media influencers and creating campaigns like a 2017 YouTube series on “Bullsh*t Free Eggs” (viewed 2.4 million times) and “Bullsh*t Free Kitchens” (viewed 7.1 million times). The main goal, says O’Hayer, is to connect with Millennials: “That’s where the growth is in any category.”
VITAL FARMS’ GROWTH has been fueled by $25 million in private equity O’Hayer has raised, most recently at a company valuation of $136 million, as estimated by Pitchbook. Much of the capital has gone toward buying trucks—and more Subarus—and building a $17 million washing-and-packing facility in Springfield, Missouri, that opened last fall and is known at Vital Farms as Egg Central Station. The financing scheme O’Hayer employed has given him the best of both worlds, allowing him to raise the capital he needed to grow while maintaining control of his business. He did this by picking the right investors and by offering regular liquidity events for investors to sell some shares.
None of his six private equity investors, O’Hayer says, are in it for a quick profit. They are willing to wait for their returns, and they had no objection when he registered the company as both a B corporation and a benefit corporation—both of which require companies to pursue priorities, such as environmental sustainability, that can limit profits and valuations. “You don’t have to sell to the highest bidder,” says O’Hayer. The liquidity events insulate O’Hayer, who remains the company’s largest shareholder, from potential interference and the pressure to sell by giving investors the opportunity to sell some shares as the value of the stock increases with funding rounds. “I do not know of any other company who has done this,” O’Hayer says. “The idea of offering liquidity to existing shareholders came from wanting to build a socially conscious business that would endure, not simply a getin-and-get-out format. That required me to give our shareholders options to sell all or part of their shares without pressuring for a sale of the enterprise.” So far, none have sold out.