GoingVC Partners is the investment vehicle of GoingVC. Interested in co-investing? Join GoingVC Angels for access to high quality, pre-diligenced deal flow and opportunities like this. For more about GoingVC Partners, click here or back our syndicate on AngelList.
Foodnome, led by CEO Akshay Prabhu, a neuroscientist who loves food, is defining the home restaurant industry as the go-to resource for local regulators. We loved the early traction the company developed as the brand for home restaurants among all relevant stakeholders (diners, cooks, and regulators). Among these early metrics were healthy unit economics and the early signs of developing a regulatory-based barrier-to-entry competitive advantage within a massive addressable market ($990B, ie. 4x the hotel industry).
Shifting Consumer Trends
- 38% of consumers say they will support local food businesses more in the future (2020 Restaurant Business)
- 3,868% increase in digital food sales in the suburbs (2020 Upserve)
- 78% of consumers wish they had a wider range of food options than they due when restricted by Covid-19 (2020 Doordash)
- 82% of consumers miss eating at least one type of cuisine because it is too difficult to prepare at home (2020 Doordash)
Foodnome deploys an asset-light operating model and was able to clearly demonstrate how capital invested will be deployed in order to sustain growth. Lastly, the company features a strong advisory committee and active board including executives from Panera, Jimmy Johns, CKE, Google, and AirBnB.
Why We Love It: Foodnome
The Problem and Solution
The problem Foodnome seeks to solve is that Americans would rather eat homemade food than go out to dinner, yet most Americans do not enjoy cooking. To resolve this, Foodnome offers delicious, authentic food options made safely and at affordable prices via Foodnomes services that allow diners to find culturally diverse meals they cannot find elsewhere (and while supporting local, small businesses).
For cooks, high startup costs for traditional restaurants (including regulatory and logistical burdens) along with traditionally high churn and low margins create significant failure rates. Foodnome empowers cooks to make a living by opening a legal restaurant in their home. Foodnome also handles the permitting and startup process, posting the menu on Foodnome’s marketplace and managing point of sale. In addition, the company brands through social media-like pages where cooks can share content and build a following. Another advantage to chefs is that home restaurants have less than 1% of the startup costs of traditional restaurants, leading to higher profit margins that enable, among other things, cooks to make more money per hour.
We believe this combination of two-sided benefits will allow Foodnome to pursue the development of a marketplace that in-and-of-itself will strengthen the competitive advantage of their business.
We’re always on the lookout for outstanding teams, and found in Akshay someone with an intimate knowledge of the home restaurant industry that is ready to redefine a market. The team also has proven early to be adept at measuring different aspects of the business and continues to operate well. In a fairly short time, they have executed and figured out a marketplace dilemma, as measured by ~4,000 cook applications with no marketing.
Lastly, the team also has a very strong roster of investors and advisors and has successfully lobbied for favorable regulation. We see the latter forming a very strong moat for the company.
The Market and Traction
Foodnome has already completed more than 5,000 transactions with growth from ~100 transactions per month to ~900. In addition, the company currently has 30 active cooks (a number they purposely throttled in the early months) with 4,000 pending applications.
Additionally, an 81 NPS score from diners and 29% reorder rate early on is very promising, especially combined with strong diner acquisition costs that continue to decline with scale.
Other Key KPIs We Love
Top Line Growth
- Strong recent top-line growth, including +32% sale growth month-over-month in December and +65% in January.
- 5,000+ total transactions
- Have acquired 4,000+ cook applications (Supply-side is not hard to solve)
Diners enjoy the experience
- 81 Diner NPS Score
- 29% repeat order rate (will grow over time as cohorts mature)
Cooks are making money
- Several cooks on pace to reach $50k per year
- Top quartile earns >$35k per year
- Anticipation that top earners run restaurants professionally as core source of income
- Even with high churn at the lower half of cook market, there is plenty of supply of cooks that are inexpensive to acquire
- 1.6k orders (orders can be more than 1 meal) -> First review is 9/17/2019
- 714 orders -> First review is 3/26/2020
- 2.2k orders -> First review is 2/27/2020
Regulators Seek Foodnome’s Advice
- Foodnome is assisting in defining how AB 626 will be implemented in San Bernardino
- Riverside County has worked with Foodnome to hone its implementation of AB 626
Overall, the early KPIs are very encouraging and the product roadmap is well thought out in its aim to streamline processes for both sides, including furthering relationships with regulators. All of this combined should lead to strong unit economics protected by a developing moat, strengthened by offering a different value proposition than competitors in the marketplace.
Are you a founder or funder? We’d love to chat!
For Founders: GoingVC Partners is a sector-agnostic, seed and early stage investor actively looking to fund strong founding teams, preferably led by or featuring those with minority backgrounds. If that sounds like you, we’d love to hear from you!