Cloud kitchen platform raises $60m for expansion

Kitopi, a Middle Eastern start-up that provides staff and technology to so-called cloud kitchens, has raised $60m in new funding as investors look for new ways to tap the fast-growing but capital-intensive market for online food delivery.

Kitopi was founded in Dubai in 2018 and now operates 30 cloud kitchens across the US, UK and Middle East. Its urban sites exclusively prepare meals for customers using delivery apps such as DoorDash, Uber Eats and Deliveroo.

Its latest financing was led by Lumia Capital, which previously invested in Careem, the Dubai-based ride-hailing group bought by Uber for $3bn, and Knollwood. Tech companies raising similar sums would typically be valued in the hundreds of millions of dollars, but Kitopi declined to provide a specific valuation.

Venture capitalists have poured billions of dollars into privately held food delivery apps, driving up the companies’ valuations even as many remain heavily lossmaking.

A new breed of start-ups such as Kitopi are hoping to provide the “picks and shovels” of the food-delivery gold rush by working with several online ordering services — meaning their investors do not have to pick the winning delivery app in any given market.

Other examples include “virtual restaurants” such as Taster and Keatz, which are creating new dedicated food-delivery brands that have little or no high-street presence.

“The food delivery ecosystem is heading in a very negative direction in terms of profitability of all stakeholders involved,” said Mohamad Ballout, Kitopi’s co-founder and chief executive. “We see a model like Kitopi can make the ecosystem profitable.”

Many existing restaurants are struggling to manage the growing influx of couriers working for food apps while also satisfying customers who want to eat on the premises.

Cloud kitchens — sometimes known as dark or ghost kitchens — have emerged as a new way for restaurants to solve this issue while also expanding availability to new areas of a city. Some are run by food delivery apps such as Deliveroo’s Editions, while others are built by start-ups like CloudKitchens, which is led by former Uber chief Travis Kalanick, Google-backed Kitchen United and London’s Karma Kitchens.

Kitopi does not compete with these companies in the real estate market. Instead, it leases such properties or staffs their kitchens. Restaurants then provide Kitopi with menus and recipes, which the staff in its cloud kitchens use to prepare meals for customers. Restaurant partners include PizzaExpress and Dubai’s Operation Falafel.

“Think of it as ‘Franchise 2.0’,” Mr Ballout said. “We are enablers to restaurants to plug in and scale up globally.”

Kitopi says it uses its own “smart kitchen operating system” to optimise the food preparation process so that the food is ready just as the courier arrives from Uber Eats or Deliveroo to pick it up.

Mr Ballout likened his business to the warehouses and edge-of-town hubs that ecommerce companies such as Amazon have set up to accelerate delivery of online orders.

“Nobody has replicated what worked in other ecommerce with food,” he said. “People are still operating last-mile logistics out of a front-of-house store. We are trying to replicate the third-party fulfilment hub that is used in other ecommerce verticals, in food.”

After raising the new funding and launching a new second headquarters in New York, Kitopi plans to open in 50 more locations across the US and 100 worldwide this year.

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