Startup Sells for Millions, Founders Make Chocolate

What do tech company founders do after selling their startup for millions? In the case of Cameron Ring and Todd Masonis, the young creators of Plaxo, an online address book service, the answer was simple: Make chocolate. Really good chocolate.

The two friends are slated to open a chocolate factory, Dandelion, at 740 Valencia St. later this year — four years after selling Plaxo to Comcast for an amount that TechCrunch estimated at $150 to $170 million.

Unlike Plaxo’s venture capitalist funding of $28 million, Dandelion is self-funded with less than a million dollars. But it demands the same hours as any startup, and Ring and Masonis take a hands-on approach.

On a recent Thursday afternoon, the successful-techies-turned-chocolate-makers were at the Mission Community Farmer’s Market peddling handmade bars. Standing near a table adorned with sample dishes and cocoa pods, Ring looked younger than his 32 years, wearing running shoes (which come in handy for Ultimate Frisbee games) and jeans. He took a quick breath, then dashed from behind the small table to chat with the public.

“We’re Americans, we want bold,” Ring said, speaking in bursts of rapid technical explanations of flavor nuances and the chocolate-making process. Cocoa is the only fruit that is fermented and roasted to formulate complex flavors. “It’s a rich palette to play with,” said Ring.

He gestured to a bar of Madagascar chocolate that he described as “a mini-starburst explosion in your mouth.” It’s true — it’s the dark chocolate equivalent of a shot of fresh espresso or a sip of top-shelf barrel-aged whiskey.

But neither Ring nor Masonis drink coffee or alcohol. Chocolate is their vice — Masonis, a self-described nerd with shaggy hair that nearly covers his eyes, says he would eat it for breakfast, lunch and dinner. Sitting behind the table, he smiled warmly when shoppers crooned over the samples.

Between fielding customer questions, both owners sneaked their own nibbles of chocolate from the sample dish.

After more then 10 years of friendship and shared business history, Masonis and Ring seamlessly finish each others’ sentences. They first met in 1997, in their freshman year at Stanford, where they lived in the same dorm. While each always had a special place in his heart for sweets, inspiration for delving into the professional world of chocolate didn’t come until October of 2009, about 15 months after selling Plaxo.

On a trip to Lyon, France, Masonis watched a young woman and her mother make chocolate as their family had for 100 years. “It was magical,” he said, describing the scene. But he felt that America could build upon that tradition and make unique bars that are bolder in flavor than their European counterparts.

Sounding more like an industrialist than a foodie, Masonis proclaimed, “America will lead the next 100 years of chocolate.”

Soon after Masonis returned home, the two friends started making chocolate bars in Silicon Valley. At first it was an obsessive hobby. A friend ran a startup called Hip Chat in a rented house, and Ring and Masonis took over the garage for making chocolate. It was a rustic setup, but they had a constant stream of tech friends to serve as taste-testers.

While chocolate-making sounds like an entirely different business from running an Internet startup, Masonis pointed out some similarities. “We learned a lot on how to start a company in a lean way,” he said. Ring added that they also learned how to focus on small, quick product iterations to maximize development in a short span of time.

Their constant chocolate experimentation paid off. In September of 2010, a last-minute opportunity to sell bars at the Underground Farmer’s Market allowed the company to speedily build a following. With new customers and wholesale accounts soon taking an interest in their chocolates, they signed a lease on Valencia Street the very next month.

Masonis opened his laptop to take a sneak peek at the plans to transform a fully functioning automotive shop into a chocolate factory. “We have to design the space for the next 10 years,” he said of the challenge in selecting stylistic devices.

Taking a cue from the purity of their own culinary approach, the partners decided to let the space speak for itself: Exposed wood beams, a rustic brick wall and an uncluttered interior show off the building’s natural architectural framework.

But 740 Valencia still has a ways to go. Construction has just begun. The auto shop moved out shortly after Dandelion signed the lease in the fall of 2010. One of the two neighboring spaces will be a new bar by the owners of the Monk’s Kettle. Originally, Tell Tale Preserve Company was going to be in the other space, but that venture ran into difficulty and it’s unclear who will take the third spot, Masonis said.

Dandelion has had its own struggles. Rent for the location is high, and the two have waited more than nine months for one permit that will allow them to change the use from auto industrial to food industrial. Even the city arborist weighed in on their application.

At least with tech startups you don’t have to deal with so many permits, they said. “And I miss copy and paste,” said Ring, picking up a delicately wrapped chocolate bar.

Each batch of chocolate reflects the specific growing conditions and processing of the bean. It’s impossible, they said, to repeat a harvest’s exact flavor attributes.

The cocoa beans are roasted in-house on the lighter side of the spectrum, to highlight each bean’s subtle characteristics and appease Ring, who is more obsessed with roasting details than Masonis. Taking a look at the bar’s sole ingredients — cocoa beans and cane sugar — it’s clear that the bean is the star of the show.

Masonis and Ring used their natural affinity for technology to construct and retrofit all the equipment to process cocoa beans, save for the temperer that allows the chocolate to set properly and become shelf-stable. Aside from saving on costs, Dandelion makes its own tools because most chocolate-making machinery is geared to bulk manufacturing.

There is one important difference between the food industry and Silicon Valley, Masonis said. “What’s fun about food is that people ultimately eat your product. And software just doesn’t taste that good.”