Rebel Foods is the latest Indian startup that has achieved unicorn status. It operates a network of dark kitchens across nearly a dozen countries.
Indian startup, 10 years old, announced on Thursday that it raised $175 million in Series F financing. This brings its total value to $1.4 billion. It was $800 million less than last year. The financing round was led by Qatar Investment Authority, a sovereign wealth fund of Qatar. Existing investors Coatue and Evolvence also participated. Rebel Foods counts Sequoia Capital India as one of its investors, along with Goldman Sachs and Goldman Sachs.
Rebel Foods is the third Indian startup that has become a unicorn in this week's market. It also became the 31st unicorn to be created this year by scores of high-profile investors like Sequoia and Tiger Global. Many more are exploring India. This week, A16z made its first Indian startup investment.
Rebel Foods has the largest number of internet restaurants worldwide, in 10 countries, including Indonesia, Malaysia, the United Arab Emirates and Malaysia. Rebel Foods has 45 brands and many partner companies such as Wendys and Mad Over Donuts. These restaurants prepare food for delivery and not take-out. These internet restaurants are said to be operated by the startup, which has over 4,000.
Dark kitchens, also known as ghost or cloud kitchens, are designed to make food service more affordable. It is costly to set up and operate a restaurant. Cloud kitchens allow partner brands and restaurants to move away expensive retail locations. It also streamlines the business by focusing only on producing food.
Jaydeep Barman (founder and chief executive at Rebel Foods), stated that the cloud kitchen model has created a major disruption in that you don't have to own five restaurants to operate them. He explained that carmakers can produce multiple models in one factory using technology, supply chain, and workflows. This means you can have one kitchen for five restaurants.
Cloud kitchens are crucial for restaurants and food delivery companies to reach a wider market. Many investors agree. Many developing markets, including India, have a minimum order size of $3-$5 for lunch and dinner. This makes it difficult for businesses to make a profit from existing business models.
This is why Zomato and Swiggy, the top Indian food delivery companies, have taken several steps to set up their own cloud kitchens.
Swiggy, for example, announced that it had invested more than 1 million square feet in real estate in 14 cities across the country in late 2019. This was to allow restaurant partners of all sizes to expand their reach to new locations, both within their own city and through cloud kitchens. After the pandemic, the firm invested more than $25 million in its cloud kitchen business. However, it significantly reduced that investment last year. Similar to Swiggy's cloud kitchen ventures, Zomato too has struggled to gain traction.
Investors are still buying the model. Rebels favors the loss of investor interest for single-brand entities due to the fact that these brands don't have the ability drive profitable unit economics from only one brand. Capital investments required to scale a single brand across multiple cities is much more expensive than brands that are part a larger portfolio. Fixed costs can be controlled, according to CapTable, an Indian news and analysis publication.
What is the reason why big companies have struggled to get into cloud kitchen? TechCrunch spoke to Ravi Golani from Rebel Foods. He said that cloud kitchen models present a challenge because there are many strategies and results.
Combining the best of digital and physical worlds allows us to see how to grow a brand, make unit economics work and ensure adequate supply chain and leveraging tech. He said that it is a completely different game and some other companies have only been able to achieve some of these. Rebel Foods has food delivery companies as its distribution partners.
Cloud kitchens are generally pictured as having five to ten different booths. Each one has its own staff, production material, and delivery tie-ups. He said that in our kitchens, we organized the entire layout using workflows and not restaurants.
According to the startup, it intends to use the new funds to expand its international reach and explore acquisition possibilities. Piyush Kakkad is the startup's chief financial officer. Rebel Foods' current annual run-rate for revenue is $150 million.
