A Vancouver startup hoping to disrupt the corporate catering business has raised $10-million in a Series A financing led by BDC Capital.
Foodee Inc. doesn't prepare food itself; rather it partners with select restaurants in select cities looking to increase the capacity usage of their kitchens during non-peak hours. It then offers corporate customers looking to supply more dynamic fare drawn from those eateries for workplace meals than the more generic offerings of typical institutional caterers "that have to be all things to all clients and offer an ersatz version of what a city can offer," said CEO Ryan Spong. Mr. Spong is a former investment banker who joined the fledgling company in 2013 after it was spun out of Invoke Labs, an incubator associated with Vancouver tech IPO hopeful Hootsuite Media Inc.
Foodee acts as the go-between, taking and dispatching orders through its online software platform and delivering food through a fleet of drivers. The company has 70 employees and operates in 10 markets in Canada and the United States including Toronto, Vancouver, Denver, Philadelphia, Atlanta and Austin, Texas, supplied by 600 restaurants and preparing meals for about 4,500 corporate clients. It is generating annualized gross sales of $20-million, of which its take is more than one-third.
Mr. Spong said the average order size is $350, and said the company's churn rate – customers who don't return – is low at 15 per cent. Sales are growing at a rate of 100 per cent a year, he said, with plenty of room to grow in its existing markets. "We want to get really good at what we're doing, which is being the best channel for food in the office," he said.
"Foodee has taken an innovative approach to providing the best food options in a city to corporate clients – all delivered with first-rate service," said Andrew Lugsdin, Partner at BDC Capital. "It is clear from their rapid growth that the customers love it."
Foodee is one of many firms that have crowded into the technology-enabled food delivery market, attracting big venture financing backing but also questions about the sustainability of their business models or competitive advantages. Stocks of newly public meal-kit delivery companies Blue Apron Holdings Inc. in the United States and Goodfood Market Corp. in Canada have struggled, while Winnipeg-based restaurant delivery service SkipTheDishes Restaurant Services Inc. sold to Britain-based rival Just Eat PLC last year for $110-million.
Other backers participating in the financing – which will be used to expand the company into additional markets – include the provincial government-supported BC Tech Fund, Yaletown Ventures, Structure Capital and Voyager Capital. Foodee previously raised $4-million in early stage financing.