Hackathons have been recognized as innovative platforms for developing new solutions to challenges in the food industry, particularly in the context of utilizing side streams—by-products or waste materials generated during food production and processing. Food enterprises in EU and especially in Finland are, however, small and have very limited resources for product development. Hence, design science was used as a methodology to develop an innovation practice applicable to food industry micro-enterprises. As objectives of the solution to be developed in a hackathon format, we defined: how mash from a brewery by-product, the ham stumps from a butcher's shop or the leftover dough from a bakery could be utilized to create new products. Then a side stream hackathon was designed to involve relevant stakeholders for the problem. Student teams demonstrated new product ideas from the side streams, which were taken into production by the micro-enterprises. The major finding was that successful innovation required the commitment and capability of the micro-enterprise to implement the idea in practice. Furthermore, university-industry innovation collaboration was found beneficial in facilitating of the necessary collaboration between micro-enterprises that is required for agri-food innovations. From a design perspective it is essential to understand the needs and limitations of the micro-enterprises and adopt the innovation practice to be accessible and efficient to the target group.