Rebel Foods Valuation: Indian Cloud Kitchen Startup Reaches $1.4 Billion

Rebel Foods Achieves Unicorn Status with $175 Million Funding

Rebel Foods, a prominent operator of a vast network of dark kitchens spanning almost a dozen markets, has recently joined the ranks of Indian startups achieving unicorn status.

Series F Funding and Valuation

The Indian startup announced on Thursday that it secured $175 million in its Series F funding round, resulting in a valuation of $1.4 billion. This represents a significant increase from its valuation of approximately $800 million last year.

Qatar Investment Authority, the sovereign wealth fund of the State of Qatar, spearheaded the financing round. Existing investors, including Coatue and Evolvence, also participated. Rebel Foods also benefits from investments from Sequoia Capital India and Goldman Sachs.

India's Unicorn Surge

Rebel Foods marks the third Indian startup to attain unicorn status this week, and the 31st this year. This surge is fueled by substantial investments from leading firms like Tiger Global, SoftBank, Sequoia, and Temasek, all actively increasing their support for emerging companies in the world’s second-largest internet market.

Notably, Andreessen Horowitz (a16z) has also entered the Indian market, making its inaugural investment in a local startup this week.

Global Network of Internet Restaurants

Rebel Foods currently manages the world’s largest network of “internet restaurants,” operating in 10 countries, including the United Arab Emirates, Indonesia, and Malaysia.

The company boasts a portfolio of over 45 brands, encompassing both those owned by Rebel Foods and partnerships with established firms like Wendy’s and Mad Over Donuts. These brands focus exclusively on food delivery, foregoing traditional dine-in or takeaway services. The startup operates more than 4,000 such internet restaurants.

The Efficiency of Dark Kitchens

The core concept behind dark kitchens – also referred to as ghost or cloud kitchens – is to optimize food service operations for cost-effectiveness. Traditional restaurants carry significant expenses related to real estate and front-of-house operations.

Cloud kitchens enable partner restaurants and brands to reduce overhead by moving away from high-cost retail locations and streamlining their focus to food production alone.

Optimizing Restaurant Operations

“The fundamental shift brought about by the cloud kitchen model is the elimination of the need for multiple real estate locations to operate diverse restaurant concepts,” explained Jaydeep Barman, founder and CEO of Rebel Foods, during a virtual conference earlier this year.

He drew a parallel to automobile manufacturing, stating that, “similar to how carmakers produce numerous models from a single factory, technology, supply chain management, and efficient workflows allow for a single kitchen to support multiple restaurants.”

Reaching a Wider Market

Many investors believe the cloud kitchen model is vital for food delivery companies, restaurants, and brands to expand their reach. In developing markets like India, the average order value for lunch or dinner is typically between $3 and $5, making conventional business models challenging to sustain profitability.

Challenges for Established Delivery Firms

This explains the efforts of leading food delivery firms in India, Swiggy and Zomato, to explore establishing their own cloud kitchen networks.

Swiggy invested in over a million square feet of real estate across 14 cities in 2019 to facilitate expansion for its restaurant partners through cloud kitchens. However, the firm scaled back this initiative significantly following the onset of the pandemic. Zomato has similarly encountered difficulties in achieving success with its cloud kitchen ventures.

A Sustainable Model with Investor Confidence

Despite these challenges, the cloud kitchen model is proving its resilience, attracting continued investor interest. CapTable, an Indian news and analysis publication, reported that “Rebel’s success is partly due to waning investor enthusiasm for single-brand businesses, which often lack the capacity to generate profitable unit economics from a single brand.”

Scaling a single brand across multiple cities requires substantial capital investment, whereas brands within a larger portfolio benefit from controlled fixed costs.

Strategies for Cloud Kitchen Success

TechCrunch consulted with Ravi Golani, Chief Strategy Officer at Rebel Foods, regarding the difficulties faced by larger firms in the cloud kitchen space. He identified a lack of standardized strategies as a key challenge, leading to varied outcomes.

“We are integrating the strengths of both digital and physical operations to optimize brand expansion, ensure viable unit economics, and leverage technology and supply chain efficiencies. This is a fundamentally different approach,” he stated, adding that other firms have only partially succeeded in these areas. Rebel Foods collaborates with food delivery companies as its distribution partners.

Optimized Kitchen Layouts

“Unlike typical cloud kitchens with separate booths for each brand, complete with dedicated staff, production materials, and delivery arrangements, we have organized our kitchens based on workflows rather than individual restaurants,” Golani explained.

Future Plans and IPO Aspirations

The startup intends to utilize the new funding to broaden its international presence and explore potential acquisition opportunities. Piyush Kakkad, the startup’s CFO, also revealed plans for a potential public offering within the next two years. Rebel Foods currently maintains an annual run rate of $150 million.