Can Kitopi Take on the World?

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In just three years Kitopi has gone from an idea to a unicorn. The UAE-based cloud kitchen company, which provides kitchen space and supporting technology to delivery-only restaurants, just raised a $415 million Series C round, giving it a reported valuation in excess of $1 billion.

One of the major uses for the fresh capital will be an expansion into Southeast Asia, a region that, along with MENA, has been very receptive to the ghost kitchen concept.

The raise was anticipated. It was larger than earlier public reports suggested but in line with what we heard in recent weeks. The main investor is SoftBank, the Japanese conglomerate famous for turning $20 million into $60 billion via Alibaba. And for turning $2 billion into a smoldering heap via WeWork.

Joining SoftBank in this round are Chimera, DisruptAD, B. Riley, Dogus Group, Next Play Capital, and Nordstar.

“What this shows is not only a great commitment to our company but to the industry and the Middle East region,” said Kitopi Co-founder and CEO Mohamad Ballout, in a blog post announcing the investment. “Softbank and our other esteemed investors recognized the value of Kitopi’s platform to the F&B industry, and how we’re truly revolutionizing the way people access food.”

This is reportedly SoftBank’s first investment in a MENA-based company.

Ballout continued, adding that “Kitopi will channel the new funding to fuel its continued expansion within the Middle East and support entry to new markets such as Southeast Asia. We will also continue to grow our strategic restaurant partnerships, build a best-in-class team across the organization while innovating and expanding our tech stack.”

Kitopi reported in the Series C announcement that it grew by 300% in 2020, “despite the pandemic.” We wonder if “because of the pandemic” or “aided by the pandemic” would be more accurate.

While the pandemic presented challenges for all businesses, it was also a catalyst for change, particularly for businesses that align with eCommerce, home delivery, virtual work, contactless payments, and so on. To cite just one example, DoorDash grew by 226% in Q4 2020.

Kitopi currently operates in the five countries listed below. The company’s engineering team is based in Poland.

Expansion is ongoing. For example, in June, Kitopi added a new country manager for Qatar in advance of launching in that market.

Unbeatable in Mena?

Steve Delpino, a former Kitopi executive who now consults to companies in the ghost kitchen industry worldwide, believes this raise will make it hard for anyone to overtake Kitopi, at least in the MENA region.

“I think in the MENA region the only company that can surpass Kitopi is IKcon,” Delpino told us in an email interview. “They operate on a very similar model and are building up to their series B round. Depending on how well they do on that round will determine how competitive they will continue to be. Everyone else will fight for the scraps.”

Dubai-based IKcon (which stands for innovative kitchen concepts) operates a network of ghost kitchens in the UAE and the KSA. Its concept is to serve as a force multiplier for existing food and beverage brands in the region that want to expand their delivery operations without opening new restaurant locations.

In March the company announced a $20 million Series A round led by Mohamed Yousuf Naghi Group, AlTouq Group, Derayah Ventures, B&Y Venture Partners, AbdulMohsin Al Houkair Holding Group, and Nazer Group. The round brought IKcon’s cumulative funding to $32 million. As Delpino said, a B round is forthcoming.

The company was founded in 2019 and currently has 15 live kitchens with another eight on the way. It has onboarded more than 70 restaurants.

IKcon offers a full-service model. It provides not just the kitchen operation but also staffing and delivery for its restaurant partners. It describes its relationship to restaurants as akin to being a franchisee. It works with brick-and-mortar restaurants as well as virtual brands.

This is an excerpt from the African SMME Tech Report on Substack. Please click HERE to subscribe. 

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